Ceo Personality, Strategic Flexibility, and Firm Performance Article Review
Research Question:
In the “CEO personality, strategic flexibility, and firm performance” article, Nadkarni and Herrmann (2010) are trying to answer the question of how CEO personality affects firm performance through influencing the firm’s adaptability to rapid, impactful, and unexpected changes. The main aim of the study is to extend previous literature that has studied the relationship between CEOs characteristics and firm strategic choices and performance by studying the underlying relationship between different CEOs personalities and strategic flexibility. Theoretical Framework:
The article is drawing on the upper echelons (Hambrick and Mason, 1984) and other similar studies that have empirically proved the vital role CEOs play in directing firms’ strategies and performance. It also builds on literatures studying CEOs characteristics and their effect on CEOs strategic choices. While previous studies have often focused on the demographic characteristics of CEOs, this literature focuses on the link between CEOs psychological traits and firm outcomes.
For this purpose, the study has selected the “five-factor model” (McCrae and Costa, 1987) which represents five broad personality constructs being (1) Conscientiousness, (2) Emotional stability, (3) Agreeableness, (4) Extraversion, and (5) Openness. The motive behind selecting this model was the need to study CEOs psychological attributes in the light of a valid and robust psychological framework.
The upper echelons, CEO psychology, the five-factor model, and other literatures on strategic flexibility form the foundation of the theoretical framework of this study. The article presents seven hypotheses regarding how each facet of the five-factor model is likely to affect strategic flexibility and how strategic flexibility relates to firm performance. It hypothesis that CEO emotional stability, extraversion, and openness are positively related to strategic flexibility, while CEO conscientiousness is negatively
In the “CEO personality, strategic flexibility, and firm performance” article, Nadkarni and Herrmann (2010) are trying to answer the question of how CEO personality affects firm performance through influencing the firm’s adaptability to rapid, impactful, and unexpected changes. The main aim of the study is to extend previous literature that has studied the relationship between CEOs characteristics and firm strategic choices and performance by studying the underlying relationship between different CEOs personalities and strategic flexibility. Theoretical Framework:
The article is drawing on the upper echelons (Hambrick and Mason, 1984) and other similar studies that have empirically proved the vital role CEOs play in directing firms’ strategies and performance. It also builds on literatures studying CEOs characteristics and their effect on CEOs strategic choices. While previous studies have often focused on the demographic characteristics of CEOs, this literature focuses on the link between CEOs psychological traits and firm outcomes.
For this purpose, the study has selected the “five-factor model” (McCrae and Costa, 1987) which represents five broad personality constructs being (1) Conscientiousness, (2) Emotional stability, (3) Agreeableness, (4) Extraversion, and (5) Openness. The motive behind selecting this model was the need to study CEOs psychological attributes in the light of a valid and robust psychological framework.
The upper echelons, CEO psychology, the five-factor model, and other literatures on strategic flexibility form the foundation of the theoretical framework of this study. The article presents seven hypotheses regarding how each facet of the five-factor model is likely to affect strategic flexibility and how strategic flexibility relates to firm performance. It hypothesis that CEO emotional stability, extraversion, and openness are positively related to strategic flexibility, while CEO conscientiousness is negatively
References: Blettner, D.P., Chaddad, F.R. and Bettis, R.A. 2012. The CEO Performance Effect: Statistical Issues and a Complex Fit Perspective, Strategic Management Journal, 33 (8): 986-999. Daily, C.M., McDougall, P.P., Covin, J.G. and Dalton, D.R. 2002. Governance and Strategic Leadership in Entrepreneurial Firms, Journal of Management, 28 (3): 387-412. Gurven, M., von Rueden, C., Massenkoff, M., Kaplan, H. and Lero Vie, M. 2013. How Universal is the Big Five? Testing the Five-Factor Model of Personality Variation among Forager–Farmers in the Bolivian Amazon, Journal of Personality & Social Psychology, 104 (2): 354-370. Hambrick, D.C. and Mason, P.A. 1984. Upper Echelons: The Organization as a Reflection of its Top Managers, Academy of Management Review, 9 (2): 193-206. Kisfalvi, V. 2002. The Entrepreneur 's Character, Life Issues, and Strategy Making: A Field Study, Journal of Business Venturing, 17 (5): 489-518. McCrae, R. R., & Costa, P. T., Jr. 1987. Validation of the five-factor model of personality across instruments and observers. Journal of Personality and Social Psychology, 52: 81–90. Nadkarni, S., Herrmann, P. 2010. CEO personality, strategic flexibility, and firm performance: the case of the Indian business process outsourcing industry. Academy of Management Journal, 53 (5): 1050-1073. Norem, J.K. 2010. Resisting the Hegemony of the Five-Factor Model: There is Plenty of Personality Outside the FFA, Psychological Inquiry, 21 (1): 65-68. University of Leicester, 2011. Foundations of Knowledge and Professional Skills. 2nd ed. Leicester: Print Services, University of Leicester Widiger, T.A. and Trull, T.J. 1997. Assessment of the Five-Factor Model of Personality, Journal of Personality Assessment, 68 (2): 228.