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Generalists vs. Specialists Impact on Firm Performance: The Case of CEOs and Acquisitions

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Investing in knowledge diversification or specialization is a topic of interest and debate for employees, managers, and researchers since a long time. In a recent study, Strategy and Management Professors Denisa Mindruta of HEC Paris, Guoli Chen and Philipp Meyer-Doyle of INSEAD and Sterling Huang of the Management University of Singapore, aimed to understand the consequences of corporate decisions of generalist and specialist CEOs on firm performance, by comparing their decisions in all the acquisitions done by U.S. S&P 1500 firms over a ten-year period.

shaking hands - cover

Viewed from the perspective of prospective employers, an individual’s past career choices have one key role: to provide information on that individual’s qualifications for a job. Yet, as those who are sifting through CVs very well know, there are no simple heuristics for judging how past work experience predicts subsequent job performance. Take, for example, two career paths: one described by a diverse work experience spanning across industries, firms, or domains, and the other one closely tied to a specific industry, firm, or domain. How do these experiences, one broad and the other focused, influence individual decisions, actions, and ultimately, job performance? 

The benefits of knowledge diversity and specialization have intrigued, and even sometimes discriminated, scholars for a long time. 

A quick historical detour shows that since the Renaissance, individuals skilled in a variety of fields, from the arts to the sciences to politics and beyond, have been celebrated as a model of intellectual and cultural achievement. This ideal has persisted over time, and it embodies the idea that having a broad range of knowledge in various areas can help individuals adapt to changing circumstances and think creatively. A diverse knowledge background allows one to approach problems and challenges from multiple angles and come up with innovative solutions.

However, history abounds with opposite arguments and examples. A quote commonly attributed to the ancient Greek poet Archilochus raises doubts on the value of knowledge breadth: "the fox knows many things, but the hedgehog knows one big thing". In everyday parlance, being a “Jack of all trades” is often followed by the expression “and master of none”, with a clearly negative connotation. Popular press and influential books have persuasively argued that specialization - famously achieved through the 10,000-Hour Rule! (see “Outliers” by Malcolm Gladwell) - is key to professional success.

Generalists and specialists 

Recent work has started to shed new light on this debate. Scholars studying scientific progress have shown that accumulating knowledge creates a heavier load for learners, which makes interdisciplinary studies hard to pursue: As knowledge accumulates within a discipline, individuals must specialize on increasingly narrower niches to reach the knowledge frontier (Jones, 2009), with the consequence that one trades-off breadth for gaining expertise (Jones, 2010).

Given the pressure towards specialization, a simple way to reap the benefits of combining diverse knowledge is to encourage teamwork between specialists from diverse fields. Empirical studies of innovation confirm that in the last decades, innovation has occurred through collaboration and less as a solo effort (Wuchty, Jones & Uzzi, 2007).  

At individual level, is it still possible and even worth it to invest in a more diverse human capital profile? While being trained in multiple disciplines becomes increasingly difficult, individuals can still broaden their knowledge by being exposed to different environments and situations via their work experience. In turn, work experience accumulates into a set of skills that form an individual’s human capital. 

We too engaged with this debate. As management scholars, we turned attention to the career paths of managers who have most impact on organizations: CEOs. It is widely understood that executives draw on skills gained throughout their career when they make corporate decisions. What is referred to as a “Generalist” CEO is an executive with a general human capital obtained from playing different roles in different contexts, such as for example, by holding multiple positions at more than one firm or being exposed to more industries or working for a conglomerate. In contrast, “Specialist” CEOs are executives with a narrower but deeper set of knowledge and skills (Custodio, Ferreira, Matos, 2013). We aimed to understand if decisions of generalist CEOs are different from the decisions of specialist CEOs. If yes, how, and with what consequences? 

Different strategies

We addressed this question by looking at acquisitions, a corporate decision that falls under the purview of CEOs and has significant impact on firm performance. We examined all acquisitions done by U.S. S&P 1500 firms over a ten-year period. Two notable patterns emerged. First, generalist and specialist CEOs follow a different acquisition strategy. Relative to specialist CEOs, generalist CEOs make an additional acquisition every four years and are 60% more likely to make an unrelated (i.e., diversifying) acquisition, selecting targets from outside their firm’s primary sector. In contrast, specialist CEOs tend to focus on internal development initiatives and when they acquire, they favor target deals in the same industry. 

