CEO power and strategic persistence: evidence from post-IPO firms in China

We draw on several lines of literatures to develop a new theory on how CEO power can lead to strategic persistence in a set of new firms that are routinely touted as nimble and agile. IPOs may trigger strategic changes in organizational goals and boundaries. However, prior studies have shown that past organizational success can lead to strategic persistence—the tendency for firms to stick with strategies that yielded success in the past. We propose that one variable—CEO power—may explain why some post-IPO firms retain their strategic posture whereas others deviate from it. Using unique samples of new post-IPO firms in China, we find a positive relationship between CEO power and strategic persistence. This effect is positively moderated by firm diversification and the CEO’s political capital. We employ a multi-method approach and find consistent results across different samples and approaches. We conclude with a discussion of the implications of our findings.