When Does Leadership Matter? The Contingent Opportunities View of CEO Leadership

46 Pages Posted: 13 Aug 2001  

Noam Wasserman

University of Southern California - Lloyd Greif Center for Entrepreneurial Studies

Nitin Nohria

Harvard Business School

Bharat N. Anand

Harvard University - Strategy Unit

Date Written: April 2001

Abstract

Despite the large literature on leadership, previous studies have diverged in their assessments of the impact of CEOs on company performance. The debate has focused on the question of "Does leadership matter?" The "leadership" proponents state that leadership is a critical factor in organizational performance. On the other side of the debate, "constraints" researchers argue that leaders are so constrained that they have little impact on company performance. Past empirical studies have failed to satisfactorily resolve the debate. In this paper, we propose that the debate thus far might be misdirected. Instead, the appropriate question should be, "When does leadership matter?"

We propose a framework - the "contingent opportunities view" - that resolves the debate between the "leadership" and "constraint" camps, and then test the framework in a quantitative study of the contexts in which CEO leadership matters. We first show that the impact that CEOs can have on company performance differs markedly by industry. We then find that the industries in which CEOs have the most significant impact on performance are those where opportunities are scarce or where CEOs have slack resources. These results have implications for CEO compensation, CEO succession, and stock-market reactions to CEO turnover.

Keywords: Leadership, Chief Executive Officers, Constraints, Contingency Theory

Suggested Citation

Wasserman, Noam and Nohria, Nitin and Anand, Bharat N., When Does Leadership Matter? The Contingent Opportunities View of CEO Leadership (April 2001). Strategy Unit Working Paper No. 02-04; Harvard Business School Working Paper No. 01-063. Available at SSRN: https://ssrn.com/abstract=278652 or http://dx.doi.org/10.2139/ssrn.278652

Noam Wasserman (Contact Author)

University of Southern California - Lloyd Greif Center for Entrepreneurial Studies ( email )

United States

Nitin Nohria

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States
617-495-6653 (Phone)
617-496-7387 (Fax)

Bharat N. Anand

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617 495-5082 (Phone)
617 495-0355 (Fax)

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