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The Influence of German Top Executives on Corporate Policy and Firm Performance

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Marcel Normann

The question of whether strategic leaders really matter is important to a wide array of topics. Three essays contribute to empirical top executive research on the relative importance of German CEOs and CFOs. The analyses are based on a unique dataset that includes observations from more than 300 CEOs and 100 CFOs working for 110 publicly listed German firms that operated in 10 different industries between 1983 and 2002. The first essay describes and analyzes characteristics of top executives. The second essay examines the existence and size of top executive-specific effects as well as industry-, company- and executive-level moderating factors. The third essay sheds light on the circumstances under which CEOs and CFOs matter the most (or least).

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3. Essay 2: Executive-specific Effects on Performance and Policy

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3.1 Top executives in the literature: deterministic, voluntaristic, and integrative models There are opposing views in the business and economics literature about the importance of executives and the roles they play in organizations. Depending on their assumptions on the free will and autonomous behavior of individuals, the range of theories extends from completely deterministic to entirely vo - luntaristic models (Hitt & Tyler, 1991; Schrader, 1995). Deterministic models argue that top executives are constrained by the external environment or sug- gest that there is only one best solution, which in fact reduces strategic deci- sions to one of mechanics (Hannan & Freeman, 1977, 1984; Pfeffer & Salan- cik, 1978; Porter, 1980, 1985). In contrast, voluntaristic models emphasize that top executives, as the dominant coalition, make strategic decisions and, thus, have a considerable effect on their organizations (Child, 1972, 1997; Hambrick & Mason, 1984). Finally, integrative models, being an extension of deterministic and voluntaristic models, suggest that the magnitude of top executives’ impact varies and depends on various environmental, organiza- tional, and individual factors (Hambrick & Finkelstein, 1987; Wasserman, Nohria, & Anand, 2001). Historically, deterministic models represent the starting point in the lit- erature. In general, there are two groups of deterministic models, external control, and rational normative models (Hitt et al., 1991; Schrader, 1995). External control models intend to explain existing structures and organiza- tions, whereas rational normative models focus on making normative recom- mendations. External control models argue that the external environment has a major impact on organizations and that decisions on structure and strategy...

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