Board Leadership, Chief Executive Officer Optimism and Firm Innovation

Main Article Content

Joel Tuwey
Dr. Vincent Ngeno


Purpose - Following the resource dependence and optimism theory, the study explored whether Chief Executive Officer (CEO) optimism moderates the link between board leadership and firm innovation in the financial sector.

Design/Methodology - 130 financial institutions in Kenya were surveyed using cross-sectional and explanatory designs. Hypothesis testing utilized both moderated hierarchical regression models and mod-graphs.

Findings - The results revealed that the board member’s openness and independence positively influence firm innovation. The moderated hierarchical regression results and figures in the mod-graphs reveal that CEO optimism enhances the association between the board member’s openness, independence, and firm innovation.

Practical Implications - The results suggested that for financial institutions to be innovative, board members should be open to each other in terms of the private ideas as well as being independent about decisions made to spur the growth of the firms. Additionally, such boards should appoint CEOs who are optimistic about being innovative.


Download data is not yet available.

Article Details

How to Cite
Tuwey, J., & Ngeno, V. (2019). Board Leadership, Chief Executive Officer Optimism and Firm Innovation. SEISENSE Journal of Management, 2(6), 1–16.
Author Biography

Dr. Vincent Ngeno, Moi University, Kenya



Abebe, M., & Myint, P. P. A. (2018). Board characteristics and the likelihood of business model innovation adoption: evidence from the smart home industry. International Journal of Innovation Management, 22(01), 1850006. DOI:

Adams, R. B., & Ferreira, D. (2007). A theory of friendly boards. The journal of finance, 62(1), 217-250. DOI:

Aiken, L. S., West, S. G., & Reno, R. R. (1991). Multiple regression: Testing and interpreting interactions: Sage.

Anderloni, L., Llewellyn, D. T., & Schmidt, R. H. (2009). Financial innovation in retail and corporate banking: Edward Elgar Publishing. DOI:

Anderson, R. C., & Reeb, D. M. (2003). Founding‐family ownership and firm performance: evidence from the S&P 500. The journal of finance, 58(3), 1301-1328. DOI:

Balsmeier, B., Fleming, L., & Manso, G. (2017). Independent boards and innovation. Journal of Financial Economics, 123(3), 536-557. DOI:

Brown, W. A. (2005). Exploring the association between board and organizational performance in nonprofit organizations. Nonprofit Management and Leadership, 15(3), 317-339. DOI:

Calantone, R. J., Cavusgil, S. T., & Zhao, Y. (2002). Learning orientation, firm innovation capability, and firm performance. Industrial marketing management, 31(6), 515-524. DOI:

Capozzi, M. M. (2010). Leadership and innovation. Development Outreach, 12(1), 25-28. DOI:

Carver, C. S., & Scheier, M. F. (2014). Dispositional optimism. Trends in cognitive sciences, 18(6), 293-299. DOI:

Charan, R. (2005). Ending the CEO succession crisis. Harvard business review, 83(2), 72-81.

Charan, R., Carey, D., & Useem, M. (2013). Boards that lead: When to take charge, when to partner, and when to stay out of the way: Harvard Business Review Press.

Chatterjee, A., & Hambrick, D. C. (2007). It's all about me: Narcissistic chief executive officers and their effects on company strategy and performance. Administrative science quarterly, 52(3), 351-386. DOI:

Chatterjee, A., & Hambrick, D. C. (2011). Executive personality, capability cues, and risk taking: How narcissistic CEOs react to their successes and stumbles. Administrative science quarterly, 56(2), 202-237. DOI:

Chen, H. L. (2014). Board capital, CEO power and R&D investment in electronics firms. Corporate Governance: An International Review, 22(5), 422-436. DOI:

Chiesi, F., Galli, S., Primi, C., Innocenti Borgi, P., & Bonacchi, A. (2013). The Accuracy of the Life Orientation Test–Revised (LOT–R) in measuring dispositional optimism: Evidence from item response theory analyses. Journal of personality assessment, 95(5), 523-529. DOI:

Chipeta, C., & Muthinja, M. M. (2018). Financial innovations and bank performance in Kenya: Evidence from branchless banking models. South African Journal of Economic and Management Sciences, 21(1), 1-11. DOI:

Cohen, L., Diether, K., & Malloy, C. (2013). Misvaluing innovation. The Review of Financial Studies, 26(3), 635-666. DOI:

Daily, C. M., Dalton, D. R., & Cannella Jr, A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of management review, 28(3), 371-382. DOI:

Dalziel, T., Gentry, R. J., & Bowerman, M. (2011). An integrated agency–resource dependence view of the influence of directors' human and relational capital on firms' R&D spending. Journal of Management Studies, 48(6), 1217-1242. DOI:

Deschamps, J.-P., & Nelson, B. (2014). Innovation governance: How top management organizes and mobilizes for innovation: John Wiley & Sons.

