How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance

Abstract

Scholars have characterized CEO tenures as life cycles in which executives learn rapidly during their initial time in office, but then grow stale as they lose touch with the external environment. We argue, however, that the opportunities for adaptive learning are limited because (1) a CEO assumes office with a relatively fixed paradigm that changes little thereafter; (2) inertia limits the speed at which an organization can align itself with a new CEO's paradigm; and (3) for any within-paradigm learning to occur, the external environment must be stable enough so that the cause-effect relationships that CEOs glean today remain relevant tomorrow. In a longitudinal study of 98 CEOs in the relatively stable branded foods industry and 228 CEOs in the highly dynamic computer industry, we found results that strongly supported our hypotheses. In the stable food industry, firm-level performance improved steadily with tenure, with downturns occurring only among the few CEOs who served more than 10-15 years. In contrast, in the dynamic computer industry, CEOs were at their best when they started their jobs, and firm performance declined steadily across their tenures, presumably as their paradigms grew obsolete more quickly than they could learn.

Who Takes More Sustainability-Oriented Entrepreneurial Actions? The Role of Entrepreneurs’ Values, Beliefs and Orientations

“…On the contrary, those firms newly established by entrepreneurs with self-regarding values, strong belief in an unjust world and high immediate-orientation conduct fewer sustainability-oriented entrepreneurial actions. In accordance with upper echelons theory assumptions [23][24][25][26], we find a strong relationship between the entrepreneurs' characteristics (values, belief and orientation) and their firms' level strategic behavior (sustainability-oriented actions). Our results reveal a dual role of entrepreneurs' values, beliefs and orientations for sustainability-oriented actions.…”

Ministers of Health: short-term tenure for long-term goals?

“…Over recent years, a significant body of research has focused on the ways that top executives influence strategic choices and organizational performance. 23 Interestingly, researchers have also found that organizations become reflections of their top executives. [23][24][25] A few studies have examined how the impact of CEOs varies over their time in office.…”

“…23 Interestingly, researchers have also found that organizations become reflections of their top executives. [23][24][25] A few studies have examined how the impact of CEOs varies over their time in office. Hambrick and Fukutomi 11 proposed that new CEOs begin with a knowledge deficit, but steadily learn about their jobs, organizations and environments.…”

Exploring the Influence of Executive Management Diversity on IT Governance

“…However, in turbulent industries, it is output function experience (e.g., such as product R&D, marketing, sales) that is associated with profitability (Hambrick & Mason, 1984). For instance, firm performance declined steadily across CEOs' tenures in the computer industry, as their paradigms grew obsolete more quickly than they could learn (Henderson et al, 2006).…”