Serving differently: CEO regulatory focus and firm stakeholder strategy

• Author: Daniel L Gamache,François Neville,Jonathan Bundy,Cole E Short
• Date: 01 July 2020
• Published date: 01 July 2020
• DOI: http://doi.org/10.1002/smj.3134

RESEARCH ARTICLE

Serving differently: CEO regulatory focus and

firm stakeholder strategy

Daniel L Gamache

1

| François Neville

2

| Jonathan Bundy

3

|

Cole E Short

4

1

Department of Management, Terry College of Business, University of Georgia, Athens, Georgia

2

Strategic Management Area, DeGroote School of Business, McMaster University, Hamilton, Ontario, Canada

3

Department of Management and Entrepreneurship, W. P. Carey School of Business, Arizona State University, Tempe,

Arizona

4

Strategic Management Area, Graziadio School of Business, Pepperdine University, Malibu, California

Correspondence

Daniel Gamache, Department of

Management, Terry College of Business,

University of Georgia, Athens, GA.

Email: dgamache@uga.edu

Abstract

Research summary: A fundamental question in

stakeholder strategy research is why firms adopt certain

strategies or approaches to engage with key stake-

holders. Recent research suggests that CEOs' character-

istics can influence their general decisions to engage

with stakeholders, however, this work has yet to con-

sider why CEOs might utilize specific stakeholder strat-

egies. In this article, we demonstrate how CEO

regulatory focus influences the nature of a firm's stake-

holder strategy. Specifically, we argue that CEO preven-

tion focus is positively associated with engagement in

governance-oriented initiatives and receptivity to

governance-oriented stakeholder activism, while CEO

promotion focus is positively associated with engage-

ment in socially-oriented initiatives and receptivity to

socially-oriented stakeholder activism. We find strong

support for our hypotheses in a sample of 374 publicly-

traded firms.

Managerial summary: The strategies a firm uses to

engage with stakeholders can influence its perfor-

mance, yet little is known about what makes firms

focus on certain stakeholders over others. To better

understand this, we examined CEO regulatory focus in

Received: 7 November 2017 Revised: 11 December 2019 Accepted: 20 December 2019 Published on: 9 February 2020

DOI: 10.1002/smj.3134

Strat. Mgmt. J. 2020;41:1305–1335. wileyonlinelibrary.com/journal/smj ©2020 John Wiley & Sons, Ltd. 1305

a sample of large public companies. Our findings reveal

that the way CEOs view decisions—either based on a

sense of duty, obligations, and responsibility or as a

means to achieve high ideals—influences their ten-

dency to prioritize shareholder concerns or the con-

cerns of a broader array of stakeholders. This suggests

that executives should be aware of their own natural

tendencies to inject their motivations into their firm's

stakeholder strategy and consider avenues to balance

their perspectives for the sake of the firm.

KEYWORDS

CEO decision-making, corporate social responsibility, regulatory

focus theory, stakeholder strategy, upper echelons theory

1|INTRODUCTION

Research in strategic management has long recognized the importance of engaging with key

stakeholders (Bundy, Vogel, & Zachary, 2018; Freeman, 1984; Harrison, Bosse, & Phillips, 2010;

Jones, 1995) and has often attempted to understand the factors that shape firms' stakeholder

strategies—the sets of plans and actions used to engage with stakeholders in the pursuit of posi-

tive shared value (Bundy, Shropshire, & Buchholtz, 2013; Durand, Hawn, & Ioannou, 2019;

Mitchell, Agle, & Wood, 1997). As part of this effort, recent research has drawn on upper eche-

lons theory (Hambrick & Mason, 1984) to focus on the role of the CEO. For example, research

in this tradition has considered certain individual-level factors that influence CEOs' decisions to

engage with stakeholders—including political and social ideology (Chin, Hambrick, & Trevino,

2013; Hafenbrädl & Waeger, 2017), commitment to ethics (Bansal & Roth, 2000; Muller & Kolk,

2010), hubris (Tang, Qian, Chen, & Shen, 2015), and narcissism (Petrenko, Aime, Ridge, & Hill,

2016; Tang, Mack, & Chen, 2018).

While important, much of the work on the role of the CEO in stakeholder strategy is general

and considers the decision of whether to engage with stakeholders in a very broad sense.

Research has yet to seriously consider how and why CEOs might pursue more specific stake-

holder strategies reflecting unique priorities and goals. This omission is critical, as the pursuit

and scope of stakeholder strategies can vary greatly, ranging from being narrowly focused on

one or a few stakeholders to being more widely focused on a diverse set of stakeholders (Agle,

Mitchell, & Sonnenfeld, 1999; Freeman, 1984). Indeed, due to the tenuous and uncertain rela-

tionship between stakeholder strategy and firm performance (e.g., Garcia-Castro & Francoeur,

2016; Hafenbrädl & Waeger, 2017), no consensus stakeholder strategy has emerged, and debate

persists regarding how firms should best engage with stakeholders (Khurana, 2007; Stout,

2012). It also means that we know relatively little about why CEOs pursue and implement dif-

ferent stakeholder strategies.

The primary goal of our study is to build and test theory that investigates whether CEOs

influence the nature of a firm's stakeholder strategy. In considering the various CEO character-

istics that might influence such a strategy, one, in particular, stands out: regulatory focus.

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