Drees, J. M., & Heugens, P. P. (2013). Synthesizing and extending resource dependence theory: A meta-analysis. Journal of Management, 39(6), 1666-1698. DOI:

Dutta, S., Lanvin, B., & Wunsch-Vincent, S. (2018). The Global Innovation Index, 2018: Ithaca, NY: Cornell, INSEAD, & WIPO.

F. Hair Jr, J., Sarstedt, M., Hopkins, L., & G. Kuppelwieser, V. (2014). Partial least squares structural equation modeling (PLS-SEM) An emerging tool in business research. European Business Review, 26(2), 106-121. DOI:

Faleye, O., Hoitash, R., & Hoitash, U. (2011). The costs of intense board monitoring. Journal of Financial Economics, 101(1), 160-181. DOI:

Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and Economics, 26(2), 301-325. DOI:

Finkelstein, S. (1992). Power in top management teams: Dimensions, measurement, and validation. Academy of Management journal, 35(3), 505-538.

Finkelstein, S., Cannella, S. F. B., Hambrick, D. C., & Cannella, A. A. (2009). Strategic leadership: Theory and research on executives, top management teams, and boards: Oxford University Press, USA. DOI:

Flynn, B. B., Huo, B., & Zhao, X. (2010). The impact of supply chain integration on performance: A contingency and configuration approach. Journal of operations management, 28(1), 58-71. DOI:

Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of management review, 24(3), 489-505. DOI:

Gabrielsson, J., & Huse, M. (2005). Outside directors in SME boards: a call for theoretical reflections. Corporate Board: role, duties and composition, 1(1), 28-37. DOI:

Gabrielsson, J., Huse, M., & Minichilli, A. (2007). Understanding the leadership role of the board chairperson through a team production approach. International journal of leadership studies, 3(1), 21-39.

Gallagher, M. W., & Lopez, S. J. (2009). Positive expectancies and mental health: Identifying the unique contributions of hope and optimism. The Journal of Positive Psychology, 4(6), 548-556. DOI:

Giorgis Sahile, S. W., Tarus, D. K., & Cheruiyot, T. K. (2015). Market structure-performance hypothesis in Kenyan banking industry. International Journal of Emerging Markets, 10(4), 697-710. DOI:

Graham, J. R., Harvey, C. R., & Puri, M. (2013). Managerial attitudes and corporate actions. Journal of Financial Economics, 109(1), 103-121. DOI:

Hambrick, D. C. (2007). Upper echelons theory: An update: Academy of Management Briarcliff Manor, NY 10510. DOI:

Harpaz-Itay, Y., & Kaniel, S. (2012). Optimism versus pessimism and academic achievement evaluation. Gifted Education International, 28(3), 267-280. DOI:

Hayes, A. F. (2013). Introduction to mediation, moderation, and conditional process analysis: Methodology in the Social Sciences. Kindle Edition, 193.

Haynes, K. T., & Hillman, A. (2010). The effect of board capital and CEO power on strategic change. Strategic Management Journal, 31(11), 1145-1163. DOI:

Helmers, C., Patnam, M., & Rau, P. R. (2017). Do board interlocks increase innovation? Evidence from a corporate governance reform in India. Journal of Banking & Finance, 80, 51-70. DOI:

Hillman, A. J., Cannella, A. A., & Paetzold, R. L. (2000). The resource dependence role of corporate directors: Strategic adaptation of board composition in response to environmental change. Journal of Management Studies, 37(2), 235-256. DOI:

Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of management review, 28(3), 383-396. DOI:

Hogan, R., & Kaiser, R. B. (2005). What we know about leadership. Review of general psychology, 9(2), 169-180. DOI:

Hoskisson, R. E., Hitt, M. A., Johnson, R. A., & Grossman, W. (2002). Conflicting voices: The effects of institutional ownership heterogeneity and internal governance on corporate innovation strategies. Academy of Management journal, 45(4), 697-716.

