Effects of an Advancing Tenure on CEO Cognitive Complexity

We study how the cognitive complexity of chief executive officers (CEOs) changes during their tenures. Drawing from prior theory and research, we argue that CEOs attain gradually greater role-specific knowledge, or expertise, as their tenures advance, which yields more complex thinking. Beyond examining the main effect of CEO tenure on cognitive complexity, we consider three moderators of this relationship, each of which is expected to influence the accumulation of expertise over a CEO’s time in office: industry dynamism, industry jolts, and CEO positional power. We conduct our tests on a sample of 684 CEOs of public corporations. The analytic centerpiece of our study is a novel index of CEO cognitive complexity based on CEOs’ language patterns in the question-and-answer portions of quarterly conference calls. As part of our extensive theory of measurement, we provide evidence of the reliability and validity of our index. Our results indicate that CEOs, in general, experience substantial increases in cognitive complexity over their time in office. Examined moderators somewhat, but modestly, alter this general trajectory, and nonlinearities are not observed. We discuss the implications of our findings.

[1]  Robert E. Hoskisson,et al.  Examination of CEO–CFO Social Interaction through Language Style Matching: Outcomes for the CFO and the Organization , 2019, Academy of Management Journal.

[2]  Cynthia E. Devers,et al.  Give it to us straight (most of the time): Top managers’ use of concrete language and its effect on investor reactions , 2018 .

[3]  M. Porter,et al.  How CEOs Manage Time , 2018 .

[4]  Michael D. Pfarrer,et al.  Crises and Crisis Management: Integration, Interpretation, and Research Development , 2017 .

[5]  T. Reus,et al.  The Acquisitive Nature of Extraverted CEOs , 2017 .

[6]  Nicola M. Pless,et al.  Business Statesman or Shareholder Advocate? CEO Responsible Leadership Styles and the Micro‐Foundations of Political CSR , 2016 .

[7]  Morten T. Hansen,et al.  The Grammar of Decoupling: A Cognitive-Linguistic Perspective on Firms’ Sustainability Claims and Stakeholders’ Interpretation , 2016 .

[8]  Ryan L. Boyd,et al.  The Development and Psychometric Properties of LIWC2015 , 2015 .

[9]  Krishna Savani,et al.  Perceiving outcomes as determined by external forces: The role of event construal in attenuating the outcome bias , 2015 .

[10]  Donald C. Hambrick,et al.  CEO Ideology as an Element of the Corporate Opportunity Structure for Social Activists , 2014 .

[11]  Joanna Tochman Campbell,et al.  You Don’t Forget Your Roots: The Influence of CEO Social Class Background on Strategic Risk Taking , 2014 .

[12]  P. Suedfeld,et al.  Integrative Complexity at Forty: Steps Toward Resolving the Scoring Dilemma , 2014 .

[13]  T. Hahn,et al.  Cognitive Frames in Corporate Sustainability: Managerial Sensemaking with Paradoxical and Business Case Frames , 2014 .

[14]  Lucian Gideon Conway,et al.  Automated Integrative Complexity: Current Challenges and Future Directions , 2014 .

[15]  Lucian Gideon Conway,et al.  Automated Integrative Complexity , 2014 .

[16]  Michael D. Young,et al.  Increased Complexity Has Its Benefits , 2014 .

[17]  Sydney E. Scott,et al.  Integrative Complexity Coding Raises Integratively Complex Issues , 2014 .

[18]  Daniel Gamache,et al.  Motivated to acquire? The impact of ceo regulatory focus on firm acquisitions , 2014 .

[19]  D. Hambrick,et al.  CEO Career Variety: Effects on Firm-Level Strategic and Social Novelty , 2014 .

[20]  Celia Moore,et al.  “Just think about it”? Cognitive complexity and moral choice , 2014 .

[21]  Matthew D. Cain,et al.  CEO Personal Risk-Taking and Corporate Policies , 2014 .

