I did it my way: CEO core self‐evaluations and the environmental contingencies on firm risk taking strategies

Abstract

This study presents an environmentally contingent view of CEO core self-evaluations (CSE) and the effects on strategic risk taking. Drawing on upper echelons theory and approach-avoidance theory, we propose that high CSE CEOs are responsive to rather than disregard environmental cues and pursue strategic risks that enable the firm to capitalize on competitive opportunities while refraining from risks not suited to the external environment. Focusing on two forms of strategic risk—resource allocation risk taking and strategic nonconformity—we develop hypotheses examining the contingencies across levels of environmental concentration, dynamism, and munificence. We test our hypotheses on a panel of 106 CEOs from publicly traded US companies over 1998-2004 using historiometric analyses. Supporting our hypotheses, findings indicate that the effects of CEO CSE on resource allocation risk taking and strategic nonconformity are contingent on industry concentration and environmental dynamism. Findings advance the understanding of CEO’s positive self-regard.