Study: A CEO’s Decision Making Is Shaped by Whether Their Parents Were Immigrants
(HARVARD BUSINESS REVIEW) Does cultural background affect a leader’s decision making? There’s a lot of research on how leaders living in different cultures behave, but little on how cultural heritage shapes leaders — even though this would seem to be just as meaningful for business performance as other factors like experience and education.
We sought to fill this gap. We conducted a study specifically focusing on whether the cultural values that CEOs inherit from their parents and grandparents affect their decision-making and their firms’ performance.
Our sample consisted of 610 U.S. bank CEOs who were born in the U.S., which we separated into three groups: those whose parents were immigrants to the U.S., those whose grandparents were immigrants to the U.S., and those whose parents and grandparents were born in the U.S. (our control group). We chose this design as a way to isolate the effect of cultural heritage: while CEOs born to immigrant parents or grandparents are exposed to the same legal, social, and institutional influences as other CEOs, they’re likely to possess a distinct cultural heritage. Research has long shown that cultural values are deeply rooted and that immigrants to the U.S. show a degree of cultural distinctness over several generations. For instance, U.S. immigrants’ family living arrangements and beliefs of the role of women in society have been found to parallel those found in the home countries of their ancestors.
The CEOs in our sample led 441 publicly-listed U.S. banks between 1994 and 2006. Among them, 293 were either children or grandchildren of immigrants, and we called them our second- and third-generation CEOs.
Our idea was that if the cultural heritage of a CEO matters to corporate outcomes, then we would observe systematic differences between firms led by second- and third- generation CEOs and firms led by the control group, following shocks to competition. And this is what we found...