Taking Charge as a Contextual Cue: How New CEO Regulatory Focus Influences Strategic Change

Abstract

Becoming CEO is an emotionally charged event that is characterized by a sharp increase in visibility, responsibilities, expectations, and job vulnerability. Thus, rather than a “honeymoon” period, new CEOs are extremely busy learning about each aspect of the firm, developing relationships with stakeholders, and determining the firm's strategic direction. We suggest that the increased job demands associated with leading the firm, coupled with accentuated job vulnerability, alter the regulatory fit new CEOs experience, thus eliciting unique reactions depending on their regulatory foci. We argue that the increased vigilance and responsibility associated with becoming CEO fit the preferred goal pursuit means of CEOs high in prevention focus, increasing their motivation to engage in strategic change during the first 3 years of their tenure. Conversely, promotion-focused new CEOs engage in less change because they experience a misfit. We also consider how dynamics of the succession event further increase job demands and job vulnerability, moderating these relationships. Using a panel dataset of more than 800 public firms from 2000–2020, we find broad support for our hypotheses. Our primary contribution is showing that the sharp increase in job demands and job vulnerability that executives experience when they first become CEO shifts their regulatory fit and subsequent motivation to engage in strategic change in ways that prior theory would not predict.