Abstract

Recent research has shown that a significant number of leaders are unable to successfully adapt to adversity within today’s increasingly volatile, uncertain, complex, and ambiguous business environment. Adversity is a highly relevant leadership issue, but research into it is rare. Furthermore, the idea of psychological capital as a resource does not allow researchers and practitioners to form a comprehensive view of its influence on leaders’ task adaptive performance in managing adversity. This study applies conservation of resources theory as a framework to examine the relationship between the impact of adversity, leaders’ psychological capital, and their task adaptive performance. Psychological capital can be conceptualized as a resource caravan consisting of hope, optimism, self-efficacy, and resilience. Impact of adversity is a condition that encompasses the magnitude, probability, and personal relevance of the impact of an adverse event. The hypothesis proposed by this study is that a high level of leaders’ psychological capital increases their task adaptive performance and vice versa. Other hypotheses states that the impact of adversity is negatively related to task adaptive performance. The data of the regression analysis from the self-assessments of 143 German leaders shows that their psychological capital is positively associated to their task adaptive performance. This finding suggests that a high level of leaders’ psychological capital increases their task adaptive performance and a low level decreases it. The data also confirmed the hypothesis that a high level of impact of adversity decreases task adaptive performance. The limitations of these findings are also discussed and the possible directions for future research are outlined.