An Empirical Test of Stewardship Theory

Journal of Business & Leadership: Research, Practice, and Teaching (2005-2012) Volume Number Journal of Business & Leadership Article 1-1-2007 An Empirical Test of Stewardship Theory James Davis University of Notre Dame Steven Frankforter Winthrop University David Vollrath Indiana University South Bend Vanessa Hill University of Louisiana , Lafayette Follow this and additional works at: https://scholars.fhsu.edu/jbl Part of the Business Commons, and the Education Commons Recommended Citation Davis, James; Frankforter, Steven; Vollrath, David; and Hill, Vanessa (2007) "An Empirical Test of Stewardship Theory," Journal of Business & Leadership: Research, Practice, and Teaching (2005-2012): Vol 3: No 1, Article Available at: https://scholars.fhsu.edu/jbl/vol3/iss1/6 This Article is brought to you for free and open access by the Peer-Reviewed Journals at FHSU Scholars Repository It has been accepted for inclusion in Journal of Business & Leadership: Research, Practice, and Teaching (2005-2012) by an authorized editor of FHSU Scholars Repository l)al i' l'raniJ I o rtcr Vo ll th and II II Davis et al.: An Empirical Test of Stewardship Theory Journ al or Business ~nd L~aclcrs hip : Resea rch Practi ce and Teachi ng 2007 Vol No I 40-50 AN EMPIRICAL TEST OF STEWARDSHIP THEORY Ja mes l);w is, Uni versity o iN otre me Da Stev en Fra nkfo e r rt Winthrop Uni versity Da vid Vo llrat h, In diana Uni ve rs ity So uth Be nd Van essa llill , Uni ve rs ity o l Loui s iana , Lalayette This slu t~)' 1es1s !h e model of Davis, Drmaldsou Sch oormau , aud (/ 99 7) llwl proposed delermiuaul.\' of a company's govemauce \'lruc/Ure lu parlicular, we foc us uu Ihe slewardship 1/wury a.\ pecls of !h e model a uri ils ability to predict th e l·hip-orieulatiou CEO at publicly listed U.S survey companies Usi based data ong btained from presen ce of a slewarrf CL'O.~ all(/ directors of I 00 compaui ch-pair e.1· iu desixu, a matwe identified three va riables that predicted th e occurrence of stewardship-orient edhavior.\· be by th e company's s fe CEO These res ult ud support for th e mod e l's ability to predict tl1e conditions iudividua/ under 1· which e steward.l11ip-orie ut rl becom e CEOs co mpan y situ ati onal va riabl es so th at EO s ca n be empowe red , ntm ll ed (Dilv et al , 1997) Wi II iam so n ( 1985) rath er th an cois ack now led ges thi s poss ibilit y but sid es in favo r o f empl oyi ng stru ctut·il l protec tions aga in st oppo rtuni sm , arg uin g th at th eaoma ocu pe :t rti ilr not be known w i th tru ·tw rthin ss f' co ntpl ete :1ss urance r, o th l l ers owcvc il t·gue th at tru st wo rthin ess is reliably recogni za bl e, and w hen u nfett ered wi th undu e co ntro l \ truUut·es, ty dt l n: ea to pro lit abl c oppo nunit ies th ar wo uld ·cscnt o th c r w( Frattk t ~e tl O, be pt 1988; Qu inn & Jones, 1995 ; a i 1997) D 11 be positi ve !) ass oc iated w ith direc to r obser va ti on o f stewa rd ship-ori ented CEO behav io r- Pe r so n a l Power : G ibson, l van cev ich ::tnd Donn ell y ( 1991) clas sifi ed powe r as eith er perso nal or in stituti onal A manage r's 41 Dm is F n ~ lon er Vo h and llrat Davis et al.: An Empirical Test of Stewardship Theory Journal of Business and Leadership: Research, Practi ce and Teaching II ill 2007 Vo l No I 40-SO ma tro l C