Abstract
Managerial cognition significantly influences resource allocation decisions. Executive tenure can promote strategic inertia, potentially leading to self-reinforcing narratives and escalated commitments within organisations. A frequently adopted approach to mitigate these issues is to introduce new decision-makers, however, recent findings challenge this approach. Instead, consistency is argued to better address inertia by enhancing responsiveness to feedback in the face of uncertain investments. Conversely, the infusion of new decision-makers could inadvertently stymie these dynamics. But how such dynamics manifest in real-world settings is underexplored in the literature. Our study seeks to fill this gap. Our examination of S&P 1500 firms indicates that there is an inverted U-shaped relationship between the extent of turnover and resource reallocation where there is substantial managerial turnover (exceeding 63% of team members), reducing capital reallocation across units. This behaviour implies that new team, due to a limited understanding of the rationale behind previous decisions, adhere to established resource allocation patterns.