Be open or overwhelmed? How CEOs’ exposure to multiple institutional logics shapes strategic responses to shareholder activism

Abstract

Previous research has paid little attention to how managerial perception of multiple institutional logics shapes organizational decision-making. I consider shareholder-activist demands based on two distinct beliefs—shareholder logic and stakeholder logic—as a typical case of logic plurality. Drawing on managerial cognition literature, I theorize the effect of CEOs’ prior exposure to institutional plurality on managerial decisions on responses to shareholder activism. I predict that experienced logic plurality triggers CEOs’ need for cognitive closure—the desire for definite (as opposed to ambiguous) opinions, thus increasing CEOs’ tendency to resist following activism instead of showing receptivity to them. I further suggest that inherent inconsistency in activist-proposed issues enhances CEOs’ need for cognitive closure driven by prior exposure to logic plurality. In contrast, cognitive complexity weakens CEOs’ perception of conflicting aspects of institutional logics, while career breadth enhances CEOs’ capability to reconcile potential inconsistencies between different logics. My research directs scholarly attention to the role of managerial cognition in organizational responses to institutional logics and offers insights for scholarship on managerial decision-making in the context of shareholder activism.