How do CEOs select imitation targets after underperformance? Motivated by recent scholarship highlighting the role of CEOs on problemistic search (Hu et al., 2023), we draw on balance theory to examine whether the selection of targets of strategic imitation is affected by similarity in visible (e.g., gender, age) and psychological (i.e., personality) attributes among the CEOs of focal and peer firms. Using a sample of 115,131 firm dyad-year of 719 publicly traded U.S. manufacturing firms (2000-2020), we find evidence for aspiration-idiosyncratic heuristic use. When firms underperform relative to their past – historically– CEOs differentiate their firms' strategies from those of firms led by individuals similar to themselves in visual attributes, i.e., they use a similarity-push heuristic. When underperformance is relative to the industry– social –, we unveil a pattern in which CEOs actively align their firm's strategy to that used by visually and psychologically dissimilar CEOs, i.e., a dissimilarity-pull heuristic. An investigation of two heuristic-enabling circumstances – high heterogeneity in the strategies of the peer group and low CEO power – bolsters our interpretation of heuristic target selection. Our research has strong implications for balance theory and the literature on problemistic search.
