Shackles of hometown identity—<scp>CEO</scp>'s hometown identity and strategic change

Abstract This study investigates the impact of CEO hometown identity on strategic change of Chinese firms. The contribution of this research lies in examining how hometown identity shackles strategic change decisions. We propose that CEOs with strong ties to their local community may exhibit caution and initiate fewer strategic changes due to their concerns about maintaining in‐group reputation. However, we argue that the negative effect of hometown identity on strategic change can be mitigated by the presence of institutional investors and slack resources. To empirically test our hypotheses, we analyze a sample of publicly listed Chinese firms spanning the period from 2008 to 2019. Our results provide robust evidence supporting our hypotheses. We employ various statistical models, including propensity score matching, instrumental variables regression, and generalized estimating equations, to ensure the reliability and validity of our findings.