Big Egos Can Be Green: A Study of CEO Hubris and Environmental Innovation

Abstract

This paper examines whether and to what extent CEO personal traits (hubris, in particular) affect firm environmental innovation. Using the overarching theoretical framework of upper‐echelons theory, the paper builds on the insights from the corporate strategy, innovation, and corporate social responsibility literatures. We also examine the moderating role of firm‐specific features (e.g. organizational slack) and the external environment (e.g. market uncertainty) in this context. Based on a sample of UK companies operating in sensitive industries, we find that CEO hubris facilitates the engagement in green innovative projects. We also find that CEO hubris does not have a uniform effect: its effect on environmental innovation increases with the organizational slack, but weakens with the extent of environmental uncertainty. Our findings suggest that availability of resources per se is not enough to produce environmental innovation. Instead, it requires a stable external environment that enables the CEO with a hubristic personality to make a correct use of them.

Are women eco‐friendly? Board gender diversity and environmental innovation

“…However, this method may lack verifiability and objectivity, as respondents' views on the questions being asked may be influenced by their personal beliefs (Arena et al, 2018). Arena et al 2018 and product innovation (PRD_INNV).…”

“…Arena et al 2018 and product innovation (PRD_INNV). As with Arena et al (2018), our main data source for PRC_INNV and PRD_INNV is ASSET4. The ASSET4 database specializes in providing objective, relevant, auditable, and systematic ESG information (Cheng, Ioannou, & Serafeim, 2014).…”

Differentiating leader hubris and narcissism on the basis of power

“…A tendency to allow their 'broad vision', about the moral rectitude of a proposed course, to obviate the need to consider practicality (HS13) Exaggerated self-belief, bordering on a sense of omnipotence, in what they personally can achieve (HS8 and NPD 1and 2) A belief that rather than being accountable to the mundane court of colleagues or public opinion, the court to which they answer is history or God (HS9 and NPD 3) CEO hubris and narcissism have been found to influence innovation; overconfidence and an insatiable need for audience approval lead CEOs to adopt technological shifts and pursue highly innovative projects (Arena et al, 2018;Gerstner et al, 2013;Tang et al, 2015a;Zhang et al, 2017). Narcissistic and hubristic CEOs pursue similar investment policies such that they overinvest in R&D and M&A (Ham et al, 2018) (cf., Roll's (1986) hubris hypothesis) and are prone to taking higher risks (Chatterjee and Hambrick, 2011;Li and Tang, 2010).…”

The influence of corporate social responsibility on investment efficiency and innovation

“…Third, whether CSR improves firms’ information environments, reduces information asymmetries, and strengthens accounting quality depends critically on whether CSR indicators truly reflect underlying CSR performance. Finally, extant research shows that overconfidence leads managers to undertake inherently risky projects (e.g., Hirshleifer, Low, & Teoh, ; Lawrence, Pazzaglia, & Sonpar, ; Li & Tang, ; Oltra, ; Tang, Li, & Yang, ; Oh, Chang, & Cheng, ), including environmental initiatives (Arena, Michelon, & Trojanowski, ). If managerial overconfidence influences CSR initiatives, particularly those that are superficial, we might fail to find an association between CSR performance and investment efficiency or innovation…”