The Connection Between Ceo Narcissism And Corporate Innovation
“A little narcissism is good. At least that's what I am telling myself,” is what Andy Dunn (2017), CEO of Bonobos Inc, answered when asked about his own narcissism. Narcissism is generally perceived as a bad character trait. Is Dunn then right when he says it has its upsides on the C-level of businesses? It is common knowledge that CEOs are the main drivers behind the innovation domain of their firms. Firstly, because top executives enjoy an important social network, with access to other prominent actors. Secondly, the power resulting from their leading position helps them promote new ideas and overcome resistance. Thirdly, top executives usually encounter less bureaucratic issues like lower employee levels would (Stock et al. , 2019). Since research is showing that leaders have, on average, a moderate to high level of narcissism (Owens et al. 2015), it is meaningful to analyse the relationship between CEO narcissism and corporate innovation.
In order to be able to research this relationship, we first need to define what narcissism is, and how it can be measured.
In the Greek mythology, Narcissus was the son of River God Cephisus and nymph Lyriope. He saw himself in water and fell in love with the reflection himself. When he figured out that this love would never be mutual, he killed himself. (“Narcissus | Greek mythology”, n. d. )
The Cambridge Dictionary defines narcissism as “too much interest in and admiration for your own physical appearance and/or your own abilities”. However, this definition lacks preciseness in order to be concise.
As most of personality traits, narcissism can be a difficult concept to measure, as it is often based on self-report. A frequently used tool for this is the Narcissistic Personality Inventory (NPI), developed by Raskin and Hall (1979) in the context of social psychological research. At the beginning, there were 223 key items measured. Those were based on the definition of narcissism found in the Diagnostic and Statistical Manual of Mental Disorders, Third Edition (DSM-3).
“The essential feature is a Personality Disorder (p. 305) in which there are a grandiose sense of self-importance or uniqueness; preoccupation with fantasies of unlimited success; exhibitionistic need for constant attention and admiration; characteristic responses to threats to self-esteem; and characteristic disturbances in interpersonal relationships, such as feelings of entitlement, interpersonal exploitativeness, relationships that alternate between the extremes of overidealization and devaluation, and lack of empathy” (American Psychiatric Association, 1980).
Those items were expressed in forced-choice statements, such that participants had to choose between a narcissistic and a non-narcissistic alternative. Afterwards, the 223 items were refined to only forty, making it the widely used NPI as we know it today (Raskin & Terry, 1991). The underlying, dimensional structure of the NPI was analysed in several studies with divergent results. For example, Emmons found 4 dimensions (1987), while Raskin and Terry had a 7-dimension result. In that paper, the researchers were not only able to find evidence for those seven components (authority, exhibitionism, superiority, vanity, exploitativeness, entitlement and self-sufficiency), but also for a general narcissism construct (Raskin and Terry, 1988).
Another narcissism measuring tool is the Five-factor narcissism inventory (FFNI) (Glover et al. , 2012). This inventory is based on the Five Factor Model. This model is built on the belief that only five (main) dimensions (agreeableness, conscientiousness, extraversion, neuroticism and openness to experience) are needed to describe ones personality in a quite general and broad way. “The FFNI was derived from the theory that narcissism (in its various forms), like other personality disorders, can be understood as comprising maladaptive variants of the FFM (Clark, 2007; Widiger & Trull, 2007)” (Glover et al. , 2012). The FFNI consists of fifteen subscales, each of them measuring elements of narcissism related to one facet of the five-factor model.
A more recent possible tool is the Pathological Narcissism Inventory (PNI). The PNI consists of 52 self-report items, covering seven different dimensions about narcissistic grandiosity (entitlement rage, exploitativeness, grandiose fantasy, self-sacrificing self-enhancement) and narcissistic vulnerability (contingent self-esteem, hiding the self, devaluing) (Pincus, 2013). As the length of this inventory can be cumbersome, a brief pathological narcissism inventory (B-PNI) was created. Therefore the 28 best-performing items of the NPI over the seven different dimensions were used and the model was afterwards controlled for internal validity. The result was a shorter inventory that “can be used in place of the original PNI to assess the various facets of pathological narcissism effectively and without loss of information” (Pincus et al. , 2015).
Those insights on narcissism and its measurement methods will be used in the following part to discuss the influence of CEO narcissism on the firm’s innovation. The base for this research is the paper “Me, myself and I: influence of CEO narcissism on firms’ innovation strategy and the likelihood of product-harm crises” (Kashmiri, Nicol and Arora, 2017). In this research, the objective was to examine the relationship between CEO’s narcissistic personality traits and firms’ innovations outcomes. The authors postulated that firms led by narcissistic CEOs would have a higher speed of innovation (characterised by higher rates of new product introductions (NPIs)) and a greater novelty of their innovations (characterised by a greater proportion of radical innovations in the new product portfolio). However, the researchers further hypothesised that those firms would also have a lower product safety performance, which gives rise to a higher likelihood of encountering product-harm crises. They also explored the mediating power of competitive aggressiveness as well as the marketing power in the top management team (TMT) and the firms’ customer orientation.
Two important mechanisms are introduced as important ways through which the CEO personality traits influence firms’ outcomes. The first one, called behaviour channelling, says that people will select alternatives that satisfy their needs the most and feed their desires. For a narcissistic CEO, this would for instance be attention and social praise. The second one, perceptual filtering, says that people search for information that fits their personalities and then look at it in ways that are in line with it. A narcissistic CEO, in search of attention, will probably try to launch more products, and therefore rather look at good than bad news about it.
