I think I can, I think I can: a cognitive appraisal theory perspective on CEO external advice seeking and firm strategic change in response to poor firm performance
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This dissertation considers factors that influence how top executives search for information in response to poor performance and how top managers’ information search behaviors, in turn, impact the level of firm strategic change they pursue. This research focuses on a particular kind of information search, specifically CEOs’ efforts to obtain advice from executives of other firms, and it considers contingencies which might determine the extent to which CEOs of poorly performing firms engage in restricted search in the form of high levels of advice seeking from friends or low levels of advice seeking from non-friends. The conceptual framework developed integrates insights from threatrigidity theory and contemporary psychological research on stress and coping, and its central thesis is that CEOs of poorly performing firms will be less prone to restricted search to the extent they are likely to be confident that they can effect performance-enhancing strategic change. Argument in support of specific hypotheses suggests that, because high CEO position tenure, high CEO industry experience, high CEO extra-industry experience, large organizational size, broad organizational product/service offerings, and low rival firm aggressiveness will increase CEO confidence, these factors will reduce CEOs’ tendencies to restricted information search in response to poor performance. These predictions are tested using a dataset that combines archival data on hospital characteristics with information on hospital CEOs and their advisors captured via an original survey. All of these predictions receive at least partial support. In considering how CEOs’ advice-seeking behaviors might, in turn, influence the level of strategic change that a firm pursues, this dissertation argues that restricted search (e.g., high levels of advice seeking from friends) will be associated with low levels of strategic change. The empirical results also support these predictions. This dissertation advances understanding of the processes that shape firm tendencies to persist in or change their strategies when they are performing poorly. It demonstrates how CEOs’ propensities to engage in strategic inertiapromoting patterns of information search in response to poor firm performance are reduced under conditions likely to increase their confidence in their abilities to effect performance-enhancing strategic change.