Despite the large literature on leadership, previous studies have
diverged in their assessments of the impact of CEOs on company
performance. The debate has focused on the question of "Does leadership
matter?" The "leadership" proponents state that leadership is a critical
factor in organizational performance. On the other side of the debate,
"constraints" researchers argue that leaders are so constrained that they
have little impact on company performance. Past empirical studies have
failed to satisfactorily resolve the debate. In this paper, we propose
that the debate thus far must be misdirected. Instead, the appropriate
question should be, "When does leadership matter?" We propose a
framework--the "contingent opportunities view"--that resolves the debate
between the "leadership" and "constraint" camps, and then test the
framework in a quantitative study of the contexts in which CEO leadership
matters. We first show that the impact that CEOs can have on company
performance differs markedly by industry. We then find that the industries
in which CEOs have the most significant impact on performance are those
where opportunities are scarce or where CEOs have slack resources. These
results have implications for CEO compensation, CEO succession, and
stock-market reactions to CEO turnover.
Key words: CEO effects, Contingent analyses, Variance decomposition
C&S, OB
45 pages
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