[22]  Thomas W. H. Ng,et al.  Does longer job tenure help or hinder job performance , 2013 .

[23]  M. Tushman,et al.  Organizational Ambidexterity: Past, Present and Future , 2013 .

[24]  Daniel A. Levinthal,et al.  The Behavioral Theory of the Firm: Assessment and Prospects , 2012 .

[25]  Jan van Dalen,et al.  The role of deliberate practice in the acquisition of clinical skills , 2011, BMC medical education.

[26]  P. Tetlock,et al.  The Effects of Top Management Team Integrative Complexity and Decentralized Decision Making on Corporate Social Performance , 2011 .

[27]  P. Suedfeld,et al.  Two Years of Ups and Downs: Barack Obama's Patterns of Integrative Complexity, Motive Imagery, and Values , 2011 .

[28]  Michael P. Haselhuhn,et al.  A Face Only an Investor Could Love , 2011, Psychological science.

[29]  Shari R. Veil.  Mindful Learning in Crisis Management , 2011 .

[30]  Erik Dane.  Reconsidering the Trade-off Between Expertise and Flexibility: a Cognitive Entrenchment Perspective , 2010 .

[31]  S. Nadkarni,et al.  CEO Personality, Strategic Flexibility, and Firm Performance: The Case of the Indian Business Process Outsourcing Industry , 2010 .

[32]  Sarah Kaplan.  Research in Cognition and Strategy: Reflections on Two Decades of Progress and a Look to the Future , 2010 .

[33]  Vincent L. Barker,et al.  CEO Commitment to the Status Quo: Replication and Extension Using Content Analysis , 2010 .

[34]  Tim Loughran,et al.  When is a Liability not a Liability? Textual Analysis, Dictionaries, and 10-Ks , 2010 .

[35]  J. Pennebaker,et al.  The Psychological Meaning of Words: LIWC and Computerized Text Analysis Methods , 2010 .

[36]  R. Rivera,et al.  The Concept of Corporate Strategy , 2009 .

[37]  Jamal Shamsie,et al.  Experiencing the Improbable: Rare Events and Organizational Learning , 2009, Organ. Sci..

[38]  William H. Starbuck,et al.  Cognitive Reactions to Rare Events: Perceptions, Uncertainty, and Learning , 2009, Organ. Sci..

[39]  J. P. Eggers,et al.  Cognition and Renewal: Comparing CEO and Organizational Effects on Incumbent Adaptation to Technical Change , 2009, Organ. Sci..

[40]  James M. LeBreton,et al.  Answers to 20 Questions About Interrater Reliability and Interrater Agreement , 2008 .

[41]  이지혜,et al.  Expertise , 2008, Current Biology.

[42]  Giovanni Gavetti,et al.  On the Origin of Strategy: Action and Cognition over Time , 2007, Organ. Sci..

[43]  D. Hambrick.  Upper Echelons Theory: An Update , 2007 .

[44]  Lucian Gideon Conway,et al.  Integrative Complexity of 41 U.S. Presidents , 2007 .

[45]  Brian D. Johnson,et al.  Is the Magic Still There? The Use of the Heckman Two-Step Correction for Selection Bias in Criminology , 2007 .

[46]  V. Narayanan,et al.  Strategic schemas, strategic flexibility, and firm performance: the moderating role of industry clockspeed , 2007 .

[47]  Cindy K. Chung,et al.  Winning words: Individual differences in linguistic style among U.S. presidential and vice presidential candidates , 2007 .

[48]  Rhonda K. Reger,et al.  A Content Analysis of the Content Analysis Literature in Organization Studies: Research Themes, Data Sources, and Methodological Refinements , 2007 .

[49]  Donald C. Hambrick,et al.  Attention as the Mediator Between Top Management Team Characteristics and Strategic Change: The Case of Airline Deregulation , 2006, Organ. Sci..

[50]  Shuping Chen,et al.  Favorable versus Unfavorable Recommendations: The Impact on Analyst Access to Management-Provided Information , 2006 .

