A Contingency-Based View of Chief Executive Officers' Early Warning Behaviour

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Januar 2008



Andreas Kirschkamp empirically analyses the early warning behavior of Chief Executive Officers in German medium-sized companies. First, he presents the design variables of early warning, then the influencing contingency variables. On the basis of the scholarly research on psychological and contingency theory, the author deduces hypotheses and tests them.


The concept of early warning in prior publications

Contingency theory as an approach to explain early warning behavior

Environmental uncertainty and the design variables of early warning behavior

Personality of the CEO and the design variables of early warning behavior

Success of early warning and economic success


Dr. Andreas Kirschkamp promovierte bei Prof. Dr. Utz Schäffer am Lehrstuhl für Controlling der European Business School, Oestrich-Winkel. Er ist im Bereich Mergers & Acquisitions bei der Verlagsgruppe Georg von Holtzbrinck in Stuttgart tätig.


A Introduction (p. 1)

1 Motivation and Objectives

"Organizations depend on the environment [] and often must cope with unstable, unpredictable external events." They can anticipate these events that affect the organization by early warning, a two-step process that comprises scanning the environment and interpreting these data into information about opportunities and risks for the organization.

"[I]dentifying the opportunities and risks" in the organizational environment gives organizations time and the possibility to survive by changing strategy or structure in order to adapt quickly to new trends or by even influencing these trends. Organizations that are aware of potential risks and chances can use this information and shape the environment or adapt to it. So, they have the possibility to avoid a missing fit between the organizational environment and the strategy of the organization which results in declining performance.

In consequence, it is not surprising that organizations anticipating these potential risks and chances tend to be more successful than competitors which are not aware of them. This process helps organizations to outperform peers and leads to a competitive advantage. Therefore, early warning is perceived as a resource defined as "stocks of available factors that are owned or controlled by the firm" which can be deployed by the company. This is supported by the resource based view that assumes "that sustained superior performance arises from sustainable competitive advantages" caused by firm-specific resources.

The relevance and necessity of this anticipation can be illustrated with examples from companies that anticipated trends and therefore gained market dominance. AMAZON foresaw the relevance of the internet as a distribution channel and DELL new methods of production and storage. Both of them were then able to convert this foresight into a benefit for the
ir customers. Examples of companies that were not able to foresee the future also prove the necessity of early warning. On the larger scale, there is a rising number of insolvencies in countries like Germany. On the smaller scale, there are many examples of companies that failed to notice risks and new trends.

The necessity of early warning systems is also reflected by German law. The KonTraG (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich = Law for Control and Transparency in Business) requires an early warning system for stock corporations. It demands these systems mainly because of two reasons: 1) the fast changing environment and 2) the backward orientation of accounting that therefore does not allow the deduction of reliable conclusions about the future. Although the regulatory demands are not completely concordant with those of the organizations, this law has been a milestone in Germany for its importance on early warning in legislation.

In the context of research on early warning there is first of all an important stream of economic literature that focuses on the phenomenon of environmental scanning. At this moment research has focused on the relationship between environmental uncertainty and specific design variables of scanning behavior. But important questions remain and further research has to be done.

The process of early warning consists of two steps: scanning and interpretation. Although the importance of the second step is stressed in literature, empirical studies have not yet focused on this step. In the context of early warning there are only case studies that tried to explore the way managers interpret the organizational environment.
EAN: 9783835055049
Untertitel: An Empirical Analysis of German Medium-Sized Companies. 2008. Auflage. eBook. Sprache: Englisch. Dateigröße in MByte: 2.
Verlag: Deutscher Universitätsverlag
Erscheinungsdatum: Januar 2008
Seitenanzahl: xxvii271
Format: pdf eBook
Kopierschutz: Adobe DRM
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