Thursday, April 17, 2014

CEO Narcissism and the Impact of Interlocks on Corporate Strategy

ZHU David H., CHEN Guoli
Read the working paper
INSEAD Working Paper 2014/31/STR

We examine how CEO narcissism influences the impact of interlocks on interorganizational imitation of corporate strategy. Our theory explains why narcissistic CEOs are influenced more by the corporate strategies that they witnessed on other boards, and less by the corporate strategies witnessed by other directors. We then explain why these effects are strengthened by the status of other firms to which the CEO had interlock ties and by the CEO’s power vis-à-vis the board. Results based on longitudinal analyses of Fortune 500 companies’ decisions on acquisition emphasis of growth strategy and international diversification (1997-2006) provide support for our theoretical expectations. This study contributes to organization research by introducing personality psychology theories to the literature of interorganizational imitation and to corporate governance research on board functions.