When Does Leadership Matter? A Contingent Opportunities View of CEO Leadership

Noam  Wasserman; Nitin   Nohria; Bharat   Anand

Chapter | Handbook of Leadership Theory and Practice | 2010

When Does Leadership Matter? A Contingent Opportunities View of CEO Leadership

by Noam Wasserman, Nitin Nohria and Bharat Anand

Abstract

There is by now a long-standing debate on the impact that CEOs have on company performance. Studies of leadership describe how CEOs can significantly impact company performance, while the "constraints" perspective argues that leaders are sufficiently constrained by their environments, and that their ability to impact performance is limited. This paper seeks to alter the framing of this debate by asking, instead, "When does leadership matter?" We develop a "contingent opportunities" theory of leadership and empirically examine our predictions on a dataset of 531 companies from 42 industries from 1979 to 1997. We show that CEO impact differs markedly by industry, and that CEOs have the most significant impact where opportunities are scarce or where CEOs have slack resources.

Keywords: Business Ventures; Leadership; Performance Improvement; Research; Opportunities;

Format: Print

Citation:

Wasserman, Noam, Nitin Nohria, and Bharat Anand. "When Does Leadership Matter? A Contingent Opportunities View of CEO Leadership." Chap. 2 in Handbook of Leadership Theory and Practice, edited by Nitin Nohria and Rakesh Khurana. Harvard Business Press, 2010.

Email mking@hbs.edu for a courtesy copy.

Back to the Roots (BTTR) is a start-up with a social mission to “undo food”—to reconnect people to where their food comes from. In late 2017, Back to the Roots cofounders Nikhil Arora and Alex Velez were contemplating their next move. The company had an eclectic portfolio of products, including ready-to-grow products, which included gardens in a can, and ready-to-eat products, which included cereals, and was being courted by two major players in each category. With an award-winning cereal-based snack bar in their hands, the duo was debating whether they should delve further into the ready-to-eat category. But it was a competitive space. They wondered whether they were ready to launch yet another new product and, if so, what this move would mean for their ready-to-grow product line. Which path would enable them to best achieve their growth goals?

The concept of dynamic capabilities draws its theoretical basis from two classic traditions within the strategy field—the resource-based view of the firm (RBV) (Wernerfelt, 1984) and market positioning (Porter, 1996). A dynamic capability qualifies as a source of sustained heterogeneous firm performance within the RBV framework because it arises from embedded organizational routines that accumulate in a path dependent process—the “stock” explanation of durable advantage (Barney, 1991). Because such a dynamic capability allows a firm to continually reposition itself in product market space, it satisfies the “flow” explanation of current competitive advantage by ensuring that the firm always maintains a wider gap between willingness to pay and cost than competitors (Brandenburger and Stuart, 1996). Indeed, dynamic capabilities seem to give rise to the enviable ability to “always have a competitive advantage in an attractive industry” and so continually deliver superior financial performance regardless of external circumstances.

Email mking@hbs.edu for a courtesy copy.

This Teaching Note explains the theory of the case and teaching plan for the case: Back to the Roots HBS case No. 518-073. Back to the Roots (BTTR) is a start-up with a social mission to “undo food”—to reconnect people to where their food comes from. In late 2017, Back to the Roots cofounders Nikhil Arora and Alex Velez were contemplating their next move. The company had an eclectic portfolio of products, including ready-to-grow products, which included gardens in a can, and ready-to-eat products, which included cereals, and was being courted by two major players in each category. With an award-winning cereal-based snack bar in their hands, the duo was debating whether they should delve further into the ready-to-eat category. But it was a competitive space. They wondered whether they were ready to launch yet another new product and, if so, what this move would mean for their ready-to-grow product line. Which path would enable them to best achieve their growth goals?

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When Does Leadership Matter? A Contingent Opportunities View of CEO Leadership

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