The impact of narcissistic CEOs on firm collaborative behavior

1 University of Groningen | Faculty of Economics & Business | Department of

Innovation Management & Strategy

Master Thesis

The impact of narcissistic CEOs on firm

collaborative behavior

Author: Ioanna Prodromiadou

1st Supervisor: Dr. Florian Noseleit

2nd Supervisor: Dr. Isabel Estrada Vaquero

University of Groningen Faculty of Economics and Business

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ABSTRACT

In this study, we try to analyze the impact of narcissistic CEOs on firm collaborative behavior by focusing on the total number of strategic alliances announced by a firm in a certain year. The sample consists of 81 firms in the pharmaceutical industry between 2002 and 2012. Empirical analysis, by associating prominence of CEO’s photograph in annual press releases, CEO’s use of first person singular pronouns, CEO’s prominence in company press releases and CEO’s power with the total number of strategic alliances have been announced by a firm, examined this

relationship. The results of the study suggest that prominence of CEO’s photograph in annual press releases, CEO’s use of first person singular pronouns and CEO’s prominence in company press releases are positive associated with narcissism in CEO’s personality, something that does not exist for CEO’s power. Furthermore, results show that CEO’s narcissistic tendencies enhance the possibility of strategic alliances formation. Based on that, narcissistic CEOs cause a positive effect on strategic decisions for alliances formation and thus, for a firm to collaborate with others.

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Table of contents

1. Introduction……… 4

2. Literature review………. 6

3. Methodology……….15

4. Results……… 19

5. Discussion……… 25

6. Conclusions……… 28

7. Implications for theory & practice………. 28

8. Limitation & future research………. 29

Acknowledgements………31

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1. Introduction

5 in an incredibly high degree crucial management decisions, organizational outcomes as well as firm performance levels. Leaders can also affect organizational performance through action in the external environment such as affecting government to change taxation or regulation policy, as well as on the internal environment by influencing operating cost or product quality. According to upper echelons theory, observable demographic characteristics of managers’ backgrounds lead to key formative experiences that in turn lead to the formation of managers’ unique cognitive styles and values. (Bamber et al 2010). So, it seems to be an important issue for researchers to examine how CEOs’ personalities are manifested in organizational outcomes (David. V., et al, 1998). In a similar way CEO’s attitudes can influence a considerable degree the level of collaborative behavior which helps firms to achieve greater performance. It is argued that prior experience, preferences and dispositions of chief executive officers result to behaviors that have great consequences not only for those who interact directly with them but also for broader sets of stakeholders.

An additional factor that can be taken into consideration when we are talking about CEO’s personality and the main focus of this study is the degree of narcissistic behavior that can be observed. This generally means that there are many times when executives, particularly CEOs tend to inject a great deal of their own image into their managerial behavior (Chatterjee & Hambrick, 2007). Although, researchers have paid a lot of attention on how this narcissistic behavior can impact on firm performance there is almost no evidence on how narcissistic CEOs interact on collaborative tasks inside and outside a firm. Narcissistic CEOs are associated with

extreme and fluctuatingperformance for their organizations and so it seems useful

to understand how narcissistic CEOs react on firm’s collaborative activities. Based on the upper echelon theory of Hambrick and Mason (1984), supporting that organizations are reflections of their top-managers, present study investigates the relationship between narcissism in CEOs and firm collaboration. The research question that will be investigated in this thesis is:

6 In this thesis we refer to firm collaborative behavior by focusing on external collaboration agreements. Thus we examine the number of firm’s partners for a certain year. In other words, we analyze the number of strategic alliances announced by a firm, which shows if CEOs have collaborative aims and so choose to internalize the skills of their partners in order to improve their position both within and without the alliance. Hamel, G. (1991).

The study continues with an extensive literature review based on literature streams of collaboration and narcissism combined with some proposed hypothesis. Next, the methodology of the conducted research is being presented in detail. The following section provides the results of the data analysis, while at the end of this paper there is the discussion and implications of the results part, followed by some directions for future research.

