Even lovers CEOs frequently invest in breakthrough technologies
Personal computer, online news, e-books, and low-cost airlines: These are just some examples of groundbreaking - so-called "discontinuous" - innovations that appeared in principle to contradict their time the existing business understanding and hence all markets swirled. What but it depends on whether an established company committing to a discontinuous technology or not? In one study, Wolf-Christian Gerstner and Andreas König studied (both University of Erlangen-Nuremberg) and Albrecht Enders (IMD, Lausanne) and Donald C. Hambrick (Pennsylvania State University) possible factors using the example of the reaction of traditional pharmaceutical companies to biotechnology between 1980 and 2008. The result: more than previously thought, the decision is for or against investing into a discontinuous technology of the personality of the CEOs and his ego.
A finding that puts some corporate decisions in a different light in retrospect. "We found that the more narcissistic the CEO is, the more likely it is that a company will invest in discontinuous technologies," says Andreas König. "Pharmaceutical companies run by particularly narcissistic CEOs were more than twice as likely to undertake biotech initiatives through acquisitions, alliances, or internal research projects than those run by less narcissistic CEOs."
Scientists ascribe five central characteristics to narcissists:
(1) Exaggerated self-confidence, which, however, (2) needs constant attention, (3) a strong drive for dominance, (4) a lack of will to integrate the feelings of others into one's own decisions, and (5) a certain restlessness and impatience. In previous research, co-author Donald Hambrick explored the topic of narcissism among CEOs. One of the challenges was to develop measures of narcissism among CEOs: Since a survey using questionnaires was not promising here, it was necessary to develop an evaluation model that is based on indicators - such as the prominence of a CEO's photo in the annual report or the relative Frequency of his name being mentioned in the press releases of the respective company. A high degree of consistency was found within the consideration of a single person, while the result differed significantly in comparison with the predecessor or successor of the respective CEO.
"Narcissism is an extremely interesting personality trait because it is ambivalent," explains Wolf-Christian Gerstner. Together with Andreas König, Albrecht Enders and Donald Hambrick, he developed the thesis that increased narcissism among CEOs means that the companies they manage are more likely to adopt new technologies. "Narcissists believe they can master such innovations, while other CEOs tend to shy away from taking too much risk," says Gerstner. At the same time, the researchers assumed that technologies that are said to have a groundbreaking effect will receive much more public attention. So a CEO can expect to get more attention by investing in discontinuous technologies than by following the same paths the company has always walked. The researchers also found this to be true.
Another central contribution of the study builds on this effect. "In the course of our study, we observed how much public attention for biotechnology - as reflected in the media - fluctuated over time," reports Albrecht Enders. “When the technology first came about, it didn't get much attention. Then there were phases of great, ebb and flow of public debates, both about the opportunities offered by biotechnology and about its economic, medical, and social risks. Nowadays, biotechnology has largely disappeared from the discussion.”
The authors examined whether narcissistic CEOs take the initiative, especially in phases of high public attention - with a clear result: "Narcissistic CEOs apparently have a great sensitivity for the spotlight. When the chance of this happening is particularly high—for example, at a time when the press is writing a lot about a technology and describing it as salutary but also risky—then narcissistic CEOs are even more likely to invest in such discontinuities than they already are ", Andreas König describes one of the core results of the study. "The influence of the public on entrepreneurial innovation - and radical innovation in particular: This is certainly one of the most important findings that our study brings to organizational research. If we can better understand the public and its enormous impact on business activities, we will also be able to better understand and predict the commercial success of certain technologies.”
It is also particularly important to the authors that their study paints a more nuanced picture of narcissistic executives. "Narcissists are not better or worse CEOs," says Wolf-Christian Gerstner: "But they may be better than their reputation. They can help to overcome organizational inertia and rigidity. And if a new technology is actually superior to the conventional approach, a narcissistic CEO could possibly mean the survival of a company.” According to the authors, the decisive challenge for entrepreneurial practice will now lie in the negative facets of narcissists such as their lack of critical ability and empathy - to control as much as possible in order to be able to use the positive sides in the long term.
The article "CEO Narcissism, Audience Engagement, and Organizational Adoption of Technological Discontinuities" by Wolf-Christian Gerstner, Andreas König (both FAU Erlangen-Nürnberg), Albrecht Enders (IMD, Lausanne) and Donald C. Hambrick (Pennsylvania State University) is published in June 2013 in the Administrative Science Quarterly, the most important journal in the field of strategic organizational research.
Source: Erlangen [ Friedrich Alexander University ]
