Theoretical background

The strategy field has a long and rich past and many writers over the years have discussed the importance of organizations having an element of mission, vision, intent or symbolism in their strategy development to guide internal and external stakeholders on the future direction of the organization (Green, Reference Goldman1988; Prahalad & Hamel, 1990; Hart, Reference Hart1992; Hart & Banbury, Reference Hart and Banbury1994; Mintzberg, Reference Mintzberg1994; Mintzberg, Ahlstrand, & Lampel, Reference Mintzberg, Ahlstrand and Lampel1998). These writers emphasize the importance of the firm having a shared ideology, intentions and beliefs to guide internal stakeholders (e.g., company directors, top managers, middle managers) and external stakeholders (e.g., suppliers, bankers, government bodies, industry groupings) on this collective vision of the future (Green, Reference Goldman1988; Strati, Reference Strati1998; Lovas & Ghoshal, Reference Lovas and Ghoshal2000; Goldman, Reference Green2012). This shared, collective vision provides a convincing motivation and focus for internal and external stakeholders as they go about their work over the long term, especially in uncertain business environments where formality and fixed rules are less effective (Ginsberg, Reference Ginsberg1988; Green, Reference Goldman1988; Liedtka, Reference Liedtka1998; Lovas & Ghoshal, Reference Lovas and Ghoshal2000).

Environmental uncertainty is an important construct in strategy process research (Hutzchenreuter & Kleindienst, Reference Hutzchenreuter and Kleindienst2006). Environmental uncertainty occurs when company directors, executives and managers individually or as a group are unable to understand or comprehend trends in the business environment external to the firm (Smircich & Stubbart, Reference Smircich and Stubbart1985; Milliken, Reference Milliken1987; Kolodinsky & Bierly, Reference Kolodinsky and Bierly2013). This uncertainty can be in relation to the business environment as a whole, or in relation to particular elements of the environment such as competitors, customers, the regulatory environment, technology and/or the supply of finance. The company director, executive or manager may also experience a lack of understanding of relationships among the elements of the environment. This perceived environmental uncertainty can be due to lack of information and/or an inability to process available information including choosing between relevant and irrelevant information (Milliken, Reference Milliken1987; Buchko, Reference Buchko1994).

Hamel and Prahalad (Reference Hamel and Prahalad1989: 64) leveraged insight from prior research studies, their own research, trends in strategy process in the business community and the success at that time of Japanese business to inform their definition of strategic intent:

It is this obsession that Hamel and Prahalad (Reference Hamel and Prahalad1989) emphasize as key to their definition of strategic intent in their message to a management audience. Hamel and Prahalad (Reference Hamel and Prahalad1989) argued that organizations needed a greater orientation to strategic intent and a lesser orientation to strategic planning to perform better. Hamel and Prahalad (Reference Hamel and Prahalad1989) note that strategic planning as a dimension of strategy development is quite limiting when the organization objective is an obsession with winning and/or global leadership as it is very difficult to precisely detail how to win and/or achieve global leadership. Strategic intent accommodates the rational and the orthodox as well as the creative and unorthodox approaches to strategy; this gives scope for the CEO and top managers in an organization to ‘Let chaos reign, then reign in chaos – repeatedly’ as Burgelman and Grove (Reference Burgelman and Grove2007: 965) describe. These insights provide more evidence to support the view that strategic intent is a multidimensional construct.