2.

Literature review

The concept of collaboration

7 together, in order to improve their competitive advantage. Based on literature, the most common motivations for cooperation are group into two categories: the complexity of technological development and the uncertainty in searching and accessing new opportunities in the market (Alvarez et al, 2009). In their study Ley et al (2014), they support that for varying information to be available in a timely fashion to the organizations and individuals who really need it, a variety of agencies need to collaborate and coordinate in real-time. In other words, sharing information and expertise in time it supposed to be fundamental solutions in crisis management. For instance, R&D partnering has attracted so much attention in recent studies, due to the fact that joint R&D it seems a common activity that companies would be willing to share with others (Hagedoorn, 2002). The variety of partners in joint R&D projects makes companies able to increase their flexibility and performance. Overall, firms invest on building strong and continuous relationships with other firms in order to achieve greater external economies of scale, market power or exploit new opportunities (Rosenfeld, 1996).

Strategic alliances formation

Strategic alliances, joint venture and a wide range of cooperative R&D patterns are the most common form of collaboration among firms in recent years. In this study we will focus on strategic alliances formation in order to evaluate the degree of firm collaborative behavior. According to Gulati et al (1998) an alliance is usually defined as

‘’…any voluntarily initiated cooperative agreement between firms that involves ex- change, sharing, or co-development, and it can include con- tributions by partners of capital, technology, or firm-specific assets ’’ (Gulati et al, 1998).

8 formation is based on strategic needs and social opportunities and is likely to happen when the payoff for cooperation exceeds that of proceeding alone (Eisenhardt et al, 1996). The resource-based and transaction-cost theories support the idea that firms engage in alliances when a need for resource acquisition or cost reduction exists.

(Kang et al, 2014). Thus, firms form strategic alliances in order to access

complementary resources needed to compete effectively in the current competitive landscape (Ireland et al, 2002), while reduction in costs results in increased

availability of capital (Das et al, 1998). Moreover, strategic alliances offer the

opportunity for firms to improve their strategic position by enhancing legitimation or even improve their power into the market. Based on all these benefits, theories suggest that top executives should always consider alliances as a key part of their firm’s strategies. (Schifrin, 2001b).

However, forming a strategic alliance can also entails a dark side for the partner firms. This is due to the fact that firms cannot fully trust their partners as the possibility of opportunistic behavior always exists and because firms are not sure if their initial goals can be achieved through a strategic alliance. Based on these dangers involved in strategic alliance formation, Das et al (2001) found trust and control as the two effective ways for the reduction of the related risk in strategic alliances.

According to the study of Chung et al (2000), the likelihood of firms to engage in strategic alliances with a specific partner is positively related to the complementarily of the capabilities, the status similarity and the social capital of the firms involved. In a similar manner, Doz (1996) focuses on the initial phase of collaboration in a

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CEO’s style of leadership and collaboration

Environmental and organizational factors are primarily seen to be the main focus of researchers in explaining how collaboration occurs. However, another emerging literature stream is that of top managers in decisions of inter-organizational collaborations. (Esteve et al, 2013).

10 public organizations and provide empirical evidence that personal attributes of top managers influence inter-organizational collaboration. From a different point of view, Chrislip and Larson (1994) investigate what principles where the most common for collaborative leaders. Their results suggest that collaborative leaders can be take visionary decisions related to how people can work together effectively. The authors also state that collaboration requires a different style of leadership in which leaders facilitate interaction, safeguard the processes, and lead with high levels of frustration.

Of equal importance is the study of Alexander et al (2001: 160) where authors outline a case of leadership for collaboration in which they define five distinctive leadership themes: systems thinking, vision based leadership, collateral leadership, power sharing, and process-based leadership.

Sullivan et al (2012) underline that several studies have focused on specific prescriptions for collaborative leaders, such as “charismatic”, “transformational”, “transactional” and “visionary”, which provide those leaders as managers of meaning, articulating organizational and inter-organizational possibilities through visions, missions and core values. Finally, Slater’s (2005: 331–2) work focuses on the need to deal with the danger of discomfort, ambiguity and uncertainty involved in leadership for collaboration. So, there are specific styles of leadership combined with specific personal characteristics that are related with effective collaborative activities.

