phbs
Do Bad Times Cultivate Courage?: CEO Downcycle Imprinting and Counter-cyclical Strategies
2022-11-09 10:51:00
Counter-cyclical strategies to exploit investment opportunities amid industry downcycles are important to achieve competitive advantage in highly cyclical industries. However, little research attention has been paid to the qualities of CEOs who establish and implement such counter-cyclical strategies. Drawing from the literature on career imprinting, we propose a CEO’s career history as one of the CEO characteristics that leads CEOs to implement counter-cyclical strategies. We propose that downcycle-imprinted CEOs (i.e., CEOs who started their industry career during industry downturns) are imprinted with downcycle-specific cognitive capabilities and interpretive frames, which make them more capable of sensing and seizing investment opportunities that emerge amid industry downcycles. We tested our argument by examining CEO career history and their corporate investment decisions in the semiconductor industry between 2001 and 2020. We found that downcycle-imprinted CEOs engaged in more counter-cyclical investments in terms of capital expenditures (CAPEX) during downcycles. Moreover, CAPEX executed by downcycle imprinted CEOs yielded higher post-downcycle performance. Our idea about CEO downcycle imprinting highlights the importance of strategic leadership in cyclical industries and as an extension, contributes to the emerging streams of studies on the micro-foundations of dynamic capabilities to cope with the changes in business environment.