A few points came out of this study.
First of all, Kashmiri, Nicol and Arora were able to prove that a higher CEO narcissism is associated with a higher firm’s rate of NPIs. This relationship can be justified by two reasons. Firstly, NPIs are very important for the growth of a firm but they also have high failure risks and uncertain returns. Due to their overconfidence, narcissistic CEO overestimate the chances of success and are therefore more eager to introduce new products. Moreover, this link is mediated by a firm’s greater competitive aggressiveness. Secondly, due to the mechanism of perceptual filtering, the narcissistic CEO will be more aware of market possibilities, as those give him the opportunity to gain attention and appraisal. This relationship is even made stronger thanks to the mediation of competitive aggressiveness: firms lead by narcissistic CEOs can use their competitive intelligence to address market changes rapidly.
Not only the speed of innovation benefits from a narcissistic CEO, the novelty of the innovation also increases when under the leadership of such CEOs: we can indeed see that the proportion of radical innovation becomes higher. This is because radical innovations come with a higher risk than incremental ones. The overconfidence of narcissistic CEOs leads them to underestimate those risks. They do not only look at the higher expected profits, but also at the at admiration that they will get for the novelty of the innovation: introducing completely new product may picture them as being visionary.
However, even though the speed and novelty of innovation improves thanks to a greater narcissism of the CEO, the likelihood of encountering product-harm crisis also increases. “A product-harm crisis is an event in which a firm’s product fails to meet a mandatory safety standard, or contains a defect that creates an unacceptable risk of serious injury, considerable harm, or death to consumers (Dawar and Pillutla 2000; Cleeren et al. 2008; Kashmiri and Brower 2016; Kashmiri, Nicol and Arora, 2017). The negative relationship between both can be explained by the fact that narcissistic CEO rather focus on grand initiatives, such as introducing very brand new products than on long-term investments in product safety and quality. But the lack of interest in those crucial products aspects is also the result of the overconfidence of those CEOs, as they underestimate the risk of facing product-harm crisis. Once again, this relationship between CEO narcissism and product-harm crisis is mediated by firm competitive aggressiveness: firms with a higher competitive aggressiveness have a greater motivation to outperform competitors and take quick competitive decisions to get competitive advantages. They tend to rush products through the product development and launch phases, so that products are commercialised without adequate quality or safety tests.
Last, the mediating role of marketing department power in the top management team (TMT) was examined. A greater power of the marketing department helps attenuate the impact of CEO narcissism on product-harm crisis. This is because a product-harm crises damages such marketing assets as brand equity and customer equity (Dawar and Pillutla, 2000). As those damages are very onerous for the marketing department, they will do their best to avoid them. The mediating role of the marketing department is itself mediated by the higher customer orientation. Firms with higher customer orientation usually commits themselves more to include the customer preferences and interests into their innovation strategy (Deshpandé and Webster, 1989), and members of the product development team can understand the consumption framework better. (Bounds et al. , 1994), which leads to products of better quality. Thus, it helps align the innovation choices of narcissistic CEOs with the market needs.
We now know that CEO narcissism is not always a negative thing. It indeed improves the speed of innovation and the novelty of it. However, this can also lead to a greater risk of encountering product-harm crisis. A marketing management with a great power in the TMT can help reduce its throwbacks. Thanks to those information and relationships, we can formulate a few advices. First of all, personality assessments should be made, in order to know to which extent one’s narcissism reaches and what the general personality is. The narcissism assessment can be done with one of the measuring methods presented in this essay, or by different ones. The five-factor model can for instance be used for the general personality assessment. Those assessments can then be used for higher promotion decisions or to higher hiring decisions. As this essay only concerns the CEO and the mediating role of the TMT, assessing the personality of each employee could become quite time-consuming and expensive, without adding value. Once the needs of the firms are clear (not all firms want to or should be innovative), the assessments can then be used to appoint the new CEO. Depending on the chosen CEO and his narcissism degree, the right management team should be constituted, as having a narcissistic CEO means that the firm needs strong marketing executives in the top management. Otherwise, the firm might encounter product-harm crisis. Besides giving advices, it can also help predict the behaviour of competitor firms (based on the CEO profile) or the one of the industry: when most CEOs in an industry are (rather) narcissistic, the industry will be more innovative. It is important to note that narcissism is a continuous variable, rather than a discrete one. This means that firms and industries with a more or less narcissistic CEO will also demonstrate different degrees of innovativeness and innovations. Besides all of this, it might be helpful to apply insights from the domain of the psychology to better understand innovation-related decisions made by senior managers.
In conclusion, narcissistic CEOs influence their firms through two mechanisms, being behaviour channelling (they select the alternatives according to their own needs and desires) and perceptual filtering (they search and interpret information in a way that fits their own personalities). This influence helps them achieve a higher speed of innovation (represented by the higher rate of firm’s NPIs) and a greater novelty of their innovations (represented by the higher percentage of radical innovations). But it also highers their chances to face product-harm crisis, such as not meeting mandatory standards or lacking long-term quality and safety management. Having a strong Marketing Role in the TMT helps counter this negative side effect. Therefore, the appointment of a CEO should not occur without also appointing the appropriate TMT. Thus, to come back to the quote of Andy Dunn (“A little narcissism is good. At least that's what I am telling myself” (2017)): when looking at firms’ innovation, this is indeed not a bad thing per se. This can even be very good for firms’ innovative outcomes, as long as there are strong marketing executives to ensure that the product safety is not jeopardized.