Hamel and Prahalad’s (Reference Hamel and Prahalad1989) insights on strategic intent were influenced in the 1980s by an increasing interest in the Western business community in the ‘invisible’, ‘soft’ management practices of successful Japanese companies including Honda, Canon and Komatsu (Hamel & Prahalad, Reference Hamel and Prahalad1989; Prahalad & Hamel, Reference Prahalad and Hamel1990). Certain insights from Eastern management practices influenced and helped to inform their writing. One key insight was the Eastern management emphasis on the development and leveraging of resources consistently to reach difficult goals and objectives over the long term – the emphasis here being a long-term focus not a short, fast episode (Lovas & Ghoshal, Reference Lovas and Ghoshal2000). Other relevant Eastern management insights were a commitment to organizational learning to beat rival firms, seeking to change industry rules to reduce a rivals competitive advantage, having a well-balanced portfolio of activities, investment in competencies over time and encouraging employees to determine themselves how to achieve challenging performance targets (Prahalad & Hamel, Reference Prahalad and Hamel1990; Lovas & Ghoshal, Reference Lovas and Ghoshal2000; Goldman, Reference Green2012). This theoretical background and appraisal of Hamel and Prahalad’s (Reference Hamel and Prahalad1989) writing helps to inform the development of the research propositions that follow.

Use of the term strength in relation to strategy-making process capability is well used and relates to the quality, flexibility, fast cycle capability, durability and robustness of strategy resources the organization develops (Hart & Banbury, Reference Hart and Banbury1994; Dess, Lumpkin, & Covin, Reference Dess, Lumpkin and Covin1997). Strength in the practice of strategic intent for an organization is an important dynamic capability. Teece, Pisano, and Shuen (Reference Teece, Pisano and Shuen1997: 516) define a dynamic capability as ‘the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments’. A company can develop strategic intent as a core competency and therefore an important firm resource so there is a connection between strategic intent and the resource-based view of the firm (Prahalad & Hamel, Reference Prahalad and Hamel1990; Lovas & Ghoshal, Reference Lovas and Ghoshal2000; Bonn, Reference Bonn2001; Galbreath, Reference Galbreath2005).

The resource-based view of the firm itself has been criticized in a number of ways (O’Shannassy, Reference O’Shannassy2005). For instance there is a lack of contingency theories for prescriptions of application for the resource-based view. There is a lack of specifics on the contextual boundaries of firm resources. There is also a lack of specifics on the ‘when, where and how’ (Priem & Butler, Reference Priem and Butler2001: 33) firm resources may be useful, with the ‘how’ issues very much related to the ‘process black box in strategy research’ (Priem & Butler, Reference Priem and Butler2001: 33). It follows that these criticisms can apply to the strategic intent construct as well. Critiques of the strategic intent construct identify the imprecise definition of certain key words and phrases (e.g., ‘obsession with winning’, ‘active management process’, Hamel & Prahalad, Reference Hamel and Prahalad1989: 64) which are often used in different ways by different organizations as an area needing further academic thought and attention. Critiques of strategic intent from a strategy practice point of view also draw attention to the possibility of heterogeneity of organizational goals and the difficulty of moulding and shaping intent over time in such an environment (Mantere & Sillince, Reference Mantere and Sillince2007). However, from an executive management perspective it is suggested here that the circumstances of heterogeneity of organizational goals could arise where there is a shortcoming in the statement of strategic intent and/or the daily management of the organization on the delivery of that intent and the disciplines associated with that work.

Table 1 below provides a summary of representative studies of strategic intent and/or symbolism in strategy research since the 1970s. In depth empirical coverage of the strategic intent construct as seen in Lovas and Ghoshal (Reference Lovas and Ghoshal2000) and Rui and Yip (Reference Rui and Yip2008) is rare. The emphasis in certain of these studies in Table 1 has been broader than a vision or symbolic element only, though many of these studies (e.g., Hart, Reference Hart1992; Hart & Banbury, Reference Hart and Banbury1994) do include a vision or symbolic element among other elements. Several articles in Table 1 are theoretical only (e.g., Hamel & Prahalad, Reference Hamel and Prahalad1989; Liedtka, Reference Liedtka1998). Examples of multidimensional typologies include Mintzberg (Reference Mintzberg1994) with vision, learning and planning elements; Hart (Reference Hart1992) and Hart and Banbury (Reference Hart and Banbury1994) included command, symbolic, generative, transactive and rational elements of strategy-making processes.

