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Mortals. Everything is so black and white to you

Updated May 14, 2022
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Mortals. Everything is so black and white to you essay

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To understand the underlying mechanism of strategic actions and organizational outcomes, we must understand the personality traits of organization leaders (e.g., Finkelstein, Hambrick et al., 2009; Hambrick, 2007). Prior research of personality traits in management and social psychology has shown that leader traits do affect strategic actions and organizational outcomes (e.g., Forsyth, Banks et al., 2012; Judge, Heller et al., 2002; Petrenko, Aime et al., 2016; Spain, Harms et al., 2014). In this line of research, a certain dichotomy of leader personality traits: bright-dark, has drawn the attention of scholars. Bright traits (e.g. humility, conscientiousness and etc.) are normally treated as socially desirable, while dark traits (e.g. hubris, overconfidence and etc.) are not as nearly desirable (Judge and LePine, 2007). In light of this view, generally the bright traits are seen as beneficial to organizational outcomes, whereas the dark traits are seen as detrimental (Smith, Hill et al., 2017).

However, we may ask: Are bright traits always beneficial and are dark traits necessarily detrimental? Recent findings suggest that the leader personality effects may not be as black and white as previously believed. And the downsides of bright traits and the upsides of dark traits deserve more attention (Smith et al., 2017). In this sense, prior research has more or less overlooked how the effects of bright and dark leader traits vary across contexts, while considering the contextual factors is critical in helping us more accurately understand when and why the downsides of bright traits and the upsides of dark traits could happen. By and large, what we need to further delve into is how do the bright and dark leader traits fit their organizational perspective thus begetting corresponding strategic actions and organizational outcomes.

Person-Organization fit theory holds that the fit between individual and the organization delineates the level of how well an individual matches organizational attributes (Kristof‐Brown, Zimmerman et al., 2005). And the success of an individual is contingent upon the fit between his/her personality and the organizational perspective (Tom, 1971). Therefore, CEOs should possess congruent traits that fit into their organizational perspectives. Among the three organizational perspectives: rational, natural and open systems (Scott and Davis, 2015) this research focuses on the open system perspective because we believe that the downsides of bright traits and the upsides of dark traits can be well manifested in an open system. Drawing from upper echelons theory, person-organization fit theory and organizational theory, we reason that the dark CEO traits may not always be detrimental and the bright CEO traits may not always be beneficial such that the effect of bright and dark traits are contingent upon the fit between these traits and the organizational perspective. We therefore contribute to upper echelons theory by extending the knowledge in understanding when and why the downsides of bright traits and the upsides of dark traits could happen. We also contribute to organization theory by adding knowledge in understanding how the organizational perspective alters the effect of leader traits. Moreover, the managerial implication of our research lies in CEO selection and retention. We suggest that instead of bearing a black and white view of bright and dark CEO traits, firms might need to focus more on the fit of the CEO traits and the firm attributes.

HYPOTHESES

Bright CEO traits: humility and conscientiousness

Research has shown that CEO humility is positively related to top management team integration, the retention of middle managers and establishment of profitable firms (Ou, Seo et al., 2017; Ou, Waldman et al., 2015). Normally, a conscientious individual who plans ahead, has high self-control and being organized is more productive (Carter, Dalal et al., 2014). Conscientiousness is also shown to be positively related to goal attainment and team performance (Bell, 2007). Furthermore, Conscientiousness is seen as the major predictor of performance (Barrick and Mount, 1991). Thus we hypothesize:

Hypothesis 1: In general, CEO Humility is positively associated with organizational performance.

Hypothesis 2: In general, CEO conscientiousness is positively associated with organizational performance.

Dark CEO traits: hubris and overconfidence

Contrarily, CEO hubris and overconfidence are seen as detrimental to organizational performance. For example, prior research has shown that hubris is highly associated with acquisition premiums and shareholder losses, and overconfidence prompts CEOs to over-estimate their ability (Hayward and Hambrick, 1997; Malmendier and Tate, 2008). Thus we hypothesize:

Hypothesis 3: In general, CEO hubris is negatively associated with organizational performance.

