Associate Professor of Strategy
Assistant Professor of Strategy
Q41718: Strategic Leadership; Corporate Strategy; Regulatory Focus; Micro-foundations of Strategy;
How CEO and CFO Regulatory Focus Interact to Shape the Firm’s Corporate Strategyin Behavioral Strategy for Competitive Advantage
Authors: Chen Guoli, Meyer-Doyle Philipp
Existing research has documented the role that CEOs, and especially CEO regulatory focus, play in shaping firm strategy. Yet, the impact of CEOs is constrained by that of the other executives in the firm, and the strategic leadership literature has repeatedly called for more research that examines the interaction between the CEO and other executives, most notably the CFO.The authors respond to this call and examine how the CEO’s and CFO’s regulatory focus interact to shape the firm’s corporate strategy and what happens in cases where they are misaligned. Making use of micro-data on the regulatory focus of CEOs and CFOs and their firms’ corporate strategy actions, the authors find that both are important drivers of the firms’ growth-oriented initiatives, and that this impact is even amplified if they align. In cases of misalignment, the authors find that on average CEOs prevail, but this effect depends on CEOs’ power. Interestingly, misalignment between CEO and CFO regulatory focus has positive performance implications, suggesting important complementarities between CEOs and CFOs.Overall, this study contributes to the strategic leadership literature by explicating important interactions and complementarities between the CEO and CFO with regards to their regulatory focus in shaping firm strategic outcomes. The authors also contribute to the literature on corporate strategy by highlighting important executive-interaction based drivers of corporate strategic decisions.Finally, the authors also extend the literature on the microfoundations of strategy by showing how important characteristics of executives interact and aggregate to shape the firm’s strategic initiatives and its performance.