Female Executives, Organizational Turnaround and Managerial Cognition

Xu Gaoyan; Li Guifang; Tao Yan; Liu Hong

doi:doi:10.16538/j.cnki.fem.20200312.301

Summary

In reality, many well-known companies hire female executives in crisis. Surprisingly, a considerable number of companies have turned around successfully. This phenomenon is thought-provoking. Managerial cognition constructs the underlying logic of the internal mechanism of organizational capabilities, strategic choice, and organizational performance, which plays a decisive role in the organizational turnaround. Therefore, based on a managerial cognition perspective, we raise a fascinating question: do female executives have unique characteristics in managerial cognition and play a decisive role in an organizational turnaround? With the sample of A-share non-financial companies listed in Shanghai and Shenzhen Exchanges from 1999 to 2012, this study constructs an interpretation framework of female executives, professional competence and political connections for the organizational turnaround. The results show that: （1） Female executives have a significantly positive impact on the organizational turnaround in crisis. There is a significantly positive relationship between the proportion of women and the organizational turnaround. Furthermore, after excluding the influence of industry and organizational life cycle, the above conclusion is still valid. （2） Professional competence and political connections of female executives reinforce the positive effect between female executives and the organizational turnaround. This study enriches the relevant research on the managerial cognition of female executives, verifies the “Lehman Sisters Hypothesis”, and has important implications for stabilizing organizational operation.

The contributions are as follows: First, it provides evidence for the legitimacy of female executive positions. Many companies still lack correct cognition and enough attention to the position legitimacy of “occupational minorities”, and there are also explicit or implicit “glass ceiling” and “glass cliff”. Under this background, this study argues that female executives are not “scapegoats” or “vases” in crisis enterprises. On the contrary, based on a managerial cognition perspective, they are more likely to be leaders who play cognitive advantages and help crisis enterprises to turn around. This study suggests that organizations should re-examine the legality of female executive positions. Second, it provides a new perspective on the turnaround strategy of crisis enterprises. Previous studies have emphasized the impact of environment, resource capability, retrenchment, and strategic actions to promote the turnaround based on the Industrial Organization Theory, Transaction Cost Theory, Resource-based View and so on. However, few studies have illustrated the importance of managerial cognition. Therefore, based on the characteristics of female executives, it is of great value to explore the impact of the human spiritual model and cognitive framework on the strategic effectiveness of crisis enterprises. Third, it expands the research on the causal factors of organizational turnaround. Based on the Upper Echelons Theory, the turnaround outcomes of crisis enterprises are significantly influenced by the top management team compensation, executive turnover, CEO status and so on. This study further introduces the new progress of the research on the TMT Heterogeneity, and it includes the proportion of female executives, professional competence and political connections into research, which enriches the research on the driving factors of organizational turnaround.