Whereas much of upper echelons research focuses on the background characteristics and traits of executives to explain their strategic choices, much less is understood about the information filtering process by which those characteristics manifest in strategic decisions. We develop theory to explain how executives process information by integrating construal level theory with upper echelons theory. Construal level theory describes how the same event can be interpreted in different ways, thus influencing the type of information people pay attention to, how they process that information, and the resulting decisions and actions. Our theoretical framework explores the dynamic nature of construal levels by developing two new constructs-construal shifts and construal flexibility. In doing so, we draw on self-regulation research to detail how executives can develop the capacity to modify how they process information to best meet changing situational demands. As an illustrative example, we apply our theory to the acquisition context and demonstrate the vital role played by construal shifts and flexibility for executives attempting to manage complex strategic actions. The end result is a framework by which executives can effectively navigate the challenging acquisition process.

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Research summary: We develop and test a contingency theory of the influence of top management team (TMT) performance-contingent incentives on manager-shareholder interest alignment.Our results support our theory by showing that although TMTs engage in significantly higher levels of acquisition investment when their average incentive levels increase, investors' responses to those large investments are generally negative. More importantly, however, we further find that within-TMT incentive heterogeneity conditions that effect, such that investors evaluate TMTs' large acquisition investments more positively as the variance in those top managers' incentive values increases. Thus, within-TMT incentive heterogeneity appears to increase manager-shareholder interest alignment, in the context of large acquisition investments. Managerial summary: We find that as the average value of TMTs' incentives increase, relative to their total pay, they invest more in acquisitions and investors' respond negatively to the announcement of those deals. However, we further show that investors respond more positively to acquisitions announced by TMTs whose members' incentive values vary (some TMT members hold higher incentives and others hold lower). Results imply that when TMT members hold differing incentives levels, they approach investments from divergent perspectives, scrutinize those investments more heavily, and make better decisions, relative to TMTs with similar incentives. They also suggest that boards seeking tighter manager-shareholder interest alignment may benefit from introducing variance into TMT members' incentive structures, as doing so appears to create divergent preferences that can improve team decision making.

Although it is well established that top management team (TMT) experience is highly valued in new ventures, research has largely focused on the value of experience depth. However, founding teams often bring a myriad of different types of experience to their business. Less is understood about how these experiences are perceived by key stakeholders, and prior theory suggests that TMT breadth could be viewed as either an asset or a liability. Drawing from theory on cognitive categorization, we hypothesize that the perceived value of executive breadth depends on the context in which a venture is situated. We argue that the characteristics of the environment shape the degree to which experience breadth is valued, and we show that investors assess breadth positively in opportunistic environments but negatively in threatening environments. Contrary to previous research, we show that breadth can, at times, be viewed as a distinct liability for a new venture. In supplementary analyses, we also show that these effects are not contingent upon the depth of the founding team’s experience. Further, we find that founding team breadth does have significant influences on firm strategy, including the structural positioning of the firm in an industry’s value chain and the cultivation of diverse revenue streams, but that the effect of breadth on investor perceptions is not mediated through these differences in strategy.

Whereas many workplaces shut down following the onset of the COVID-19 pandemic, many others in essential industries had to remain operational, thus exposing their employees to COVID-19's inherent dangers. These firms were pressed to take immediate action to protect their employees' safety and financial well-being. However, firms varied considerably in the degree to which they took action, and stakeholders appeared to take notice. Leveraging attribution theory, we build theory around the impact of firm actions to protect employee safety and compensation on stakeholder sentiment toward the firm. We further examined how firm leadership helped shape stakeholder sentiment by theorizing about the joint impact of actions with Chief Executive Officer (CEO) benevolence. We built a unique, multisourced data set and tested our theory on a sample of public firms in the consumer staples sector. Our longitudinal analysis of positive stakeholder sentiment expressed on social media demonstrated the importance of these immediate firm actions on sentiment in the initial months of the pandemic. Specifically, firm compensation actions were associated with a growth in positive sentiment over these months, particularly when made by CEOs with high benevolence, whereas firm safety actions led to growth in positive sentiment but only when made by CEOs with low benevolence. We discuss the implications of these findings for our understanding of firm actions and leadership at the onset of the COVID-19 pandemic.