Managerial aspects of differentiation strategy: Evidence from the analysis of trademark statistics

Shukhrat Nasirov, Cher Li & Stephen Thompson, “Managerial aspects of differentiation strategy: Evidence from the analysis of trademark statistics”

Earlier research on competitive strategy has demonstrated only partial support for aligning CEO personality with product differentiation. Our article revises and extends these findings by considering a much wider set of managerial characteristics proposed by subsequent studies. By integrating the upper echelons perspective with the hierarchical view of strategy, we also draw attention to alternative channels through which chief executives may influence organisational outcomes. In particular, we argue that along with direct involvement, decisions made by the CEO regarding the firm's businesses portfolio and resource allocation will eventually affect the extent of product differentiation, too. Our empirical testing is based on a sample of 854 chief executives in 263 U.S. publicly traded companies over the period 1992-2012. Using trademarks to measure product differentiability, we have demonstrated that CEOs' tenure, firm-specific knowledge, education, and proactivity have statistically significant explanatory power for variations in the degree of product differentiation across companies, even after controlling for unobserved firm-specific and year-specific heterogeneity. Furthermore, it has been shown that managerial characteristics stipulate the selection of product markets or industries to be in, thus mediating the relationship between chief executives and differentiation strategy. By confirming CEO biases that guide product differentiation, this research contributes to the broader discussion on the necessity to account for managerial background characteristics when considering the process of making strategic decisions.