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This study examines the effect of dominant CEOs -defined as CEOs who are very powerful relative to other executives in their top management teams -on firm strategy and performance. Based on a sample of 51 publicly traded, single-business firms from the US computer industry for the period 1997-2003, our results suggest that firms with dominant CEOs tend to have a strategy deviant from the industry central tendency and thus extreme performance -either big wins or big losses. Further, powerful boards weaken the tendency of dominant CEOs towards extremeness and, more important, improve the likelihood of dominant CEOs having big wins versus big losses. This study reconciles the pessimistic and heroic views regarding dominant CEOs, and suggests that the notion of power balance should be considered in a broader context.

Executive Overview Wealth creation in entrepreneurial and established orgcrnfzafion.i is a complex, challenging task in today's global and technologically advancing business environment. Strategic leadership enhances the wealth-creation process in enfrepreneuriai and established organizations, and leads to above-average returns. On the other hand, managerial leadership will likely lead to average returns at best, but is most likely to achieve below-average returns and destroy wealth. Organizations led by visionaries who are not properly supported by strong managerial leadership may destroy wealth even more quickly than organizations led by managerial leaders. This article defines strategic leadership, differentiates among the concepts of strategic, visionary, and managerial leadership, and examines the differential links between the three types of leadership and wealth creation. When organizations restore strategic control and allow the development of a critical mass of strategic leaders, these leaders will be a source of above-average returns. The result will be wealth creation for the employees, customers, suppliers, and shareholders of entrepreneurial and established organizations.

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