CEOs’ Personality and Abilities matter
In his doctoral thesis Dominik Burger (2017) investigated what roles personality and abilities plays for CEO:s in small and medium companies (SME). Using Higgins "Regulatory focus theory", Burger used CEO:s promotionand prevention focus to figure out to what extend it affected the performance of the SME:s.
Individuals with a promotional focus tend to be driven by the need for growth and advancement, and thus – maximize achievements.
Individuals with a high prevention focus tend to have an interdependent self-view, are driven by the need for security and responsibility, and thus – aim to avoid failures.
The analysis of 152 survey responses from CEOs in Switzerland revealed that CEOs’ promotion focus positively affects the firm’s exploration and exploitation.
Exploration is associated with “search, experimentation, and variation,” whereas exploitation refers to “productivity and efficiency through choice, execution, and variance reduction” (Lavie et al., 2010: 110)
While CEOs’ prevention focus is negatively associated with the firm’s exploration but not significantly related to its exploitation. The positive relationships between CEOs’ promotion focus and the firm’s exploration/exploitation activities are enhanced when competition is intense.
Burger also analyzed how CEOs’ regulatory focus relates to firm performance through empathy. The analysis of 133 survey responses from CEOs in Switzerland revealed that CEOs’ empathy mediates the positive relationship between their promotion focus and the firm’s performance. CEOs’ prevention focus is negatively related to empathy, and CEOs’ empathy does not mediate the negative relationship between their prevention focus and the firm’s performance.
Summing up, the dissertation shows that CEOs’ regulatory focus, especially their promotion focus, influences the firm’s exploration and exploitation. In addition, the dissertation reveals that CEOs’ promotion focus affects the firm’s performance, and that this effect is mediated by their empathy for customers. As such, CEOs’ personal characteristics and abilities play an important role in the exploration, exploitation, and performance of SMEs.