Hughes, N., & Lonie, S. (2007). M-PESA: mobile money for the “unbanked” turning cellphones into 24-hour tellers in Kenya. Innovations: technology, governance, globalization, 2(1-2), 63-81. DOI:

Huse, M. (2005). Accountability and creating accountability: A framework for exploring behavioural perspectives of corporate governance. British journal of management, 16, S65-S79. DOI:

Iren, P., & Tee, K. (2018). Boardroom Diversity and Innovation in the UAE Banks. International Journal of Innovation Management, 22(03), 1850029. DOI:

Jack, W., & Suri, T. (2011). Mobile money: The economics of M-PESA: National Bureau of Economic Research. DOI:

Jack, W., & Suri, T. (2014). Risk sharing and transactions costs: Evidence from Kenya's mobile money revolution. American Economic Review, 104(1), 183-223. DOI:

Jehn, K. A. (1995). A multimethod examination of the benefits and detriments of intragroup conflict. Administrative science quarterly, 256-282. DOI:

Jiang, J., Wang, S., & Zhao, S. (2012). Does HRM facilitate employee creativity and organizational innovation? A study of Chinese firms. The International Journal of Human Resource Management, 23(19), 4025-4047. DOI:

Jiraporn, P., Lee, S. M., Park, K. J., & Song, H. (2018). How do independent directors influence innovation productivity? A quasi-natural experiment. Applied Economics Letters, 25(7), 435-441. DOI:

Jose, P. E. (2013). Doing statistical mediation and moderation: Guilford Press.

Khraisha, T., & Arthur, K. (2018). Can we have a general theory of financial innovation processes? A conceptual review. Financial Innovation, 4(1), 4. DOI:

Kimenyi, M., Mwega, F. M., & Ndung'u, N. (2015). The African lions: Kenya country case study: WIDER Working Paper. DOI:

Kor, Y. Y. (2006). Direct and interaction effects of top management team and board compositions on R&D investment strategy. Strategic Management Journal, 27(11), 1081-1099. DOI:

Langabeer, J. R., & DelliFraine, J. (2011). Does CEO optimism affect strategic process? Management Research Review, 34(8), 857-868. DOI:

Langabeer, J. R., & Yao, E. (2012). The impact of chief executive officer optimism on hospital strategic decision making. Health care management review, 37(4), 310-319. DOI:

Lashitew, A. A., van Tulder, R., & Liasse, Y. (2019). Mobile phones for financial inclusion: What explains the diffusion of mobile money innovations? Research Policy, 48(5), 1201-1215. DOI:

Leblanc, R., & Gillies, J. (2005). Inside the boardroom: How boards really work and the coming revolution in corporate governance: John Wiley & Sons.

Lepoutre, J., & Oguntoye, A. (2018). The (non-) emergence of mobile money systems in Sub-Saharan Africa: A comparative multilevel perspective of Kenya and Nigeria. Technological Forecasting and Social Change, 131, 262-275. DOI:

Lerner, J., & Tufano, P. (2011). The consequences of financial innovation: a counterfactual research agenda. Annu. Rev. Financ. Econ., 3(1), 41-85. DOI:

Levinthal, D. A., & March, J. G. (1993). The myopia of learning. Strategic Management Journal, 14(S2), 95-112. DOI:

Li, Y.-H., Huang, J.-W., & Tsai, M.-T. (2009). Entrepreneurial orientation and firm performance: The role of knowledge creation process. Industrial marketing management, 38(4), 440-449. DOI:

Lin, H.-F. (2007). Knowledge sharing and firm innovation capability: an empirical study. International Journal of manpower, 28(3/4), 315-332. DOI:

Lu, J., & Wang, W. (2018). Managerial conservatism, board independence and corporate innovation. Journal of Corporate Finance, 48, 1-16. DOI:

Makri, M., & Scandura, T. A. (2010). Exploring the effects of creative CEO leadership on innovation in high-technology firms. The Leadership Quarterly, 21(1), 75-88. DOI:

Manso, G. (2011). Motivating innovation. The journal of finance, 66(5), 1823-1860. DOI:

Merton, R. C. (1995). Financial innovation and the management and regulation of financial institutions. Journal of Banking & Finance, 19(3-4), 461-481. DOI:

Munyegera, G. K., & Matsumoto, T. (2016). Mobile money, remittances, and household welfare: panel evidence from rural Uganda. World Development, 79, 127-137. DOI:

Muthiora, B. (2015). Enabling mobile money policies in Kenya: Fostering a digital financial revolution. GSMA Mobile Money for the Unbanked.