The case of narcissistic CEOs

11 empathy, and hostility (Rosenthal & Pittinsky, 2006). In recent studies there is a clear distinction between normal and pathological form of narcissism (Ackerman et al, 2010). Based on literature normal narcissism is associated with the promotion of a positive self-image by holding positive illusions about self or striving for success in achievement related contexts, without reflecting problematic aspects of personality (Pincus & Lukowitsky, 2010). By contrast, pathological narcissism is linked with self- regulated actions that cause negative feelings such as distress and impairment, and is usually expressed through grandiosity and vulnerability (Pincus & Lukowitsky, 2010). Buss’s (1991) research also underlines the grandiosity as the main characteristic observed in narcissism.

Highly narcissistic CEOs defined as those who have very inflated self-views and who are preoccupied with having those self-views continuously reinforced (Campbell, Goodie, and Foster, 2004). In the research of Rosenthal et al (2006), authors claim that: “Narcissistic leaders have grandiose belief systems and leadership styles, and are generally motivated by their needs for power and admiration rather than empathetic concern for the constituents and institutions they lead. ’’, (Rosenthal & Pittinsky, 2006). Generally, grandiose narcissism is of prime importance trait, especially when discussing leadership and decision making (Grampbell, 2011). A significant research outcome in the literature is also the contextual reinforcement model of Campbell & Campbell (2009), which provides evidence that narcissistic leaders are more useful in chaotic situations and in news leadership positions, whereas the are seen to be unproductive in more stable conditions (Campbell, 2011).

12 oversensitive to criticism (Campbell et al, 2011). Moreover, among the most common downsides of narcissistic leaders’ are found to be elements such as over-involvement, abusiveness and their tendency to leave damage systems and relationships in their wave (Rosenthal & Pittinsky, 2006). Narcissistic leaders also react negatively on advisers’ suggestions and tend to blame others for their own failures (Hogan et al, 1990). In the study of Rosenthal and Pittinsky (2006), it is stated that those negative aspects of narcissistic CEO are rooted in several traits that comprise narcissism such as arrogance, feeling of inferiority, need for recognition and superiority, hypersensitivity and anger, lack of empathy, amorality, inflexibility and paranoia. However, the same study provides some positive aspects of narcissistic leaders as well. It is stated that narcissistic leaders are visionaries who can gain devoted followers and who do not just try to understand the future but they do shape it. Moreover, they claim that narcissist CEOs are characterized by grand vision which leads to effective leadership. Apart from that, it is argued that narcissism is systematically associated with certain forms of self-enhancement such as optimistic expectations for the future and self-enhancing attributions for past events, which encourage individuals to take on difficult tasks and foster persistence in the face of failure respectively (Farwell, 1998). Thus, psychological health and personal productivity are usually encouraged.

13 elements that make them interact negatively on feedback with some anger and aggression. (Chatterjee & Hambrick, 2007). Results also indicate that narcissistic CEOs can lead firms to both an extreme success and to a dramatic failure.

14 and focusing on their own best, narcissistic managers can negatively influence collaboration among employees and even drive away the most talented of them.

Literature provides a wide range of studies focusing on how narcissism can be measured. For instance, the study of Chatterjee & Hambrick, (2007) and the study of Gerstner et al, (2013), measure some physical traces, spoken and written words in order to estimate the existence of narcissism in CEO’s personality. In addition Rijsenbilt, A., & Commandeur, H. (2013), make use of another important variable associated with narcissism that of CEO’s power into a firm. Following these studies, four possible indicators of narcissism are provided, based on which some hypothesis will be constructed.