Second, the acquisition performance (measured as the cumulative abnormal return to the acquisition announcement) is higher when the fit between CEO human capital and opportunities is clearer. That is, generalist CEOs pursuing diversifying acquisitions and specialist CEOs related acquisitions generate higher returns than alternative situations (i.e., generalist CEOs doing related acquisitions and specialist CEOs unrelated acquisitions).


Managers tend to engage in strategic actions that correspond to their human capital (generalist or specialist), a fit that is associated with stronger performance.


We interpret these findings as suggesting that managers tend to engage in strategic actions that correspond to their human capital, and that such a fit is associated with stronger performance.

Who to choose?

In doing this study, we had to consider alternative explanations for the same empirical patterns. We were particularly concerned about factors that could explain both the appointment of a generalist CEO and firm growth through (diversifying) acquisitions. To do so, we had to understand what type of firms hire generalist CEOs. We tested several explanations (including firm size, diversification level, and prior acquisition activity) but it was the human capital profile of the firm’s directors that stood out: boards composed of directors who themselves have a more generalist human capital profile tend to prefer a generalist over a specialist CEO; likewise, generalist CEOs join these firms because they anticipate a closer strategic alignment with and support from such boards. While these are central tendencies, hiring is a complex decision and we observed enough variation in the sample to put our analysis to the following test: would generalist CEOs pursue the hypothesized acquisition strategy even in situations in which they are working with a less generalist board? We found that generalist CEOs are indeed more likely to engage in acquisitions only if they work at firms with higher generalist boards. The rest of our conclusions remained valid even after taking into account this two-sided matching of generalist CEOs and generalist boards.


Generalist CEOs spur firm innovation, but the jury is out regarding whether they improve firm performance overall.


Our research complements past findings on the link between CEO human capital profile, decision making and firm outcomes. Notably, Custodio et al. (2019) found that generalist CEOs spur firm innovation. However, the jury is out regarding whether they improve firm performance overall (Li & Patel, 2019). 

When considering the consequences of career moves, most working professionals will weigh-up pecuniary and non-pecuniary benefits such as career progression, impact, and work-life balance. Yet, there is a hidden and important aspect of these career choices, as they shape the type of human capital that individuals build through work experience. Encouraging for those who depart from the beaten path and venture to move across positions, firms, and industries, is that statistically, generalist CEOs enjoy a 10% pay premium relative to specialist CEOs (Custodio et al., 2013).


This research paper was awarded the best research article by the Prix Fondation HEC. Learn more on HEC Newsroom's article. Listen to the testimonial from Denisa Mindruta, winner of the Professor Article of the Year.



Laurent Inard, Partner and Supervisory Board Member at Mazars, shares his opinion on the research:


“I was honored to award the best research paper 2022 as President of the Jury of the HEC Foundation's Prizes. The question addressed is of great interest, at the crossroads of two disciplines, namely (i) strategy (i.e. strategies of acquisitions) and (ii) human capital (more precisely the profile of managers). While common sense may tell us that there exists a relation between the profile of managers and their appetence regarding acquisitions, it is a great achievement not only to have been able to evidentiate such a relation, but also to have quantified and characterized it through the study of several indicators such as (i) the number of transactions, (ii) the nature of the transactions (i.e. core business or diversified), (iii) their post-acquisition performance!

Last but not least, the research also introduced a powerful concept – namely the two-sided market theory – in an original context, which is the study of the couplings between the managers and the firms: which factors drive them? One of the key takeway is that the profiles of the board of directors is of the essence, even more than the size, diversification level or history of acquisitions… This two-sided model, very promising, shall open the way to further research and for example the composition of the boards, their diversification etc."

Article by Denisa Mindruta (HEC Paris) based on the research paper, “Generalist vs. Specialist CEOs and Acquisitions: Two-sided Matching and the Impact of CEO Characteristics on Firm Outcomes”, coauthored by Guoli Chen and Philipp Meyer-Doyle (INSEAD, Singapore), and Sterling Huang (Management University, Singapore), published in the Strategic Management Journal in 2022.

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