The authors write that “interorganizational executive linkages provide critical information and other resources that are needed to formulate and implement successful turnaround strategies.” Because CEOs’ external network ties are often with companies in other industries, the authors note, these connections might also provide them with a source of more innovative strategies that don’t conform to what their industry counterparts are doing.
However, the authors found no support for their second hypothesis — that founder-CEOs were more likely to lead their declining companies back to prosperity. The authors had expected that firms led by founders would be more likely to successfully rebound, in line with the theory that founder-CEOs can react more effectively to organization-wide crises. Past research has also suggested that founder-CEOs tend to be more visionary and have more emotional attachment to the firm, lending them greater legitimacy in representing the company through challenging times.
But on the basis of their research, the authors speculate that in times of turmoil, founder-CEOs might lose their legitimacy because they are so identified with the firm, both from their long tenure and from their perceived commitment to the status quo. This is not necessarily the case with “superstar” founder-CEOs, like Steve Jobs or Michael Dell, the authors note, who have enough sway with media analysts and shareholders to keep their star power in play, for themselves and for their companies in times of struggle.
Declining firms are more likely to recover and avoid bankruptcy if their CEOs hold positions on other companies’ boards of directors. The finding implies that in times of poor performance, inter-firm links can serve as vital conduits for information and other resources, which leaders can draw on to fashion and execute a turnaround strategy.