Prominence of CEO’s photograph

One can think that narcissistic CEOs struggle for a great deal of visibility in annual press releases because of their self-admiration and also their tendency to think about themselves as more important than all others in the firm (Chatterjee & Hambrick, 2007). Thus narcissistic CEOs favor their self-promotion through their photograph in annual press releases:

Hypothesis 1: The greater the prominence of CEO’s photograph, the higher the

degree of narcissism in his/her personality observed.

CEO’s use of first person singular pronouns

It is expected that high narcissistic CEOs express themselves by using more first-person singular pronouns than first-first-person plural pronouns in an effort to provide themselves, despite the fact that they usually write or speak on behalf of the entire executive team. Thus we assume that high narcissistic CEOs favor the use of first-person singular pronouns:

Hypothesis 2: The greater the use of first singular pronouns by CEO, the higher the

degree of narcissism in his/her personality observed.

15 Based on the study of Chatterjee and Hambrick (2007), which states that high

narcissistic CEOs try to being mentioned as often as possible in order to provide their authority, it is expected that a positive relationship exists between narcissism and CEO’s prominence in annual reports:

Hypothesis 3: The greater the CEO’s prominence in press releases, the higher the

degree of narcissism in his/her personality observed.

CEO’s power

We can easily understand that the extent CEO’s power can differently affect

strategic decisions. For instance, CEO’s duality is associated with increased power of CEO and leads to opportunistic behavior (Rijsenbilt, A., & Commandeur, H., 2013). Based on that, we assume that CEO’s power favors narcissism creation.

Hypothesis 4: The greater the CEO’s power into a firm, the higher the degree of

narcissism in his/her personality observed.

Finally, it becomes clear that in the case of narcissistic CEOs, elements such as dominance, confidence, grandiosity and visualization can impact differently on general firm’s internal and external collaborative behavior. On the one hand narcissistic CEOs tend to take decisions that serve their own needs, but on the other hand, they seem to be visionaries and lead the firm towards success by taking risks associated with strategic decisions. We then expect that CEOs with narcissistic tendencies are willing to form strategic alliances as a consequence of their visualization and dynamic character. Thus, our investigation is based on the assumption that a positive relationship exists between CEO narcissism and strategic alliances formation.

Hypothesis 5: Narcissism in CEO’s personality is positively related with strategic

alliances formation by a firm.

3. Methodology

16 The purpose of this study is to investigate the relationship between narcissism in CEO’s personality and firm collaborative behavior. For that reason, this research adopts a theory testing approach as it tries to analyze the relationship between these two variables through a statistical method. More specifically, 4 specific variables have been measured in order to identify the levels of narcissism observed in CEO’s personality and then following a regression analysis these variables have been associated with the number of strategic alliances that each firm have announced in a certain year, controlled by some contextual variables.

Data collection

For this thesis a sample of annual reports in the pharmaceutical industry between 2002 and 2012 has been examined. The data contain information about the progress made by each firm in a certain year and more specifically, the main focus of this study is CEO’s message to the shareholders involved in each report. As it is stated, this part can provide linguistic traces of the destructive narcissism and aspects of corporate leadership of the firm (Craig & Amernic, 2011). For that reason and after constructing specific variables an evaluation of narcissistic behavior will be done. A second database used to examine the research question of this study, contains information about the number of the newly strategic alliances that each firm has been announced per year. By combining these two databases, I aim to examine the correlation between CEO narcissism and strategic alliances formation, in an effort to investigate how narcissistic CEOs impact on firm collaborative behavior.

Dependent variable: Strategic alliances.

To examine how CEO’s narcissistic behavior affects firm’s engagement in strategic alliances, the total number of alliances depicted in the second database is utilized as dependent variable and will be associated with some indicators of CEO’s personality that have been observed in company’s press releases.

17 The independent variables of this study are presented by some CEO’s characteristics as they can be observed in companies’ press releases and which consist indicators for the extent of CEO’s narcissistic behavior. For that reason, and using a

combination of the methods presented in the studies of Chatterjee & Hambrick, (2007), Gerstner et al, (2013) and Rijsenbilt, A., & Commandeur, H. (2013), this thesis concludes to four possible indicators of narcissism, which utilize the independent variables of this study. These variables are Prominence of CEO’s photograph, CEO’s use of first person singular pronouns, CEO’s prominence in annual press releases and CEO’s power. Next, it is provided how these variables are going to be measured.

1. Prominence of CEO’s photograph: This variable is measured as follows: 4 points if CEO’s photograph was of him or her alone and occupied more than half a page, 3 points if the photo was of the CEO alone and occupied less than half a page, 2 points if the CEO was photographed with one or more fellow executives and 1 point if there was no photograph of the CEO.

2. CEO’s use of first person singular pronouns: Here the focus is on expressive behavior by measuring the number of first-person singular pronouns and then divided by the number of those pronouns plus all first-person plural pronouns.

18 4. CEO’s power: This variable examines CEO’s duality and equals one if CEO is also

the chairman of the board or president and zero otherwise.

Control variables

The study includes controls for contextual variables that might potentially confuse the results regarding the number of firm strategic alliances found and how they are associated with the dimension of narcissism. First of all, we consider firm size as the first control variable of our analysis. Literature provides a wide range of studies focus on strategic alliances formation that also refers to the firm size as one of the main control variables. This happens due to the fact that big firms are usually expected to have more resources and thus be more capable to engage in strategic alliances than small firms as strategic alliances include various costs, such as actual capital

investment, unexpected leakage of firm-specific resources, capabilities and so on. (Park et al, 2005). Furthermore, we control for an additional explanation that is likely to affect results in newly initiated alliances observed, that of prior experience. Experience appears as a predictor in a firm’s tendency to engage in strategic alliances. More specifically, studies reveal that experience and strategic alliance formation are positive related with each other. That relationship is normally attributed to the fact that the greater the experience of a firm in forming alliances the less the related uncertainty and risk associated with partnership. To estimate an adequate experience of a firm in forming strategic alliances, we consider a time period of 5 years.

Data Analysis

19 study; the number of strategic alliances for a specific year counts data. For that reason a negative binomial regression is used. Results of these models are aim to estimate if the proposed hypothesis are supported.

4.

Results

Tables 1, 2 and 3 provide a confirmatory factor analysis of the relationship between narcissism creation and the four independent variables used in this study. Results of this factor analysis illustrate that only the first three variables (prominence of CEO’s photograph, CEO’s use of first person singular pronouns & CEO’s prominence) found to have a positive relationship with the creation of the ‘’narcissism’’ factor. On the other hand, a negative relationship exists between CEO’s power and narcissistic behavior. This means that the greater the power of a CEO in a firm, the less the likelihood for his/her narcissistic behavior. For that reason a second factor analysis with only the first three variables has been executed and depicted in tables 4, 5 and 6. Next we will summarize results of these factor analyses in more detail, as well as their association with the proposed hypotheses.

Factor analysis/correlation with all the 4 variables

(prominence of CEO’s photograph , CEO’s use of first person singular pronouns, CEO’s prominence ,CEO’s power)

Table 1

Factor Eigenvalue Difference Proportion Cumulative

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Table 2

Factor loadings (pattern matrix & unique variances)

Variable Factor 1 Uniqueness Prominence of

CEO’s photograph 0. 7138 0.4904 CEO’s use of first person

Singular pronouns 0.5995 0.6406 CEO’s prominence 0.4994 0.7506 CEO’s power -0.1737 0.9698

Table 3

Kaiser-Mayer- Olkin measure of sampling adequacy Variable KMO

Prominence of

CEO’s photograph 0.4925 CEO’s use of first person Singular pronouns 0.5015 CEO’s prominence 0.4886 CEO’s power 0.4775 Overall 0.4917

21 eigenvalue. We then applied Kaiser’s criterion in order to estimate which factors should be retained and based on that 1 linear component within the data set has been identified, which explains 28.71% of the total variance (Table 2). Then we present the loadings of the four variables on the factor extracted (Table 3), based on which we found evidence that the factor «Narcissism» consists only of the three out of four proposed variables. These variables are: prominence of CEO’s photograph, CEO’s use of first person singular pronouns and CEO’s prominence in press releases. By contrast, CEO’s power into a firm has not been found to predict narcissism.

