The pandemic that shocked managers across the world: The impact of the COVID-19 crisis on leadership behavior

Abstract

In March 2020, the COVID-19 virus turned into a pandemic that hit organizations globally. This pandemic qualifies as an exogenous shock. Based on the threat-rigidity hypothesis, we hypothesize that this shock led to an increase in directive leadership behavior. We also argue that this relationship depends on the magnitude of the crisis and on well-learned responses of managers. In our empirical analysis we employ a differences-in-differences design with treatment intensity and focus on the period of the first lockdown, March until June 2020. Using a dataset covering monthly data for almost 27,000 managers across 48 countries and 32 sectors for January 2019 to December 2020, we find support for the threat-rigidity hypothesis. During the first lockdown, directive leadership increased significantly. We also find that this relationship is moderated by COVID-19 deaths per country, the sectoral working from home potential, and the organizational level of management. Our findings provide new evidence how large exogenous shocks like COVID-19 can impact leadership behavior.