Do CEOs Matter to Firm Strategic Actions and Firm Performance? A Meta‐Analytic Investigation Based on Upper Echelons Theory

TLDR

Upper‑echelons theory posits that CEO characteristics shape firm strategic actions, which then influence future performance, a premise supported by decades of research. The study aims to systematically synthesize existing empirical evidence on UET to evaluate and extend the theory. The authors conduct a meta‑analysis of 308 studies examining the links between CEO characteristics, strategic actions, and future performance. The meta‑analysis confirms UET predictions: CEO tenure, education, experience, and self‑concept are linked to strategic actions, which in turn predict future performance, and these characteristics also show direct positive effects on performance, with nuanced relationships revealed in fine‑grained analyses.

Abstract

What roles do CEOs play in firm performance? To address this question, the management field has accumulated a substantial amount of research over the past 3 decades built on upper echelons theory (UET), which posits that CEO characteristics manifest in firm strategic actions and, in this way, future firm performance. Hence, there is a need to systematically amass and take stock of prior empirical findings for UET testing and development. We use meta‐analytic techniques to synthesize prior UET research on the relationships among commonly studied CEO characteristics, firm strategic actions, and future firm performance. Based on 308 studies, meta‐analytic results generally support UET's predictions with a few exceptions: CEO characteristics (i.e., tenure, formal education, prior career experience, and positive self‐concept) are significantly associated with firm strategic actions, which in turn are significantly related to future firm performance. Moreover, CEO characteristics (i.e., age, tenure, formal education, and prior career experience) are positively related to future firm performance. In addition, fine‐grained analyses have revealed interesting and important relationships between specific measures of CEO characteristics (e.g., CEO prior task experience) and firm outcomes (e.g., firm strategic actions that match with CEO prior task experience). Implications for theory, future research, and practice are discussed.