Director Deaths, CEO Relational Identification, and the Search for a Quiet Life: Evidence from Organizational Innovation Output
2014-11-13 08:37:58
by Guoli Chen, INSEAD

Friday, November 28, 2014 | 2:00pm – 3:30pm | Room 335, HSBC Business School Building


Anecdotal and empirical evidence from a broad range of sources suggests that individuals often respond to the death of a peer by re-evaluating their approach to, and priorities in, their life and their career. In this study, we synthesize work addressing this general human tendency with management research in the domain of strategic leadership. Building on relational identification theory, we argue that CEOs who experience the death of a director at the same firm will be subsequently more likely to seek a “quiet life,” which will have significant organizational outcomes. In particular, because firm-level innovation requires substantial executive effort, cognitive complexity, and keen attention to detail, we hypothesize that firms led by CEOs experiencing peer deaths will subsequently produce significantly less innovative outputs. We provide additional support for our theory by showing that the impact of experiencing the death of a peer is amplified by several factors that are likely to increase a CEO’s level of relational identification with the deceased – CEO-director demographic similarity and the suddenness of the death. To test our hypotheses, we use a sample of director deaths in U.S. public firms and a difference-in-differences estimation approach.