The Brexit Referendum and directive leadership:Using matching to establish causality

Title:

THE BREXIT REFERENDUM AND DIRECTIVE LEADERSHIP: USING MATCHING TO ESTABLISH CAUSALITY (Wout de Vries, Harry Garretsen, Janka I. Stoker and Hein Wendt)

Abstract: Recent research has shown that systemic crises like the 2008 financial crisis or the COVID-19 pandemic are associated with an increase of directive leadership behaviors. A main difficulty of this research is to infer causality. Using propensity score matching, this paper shows whether a crisis may actually cause a change in average directive leadership behavior when comparing groups of individual managers. To this end, we use the 2016 Brexit referendum in the United Kingdom (UK), and assess the leadership response of a sample of 5,048 managers. We treat the outcome of the Brexit referendum as a shock and employ the threat-rigidity hypothesis to predict that this shock will be followed by an increase in average directive leadership behavior. In line with our predictions, we find such an increase, which is primarily driven by managers at lower hierarchical levels. Crucially, we confirm our findings by matching the managers within the UK to a control group of comparable managers outside the UK, and by conducting a difference-in-differences analysis. Taking our matching results together with the exogenous and unexpected outcome of the Brexit referendum, we conclude that the outcome of the Brexit referendum led to an increase in directive leadership.