Hamel and Prahalad (Reference Hamel and Prahalad1989) do spread a number of remarks about strategic intent through their article, however, we can see above that the specific definition provided there is quite brief. Building on insights from Hamel and Prahalad (Reference Hamel and Prahalad1989) strategic intent is defined here as an invisible, ‘soft’, active management practice that envisions a desired leadership position for the firm. Strategic intent makes a clear statement of ambition and future leadership that communicates a winning position in an industry, marketplace or region to internal and external stakeholders. Strategic intent gives insight into the shared ideology, intentions, beliefs and commitment to learning of the organization (Green, Reference Goldman1988). Strategic intent is a dynamic capability that gives a direct intuitive understanding of the future direction of the organization that helps employees to focus their efforts on achieving firm goals and objectives when confronted by uncertainty (Teece, Pisano, & Shuen, Reference Teece, Pisano and Shuen1997; Liedtka, Reference Liedtka1998). This direct intuitive understanding helps the organization when decision making is decentralized and more autonomy and responsibility is given to middle managers to discover desirable outcomes (Liedtka, Reference Liedtka1998). In this way strategic intent informs a creative tension for employees in formulating and implementing strategy choices that deliver on ambition (Liedtka, Reference Liedtka1998). This strategic intent informs consistency of resource allocation at different levels of the organization and in different business units while the organization pursues these ambitions over time (Lovas & Ghoshal, Reference Lovas and Ghoshal2000).

Synthesis of insight from the literature summarized in Table 1 indicates three dimensions to the strategic intent construct. Appraisal of the content of key articles indicates frequent mention of shared vision (Hamel & Prahalad, Reference Hamel and Prahalad1989, Reference Hamel and Prahalad1994; Hart, Reference Hart1992; Lovas & Ghoshal, Reference Lovas and Ghoshal2000; Mantere & Sillince, Reference Mantere and Sillince2007), an active means of resource allocation (Hamel & Prahalad, Reference Hamel and Prahalad1989, Reference Hamel and Prahalad1994; Noda & Bower, Reference Noda and Bower1996; Mantere & Sillince, Reference Mantere and Sillince2007) and the need for foresight or an ability to predict the future (Hamel & Prahalad, Reference Hamel and Prahalad1989; Burgelman, Reference Burgelman1994; Mantere & Sillince, Reference Mantere and Sillince2007). This background informs the proposed dimensions of the strategic intent construct here. Strategic intent requires a shared vision for the future direction of the organization, developed by the CEO and top managers and communicated to organization members. This shared vision will convey a desired leadership position (Hamel & Prahalad, Reference Hamel and Prahalad1989; Lovas & Ghoshal, Reference Lovas and Ghoshal2000). Strategic intent gives resource focus to the whole organization in an active rational process. Top managers use strategic intent to convey firm direction, firm goals and aid discovery in the allocation of resources. Organization members gain a better understanding of the future direction of the firm and how to prioritize use of resources from this statement of strategic intent (Hamel & Prahalad, Reference Hamel and Prahalad1989; Lovas & Ghoshal, Reference Lovas and Ghoshal2000). Finally, foresight helps organization members understand the firm, the industry and resource allocation. Use of scenarios helps to inform foresight, giving some understanding of the future (Hamel & Prahalad, Reference Hamel and Prahalad1989; Burgelman, Reference Burgelman1994; Courtney, Reference Courtney2001).

It is also evident from appraisal of the content of the literature and Table 1 that the CEO plays a key role in developing, communicating and implementing strategic intent. This literature in Table 1 highlights the importance of the CEO giving a symbolic focus to the organization and providing an example to employees (Burgelman, Reference Burgelman2002). Given the important role of the CEO as the key organization strategist and steward it is argued here that there is a connection between corporate governance theory and practice and a firm’s strength of orientation to strategic intent (Burgelman, Reference Burgelman1994, Reference Burgelman2002; Galvin & Arndt, Reference Galvin and Arndt2014). This is an under researched and not well understood area and an opportunity to build theory (Galvin & Arndt, Reference Galvin and Arndt2014). Corporate governance is concerned with the relationships and interactions of board members, executives, shareholders and regulatory authorities in managing the corporation for performance (Krause, Semadeni, & Cannella, Reference Krause, Semadeni and Cannella2014). The CEO plays a key role in an organization in corporate governance theory and practice. Insight on corporate governance practice draws on a number of theories including agency theory, institutional theory resource dependence theory and stewardship theory (Johnson, Daily, & Ellstrand, Reference Johnson, Daily and Ellstrand1996; Galvin & Arndt, Reference Galvin and Arndt2014).

