CEO narcissism and innovation ambidexterity: The moderating roles of CEO power and firm reputation
Shuyang You, Zhengyu Li, Liangding Jia, Yahua Cai
kHUB post date: July 5, 2023
Originally published: November 30, 2022 (PDMA JPIM • Vol. 40, Issue 2 • March 2023)
Read time: 50 minutes
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We examine how CEO narcissism affects firm innovation ambidexterity—the relatively balanced development in existing domains through exploitative innovation and in new domains through exploratory innovation. We theorize that firms led by more narcissistic CEOs are less likely to achieve innovation ambidexterity than those led by less narcissistic CEOs. Drawing on the trait activation theory, we further argue that this negative relationship is strongest when the CEO's power is intermediate and when the firm's reputation in the market is intermediate. Our analyses of a large-scale onsite survey collected from 132 Chinese firms, matched with their archival patent information, support our hypotheses. Our study first sheds new light on the existing literature on the influence of firm managers on innovation ambidexterity by considering their different personalities. Second, this study contributes to the strategic leadership research on CEO narcissism by extending its implications to innovation ambidexterity as a new organizational outcome. Third, our study indicates that narcissistic CEOs' priority orders to chase the two conflicting needs—that is, the need to dominate decision-making and the need for acclaim—vary in different scenarios. This finding thus challenges the assumption in prior CEO narcissism research that the behavioral manifestations of narcissistic personalities' different facets are the same regardless of the contextual scenarios.
Practitioner Points
- Firms with narcissistic CEOs are less likely to achieve innovation ambidexterity—that is, the relatively balanced development in existing product domains through exploitative innovation and in new product domains through exploratory innovation. Companies should be cautious about how their CEO's mental model, biased along certain lines by narcissistic needs, may hamper the firms in achieving innovation ambidexterity.
- The negative effect of CEO narcissism on firm innovation ambidexterity is strongest when the power of the CEO in the firm is intermediate. The board of directors should be aware that they can enhance their own role in building an ambidextrous organization through carefully matching the level of power that the CEO may acquire to the CEO's level of narcissistic traits.
- When the reputation of the firm in the market is intermediate, the negative effect of CEO narcissism on firm innovation ambidexterity also reaches the highest level. Firms need to establish a strong culture that emphasizes team spirit to prevent a narcissistic CEO from misattributing that success largely to his/her contributions. In so doing, firms may better protect themselves from CEO narcissism-based decisions that negatively impact innovation ambidexterity.