ulture: Hofstede ( 1980 1) , 199 described an ons personal power is developed w ithin th e context of th e nal s relati indis co v iduali ismm- ll ec tiv d im ension of culture th at 1vo uld hip rath er th an th e manage r's positi on interperso support a stewa rdship-ori ented govern ance stru cture The within the fi rm and is grounded upon th e subord in ate's individuali sm dimension emphasizes personal goa ls over group identi fi ca tion w i1h and res pec t for th eir leader's co mpetence goals w hi le th e co ll ec ti v ist d im ension defin es th e se lf as a part and abi l ity T hi s fo rm o f pow er inc ludes French and Raven' s of th e group O ne's group m ember ships are an import ant ( 1959) referent and ex per1 power Director·sw ill perceiv e CEO ll sts tivi have very stat em ent o f id enti ty and achi evement Coec stewa rdsh ip w hen 1hey obser ve th eir man age rs utili zing persona l power to modify th e behav ior o f th eir fo llo wer s positi ve allitudes tow ard harm ony w ithin groups, avo iding confrontati on, wh il e stsindi v idu ali see co nn ict and ( Da v is et al , 1997) Converse ly, o pporluni sts wi ll tend to emp loy differenl ty pes o f power th an stewa rd s For instance, co nfrontati on as an oppo rtunity to acti vely reso lve co nflict by they wi ll tend to use coercive or instituti communi ca tin g more direc tl y Co ec onal power th at is ll t ivi sts prefer long-term deri ved by v inu e o f th eir form al author-il y in th e orga ni za ti on relati onships and wil l frequentl y require more tim e and expend ( Dav is, et al, 1997) grea ter effot1to become fami liar w ilh oth ers prior to a bu sin es s stsidu a li are mo re short-term orie nted, transac ti o n Indiv H y po th es is : Exec ul ive repon ing hi gh nalperso power y entl of persona l choos in g to co nduct business in depend w ill be posly il ive assoc ia1ed w ilh tor· d ir·ec obse rva ti on re i ~Hi o n s hi p s, usin g a cost-bene fit approach to eva lu ate o f stewardship-o ri ented C EO beha vior bu sin ess exc hanges, and au empt ing to redu ce th e ri sk s of doing bu siness through en veco ist cultures form al co nlr·acts li ee ll cti Sit ua ona ti l Fact o r s arc mo r-e ndu co ci ve to stewa rdship govern ance structu r es w hil e d ivinid ual ist ic c ultures tend to foster opportu ni sm sr y: /\ gy ( 1973) arg ued fo r ih c M an age m ent phil osoriph deve lopment o f norm al iw models of organ iza l io n base d o n H y poth es is 7: Exec uti ves repo rtin g co ll ectivi st cs ulture se l f-ac tual izi ng ass um pl ions to create an orga ni zati e onal cu ltur at th eir· co mpani es w ill be pos iti ve ly ass oc iat ed w ith supported the development of slewa rd ship types of director obser va t ion of stewa rd ship-o ri ented C EO relationshi ps be twee n excc ul ivcs and th eir firm s T he positi on behav ior advoca ted by A rgy r is ( 1973) wa s sim i lar to th e argum ent s Po wer di l ance: A second d im ensio n deve lo ped by adva nced ea r li er by McGrego r ( 1960) in hi s d isc uss io n o f H ofstede ( 19801), 199 to characteri ze t he cross -cu al ltur T heo ry Y manage ment and by Like rt ( 196 1) in hi s co mpari son di fferences thi s is parti cul arl y releva nt to stewa rdship is th e of Sys tem ~ manage rn cnl w it h more co ntroed l-o ri ent sys tems co nce pt of power di