The Impact of Managerial Ability on Firm Optimal Distinctiveness: The Moderating Effect of CEO Tenure

Optimal distinctiveness within a single policy has been rarely examined in both the market and non-market strategy literature. Both agency theory and Upper Echelons theory suggest that CEOs play a significant role in shaping firms’ strategic behavior. Given the growing importance of managerial talent in today’s complex, dynamic business environment, as well as an increasing focus on firms’ CSR policies, this study investigates the relationship among managerial ability, CEO tenure, and firms’ optimal distinctiveness in CSR practices. We specifically examine the effect of managerial ability (talent) on CSR emphasis differentiation and scope conformity. Using a sample of 28,593 firm-year observations from 1992-2013, we find that managerial ability is negatively related to CSR scope conformity and positively related to CSR emphasis differentiation. We also find that CEO tenure moderates the relationship between managerial ability and CSR conformity, such that as CEO tenure increases, the negative relationship between managerial ability and CSR conformity decreases. Our results contribute to the growing literature on the role of upper echelon characteristics in shaping firms’ strategic behavior and how more able CEOs deal with pressure for legitimacy and competitive advantage in their CSR practices. We provide implications for scholars and practitioners seeking to understand how managerial ability and CEO tenure impact firms’ CSR strategies.