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From a theoretical standpoint in the strategy literature, CEO communication has been viewed as
a core managerial cognitive capability that underpins the firm-level dynamic capability of
reconfiguring. In the dynamic capabilities literature, reconfiguring is instrumental in achieving
strategic asset alignment and overcoming resistance to change. In other words, as Helfat et al. (2007)
argue, in the face of a change in the external environment, “reconfiguring” involves the acquisition of
new assets as well as the enhancement and/or reconfiguring of existing assets through innovation.
Helfat and Peteraf (2015) establish a link between CEO communication and reconfiguring, outlining
several characteristics of oral communication by CEOs and their effects on individual workers and
firm strategy: “The communication style of top managers in general, and the way in which they
communicate a vision for the organization in particular, can inspire workers, encourage initiative, and
drive entrepreneurial growth (Baum, Locke, and Kirkpatrick, 1998; Westley and Mintzberg, 1989).
Managerial skill in using language, such as through impromptu talks, flow of words, and articulation
in conversation, may affect worker response to change initiatives” (Helfat and Peteraf, 2015; page
843).
The authors also distinguish between “oral language” (i.e. what the CEOs say) and “non-verbal”
communication (i.e. how the CEOs say what they say). In fact, Helfat and Peteraf (2015) argue that
non-verbal behavior such as facial expressions and gestures can convey a range of information,
including that regarding opinions, values, cognitive states such as comprehension or confusion,
physical states such as fatigue, and emotions. As the authors state, CEOs can use oral language and
non-verbal communication to facilitate strategic change within organizations and drive alignment by
orienting members toward common goals (Hill and Levenhagen, 1995).
The empirical literature in strategy has long studied the effect of CEO communication on firm
level outcomes, focusing almost entirely on the content of written communication. Yadav et al.
(2007) coded CEO communication using letters to shareholders that were featured in firms’ annual
reports. Using these data, the authors showed that certain features of CEO communication –
specifically having greater internal and external focus – can have a “positive and long-term impact on
how firms detect, develop and deploy new technologies over time” (Yadav, et al 2007: 84). Similarly,
D’Aveni and MacMillan (1990) compared senior managers’ letters to shareholders during demand-
decline crises for 57 bankrupt firms and 57 matched survivors. The authors found that under
environmental uncertainty, not only do the CEOs of surviving firms pay disproportionate attention
to the output environment of the firm, but their communication to shareholders also more strongly
reflect these structural differences in their attention. CEO communication has also been studied in
the strategy literature on cognitive frames: Kaplan (2008) uses CEO letters to shareholders and
content analysis to measure managerial cognition.