When does CEO outsiderness generate strategic change? When paradox and irony meet
Karaevli, Ayşe and Zajac, Edward (2009) When does CEO outsiderness generate strategic change? When paradox and irony meet. [Working Paper / Technical Report] Sabanci University ID:SU_FMAN_2009/0004
Academic researchers, business commentators, and board of directors have all debated whether new and different CEO leadership is a prerequisite for corporate strategic change. This study reframes and informs this debate theoretically and empirically by providing an integrated and nuanced contingency framework that explains when new CEO outsiderness is most likely to generate strategic change. This framework, which considers a number of behavioral and economic pre-succession contextual factors, emphasizes how the same factors that typically motivate the selection of outsider CEOs can often paradoxically hinder the likelihood of a new CEO implementing change. Using extensive longitudinal data from three U.S. industries between 1972 and 2007, we find that CEO outsiderness generates a greater degree of post-succession strategic change under pre-succession conditions of higher firm performance, strategic persistence, a longer-tenured predecessor CEO, and an independent board. We discuss how our theory and empirical findings challenge the largely taken-for-granted assumption regarding the outsider succession-strategic change relationship and allow us to see the irony and reconcile the paradox in this complex relationship.
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