"The biggest challenge for all of us, not just politicians or bureaucrats, is that we, Indians, have the highest ego per unit of achievement."
-Narayana Murthy, Founder, Infosys, India (Gupte 2016).
The above statement depicts the egotistic personality of Indians; this self-interest is likely to be part of the personality of an Indian CEO, influencing strategic decisions, such as internationalization. Internationalization, the expansion of a business beyond its home country (Hitt et al. 1994), is one of the fastest-growing forms of expansion strategy pursued by EMFs. Given the challenges of liability of emergingness (LOE), liability of foreignness (LOF), and the technological and marketing lag of EMFs compared to advanced countries (Ramamurti 2012), internationalization cannot be explained only by the economic motives or dynamic capabilities of a firm. However, international business literature often views internationalization decisions as purely rational--assuming that firms internationalize purely for economic benefits (Schotter and Beamish 2014)--and ignores the role of CEO personality (Aharoni et al. 2011). It is important for both academicians and managers to understand the influence of a CEO's personality on risky decisions, such as internationalization as explained below.
Academicians expert in the microfoundations literature in international business asserts that CEOs and their traits have explanatory power in understanding the global strategy of firms (Felin and Foss 2005; Felin and Hesterly 2007). Felin and Foss (2005, p. 441), commenting on the significance of managerial traits, argued "... to fully explicate organizational anything--whether identity, learning, knowledge, or capabilities--one must fundamentally begin with and understand the individuals that compose the whole...." Gavetti (2012) also emphasized the need to understand the behavior of strategic leaders, such as CEOs, in pursuing cognitively distant strategies that involve a high level of risk, such as internationalization. Despite these appeals for further research, the role of senior executives' personality in shaping a firm's activities across different geographic markets is only scantly understood (Foss and Pedersen 2016; Oesterle et al. 2016). Through this paper, we address this significant concern raised by international business scholars.
As internationalization is a risky decision, CEOs with a high risk propensity are likely to internationalize firms more than peers less tolerant of risk. As emerging markets, such as India, have traditionally remained separate from the world economy (Srinivasan 2006), CEOs in emerging markets might need to have extraordinary risk-taking ability, a trait possessed by narcissistic CEOs. Thus, exploration of CEO narcissism and EMF internationalization decisions can help the board hire CEOs with extraordinary risk-taking ability. Thus, exploring narcissism and internationalization relationship is of interest for practitioners as well.
Furthermore, this relationship might be even stronger under certain contingencies, such as CEO power granted by corporate governance factors and media attention received by the CEO. Thus, understanding the contingent model of narcissism and its impact on internationalization could especially help stakeholders from EMFs who need to internationalize to defend their home markets.
Upper echelon theory emphasizes the influence of managerial demographic traits on strategic decisions, including internationalization. It is the only micro-level theory able to expand our understanding of the influence of CEOs' attributes on firms' internationalization behavior. It specifically explains that executives' interpretations of the strategic opportunities and threats they face are functions of their experiences, values, and personalities (Hambrick 2007). Narcissistic individuals are largely driven by self-interest, overconfidence, and high-risk propensity (Resick et al. 2009). Consequently, narcissist CEOs are willing to take projects that are extremely challenging and involve risky strategies.
We extend the narcissism literature to the internationalization of EMFs in two ways. First, where the study by Oesterle et al. (2016) explored growth in revenues from internationalization through changes in the foreign sales ratio, we focus on the investment side, growth in the foreign asset ratio. Second, we test the boundary conditions under which the influence of narcissistic CEOs on internationalization could be even stronger. In this context, we introduce the role of CEO celebrity status and the relative power this gives CEOs compared to a board of directors as moderators. The rise of the celebrity CEO and the constant depiction of CEOs in the mass media as responsible for a firm's actions and the ensuing consequences has gained traction among management scholars (Hayward et al. 2004). CEO media tenor has also been found to explain several corporate-level outcomes, such as brand reputation and firm performance (e.g., Graffin et al. 2012; Hayward et al. 2004; Wade et al. 2006). We assert that the celebrity status of CEOs could also influence a firm's internationalization by further boosting the narcissistic tendencies of a CEO. This effect of a celebrity CEO as a moderator for narcissism and internationalization has not been explored in the extant literature. Although the role of a CEO's power has been discussed in the international business literature from a governance perspective (Singh and Delios 2017; Singla et al. 2014), the interaction of this governance aspect with executives' personality traits in influencing internationalization decisions has not been explored to date.
