Has the “CEO effect” increased in recent decades? A new explanation for the great rise in America's attention to corporate leaders


  • Timothy J. Quigley,

    Corresponding author
    1. Terry College of Business Management, University of Georgia, Athens, Georgia, U.S.A.
    • Correspondence to: Timothy J. Quigley, Terry College of Business, University of Georgia, 421 Brooks Hall, Athens, GA 30602, U.S.A. Email: tquigley@uga.edu

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  • Donald C. Hambrick

    1. Smeal College of Business Management and Organization, The Pennsylvania State University, University Park, Pennsylvania, U.S.A.
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We introduce a new explanation for one of the most pronounced phenomena on the American business landscape in recent decades: a dramatic increase in attributions of CEO significance. Specifically, we test the possibility that America's CEOs became seen as increasingly significant because they were, in fact, increasingly significant. Employing variance partitioning methodologies on data spanning 60 years and more than 18,000 firm-years, we find that the proportion of variance in performance explained by individual CEOs, or “the CEO effect,” increased substantially over the decades of study. We discuss the theoretical and practical implications of this finding. Copyright © 2014 John Wiley & Sons, Ltd.