Agency theory argues that company executives are confronted with a principal–agent problem in that they have difficulty balancing their personal interests from the interests of the organization employing them (Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011; Krause, Semadeni, & Cannella, Reference Krause, Semadeni and Cannella2014). In institutional theory economic, political, regulatory and social factors (e.g., Australian Stock Exchange, Australian Competition and Consumer Commission, Australian Securities and Investment Commission) provide a favourable environment and an important influence on managing the corporation for performance (Johnson, Daily, & Ellstrand, Reference Johnson, Daily and Ellstrand1996; Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011). Resource dependence theory evidences an understanding that the resources required by an organization can be owned by other organizations. This has implications for a range of management and corporate governance matters including recruitment, training and retention of executives and company directors, and also selection and hiring of consultants (Hillman, Cannella, & Paetzold, Reference Hillman, Cannella and Paetzold2000; Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011). In stewardship theory it is argued that executives as stewards of the corporation build useful knowledge, skills and experience over time. These executives will be responsible stewards of the firm, focus their work on pursuing the best interest of the organization, build knowledge, build networks, perform better and as a consequence enjoy longer tenure (O’Shannassy, Reference O’Shannassy2010; Kolodinsky & Bierly, Reference Kolodinsky and Bierly2013). The good work of a well-trained, knowledgeable, trustworthy and effective CEO as an effective steward of the firm is that he or she will develop and communicate to the company the strategic intent he or she develops (Hamel & Prahalad, Reference Hamel and Prahalad1989; Johnson, Daily, & Ellstrand, Reference Johnson, Daily and Ellstrand1996; Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011). The CEO who is a good steward will also exhibit favourable behaviours consistent with the strategic intent articulated including the guidance of resource allocation (Johnson, Daily, & Ellstrand, Reference Johnson, Daily and Ellstrand1996; Lovas & Ghoshal, Reference Lovas and Ghoshal2000).

Research propositions

Figure 1 below depicts a moderated meditation set of relationships between the study variables CEO tenure, strategic intent, perceived environmental uncertainty and organization performance (Edwards & Lambert, Reference Edwards and Lambert2007). A series of research propositions are developed next reflecting the moderated meditation model proposed.

Figure 1 Moderated mediation theoretical model (adapted from Edwards & Lambert, Reference Edwards and Lambert2007)

The CEO is the key organization strategist (Burgelman, Reference Burgelman1994; Burgelman & Grove, Reference Burgelman and Grove2007). CEOs with long tenure will benefit in their strategy work from their experience of organization strategy and operations. CEOs who perform well in the job and are good stewards will stay in the job longer, have had more time to ingratiate themselves to the chairperson and the board, build working relationships with other members of the TMT, think through strategic intent, communicate the strategic intent to internal and external stakeholders (especially middle management), and have experience implementing the stated strategic intent (Hamel & Prahalad, Reference Hamel and Prahalad1989; Coles, McWilliams, & Sen, Reference Coles, McWillams and Sen2001; Pugh & Bourgeois, Reference Pugh and Bourgeois2011; Steptoe-Warren, Howat, & Hume, Reference Steptoe-Warren, Howat and Hume2011). The ethos of this approach is for the CEO to create an environment during their tenure that listens to employees views, the intent inspires employees, brings people together, creates shared commitment, informs resource allocation and enjoyment of strategy work for internal and external stakeholders (e.g., management consultants, legal advisers) with a working relationship with the company (Hamel & Prahalad, Reference Hamel and Prahalad1989). The intent should be crafted in such a way so as to inspire and focus on multiple levels (Mantere & Sillince, Reference Mantere and Sillince2007). Applying stewardship theory this is how CEOs build and nurture a shared vision, foresight and an understanding of resource allocation requirements – the elements of strategic intent (Lovas & Ghoshal, Reference Lovas and Ghoshal2000; Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011). Developing strength in strategic intent orientation is a desirable firm outcome and CEOs play the key role in the development of this dynamic capability. This suggests a positive linear relationship between length of CEO tenure and strategic intent strength. Hence:

The CEO has a central role in strategy development, corporate governance and general management (Krause, Semadeni, & Cannella, Reference Krause, Semadeni and Cannella2014). There is a debate in the literature on whether agency theory or stewardship theory is the correct way to view the relationship between CEO tenure and organization performance (Miller, Reference Miller1991).

Applying agency theory there are seasons to CEO tenure giving a curvilinear or inverted U-shape with organization performance (Simsek, Reference Simsek2007). Initially there is an improvement in organization performance as the new CEO responds to the hiring mandate from the chairperson and the board of directors, undertakes a period of experimentation to find the right strategy, finds an enduring theme for his or her tenure, and then reinforces the enduring theme with a series of incremental decisions on organization management. After a peak in performance there is a performance decline due to CEO boredom, fatigue and/or reduced entrepreneurial motivation and instincts (Miller, Reference Miller1991). There is some research evidence of this curvilinear relationship, particularly in the United States where there is wide practice of chairperson and CEO duality. However, this research evidence is not conclusive (Coles, McWilliams, & Sen, Reference Coles, McWillams and Sen2001).

An alternative argument applies stewardship theory (Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011). In stewardship theory CEOs are essentially trustworthy executives with the best interests of the organization informing their work. Where the CEO is an internal appointment or has a strong functional background he or she may have detailed functional knowledge and experience (e.g., marketing, finance, human resources) and a network of internal and/or industry contacts (Krause, Semadeni, & Cannella, Reference Krause, Semadeni and Cannella2014). CEOs with long tenure will have the opportunity to commit time and effort to using this knowledge for the benefit of the organization (Johnson, Daily, & Ellstrand, Reference Johnson, Daily and Ellstrand1996). Applying resource dependence theory the resources required by an organization can be owned by other organizations and a CEO with long tenure will have more time to locate, recruit and/or get access to the human, financial and other resources required to advance the interests of the company (Boyd, Haynes, & Zona, Reference Boyd, Haynes and Zona2011). This results in a positive linear relationship between length of CEO tenure and organization performance (Coles, McWilliams, & Sen, Reference Coles, McWillams and Sen2001). The research evidence is greater for the linear relationship reflecting stewardship theory, hence:

One of the great traditions of the rich and venerable strategy field is studies of strategy process strength of orientation and organization performance (Hart & Banbury, Reference Hart and Banbury1994; Dess, Lumpkin, & Covin, Reference Dess, Lumpkin and Covin1997). A study of strategic intent adds further value to this stream of research where there is more to be learned (Bower, 1996). We have seen in the executive management literature that explanation of the strategic intent construct has been informed by Eastern, intuitive, inspirational, people-oriented, ‘soft’ management practices which are of considerable value to organizations seeking superior performance (Hamel & Prahalad, Reference Hamel and Prahalad1989; O’Shannassy, Kemp, & Booth, Reference O’Shannassy2010). Strategic intent is inspirational at multiple levels of the organization and communicates a desired future state that delivers better organization performance. This is because the long run shared vision informed by foresight guides the rational resource allocation process (Hamel & Prahalad, Reference Hamel and Prahalad1989; Burgelman, Reference Burgelman1996). Strategic intent should be crafted in such a way that it inspires and informs strategy work in a positive way and avoids the risk of a ‘monolithic trap’ restricting the individual talents and creative contribution of employees through the organization (Mantere & Sillince, Reference Mantere and Sillince2007: 414). Focus in organizations on improving the ‘softer’ aspects of strategy capability has been recommended in the strategy literature as a solution to the limitations of ‘hard’, analytical, planning oriented strategy work (Mintzberg, Reference Mintzberg1994; O’Shannassy, Reference O’Shannassy2010). In this way strategic intent helps the organization and guides the organization members as they push the business forward into the future. Hence:

Next, Hamel and Prahalad (Reference Hamel and Prahalad1989) mention the value of a crisis to provide impetus and motivation to the organization to pursue strategic intent. The relationship between environmental uncertainty, strategy process constructs and organization performance is a matter of debate in the literature (Yasai-Ardekani & Haug, Reference Yasai-Ardekani and Haug1997). Traditionally, environmental uncertainty has had a positive association with strategy process and organization performance in studies including Lindsay and Rue (Reference Lindsay and Rue1980), and Odom and Boxx (Reference Odom and Boxx1988); this link was communicated and justified most effectively by Mintzberg (Reference Mintzberg1994). This is informed by the view that when companies experience perceived environmental uncertainty strategists need to work together better to process the situation and respond effectively (Calantone & Rubera, Reference Calantone and Rubera2011).

There is another stream of empirical literature that uses environmental uncertainty as a moderator variable, jointly predicting organization performance with a strategy process or strategy practice variable(s) (e.g., Dess, Lumpkin, & Covin, Reference Dess, Lumpkin and Covin1997; Brews and Hunt, Reference Brews and Hunt1999; Andersen, Reference Andersen2004). This approach is informed by the logic that it is easier to control processes inside the firm than what is taking place in the business environment outside the firm. So this issue of the research role of environmental uncertainty as an independent variable or as a moderator variable is a matter of some contention in the research literature. For this research here it is argued that perceived environmental uncertainty negatively moderates the influence of strategic intent on organization performance with the two variables acting jointly. Strength of strategic intent is something the organization can develop and nurture over the CEO’s tenure as a firm resource. Perceived environmental uncertainty can make this process of strategic intent nurturing and development more difficult, making it more challenging for the CEO leading his or her TMT to deliver organization performance outcomes. This is why:

Earlier discussion has established the stewardship theory argument that there is a positive linear relationship between greater CEO tenure and better organization performance and that there is greater research evidence for this relationship than for the alternative agency theory-based curvilinear (i.e., quadratic, inverted U-shape) relationship (Coles, McWilliams, & Sen, Reference Coles, McWillams and Sen2001). It is also likely that the effect of CEO tenure inside the organization will vary depending on the level of environmental uncertainty outside the organization (Carpenter & Fredrickson, Reference Carpenter and Fredrickson2001). There are elements of the business environment outside the firm including customer behaviour, competition, supply of finance and technology that have an impact on the ability of the CEO who is a good steward to perform well and lead the organization to better performance (Buchko, Reference Buchko1994; Carpenter & Fredrickson, Reference Carpenter and Fredrickson2001). So there is a joint multiplicative effect where the influence of the CEO over time is moderated by the level of perceived environmental uncertainty in a negative relationship – high levels of perceived environmental uncertainty make it more difficult for the CEO to deliver better performance over his or her tenure. Given these arguments the hypothesized direct effect between long CEO tenure and better organization performance in Figure 1 is also moderated negatively by perceived environmental uncertainty. Hence:

In summary to prove moderated mediation in this manuscript the tests Propositions 1 to 5 are proposed. First CEO tenure should predict strategic intent. Second CEO tenure should predict organization performance. Third strategic intent should predict organization performance. Fourth strategic intent and perceived environmental uncertainty should jointly predict organization performance in a second stage model of moderation with perceived environmental uncertainty acting negatively (Edwards & Lambert, Reference Edwards and Lambert2007). Fifth CEO tenure and perceived environmental uncertainty jointly predict organization performance in a direct effect moderation with perceived environmental uncertainty acting negatively. So overall Figure 1 depicts a direct effect and second stage model of moderation.