[51]  David J. Miller,et al.  How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance , 2006 .

[52]  Edward Levitas,et al.  CEO Tenure And Company Invention Under Differing Levels of Technological Dynamism , 2005 .

[53]  Wendy K. Smith,et al.  Managing Strategic Contradictions: A Top Management Model for Managing Innovation Streams , 2005 .

[54]  Hanna Zijlstra,et al.  Validiteit van de Nederlandse versie van de Linguistic Inquiry and Word Count (liwc) , 2005 .

[55]  Avshalom Caspi,et al.  Personality development: stability and change. , 2005, Annual review of psychology.

[56]  Fernand Gobet,et al.  Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/acp.1110 Chunking Models of Expertise: Implications for Education FERNAND GOBET* , 2022 .

[57]  K. A. Ericsson,et al.  Recent advances in expertise research: a commentary on the contributions to the special issue , 2005 .

[58]  B. Roberts,et al.  Evaluating Five Factor Theory and social investment perspectives on personality trait development , 2005 .

[59]  Barry M. Staw,et al.  Lend me your wallets: the effect of charismatic leadership on external support for an organization , 2004 .

[60]  Gregory S. Miller,et al.  Managerial and Investor Responses to Disclosure Regulation: The Case of Reg Fd and Conference Calls , 2004 .

[61]  J. Pennebaker,et al.  Psychological aspects of natural language. use: our words, our selves. , 2003, Annual review of psychology.

[62]  Antoinette Schoar,et al.  Managing with Style: The Effect of Managers on Firm Policies , 2003 .

[63]  J. Pennebaker,et al.  PERSONALITY PROCESSES AND INDIVIDUAL DIFFERENCES Words of Wisdom: Language Use Over the Life Span , 2003 .

[64]  Anne E. Sartori.  An Estimator for Some Binary-Outcome Selection Models Without Exclusion Restrictions , 2003, Political Analysis.

[65]  Cameron Anderson,et al.  Power, Approach, and Inhibition , 2003 .

[66]  James D. Westphal,et al.  Getting by with the Advice of Their Friends: CEOs' Advice Networks and Firms' Strategic Responses to Poor Performance , 2003 .

[67]  Jeffrey D. Kubik,et al.  Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts , 2003 .

[68]  Timothy G. Pollock,et al.  The Role of Power and Politics in the Repricing of Executive Options , 2002 .

[69]  Albert A. Cannella,et al.  Power Dynamics Within Top Management and Their Impacts on CEO Dismissal Followed by Inside Succession , 2002 .

[70]  Ulrike Malmendier,et al.  CEO Overconfidence and Corporate Investment , 2002 .

[71]  George H. Tompson,et al.  Examining the effect of complexity in strategic group knowledge structures on firm performance , 2002 .

[72]  Kimberly A. Neuendorf,et al.  The Content Analysis Guidebook , 2001 .

[73]  Nicolaj Siggelkow.  Change in the Presence of Fit: the Rise, the Fall, and the Renaissance of Liz Claiborne , 2001 .

[74]  Jamal Shamsie,et al.  Learning across the life cycle: Experimentation and performance among the hollywood studio heads , 2001 .

[75]  Mason A. Carpenter,et al.  Bundling Human Capital with Organizational Context: The Impact of International Assignment Experience on Multinational Firm Performance and CEO Pay , 2001 .

[76]  Albert A. Cannella,et al.  So Close and Yet So Far: Promotion Versus Exit for CEO Heirs Apparent , 2001 .

[77]  J. Pennebaker,et al.  Linguistic styles: language use as an individual difference. , 1999, Journal of personality and social psychology.

[78]  Jeffrey M. Wooldridge,et al.  Introductory Econometrics: A Modern Approach , 1999 .

[79]  P. Tetlock,et al.  Accounting for the effects of accountability. , 1999, Psychological bulletin.

[80]  G. Huber,et al.  Firm and industry as determinants of executive perceptions of the environment , 1998 .

[81]  Rex B. Kline,et al.  Principles and Practice of Structural Equation Modeling , 1998 .

[82]  Erich N. Brockmann,et al.  Strategic Decision Making: The Influence of CEO Experience and Use of Tacit Knowledge , 1997 .

[83]  W. Ocasio.  TOWARDS AN ATTENTION-BASED VIEW OF THE FIRM , 1997 .

[84]  Jonathan L. Johnson,et al.  Sources of CEO Power and Firm Financial Performance: A Longitudinal Assessment , 1997 .

[85]  W. Boeker.  Strategic Change: The Influence Of Managerial Characteristics And Organizational Growth , 1997 .

[86]  Barbara S. Lawrence,et al.  Perspective---The Black Box of Organizational Demography , 1997 .

[87]  R. Grant.  Toward a Knowledge-Based Theory of the Firm,” Strategic Management Journal (17), pp. , 1996 .

[88]  David J. Miller,et al.  The Resource-Based View of the Firm in Two Environments: The Hollywood Film Studios From 1936 to 1965 , 1996 .

[89]  James D. Westphal,et al.  Who Shall Succeed? How CEO/Board Preferences and Power Affect the Choice of New CEOs , 1996 .

[90]  Andrew G. Kotulic,et al.  Rationality in Strategic Decision Processes, Environmental Dynamism and Firm Performance , 1995 .

[91]  William H. Glick,et al.  Functional Background as A Determinant of Executives' Selective Perception , 1995 .

[92]  R. Rubin,et al.  A New Measure of Cognitive Flexibility , 1995 .

[93]  James D. Westphal,et al.  Who Shall Govern? CEO/Board Power, Demographic Similarity, and New Director Selection , 1995 .

[94]  Stefan Wally,et al.  Personal and Structural Determinants of the Pace of Strategic Decision Making , 1994 .

[95]  G. Johnson,et al.  Ceos' cognitive maps and the scope of the organization , 1994 .

[96]  W. Ocasio,et al.  Political Dynamics and the Circulation of Power: CEO Succession in U.S. Industrial Corporations, 1960-1990 , 1994 .

[97]  I. Nonaka.  A Dynamic Theory of Organizational Knowledge Creation , 1994 .

[98]  D. Hambrick,et al.  TOP EXECUTIVE COMMITMENT TO THE STATUS QUO: SOME TESTS OF ITS DETERMINANTS , 1993 .

[99]  Paul C. Nutt,et al.  Flexible Decision Styles And The Choices Of Top Executives , 1993 .

[100]  Robert J. Crutcher,et al.  The role of deliberate practice in the acquisition of expert performance. , 1993 .

[101]  A. Huff,et al.  STRATEGIC GROUPS: A COGNITIVE PERSPECTIVE , 1993 .

[102]  S Finkelstein,et al.  Power in top management teams: dimensions, measurement, and validation. , 1992, Academy of Management journal. Academy of Management.

[103]  C. Eden.  ON THE NATURE OF COGNITIVE MAPS , 1992 .

[104]  E. Brill.  A Simple Rule-Based Part of Speech Tagger , 1992, HLT.

[105]  D. Hambrick,et al.  The seasons of a CEO's tenure. , 1991, Academy of management review. Academy of Management.

[106]  Beverly B. Tyler,et al.  Strategic decision models: Integrating different perspectives , 1991 .

[107]  Alan D. Meyer,et al.  ENVIRONMENTAL JOLTS AND INDUSTRY REVOLUTIONS: ORGANIZATIONAL RESPONSES TO DISCONTINUOUS CHANGE , 1990 .

[108]  D. Hambrick,et al.  Top-management-team tenure and organizational outcomes: The moderating role of managerial discretion. , 1990 .

[109]  Kathleen M. Eisenhardt,et al.  Making Fast Strategic Decisions In High-Velocity Environments , 1989 .

[110]  Roderick E. White,et al.  Top management teams and organizational renewal , 1989 .

