Academic journal article Academy of Strategic Management Journal

CEO Trustworthiness: A Source of Competitive Advantage

Academic journal article Academy of Strategic Management Journal

CEO Trustworthiness: A Source of Competitive Advantage

Article excerpt


Seeking to understand why some organizations are more successful than others, strategy researchers focus on identifying sources of competitive advantage. Recently, researchers have begun to systematically examine leadership at the top of organizations (Gupta, 1988). The emerging concept representing leadership at this level is known as "strategic leadership." Hambrick (1989) identifies strategic leaders as those who have overall responsibility for an organization, are concerned with external as well as internal spheres of influence, and are surrounded by ambiguity and complexity.

During the last decade, numerous researchers have stressed the importance of personal character and interpersonal trust to organizational leadership effectiveness (e.g., Badaracco & Ellsworth, 1989; Bennis, 1989; Granovetter, 1985; Zaleznik, 1989). Based upon over ten years of study, Kouzes and Posner (1993) suggest that credibility and trust form the foundation upon which organizational leaders and constituents create the future. Other social scientists agree, though with different terminology, stressing the importance of executive integrity (Locke, 1991), principle-centeredness (Covey, 1992), and reciprocal trust (Bennis, 1989) to interpersonal influence and organizational performance. Theoretical arguments and studies are beginning to emerge which suggest that leader trustworthiness may be a key determinant of strategic leadership effectiveness and organizational performance (e.g., Barney & Hansen, 1994; Badaracco & Ellsworth, 1989; Kouzes & Posner, 1993). The purpose of this paper is to explore the importance of leader trustworthiness from a resource-based perspective.


Resource-based models of competitive advantage are based on two assumptions: (1) that strategic resources may vary across organizations, and (2) that these resources may not be perfectly mobile (Rumelt, 1984; Wernerfelt, 1984, 1989). Therefore, resource heterogeneity can be long lasting. Therefore, the resource-based view focuses on the impact of idiosyncratic firm attributes on a firm's competitive performance.

Although a firm's resources include all assets, organizational processes and routines, capabilities, knowledge, and so forth, not all resources are strategically valuable. According to the resource-based perspective, the potential of any resource to be a source of competitive advantage depends upon its strategically-relevant value and its rareness among competitors (Barney, 1991; Rumelt, 1984). Resources that enable the firm to conceive and implement strategies that improve its efficiency and effectiveness are generally considered valuable (Barney, 1991; Wernerfelt, 1984). However, the strategic relevance and ultimate value of any resource may be expected to vary with internal and external environmental conditions (Barney, 1995; Miller & Shamsie, 1996). Therefore, the resource-based view suggests that the potential for strategic leader trustworthiness to be a source of competitive advantage depends upon its context-specific value and its rareness.

Leader Trustworthiness

Simply stated, trustworthiness is an attribution based on the judgement that a person is worthy of trust. Gambetta (1988) defines trust as a particular level of subjective probability with which an agent assesses that another person or persons will perform a particular action--both before he can monitor such action and in a context which affects his own actions. Hart (1988) similarly describes trust as a subjective attitude, based on inconclusive evidence, that a person or thing will not fail in performance. As a result, the determination of trustworthiness is provisional and situational (Gabarro, 1978; Whitney, 1993).

The development of trust depends upon what is known. People come to know another by reputation and attribute personal characteristics based on interpretations of messages received from a variety of sources (Good, 1988). …

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