Hypothesis 4: In general, CEO overconfidence is negatively associated with organizational performance.

CEO traits in open systems

As the two basic sets of system processes, morphostasis and morphogenesis refers to the tendency to preserve the established state and the tendency to elaborate or change (Buckley, 1967; Scott et al., 2015). Open systems are typically the latter, which “In adapting to the external environment, open systems typically become more differentiated in form, more elaborate in structure” (Scott et al., 2015, p.97). Therefore, these attributes of open systems require their leaders to be more innovative and more inclined to change.

As prior research has shown, overconfident CEOs invest more in innovation and achieve greater innovative success. More interestingly, this innovative success of overconfident CEOs only happens in innovative industries (Hirshleifer, Low et al., 2012). CEO overconfidence is also found to be positively related to entrepreneurial orientation which in turn relates to innovation and change (Wales, Patel et al., 2013). CEO hubris is also found to be positively related to firm innovation (Tang, Li et al., 2015). Therefore, hubris and overconfidence might be detrimental in general, but they fit into an open system which requires more elaboration and change. Thus we hypothesize:

Hypothesis 5: The relationship between CEO hubris and organizational performance will be moderated by an open system perspective, such that this relationship will become positive in an open organization.

Hypothesis 6: The relationship between CEO overconfidence and organizational performance will be moderated by an open system perspective, such that this relationship will become positive in an open organization.

In the meantime, prior research has also shown that the lack of CEO humility (i.e. grandiose self-concept) is positively related to bolder strategic actions (Wang, Holmes et al., 2016). Drawing from the HEXACO framework, CEO conscientiousness is the only one that is not significantly related to firm strategic actions (Wang et al., 2016). Moreover, too much conscientious will impede individuals from adapting to change (LePine, 2003). Therefore, humility and conscientiousness might be beneficial in general, but they might not fit into an open system which requires more elaboration and change. Thus we hypothesize:

Hypothesis 7: The relationship between CEO humility and organizational performance will be moderated by an open system perspective, such that this relationship will become negative in an open organization.

Hypothesis 8: The relationship between CEO conscientiousness and organizational performance will be moderated by an open system perspective, such that this relationship will become negative in an open organization.

METHODS

Sample, data collection and measurement

For dependent variables we will use the S&P 500 COMPUSTAT to gather organizational performance such as ROA/ROS/MTB. The starting population will include all S&P 500 firms. Following prior research, we will exclude firms that fall into SIC 6000 series and 9000 series as they are highly regulated such as financial, governmental and unspecified (e.g. Petrenko et al., 2016).

For independent variables such as CEO hubris, overconfidence, humility and conscientiousness we will follow the videometrics methods used by Petrenko et al. (2016) in measuring CEO narcissism. Similar measurement will be used to code and score CEO overconfidence, hubris, humility and conscientiousness.

For the definition of open system perspective we believe that environmental dynamism (Henderson, Miller et al., 2006) can be a proxy in that it includes innovation degree, tech change, supply instability, competitive rivalry and market growth (Dess and Beard, 1984). These dimensions can well represent an open system perspective which entails the adaptation to the external environment with more differentiation in forms and more elaboration in structure (Scott et al., 2015). Following Henderson et al. (2006), we define firms in the computer industry as open systems due to fast change, innovation, unstable demand and growth in this industry (Brown and Eisenhardt, 1997).

We also consider control variables at both CEO and firm level such as CEO age, education, gender, tenure, firm slack resources (patents, ratio of current assets to current liabilities and etc.) because these variables might be important to making strategic change. We will gather these data in the S&P 500 COMPUSTAT and the EXECUCOMP. With these data and methods we can test for the hypotheses to see if there are significant difference of the leader trait effects in open systems versus in general.

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Mortals. Everything is so black and white to you. (2022, May 14). Retrieved from https://samploon.com/mortals-everything-is-so-black-and-white-to-you/

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