Research has identified several drivers of competitive actions and responses in firms, but limited attention has been given to how critical events, such as the death of a CEO, can affect competitors’ competitive moves. Firms should be aware of the fact that a CEO’s sudden death can go beyond the boundaries of a firm undergoing the sudden death and influence inter-firm rivalries by shaping the cognitive base and values of top executives of firms involved in rivalries.

The war is at its height – wear my armor and beat my war drums. Do not announce my death.

(by Admiral Yi Sun-Shin)

Admiral Yi Sun-Shin is a Korean admiral and national hero who achieved his victories against the Japanese navy during the Imjin War that took place in the sixteenth-century Joseon Dynasty. When he was shot by a Japanese arquebus bullet at the Battle of Noryang, he ordered his staff to keep his death a secret, because it could decrease the morale of his fleet and jeopardize their chance to achieve victory in the fierce battle. The admiral’s saying still holds true in the business world, where firms constantly try to take advantage of every opportunity, even when it involves the death of a chief executive officer (CEO) at a direct rival. A recent study published in Journal of Management Studies reveals that competitors aggressively make competitive moves to take advantage of a sudden death of a CEO.

A CEO’s sudden death as a window of opportunity

A firm could become vulnerable to its competitors if its CEO dies suddenly. The literature on death awareness suggests that accepting one’s inevitable death is a universal experience, and it can significantly impact people’s motivations and behaviors. Death awareness can cause death anxiety, which leads to self-protective responses and disengagement from the workplace. On the other hand, death reflection can lead to contemplation of one’s life and prosocial behavior. When a CEO dies suddenly, top executives of a firm may disengage from work in the short term, reevaluate their goals and values, and even reallocate corporate resources in the long run. As a result, the firm may face difficulties responding to competitive actions, and this creates an opportunity for competitors to take advantage of the vulnerable firm.

Competitors’ strategic investments to exploit the CEO sudden death

The expectancy-valence suggests why competitors make competitive moves in response to a CEO’s sudden death at a direct rival firm. It proposes that there are two conditions that underpin a proclivity to take an action: 1) an individual’s subjective value of an action, and 2) an individual’s assessment of the probabilities of achieving a reward from an action. The unexpected death of a CEO at a peer firm can induce competitors to take competitive actions because attacking the peer firm debilitated by the sudden demise of its CEO can increase both value and probabilities of successful competitive actions taken in response. Our findings show that competitors increase their strategic investments in research and development, capital expenditures, and acquisitions after the sudden death of a CEO at a firm. The effect is even stronger when the competitors and the firm share similar strategic profiles or when the competitors have greater organizational slack. In contrast, they reduce their strategic investments when a deceased CEO and competitor CEOs share similar demographic attributes. Furthermore, the competitors increase the number of various strategic actions following a CEO’s sudden death. Overall, a CEO’s sudden death can expose strategic weaknesses and evoke competitive actions from competitors looking to take advantage of the firm debilitated by the sudden demise of its CEO.

Practical implications

Firms are in constant competition to gain an advantage in the competitive marketplace. When a CEO at a direct rival suddenly dies, competitors exploit the strategic vulnerability arising from the CEO sudden death by making strategic investments and taking strategic actions to gain an advantage. This study provides valuable insights for corporate leaders. It suggests that firms need to be aware of the fact that critical events could make them vulnerable to their competitors looking to exploit every opportunity. Firms can mitigate the impact of critical events that increase the risk of competitive disadvantage by developing a contingency plan and anticipating potential challenges.