Seminar in presence

Building BL26/B – Room 0.17 Sala Consiglio (ground floor)
Department of Management, Economics and Industrial Engineering
Via R. Lambruschini, 4/B

Mariano Heyden
Monash Business School, Melbourne

Abstract:

The pursuit of technological innovation is risky and can produce extreme outcomes – both breakthroughs and low-value innovations. Prior studies have shown that innovation outcomes reflect the risk dispositions of the CEO, with two perspectives central to this debate. Agency theory assumes that CEOs tend to be inherently risk averse and avoid extreme outcomes, thus have to be incentivized via compensation arrangements. In turn, behavioral perspectives relax these assumptions, acknowledging that overconfident CEO are innately inclined towards taking risks.
Connecting these logics, we hypothesize and find that, separately, both overconfident CEOs and option-based compensation can influence extreme positive and negative innovation outcomes. Yet, overconfident CEOs are less sensitive to compensation-based incentives, suggesting a previously undocumented substitutive effect at play and further support for the ‘weak incentive’ perspective on how compensation arrangements condition the innate dispositions of CEOs. Interestingly, our extended analysis uncovers that overconfident CEOs reduce low-value innovations and are able to tilt the firm’s innovation outcomes toward extreme positive results. Together, this suggests that under some compensation arrangements, CEO overconfidence may not be necessarily undesirable for mitigating extreme innovation outcomes. We discuss implications for theory and practice.

Mariano Heyden is Professor of Strategy & International Business at the Monash Business School, where he also serves as Director of PhD Degrees in the Department of Management. His research tackles the characteristics of senior business leaders that enable innovation and change, appearing in leading scholarly journals such as Journal of Management, Journal of Applied Psychology, Research Policy, Organization Studies, Journal of Management Studies, Journal of Corporate Finance, The Leadership Quarterly, Human Resource Management, Industrial & Corporate Change, and Long Range Planning. He is a Trustee of the Society for the Advancement of Management Studies (UK) and a Representative-at-Large of the Strategic Management Society (US). His thought leadership has been covered by Harvard Business Review, MIT Sloan Management Review, ABC News, The Australian, Business Insider, The Conversation, Sydney Morning Herald, Manage Magazine, and the World Economic Forum. He holds several editorial roles, including Senior Editor for the Strategic Management and Organizational Behavior & HRM tracks at Journal of Business Research.

Please click here to register.