Sydney Finkelstein

CEO Duality as a Double-Edged Sword: How Boards of Directors Balance Entrenchment Avoidance and Unity of Command

When a firms chief executive officer is also the chairperson of its board, directors have opposing objectives. According to organization theory, such CEO duality establishes strong, unambiguous le...

The Influence of Organizational Acquisition Experience on Acquisition Performance: A Behavioral Learning Perspective

Drawing on work from behavioral learning theory in psychology, this study examines the influence of prior organizational acquisition experience on the performance of acquisitions. This theory, which examines both the conditions preceding organization events and organizational responses, predicts that experience effects may range from positive to negative. Consistent with this theory, data from 449 acquisitions show an overall U-shaped relationship between organization acquisition experience and acquisition performance. In addition, the more similar a firms acquisition targets are to its prior targets, the better they perform. These findings suggest that relatively inexperienced acquirers, after making their first acquisition, inappropriately generalize acquisition experience to subsequent dissimilar acquisitions, while more experienced acquirers appropriately discriminate between their acquisitions. Behavioral learning theory, then, may enhance understanding of organization experience effects.

Managing Professional Intellect: Making the Most of the Best

In the postindustrial era, the success of a corporation lies more in its intellectual and systems capabilities than in its physical assets. The capacity to manage human intellect—and to convert it into useful products and services—is fast becoming the critical executive skill of the age. As a result, there has been a flurry of interest in intellectual capital, creativity, innovation, and the learning organization, but surprisingly little attention has been given to managing professional intellect.

How Much Does the CEO Matter? The Role of Managerial Discretion in the Setting of CEO Compensation

The idea that managerial discretion—defined as latitude of action—may be an important determinant of CEO compensation has been recognized for some time. However, in spite of considerable work that ...

Understanding Acquisition Performance: The Role of Transfer Effects

Drawing on work from transfer theory at the individual unit of analysis, this study examines positive and negative transfer effects in organization acquisitions. Data from 43 organizations reveal that, consistent with theories on positive transfer of industry knowledge, similar acquisitions are positively related to acquisition performance. In addition, hypotheses on the negative transfer effects of past acquisition knowledge are borne out: relative to first acquisitions, second acquisitions are found to be negatively associated with acquisition performance. These findings indicate that the application of transfer theory to strategic issues at the organization unit of analysis may provide new insights.

Interindustry merger patterns and resource dependence: a replication and extension of Pfeffer (1972)

This paper reexamines Pfeffer’s (1972) classic study on interindustry merger patterns by replicating and then extending his findings. Pfeffer argued and found that resource dependencies, as measured by interindustry economic transactions, explained merger patterns. The replication investigates how robust the resource dependence explanation for interindustry mergers is when more precise methods are applied to a data set that essentially recreates Pfeffer’s. The extension examines the strength of the resouce dependence effect over time, and offers hypotheses that seek to explain both longitudinal and cross-sectional variation in the strength of this effect. Results indicate that while the significance of the resource dependence effect is once again observed, after applying more refined analytical methods to the data the explanatory power of resource dependence is greatly diminished. In addition, variation in the strength of the resource dependence effect suggests some boundary conditions for the theory, at least with respect to its ability to predict interindustry mergers.

Someone to Look Up To Executive–Follower Ethical Reasoning and Perceptions of Ethical Leadership

Despite a business environment that highlights the importance of executives’ ethical leadership, the individual antecedents of ethical leadership remain largely unknown. In this study, the authors propose that follower perceptions of ethical leadership depend on the executive leader’s cognitive moral development (CMD) and, more importantly, on the relationship between executive leader and follower CMD. In a sample of 143 leader–follower dyads, the authors find a direct positive relationship between leader CMD and perceptions of ethical leadership. Using polynomial regression, they find that ethical leadership is maximized when the leader’s CMD diverges from and is greater than the follower’s CMD. The authors explain these findings using a social learning theory framework. Leaders who are more advanced ethical reasoners relative to their followers are likely to stand out as salient ethical role models whose ethics-related communication and behavior attract followers’ attention. The authors discuss the research and practical implications of these findings.

ISOMORPHISM IN REVERSE: INSTITUTIONAL THEORY AS AN EXPLANATION FOR RECENT INCREASES IN INTRAINDUSTRY HETEROGENEITY AND MANAGERIAL DISCRETION

Abstract DiMaggio and Powell (1983) argued that organizations, in their quest for legitimacy, are subjected to isomorphic pressures which produce increasing similarity among peer organizations over time: “Once an organizational field becomes well established ... there is an inexorable push toward homogenization.” Yet, in contradiction to this “iron cage” hypothesis, many industries became more heterogeneous, not more homogeneous, in their profiles during the latter decades of the twentieth century, particularly between about 1980 and 2000 (at least on the American landscape). Why didn’t “inexorable homogenization” occur? We argue that DiMaggio and Powell were correct about the forces that give rise to isomorphism but failed to anticipate several major macrosocial trends that caused those forces all to move in directions that diminished, rather than accentuated, isomorphism. For example, DiMaggio and Powell argued that ambiguity about goals will propel isomorphic change; but the goals for publicly-traded U.S. corporations became less ambiguous. They hypothesized that the fewer the alternative organizational models in a field, the faster the rate of isomorphism; but the array of organizational models increased significantly. We empirically illustrate the increased heterogeneity that occurred within American industries by tracing the trend toward divergence – on several dimensions of strategy and performance – within the steel industry. An analysis of 18 additional industries similarly yields far more evidence of increased heterogeneity than of increased homogeneity over the latter decades of the twentieth century. We go on to argue that reduced isomorphic pressures not only engendered greater intraindustry variety, but also increased managerial discretion, which contributed greatly to the romanticization of CEOs that occurred during the period 1980–2000.

Vision by design: a reflexive approach to enterprise regeneration

Purpose – This paper aims to introduce a strategic visioning method called vision by design and to use the example of Harley‐Davidsons corporate regeneration to illustrate how the method works in practice. This approach conceives visioning as a practical tool of management whose power stems from the facilitation of strategic conversations among stakeholders and the reflexive engagement of business leaders in past‐present‐future thinking.Design/methodology/approach – The paper presents a four‐dimensional visioning model that facilitates exploration of both the internal and external contexts of the business. The advantage of the approach lies in breaking down vision into its component parts, lending simplicity and structure to the visioning process. The study employs a case study of the turnaround of Harley‐Davidson to illustrate this method.Findings – The paper finds that, in undertaking corporate regeneration, Harley‐Davidsons senior management recognized the need for a vision that was comprehensive, in...

Why is Industry Related to CEO Compensation?: A Managerial Discretion Explanation

Although research on CEO compensation is voluminous, only limited attention has been paid to the role of industry. In this paper we develop an industry-level explanatory theory based on the concept of managerial discretion, and test it using a multi-level structural equation modeling approach at the industry level. In contrast to previous work, this theory offers an explanation of why, and how, industry is related to CEO compensation. In a sample of 933 firms in 109 3-digit SIC industries, we find that the level of industry discretion is significantly related to both the level of CEO compensation, and the proportion of performance-contingent CEO compensation. The implications of these findings for industry-level research in general, and research on CEO compensation in particular, are discussed.