Toward more accurate contextualization of the CEO effect on firm performance

Donald C. Hambrick, Timothy J. Quigley

Research output: Contribution to journalArticlepeer-review

118 Scopus citations

Abstract

We introduce multiple refinements to the standard method for assessing CEO effects on performance, variance partitioning methodology, more accurately contextualizing CEOs' contributions. Based on a large 20-year sample, our new 'CEO in Context' technique points to a much larger aggregate CEO effect than is obtained from typical approaches. As a validation test, we show that our technique yields estimates of CEO effects more in line with what would be expected from accepted theory about CEO influence on performance. We do this by examining the CEO effects in subsamples of low-, medium-, and high-discretion industries. Finally, we show that our technique generates substantially different - and we argue more logical - estimates of the effects of many individual CEOs than are obtained through customary analyses.

Original languageEnglish (US)
Pages (from-to)473-491
Number of pages19
JournalStrategic Management Journal
Volume35
Issue number4
DOIs
StatePublished - Apr 2014

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

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