Upper echelons and intra‐organizational learning: How executive narcissism affects knowledge transfer among business units

Abstract Research Summary What affects organizational units' propensity to learn from each other? Extending the insights of upper echelons theory to the business unit level, we examine the relationship between executive narcissism and inter‐unit knowledge transfer. We predict that the narcissism of executives heading business units is negatively related to a unit's receptivity to knowledge emanating from other units. We further theorize that the effect of narcissism is reduced when there is high environmental complexity or dynamism as these challenging situations provide narcissists an excuse for external learning. Conversely, the effect is amplified when high perceived inter‐unit competition enhances narcissists' distinctiveness‐seeking tendencies. Using a two‐wave, multisource survey design and collecting primary data from 118 business units of a headhunting company in China, we find strong support for hypotheses. Managerial Summary Knowledge transfer among business units inside a multi‐unit firm is beneficial to firm performance but is never easy. Our research suggests that narcissistic executives are likely to impede inter‐unit knowledge transfer, because their sense of superiority may lead them to overestimate the value of internal knowledge and underestimate the value of external knowledge. This tendency is dampened in complex and dynamic environment which give narcissists an excuse for external learning. Conversely, this tendency is amplified by high inter‐unit competition which motivates narcissists to seek distinctiveness with other units. Thus, when seeking to promote inter‐unit knowledge transfer, firms should be aware of the crucial impact of executive narcissism, and more importantly be careful when undertaking relative performance evaluations or other similar practices which strengthen inter‐unit competition.