[111]  Barbara W. Keats,et al.  A Causal Model of Linkages Among Environmental Dimensions, Macro Organizational Characteristics, and Performance , 1988 .

[112]  J. Walsh.  Top management turnover following mergers and acquisitions , 1988 .

[113]  Jeffrey K. Liker,et al.  A day at the races: A study of IQ, expertise, and cognitive complexity. , 1986 .

[114]  D. Hambrick,et al.  Upper Echelons: The Organization as a Reflection of Its Top Managers , 1984 .

[115]  Gregory G. Dess,et al.  Dimensions of Organizational Task Environments. , 1984 .

[116]  L. J. Bourgeois,et al.  Organizational Slack and Political Behavior Among Top Management Teams. , 1983 .

[117]  Lung-fei Lee.  Generalized Econometric Models with Selectivity , 1983 .

[118]  Barry M. Staw,et al.  Threat-rigidity effects in organizational behavior: A multilevel analysis. , 1981 .

[119]  Paul J. Feltovich,et al.  Categorization and Representation of Physics Problems by Experts and Novices , 1981, Cogn. Sci..

[120]  C. Hale.  Cognitive complexity‐simplicity as a determinant of communication effectiveness , 1980 .

[121]  R. Billings.  A Model of Crisis Perception: A Theoretical and Empirical Analysis. , 1980 .

[122]  Craig Eric Schneier,et al.  Measuring Cognitive Complexity: Developing Reliability, Validity, and Norm Tables for a Personality Instrument , 1979 .

[123]  D. Curry,et al.  An Assessment of the Role Construct Repertory Test , 1978 .

[124]  B. E. Partridge,et al.  The Nature of Managerial Work , 1974 .

[125]  C. H. Castore,et al.  Leadership in negotiations and the complexity of conceptual structure. , 1968, The Journal of applied psychology.

[126]  J. S. Vannoy.  GENERALITY OF COGNITIVE COMPLEXITY-SIMPLICITY AS A PERSONALITY CONSTRUCT. , 1965, Journal of personality and social psychology.

[127]  M. Shubik,et al.  A Behavioral Theory of the Firm. , 1964 .

[128]  W. A. Scott.  Cognitive Complexity and Cognitive Flexibility , 1962 .

[129]  J. Bieri.  Cognitive complexity-simplicity and predictive behavior. , 1955, Journal of abnormal psychology.

[130]  H. Simon,et al.  A Behavioral Model of Rational Choice , 1955 .

[131]  David A. Guenther,et al.  Is Tax Avoidance Related to Firm Risk , 2017 .

[132]  Marjorie A. Lyles,et al.  Organizational Learning , 2007 .

[133]  Lowell W. Busenitz,et al.  Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making , 1997 .

[134]  Helmut Schmidt,et al.  Probabilistic part-of-speech tagging using decision trees , 1994 .

[135]  David J. Miller,et al.  The Architecture of Simplicity , 1993 .

[136]  Charles P. Smith.  Motivation and personality: Name Index , 1992 .

[137]  David J. Miller,et al.  Stale in the Saddle: CEO Tenure and the Match Between Organization and Environment , 1991 .

[138]  M. Bazerman,et al.  BLIND SPOTS IN INDUSTRY AND COMPETITOR ANALYSIS: IMPLICATIONS OF INTERFIRM (MIS)PERCEPTIONS FOR STRATEGIC DECISIONS , 1991 .

[139]  R. Bagozzi,et al.  On the evaluation of structural equation models , 1988 .

[140]  D. Hambrick,et al.  Managerial discretion: A bridge between polar views of organizational outcomes. , 1987 .

[141]  Anthony R White,et al.  Strategic management , 1986 .

[142]  A. Meyer.  Adapting to environmental jolts. , 1982, Administrative science quarterly.

[143]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[144]  H. Simon,et al.  Perception in chess , 1973 .

[145]  W. H. Crockett.  Cognitive complexity and impression formation. , 1965, Progress in experimental personality research.