Results found support for our first hypothesis about the positive relationship between the prominence of CEO’s photograph and degree of narcissism observed (0.7138). It is confirmed that the greater the prominence of CEO’s photograph in annual press releases, the higher the degree of narcissism in his/her personality. We also hypothesized that the greater the CEO’s use of first person singular pronouns, the higher the degree of his/her narcissistic behavior. Results of the factor analysis indicate also support for hypothesis 2 (0.5995). Furthermore, results confirm

hypothesis 3 which refers to the CEO’s prominence in company press releases. More specifically, a positive relationship seems to exist between CEO’s prominence and narcissism creation in CEO’s personality (0.4994). Finally, results do not provide evidence for our hypothesis regarding CEO’s power into a firm. We found an inverse relationship between CEO’s power and narcissism creation (-0.1737). Thus, there is no support for hypothesis 4. We should note that, for our data the value is 0.4917 and based on Kaiser’s criterion this falls into the range of unacceptable. So, we shouldn’t be confident that the sample size is adequate for the factor analysis.

Factor analysis/correlation with only 3 variables

22 Table 4

Factor Eigenvalue Difference Proportion Cumulative

Factor 1 1.14555 0.15207 0.3818 0.3818 Factor 2 0.99348 0.13250 0.3312 0.7130 Factor 3 0.86098 0.2870 1.0000 Table 5

Factor loadings (pattern matrix & unique variances)

Variable Factor 1 Uniqueness Prominence of

CEO’s photograph 0.7479 0.4406 CEO’s use of first person

Singular pronouns 0.6335 0.5987 CEO’s prominence 0.4299 0.8152

Table 6

Kaiser-Mayer- Olkin measure of sampling adequacy Variable KMO

Prominence of

23 Using only 3 of the 4 variables, because CEO power is negatively related, the KMO statistic for our data was 0.5017 (table 6) which falls into the range of being acceptable that time, and so we can argue that the sample size is adequate for the factor analysis. After having listed the eigenvalues associated with each linear component (factor), we concluded to 1 factor within the data set, which explains 38.18% of total variance (table 4). Results of this second factor analysis suggest that the factor «Narcissism» consists of the three variables: prominence of CEO’s photograph in annual reports, CEO’s use of first person singular pronounce in interviews and CEO’s prominence in press releases, with their loadings on the factor to be 0.7479, 0.6335 and 0.4299 respectively.

Next, Table 7 presents a correlation analysis in order to examine the association between:

 Prominence of CEO’s photograph and degree of narcissism

 The use of first person singular pronounce by CEO and degree of narcissism  CEO prominence and degree of narcissism

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Table 7

Correlations among the study variables

3. CEO’s use of first person singular pronouns 0.1215 0.1184 1 4. CEO’s prominence in press releases 0.0921 0.0776 0.0071 1 5. CEO’s power -0.0652 0.0525 0.0022 -0.0854 1 6. Factor 1 0.2160 0.7138 0.5995 0.4994 -0.1737 1 7. Factor 2 0.2084 0.7479 0.6335 0.4299 -0.0166 0.9850 1 8. Firm size 0.5195 0.2777 0.0908 0.0401 0.0668 0.2570 0.2496 1 9. Alliance experience 0.6906 0.1849 0.0544 0.0798 -0.1188 0.2071 0.1884 0.6924

As it is shown, the correlation between the degree of narcissism and the prominence of CEO’s photograph was 0.7479 (p<0.01), the CEO use of first person singular pronouns was 0.6335 (p<0.01), the CEO prominence was 0.4299 (p<0.05) and the CEO power was -0.0166 (p>0.05).

25 alliance formation. Results of this binomial regression analysis indicate that the association between background variables and newly initiated alliance was significant (p<0.01), providing support for hypothesis 5.