Ngugi, B., Pelowski, M., & Ogembo, J. G. (2010). M‐pesa: A Case Study of the Critical Early Adopters’ Role in the Rapid Adoption of Mobile Money Banking in Kenya. The Electronic Journal of Information Systems in Developing Countries, 43(1), 1-16. DOI:

Nicholson, G. J., & Kiel, G. C. (2004). A framework for diagnosing board effectiveness. Corporate Governance: An International Review, 12(4), 442-460. DOI:

Oh, W.-Y., & Barker III, V. L. (2018). Not all ties are equal: CEO outside directorships and strategic imitation in R&D investment. Journal of Management, 44(4), 1312-1337. DOI:

Pfeffer, J., & Salancik, G. R. (1978). The extemal control of organizations. A Resource Dependence Perspective, New York et al.: Harper & Row.

Pfeffer, J., & Salancik, G. R. (2003). The external control of organizations: A resource dependence perspective: Stanford University Press.

Pugliese, A., Minichilli, A., & Zattoni, A. (2014). Integrating agency and resource dependence theory: Firm profitability, industry regulation, and board task performance. Journal of Business Research, 67(6), 1189-1200. DOI:

Reguera-Alvarado, N., & Bravo, F. (2018). The impact of directors’ high-tech experience on innovation in low-tech firms. Innovation, 20(3), 223-239. DOI:

Scheier, M. F., & Carver, C. S. (1985). Optimism, coping, and health: assessment and implications of generalized outcome expectancies. Health psychology, 4(3), 219. DOI:

Scheier, M. F., Carver, C. S., & Bridges, M. W. (1994). Distinguishing optimism from neuroticism (and trait anxiety, self-mastery, and self-esteem): a reevaluation of the Life Orientation Test. Journal of personality and social psychology, 67(6), 1063. DOI:

Sekaran, U., & Bougie, R. (2013). Edisi 6. Research Methods for Business.

Seligman, M. E. (2006). Learned optimism: How to change your mind and your life: Vintage.

Sellevold, T., Huse, M., & Hansen, C. (2007). The value creating board: results from the" Follow-up surveys" 2005/2006 in Norwegian firms.

Sena, V., Duygun, M., Lubrano, G., Marra, M., & Shaban, M. (2018). Board independence, corruption and innovation. Some evidence on UK subsidiaries. Journal of Corporate Finance, 50, 22-43. DOI:

Sonnenfeld, J. A. (2002). What makes great boards great. Harvard business review, 80(9), 106-113.

Stevens, J. P. (2012). Applied multivariate statistics for the social sciences: Routledge. DOI:

Sun, S. L., Zhu, J., & Ye, K. (2015). Board openness during an economic crisis. Journal of Business Ethics, 129(2), 363-377. DOI:

Sunder, J., Sunder, S. V., & Zhang, J. (2017). Pilot CEOs and corporate innovation. Journal of Financial Economics, 123(1), 209-224. DOI:

Tarus, D. K., & Sitienei, E. K. (2015). Intellectual capital and innovativeness in software development firms: the moderating role of firm size. Journal of African Business, 16(1-2), 48-65. DOI:

Trevelyan, R. (2008). Optimism, overconfidence and entrepreneurial activity. Management Decision, 46(7), 986-1001. DOI:

Tuwey, J. K., & Tarus, D. K. (2016). Does CEO power moderate the relationship between board leadership and strategy involvement in private firms? Evidence from Kenya. Corporate Governance: The International Journal of Business in Society, 16(5), 906-922. DOI:

Wang, P. (2009). An integrative framework for understanding the innovation ecosystem. Advancing the Study of Innovation and Globalization in Organizations.

Weill, P., & Ross, J. W. (2004). IT governance: How top performers manage IT decision rights for superior results: Harvard Business Press.

Xie, X., & O'Neill, H. (2013). Boards as resource providers and monitors for research and development. Journal of Business Strategies, 30(2), 180.

Yar Hamidi, D., & Gabrielsson, J. (2014). Developments and trends in research on board leadership: a systematic literature review. International Journal of Business Governance and Ethics, 9(3), 243-268. DOI:

Zhang, H., Ou, A. Y., Tsui, A. S., & Wang, H. (2017). CEO humility, narcissism and firm innovation: A paradox perspective on CEO traits. The Leadership Quarterly, 28(5), 585-604. DOI:

Zhao, Q., & Ziebart, D. (2017). Consequences of CEO Overconfidence. Accounting and Finance Research, 6(2), 94-113. DOI: