Entry Mode Choice: The Roles of CEO Overconfidence and CEO Incentives
Although the importance of CEO overconfidence in influencing firm decisions has been quite documented in prior studies, no field research has examined the impact of CEO overconfidence onentry mode choice. Grounded in upper echelons theory and entry mode literature, this study establishes a link between CEO overconfidence andthe choice of foreign entry mode. In addition, since agency theory suggested that incentive mechanisms play an important role in influencing executive behaviors and managerial decisions, we investigate the role of the managerial incentive mechanism (i.e. equity ownership and compensation structure) in moderating the main effect of CEO overconfidence on entry mode choice. The present study helps the understanding of the role of the personal attributes of CEOs in influencing international decision-making with regard to choice of entry mode. This study also helps to identify the condition under which overconfident CEOs’ willingness in choices of foreign market entry modes. Our study thus contributes in enriching both the literature in CEO overconfidence, entry mode research and agency theory.
Keywords - CEO overconfidence, entry mode