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CEO overconfidence and firm internationalization: the moderating role of experience and managerial discretion

Author

Listed:
  • Runhui Lin
  • Fei Li
  • Adedigba Olawoyin

Abstract

Purpose - Overconfidence as an important psychological factor can also affect CEO’s cognitive preferences, while there are few studies about the impact of CEO’ overconfidence on the international expansion of companies. This paper aims to fill this gap and further discuss the moderating role of CEO’s overseas experience, CEO duality and ownership. Design/methodology/approach - The authors focus on the Chinese context, collect 2008–2016 data from China's manufacturing industry as sample, use fixed effect model to analyse the effect of CEO overconfidence on international expansion strategy of Chinese firms. Findings - The empirical results show that: CEO overconfidence positively promotes the degree of firm internationalization. CEO foreign experience positively affects the internationalization degree, but can restrain overconfidence thus negatively regulate this impact relationship. When duality is present, both CEO power and managerial discretion are pronounced and they exhibit a stronger effect. Firm’s equity nature will affect the relationship between CEOs' overconfidence and the degree of internationalization. Compared with private enterprises, CEOs in state-owned enterprises have limited power, therefore, this influence relationship is weaker. Originality/value - This study has emphasized the importance of top executives' psychological characteristics on firm internationalization, which is key application and complement of upper echelons theory and fills the research gap in the literature. In this paper, the authors found the advantages of overconfidence for firms, which helps to understand the complex meaning of overconfidence. The results of moderating effect further explore the application of overconfidence in different context, which has some implications for management practice.

Suggested Citation

  • Runhui Lin & Fei Li & Adedigba Olawoyin, 2020. "CEO overconfidence and firm internationalization: the moderating role of experience and managerial discretion," Nankai Business Review International, Emerald Group Publishing Limited, vol. 11(4), pages 597-616, June.
    • Handle: RePEc:eme:nbripp:nbri-08-2019-0037
    DOI: 10.1108/NBRI-08-2019-0037
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    Citations

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    Cited by:

    1. Natalya D. Likhareva & Elena B. Gafforova & Igor A. Novikov, 2022. "International market selection by small enterprises: Cognitive biases and heuristics in decision-making," Upravlenets, Ural State University of Economics, vol. 13(1), pages 84-99, March.
    2. Liu, Feifei & He, Xinming & Wang, Tao, 2023. "In the name of the family: The effect of CEO clan culture background on firm internationalization," Journal of Business Research, Elsevier, vol. 161(C).
    3. Sun, Bing & Zhang, Yanfeng & Zhu, Kunyan & Mao, Hongying & Liang, Tian, 2024. "Is faster really better? The impact of digital transformation speed on firm financial distress: Based on the cost-benefit perspective," Journal of Business Research, Elsevier, vol. 179(C).

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