The use of variance decomposition in the investigation of CEO effects: : How large must the CEO effect be to rule out chance?

• Autores: Markus A. Fitza
• Localización: Strategic management journal, ISSN 0143-2095, Vol. 35, Nº 12, 2014, págs. 1839-1852
• Idioma: inglés
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• Resumen

  • Variance decomposition analysis is often used to examine the degree to which CEOs influence their companies' performance (the so-called CEO effect). Such studies play an important role in a body of literature that investigates the effect of leadership on organizations. In this paper, I argue that these previous studies have an important underlying flaw. Empirically, these studies wrongly attribute the performance effect of randomness�of chance�to the CEO. I demonstrate how randomness can affect the measured effects in a variance decomposition analysis, and I show that this is especially problematic for the measurement of CEO effects. I demonstrate how this results in a greatly inflated CEO effect and develop an approach to correct for it.