Journal of General Management
This study integrates research on managerial discretion within the behavioral theory of the firm to examine how four CEO psychological traits serving as antecedents of managerial discretion—ambiguity tolerance, cognitive complexity, locus of control, and commitment to the status quo—moderate firm responses to poor performance. Using CEOs’ responses to questionnaires, CEO ambiguity tolerance is found to positively moderate the relationship between negative attainment discrepancy and strategic change when performance is slightly below aspirations, defined as average market return for the firm’s industry. Further, CEOs with greater cognitive complexity are found to engage in more strategic change when performance is farther below aspirations. Thus, this study begins to unpack the role of CEOs’ cognitive makeup on firm responses to performance shortfalls.
Wangrow, David B.; Kolev, Kalin; and Hughes-Morgan, Margaret, "Not All Responses Are the Same: How CEO Cognitions Impact Strategy When Performance Falls Below Aspirations" (2019). Management Faculty Research and Publications. 325.
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