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CEO cognitive competencies in managing turnaround: Complexity and focus

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  • Xin Liang

Abstract

This study examines the knowledge structures (KSs) of CEOs of firms that attempted turnaround from performance decline. We developed and tested a theoretical model that describes how two cognitive characteristics of CEOs, complexity and centrality, influence the likelihood of turnaround. It is found that CEO KS centrality directly increases the chance of turnaround. In addition, CEO KS complexity is found to increasingly improve the chance of turnaround as a firm in decline launches a greater extent of strategic change to their organization. Together, in theory, our research suggests that CEO cognitive competencies matter for managing successful turnaround attempts. Practically speaking, the findings of this article imply that to improve their chance of achieving successful turnaround, declining firms should look for CEOs who are cognitively focused or who are cognitively complex enough to engage in the degree of strategic changes launched to save the firm. JEL Classification: L20, M1

Suggested Citation

  • Xin Liang, 2024. "CEO cognitive competencies in managing turnaround: Complexity and focus," Australian Journal of Management, Australian School of Business, vol. 49(4), pages 636-656, November.
    • Handle: RePEc:sae:ausman:v:49:y:2024:i:4:p:636-656
    DOI: 10.1177/03128962231168009
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    Keywords

    CEO knowledge structure centrality; CEO knowledge structure complexity; firm turnarounds; strategic change;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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