Table 8

Results of Negative Binomial Regression of the number of alliances

Variables Model 1 Model 2

Newly initiated Strategic Newly initiated strategic alliances alliances Narcissism (Factor 1) 0.127*** (0.296) Narcissism (Factor 2) 0.119*** (0.0289) Firm size (ln) 0.195*** 0.197*** (0.0391) (0.397) Alliance experience (ln +1) 0.823*** 0.820*** (0.107) (0.109) Constant -0.469 -0.484 (0.624) (0.625) Log likelihood -716.966 -717.494 Wald chi2 (Prob> chi2) 550.27 (0.00) 535.73 (0.00) No of observations 529 529

Standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

Note: All regressions include time dummies which are not reported for brevity

5. Discussion

26 narcissistic CEOs favor the formation of strategic alliances. Following that, we tried to investigate some hypotheses based on CEOs ‘characteristics have been observed in annual press releases. After having investigate which are those factors that can indicate narcissism in CEO, the general intent of this thesis is to examine how such a kind of personality affects strategic decisions related with collaboration agreements, like CEO’s decision for strategic alliances formation. Results of the empirical analysis found support for the four out of five proposed hypotheses.

First, we support that the prominence of CEO’s photograph is positive related with CEO narcissism, which in turn leads to more newly initiated strategic alliances announced by a firm. Together CEO’s letter and CEO’s photograph gives a clear view of how CEOs presents both themselves and the hole company to the public. This can provide CEO’s personal tendencies, such as the extent of narcissism behavior (Olsen et al, 2013). Results of this study indicate that the greater the prominence of CEO’s photograph in annual press releases, the higher the degree of narcissism observed and thus, the greater the possibility of strategic alliances formation.

Second, we observed another element in the image of CEO provided through the company’s press releases, that of CEO’s use of first person singular pronouns. We found that the extended use of those pronouns is positive related with narcissism creation in CEO’s behavior into a firm. Because the use of first-person singular pronouns is associated with self-absorption, as Raskin et al state, it can be an

indicator of narcissism in CEO’s personality (Raskin & Shaw, 1988). Results show that CEO’s who tend to speak by using I, me, my, instead of we, our, ours, are more narcissistic than others and thus is possible to guide firms towards the formation of strategic alliances.

Third, we found a positive relationship between CEO’s prominence in annual press releases and his/her narcissistic behavior. Most of the times, the content of annual reports is under CEO’s control, who have the opportunity to provide themselves as much as possible (Chatterjee & Hambrick, 2007). For that reason, results of this study demonstrate that the greater the CEO’s prominence in company press

27 that this aspect of narcissistic behavior contributes to the CEO’s tendency to support strategic alliances formation

Lastly, CEO’s power into a firm has been examined and associated with the possibility of CEO’s narcissism. Our results do not provide evidence for that

relationship to exist. A possible explanation could be that this study focuses on the CEO’s letter to the shareholder in which any CEO uses a unique “leadership through language” (Craig et al, 2011), regardless his/her power into a firm. Another reason could be the fact that narcissistic CEO’s tend to present the image of an

over-confident person with an inflated self-view which in most times appears as an aspect of CEO’s personality and not as a consequence of CEO’s power and work into a firm.

In general, results of the study demonstrate that, prominence of CEO’s photograph, CEO’s use of first person singular pronouns, and CEO’s prominence in press releases are appropriate factors for the identification of narcissism in CEO’s personality. On the other hand CEO’s power has not been found to be linked with narcissistic behavior but instead, it seems to weakness the possibility of narcissism in CEO’s personality. In addition, empirical evidence of this thesis reveals that narcissistic CEOs favor the formation of strategic alliances with other firms. In other words, when narcissism in CEO’s personality exists, there is an increase in the total number of strategic alliances announced by a firm.