stance Power d istance is ge nerall y defined Eac h o f th ese ih eo ri sts advoca ted th e deve lopment of as " th e ex tent to w hi ch less ul powerf members o f in stitution s e 1i normalive mode ls o r organi za1i on brea k in g w il hgem oso adi onal ptr phi and orga ni zati o ns w ithi n a co untry ex pec t and acce pt th at na nt hil es to fac i I ilatc th e g se l f-act uali zin powe r is d istri but cd unequall y " ( Ho fstede, 199 1: 28 ) In certain be hav iors that arc co nsistent wi 1h stewa rdshi p th eo ry cultures, ly lar relati ve ge differences in po wer among members W alton ( 1980 , 1985) ad voca ted hi gh-co mmitm ent are accep ted and to leraled In a culture w ith hi g h power rna nage mcnl ph i loso phv that wa s char·actcr d ize by hi g h di stance, th ere is an acce ptance th at less powe rful m embers parti cipati on open co mmtiuni on,caempowe rm e nt o f wor·kers w ill be depe ndent on more mem po w erful bers and privil eges and th e es tab l ishment of trust Law ler ( 1986 , 1992) elaborated and statu s symbo ls arc both ex pec ted and popu lar In lo w on t his vi ew by co ntra sl in g the manage ment he phil osophi es powe r· d istance cu lt ures , in equ al iti es are minimi ze d, th e described as co ntro l-o ri ent ed ve rsus in vo me -or lveienl nt eu in depende nce o f th e less pow er ful is va lu ed and enco uraged, Acco rdin g to L aw ler the co n1r·o ed approac cl-mi n1 h is based 11 and statu s ands m c las bo ls sy are frowned upon ( H odgell s & a rnanagc ing ilt phi 1·1 i contro the losop ment g hy th think in am ll pa Lel uth or the wo rk mu strtbe: sepa rated fro m the doin g pn o f the wo rk-conlr ma eme -ocnlph scl rihmcnt and pc Mo e gh Order ll> Ex i> Viii> nl>l i> Va lu COilllll>llll III Pcr ,o lna C J>o w~r ln lvcm c111 C ullurc Tab lelowI be shows th e descri pti ve stati stics, alpha s, va ri ati on in nat ion fac tors (V I Fs), and th e co rrelati on ma tri x W e meas ured reliability by co mput in g alpha scores A ll alp has exceeded th e minimum stand ard o f 50 foent r al ex perim va ri ab les and we re dee med acce pt able (N unn ll y,allio y, 1967) Addit na we obse r ved no multico llinea rit y probl ems th at wo ul d affec t th e result s, with only one va ri able ( hi gh ord er needs) ex hi b it ed a V IF th at exceeded 2.0, far from th e criti ca l I im it of I (Ne tt er, Wa sserm an, & Kut ner, 1989) Tab le 1: D esc er·i ptiv S tati st ics, A lph as, Variation Infl a tion Fa c to r·s (VI F s ), an d t h e Co n eio lat n Matr· ix rvh.:all S I) ' VII' AlpJII :~ Sie enlli \\:il'd i-s1c- l'c.rsoll >gh tnn h'I Ex o rd c1 ld 111 U I II{1 V;0 Va lu ~ CCIII Oil 1l 11111 lllp Cnl h II CCd \ ~ I Sicw:l r lb l> t: nnki 11 F\1 11 11 '\ IC 111 lO (1\ ill 43 ~ I 2') 92 62 ()(, 39 S5 10 ll ld enlill cai> il Va lu._; C {) llllllltlll ~ tll Pc r~ un t ll po wer lii \0 \ VC il\ C ill Cul re 25 \\l\VI: r Cli \U IIl CC >p 7lllr Sloc k O\\ nn l11p D11 l11 at 66 23 c4 76 ~ :\8 ) 62 -11 7 llllg /l O rg: 1\ ;III llll O:l l< 111 :111 cw , II :II :1 1d ~ : 11 -d !uall tn l'uhlil' t\d miuistration lw em It an utl lOr it SD SA is reve rse-scaled Published by FHSU Scholars Repository, 2007 50 11 ... l'raniJ I o rtcr Vo ll th and II II Davis et al.: An Empirical Test of Stewardship Theory Journ al or Business ~nd 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