This is a study of the determinants of risk-taking by chief executive officers (CEOs). We adopt an interactionist logic, proposing that executive confidence – a key ingredient in assessing risks – is shaped by contextual stimuli but moderated by the executive’s disposition, particularly his or her degree of narcissism. We introduce the concept of “capability cues,” which are contextual signals that decision makers might reasonably interpret as indicators of their current level of overall ability, arguing that positive cues will induce boldness, while negative cues will induce timidity. Drawing from prior theory and research about how narcissists react to stimuli, we hypothesize that highly narcissistic CEOs will be relatively unresponsive to objective indicators of their performance; in contrast, highly narcissistic CEOs will be exceptionally emboldened by social praise (in the forms of media praise and media awards). We test our theory on a longitudinal sample of 152 CEOs in the computer hardware and software sectors, using multiple archival data sources. We find considerable support for our several hypotheses, thus opening a new theoretical avenue, and contributing new evidence, regarding the antecedents of risk-taking.
CHATTERJEE, A. and HAMBRICK, D. (2010). CEO Personality, Capability Cues, and Risk-taking: How Narcissists React to Their Successes and Stumbles. In: Academy of Management Best Paper Proceedings. Academy of Management.