It is widely known that narcissistic leaders are associated with several problems regarding their interaction with others and effective collaboration with them, as they usually take decisions that serve their own needs. These problems possibly come from their tendency to be motivated by their personal need for power, admiration and self-enhancement rather than the deep understanding of the needs of the organizations they lead (Rosenthal & Pittinsky, 2006). Moreover, it seems that

narcissistic CEOs provide obstacles in effective collaboration with others due to some negative aspects of their personality like their sensitivity to criticism, lack of

28 explains why they have been found to be willing in forming strategic alliances when a need exists. Moreover, narcissistic CEOs tend to take more risks than non-narcissistic leaders appear to do and thus they do not interrupt their goals considering the dangers associated with engaging in a new partnership.

6. Conclusion

The main objective of this study is to analyze how narcissistic CEOs affect firm collaborative behavior. Based on the Upper Echelon theory of Hambrick and Mason (1984), who state that firms are reflections of their managers’ characteristics, this study focuses on the dimension of narcissism in CEO’s personality. Personality traits affect how people interact with others, process information and thus, come to decisions. Narcissism is one of those traits as it appears to influence a person’s desired interactions and response from others (Olsen et al, 2013). By focusing on the words, language and discourse of CEO depicted in annual press releases, we have the opportunity to discover aspects of his/her personality and corporate leadership (Craig et al, 2011). For that reason, four measures of narcissism found in companies’ annual reports have been used in this study. These measures are: prominenene of CEO’s photograph, CEO’s use of first person singular pronouns, CEO’s prominence and CEO’s power. Despite the possible problems associated with narcissism in CEO’s behavior, through this study we confirm that it is quite common for narcissistic CEOs to lead firms engage in collaboration with others. By taking into consideration the total number of newly strategic alliances announced by each firm in a certain year, our results demonstrate that CEOs with a narcissistic behavior are likely to guide their firms towards the formation of strategic alliance which in turn provides evidence for their positive impact on the total level of firm collaborative behavior.

7. Implications for theory & practice

29 that. Practitioners can derive the insight that narcissism in CEO can lead to positive effects on firm’s general collaborative attitude and thus to its performance. Firms that seek to enhance their position into a market by forming strategic alliances, they have to consider the importance of a CEO with narcissistic tendencies. In essence, results suggest that complementarities of resources, reduction of costs and increases in the total capital are more likely to occur when a narcissistic leader acts.

Furthermore, this study reveals the fact that CEOs with greater power into a firm, through their negative relationship with narcissism creation, are not associated with greater impact on strategic alliances formation. Thus practitioners should not provide CEOs with an extend power into a firm as those who have also the power and the thinking of engaging in collaborations in the firm’s external environment.

Finally, the results suggest that narcissism should be considered as an important element in CEO’s personality that can lead to fruitful outcomes. However, we cannot generalize the findings of this study and state that narcissism causes always positive effects. As it is already extensively researched, narcissism is associated with several behavior problems. Thus managers should be aware of their narcissistic behavior and their effects on firm performance.

8. Limitations and directions for future research

There are some limitations in this study which suggest additional future research. These limitations are the following:

30 Second, the sample of this study consists of a large number of firms, all involved in the pharmaceutical industry. Due to that fact, results cannot be generalized and presented for any sector. If we look for narcissistic CEOs in different sectors like the technological industry, results may not be the same with what this study presents as different leading strategies and corporate governance required. Future research could overcome this limitation by exploring how narcissistic leaders affect firm collaborative behavior based on a sample of firms in various industries.

Third, it would be valuable to examine how narcissistic CEOs behave on their daily interactions with other employees and not only considering their image they provide through a formal report. We can easily understand that written words are usually well prepared and best suited to the image that any person wants to provide. By contrast, daily conversations can be a more representative sample for measuring narcissism in CEO’s behavior. Thus, more research could be done in how narcissistic CEOs interact with others and what are those personal traits that enhance or create obstacles in any form of collaboration.

A fourth limitation is that change in CEO is not considered. It is probable that for some of the firms involved in the sample, CEOs changed over the 10 year

31

Acknowledgements

32

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