Ceo Personality, Strategic Flexibility, and Firm Performance: the Case of the Indian Business Process Outsourcing Industry
Academy of Management Journal 2010, Vol. 53, No. 5, 1050–1073.
CEO PERSONALITY, STRATEGIC FLEXIBILITY, AND FIRM PERFORMANCE: THE CASE OF THE INDIAN BUSINESS PROCESS OUTSOURCING INDUSTRY
SUCHETA NADKARNI Drexel University POL HERRMANN Iowa State University
We examine the relationships between CEO personality, strategic flexibility (ability to adapt quickly to environmental changes), and firm performance, using a sample of 195 small and medium-sized firms from the Indian business process outsourcing industry. We hypothesize that strategic flexibility mediates the relationships between CEO personality and firm performance. Our results extend previous research by not only highlighting the importance of CEO personality in driving strategic flexibility, but also indicating how each facet of CEO personality either enhances or inhibits strategic flexibility.
With increasingly intense competition, shrinking product cycles, accelerated technological breakthroughs, and progressively greater globalization, the business arena may best be described as being in a chronic state of flux, with continual variation in its external environment. Given such everchanging environmental conditions, a firm’s ability to change direction quickly and to reconfigure strategically is crucial to its success in achieving sustainable competitive advantage (Hitt, Keats, & DeMarie, 1998). In other words, firms need to embrace strategic flexibility (Hitt et al., 1998; Johnson, Lee, Saini, & Grohmann, 2003). Ample empirical evidence supports the contention that strategic flexibility drives firm performance (Grewal & Tansuhaj, 2001; Nadkarni & Narayanan, 2007; Worren, Moore, Cardona, 2002). It is therefore not surprising that the academic and practitioner literature in strategic management is increasingly recognizing strategic flexibility as an important research area. Nevertheless, several gaps remain in scholars’ understanding of how firms embrace strategic flexibility. One particularly
CEO PERSONALITY, STRATEGIC FLEXIBILITY, AND FIRM PERFORMANCE: THE CASE OF THE INDIAN BUSINESS PROCESS OUTSOURCING INDUSTRY
SUCHETA NADKARNI Drexel University POL HERRMANN Iowa State University
We examine the relationships between CEO personality, strategic flexibility (ability to adapt quickly to environmental changes), and firm performance, using a sample of 195 small and medium-sized firms from the Indian business process outsourcing industry. We hypothesize that strategic flexibility mediates the relationships between CEO personality and firm performance. Our results extend previous research by not only highlighting the importance of CEO personality in driving strategic flexibility, but also indicating how each facet of CEO personality either enhances or inhibits strategic flexibility.
With increasingly intense competition, shrinking product cycles, accelerated technological breakthroughs, and progressively greater globalization, the business arena may best be described as being in a chronic state of flux, with continual variation in its external environment. Given such everchanging environmental conditions, a firm’s ability to change direction quickly and to reconfigure strategically is crucial to its success in achieving sustainable competitive advantage (Hitt, Keats, & DeMarie, 1998). In other words, firms need to embrace strategic flexibility (Hitt et al., 1998; Johnson, Lee, Saini, & Grohmann, 2003). Ample empirical evidence supports the contention that strategic flexibility drives firm performance (Grewal & Tansuhaj, 2001; Nadkarni & Narayanan, 2007; Worren, Moore, Cardona, 2002). It is therefore not surprising that the academic and practitioner literature in strategic management is increasingly recognizing strategic flexibility as an important research area. Nevertheless, several gaps remain in scholars’ understanding of how firms embrace strategic flexibility. One particularly