We tested our proposition in India, one of the fastest-growing emerging markets. Our findings indicate that, indeed, firms with narcissist CEOs experience higher growth in their degree of internationalization (DOI) than firms with less narcissistic CEOs, and this relationship becomes stronger when a CEO achieves celebrity status or gains power in the organization.
2 Theory and Hypotheses Development
2.1 EMFs in International Markets
Emerging markets, such as India, became integrated with the world economy much later than firms from developed markets (Li et al. 2017). Despite several disadvantages, such as the LOE (Madhok and Keyhani 2012), late mover disadvantage (Guillen and Garcia-Canal 2009), and underdeveloped institutional environments in their home countries (Khanna and Palepu 1997), these firms rapidly internationalized, gaining increasing attention from international business scholars (Aulakh 2007; Guillen and Garcia-Canal 2009; Luo and Tung 2007; Ray and Gubbi 2009). Indian firms, instead of taking less risky routes, such as alliances or joint ventures, favored acquisitions in both developed and developing markets as the entry mode for internationalization, thus further raising risks and uncertainty (Deng and Yang 2015; Kumar 2008; Shimizu et al. 2004; Singal and Jain 2012).
Risks associated with internationalization, such as asymmetric information, political risk, exchange-rate risk, or unknown consumer taste and preferences, may vary with psychic or geographical distance between focal countries (Johanson and Vahlne 2009; Oesterle et al. 2016). Still, EMFs, especially those from India, have expanded their boundaries across both developed and developing countries, thus managing psychic and geographical distances. Internationalization not only increases LOF (Elango and Pattnaik 2007) and retaliation from the host country's local firms (Mitchell et al. 1992); it also increases monitoring costs of business in the home country, compared to when firms have purely domestic operations (George et al. 2005). Given the relatively low experience of EMFs in international markets, this cost might be even higher for them.
Overall, these attributes taken together imply that internationalization for EMFs is a complex and risky strategy that requires greater managerial boldness and high levels of confidence and risk-taking propensity (Chittoor et al. 2015). Individuals with narcissistic personalities are more likely to have these traits than non-narcissist individuals, as we explain below.
2.2 Narcissist Personality
According to the psychology literature, narcissism is a clinical disorder characterized by self-admiration and self-aggrandizement (Ellis 1898; Freud 1957). Although clinical psychologists consider narcissism as a personality disorder, personality psychologists, on the contrary, portray narcissism as a dimension on which every individual can be aligned; varying in the degree to which an individual has a magnified sense of the self and is indulged in boasting that self-view continuously (Campbell et al. 2004; Judge et al. 2006).
Narcissists have a consistent sense of supremacy (Emmons 1981), consider themselves highly intelligent, and display enormous confidence in their abilities (Campbell et al. 2004; Judge et al. 2006). As they become overconfident about their abilities, their risk-taking propensity increases (Campbell et al. 2004). Narcissists are attention seekers and are preoccupied with fantasies of success (Dewall et al. 2011). While aiming for success, they worry little about the challenges or adverse outcomes that may result from risky moves. They not only are over-confident about success but also believe in bold moves that will garner the attention of people toward them. Furthermore, narcissistic individuals are inter-personally exploitative and thus pursue only self-centered goals, like high prestige, attraction, and rewards, congruent with their illusory successes (Dickinson and Pincus 2003). Such motives further drive narcissistic individuals to have excessive belief in themselves and take risks.
Explaining narcissism in leaders, Rosenthal and Pittinsky (2006, p. 617) noted that a "significant number of world leaders had grandiose belief systems, and their decisions...