Go big or go home: do narcissistic CEOs pursue affordable loss behaviors?

Abstract

PurposeThe affordable loss (AL) heuristic, as one crucial sub-dimension of effectuation, delineates the maximum level of investment entrepreneurs are ready to lose in a worst-case scenario. Conflicting conceptualizations remain regarding whether entrepreneurs’ psychological traits matter for AL. Based on the narcissistic admiration and narcissistic rivalry perspective, this study investigates the relationship between chief executive officer (CEO) narcissism and AL behaviors.Design/methodology/approachUsing data collected from the CEOs and paired vice presidents at 122 small and medium enterprises (SMEs) in mainland China, the authors intend to further explore the association between psychological traits, especially CEO narcissism and AL behaviors under environment and resource constraints (e.g. perceived uncertainty and slack resources).FindingsThe findings show that CEO admiration-based narcissism is positively related to AL behaviors in the firm. Furthermore, when firms hold more slack resources, narcissistic admiration has a stronger positive association with AL; while when the environment becomes more uncertain, narcissistic admiration has a weaker positive association with AL. In contrast, CEO rivalry-based narcissism is negatively related to AL behaviors in the firm. When the environment becomes more uncertain, narcissistic rivalry has a stronger negative association with AL.Originality/valueThis article contributes to trait-based effectuation research and suggests that individual psychological traits affect AL behaviors at the firm level, though the patterns of the relationship vary with both the type of narcissism and contexts.