Discovery at Carlson·14 The impact of a CEO’s cultural heritage

Tracy Yue Wang: The impact of a CEO’s cultural heritage
Imagine this scenario: Two people are equally qualified candidates to be the next CEO of your large, U.S.-based company. One person is of British heritage, the other German. Your top priority for the new CEO is growing the company via mergers and acquisitions (M&A). Based on that information, who do you choose?
Tracy Yue Wang, a Carlson School Finance Professor, would pick the Brit every time. And her research strongly backs that up.
Why?
“The British, culturally speaking, are more comfortable with uncertainty relative to the Germans,” says Wang. “M&A activities are often company-altering decisions and inherently come with many unknowns. Having a CEO who isn’t afraid of those, which we can tell from their cultural heritage, signals they’re more likely to engage in those activities. In contrast, Germans prefer certainty, meaning M&A is much less likely to occur.”
In fact, Wang finds that a CEO’s cultural heritage plays a deeper role in their decision making than we may assume. Wang and her colleagues reviewed more than 13,000 CEOs of nearly 9,000 U.S. publicly-traded companies between 1982- 2012, using immigration records and last names to determine cultural origin. They found 8,250 unique last names, most commonly of British, German, Irish, and Italian heritage.
Avoiding uncertainty
Wang and her team then used an uncertainty avoidance index (UAI) to capture cultural attitudes toward unfamiliar and unstructured situations. Dutch social psychologist Geert Hofstede developed UAI after reviewing several social characteristics and measuring their prevalence in each nation’s population.
Looking at M&A activity—which comes with uncertainties— proved useful for Wang and her team in confirming that cultural attitudes can affect CEO decision making.
“We found that CEOs with a more uncertainty-adverse cultural heritage are significantly less likely to engage in corporate acquisitions,” she says. “Also, those CEOs from more uncertainty-avoiding cultural backgrounds are more likely to choose targets in industries in which they have prior work experiences, lowering that uncertainty.”
"Corporate leaders’ cultural heritage can help us understand corporate decision making."
The role of a CEO’s parents
On top of that, Wang’s research also looked at the influence of CEOs parents. Since most of the CEOs in U.S. publicly-traded companies were born in the U.S., parenting likely plays a crucial role in the transmission of cultural values and preferences. This is indeed what Wang’s research found. A CEO’s cultural heritage is a better predictor of his or her corporate decisions if the CEO’s parents emphasize cultural heritage more. They also found some interesting differences between sons and daughters. Male CEOs’ attitudes towards uncertainty were mainly influenced by their father’s cultural heritage while female CEOs’ attitudes towards uncertainty were shaped by both parents’ heritage.
These links between cultural heritage and decision making are quite persistent, lasting up to 100 years after the family immigrated to the U.S., according to their estimates. But there is gradual assimilation over time.
Long-lasting impact
“Corporate leaders’ cultural heritage can help us understand corporate decision making,” Wang says. "CEOs have the biggest impact on their company out of anybody. If we are able to figure out their preferences and look at the factors that affect their decision making such as their cultural heritage, we can better assess their appetite for uncertainty and understand why a CEO may be making certain decisions.”

文化背景影响CEO决策
设想一下:你拥有一家位于美国的大型企业,目前有两位实力相当的CEO人选其中一位是英裔,另一位是德裔。你希望新任CEO通过并购扩大企业规模。基于以上信息,你选哪一位?
卡尔森学院财经学教授Trace Yue Wang坚定地选择英裔候选者,并通过研究有力地支持了这一选择。
“从文化的角度来说,英国人比德国人更适应不确定性。并购项目天然地伴随着不可知,CEO需要作出许多会彻底改变公司的决策。不畏惧不确定性的CEO会更积极地参与这些活动,而这一点可以根据其文化背景来判断。德国人倾向于确定性,因此并购成功的可能性会低很多。”
Wang教授发现,CEO的文化背景在决策中起到了非常重要的作用。她和同事研究了大约9,000家美国上市企业在1982到2012年间的13,000多名CEO,并根据移民记录和姓氏来确定其文化背景。他们一共统计了8,250个姓氏,大多数来源于英国、德国、爱尔兰和意大利。
避免不确定性
Wang教授及其团队使用避免不确定性指数(UAI)来分析人们对于不熟悉、凌乱环境的文化态度。UAI是德国社会心理学家GeertHofstede通过研究社会特征、并评估其与各国居民的相关性而开发的。
并购活动充满了不确定性,而研究并购活动帮助Wang教授及其团队确认了文化背景对CEO决策的影响。
“我们发现,来自反对不确定性的文化背景的CEO较少参与企业收购,并且会选择与过往工作经验有关的行业目标来降低不确定性。”
“了解企业领导人的文化背景,有助于理解企业决策。”
CEO父母的作用
Wang教授也研究了CEO父母的作用。大部分美国上市企业的CEO都出生于美国,所以文化价值和偏好的传播应当主要由父母承担。Wang教授的研究证实了以上猜测。如果父母较为强调文化背景,那么该CEO的文化背景对企业决策的影响更大。此外,两性之间也有差异。男性CEO对待不确定性的态度主要源自父亲的文化背景,而女性CEO则受到父母双方的影响。
文化背景对决策的影响力十分持久,研究者估计,这种影响力能维持到家庭移民至美国的100年后。但是,影响力度随时间推移而递减。
长远影响
“了解企业领导人的文化背景,有助于我们理解企业决策。CEO对企业的影响力大于其他人。如果能够了解其偏好,并审视文化背景等影响决策的要素,我们将能更好地理解其风险偏好、理解CEO作出某项决策的原因。”