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.
Study: A CEO’s Decision Making Is Shaped by Whether Their Parents Were Immigrants
An examination of banks dealing with unexpected shocks.
March 28, 2018
agalma/Getty Images
Summary.
Does cultural background affect a leader’s decision making? A study supports the idea that the culture of a CEO’s ancestors influences his or her decision-making, firm policy choices, and ultimately the firm’s performance. Researchers studied 610 U.S. bank CEOs who were born in the U.S., and who fell 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). Analyzing what happened to banks after an unexpected shock, which increased competitive pressures in some states but not in others, researchers found that banks led by CEOs whose parents or grandparents were immigrants were, on average, associated with superior performance. This superior firm performance was strongest for second-generation CEOs, and the effect weakened with each later generation. The effect also varied by the country of origin of a CEO’s ancestors. Looking more closely at the cultures CEOs’ ancestors came from, the data showed that banks led by CEOs whose parents or grandparents came from a group-oriented (versus self-oriented) culture made more cautious but superior investment decisions. These findings broadly show that cultural heritage matters and that it’s beneficial for companies to be diverse and to recruit talents from various backgrounds.