Steering the Intangible Wheel: Chief Executive Officer Effect on Corporate Cultural Change

Xina Li (), Guoli Chen () and Rui Shen ()
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Xina Li: Strategy Area, INSEAD, Singapore 138676
Guoli Chen: Strategy Area, INSEAD, Singapore 138676
Rui Shen: Shenzhen Finance Institute, School of Management and Economics, The Chinese University of Hong Kong, Shenzhen 518172, China

Organization Science, 2024, vol. 35, issue 5, 1770-1794

Abstract: We provide large-scale empirical evidence of how much chief executive officers (CEOs) change corporate culture. To do this, we use employee reviews to measure corporate cultural change in S&P 1500 firms. In a variance decomposition analysis, we find a modest effect of CEOs on corporate cultural change. The effect of CEOs on cultural change is larger than industry effect but smaller than firm effect. Regression analysis in the context of CEO succession further shows consistent evidence of a modest effect of CEO succession on corporate cultural change. In addition, the relationship between CEOs and cultural change is not likely to be fully explained by time trend, reverse causality, sample selection bias, and omitted variable bias. An investigation into the contextual contingencies of the CEO-cultural change relationship suggests that succession characteristics, such as predecessor influence and turnaround situation, weaken postsuccession cultural change, but industry task environment has a weak moderation effect. Overall, our study contributes to the literature on strategic leadership and corporate culture.

Keywords: corporate culture; CEO effect; executive succession; variance decomposition (search for similar items in EconPapers)
Date: 2024
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