Once an outsider, always an outsider? CEO origin, strategic change, and firm performance

Abstract

In this study, we examine how the relationship between the level of strategic change in the pattern of resource allocation and firm performance differs between firms led by outside CEOs and those led by inside CEOs. Based on longitudinal data on the tenure histories of 193 CEOs who left office between 1993 and 1998, we find that the level of strategic change has an inverted U‐shaped relationship with firm performance. As the level of change increases from slight to moderate, performance increases; as the level of change increases from moderate to great, performance declines. Further, we find that this inverted U‐shaped relationship differs between firms led by outside CEOs and those led by inside CEOs. That is, both the positive effect of strategic change on firm performance when the level of change is relatively low and the negative effect of strategic change on firm performance when the level of change is relatively high are more pronounced for outside CEOs than for inside CEOs. Supplementary analyses also suggest that this difference between outside and inside CEOs exists in later years but not in the early years of CEO tenure. Copyright © 2009 John Wiley & Sons, Ltd.

Práticas de gestão da mudança: Impacto nas atitudes e nos resultados percebidos

“…Esses supostos grupos profissionais são, por exemplo, a gestão de topo (Barron, Riby, Greer, & Smallwood, 2011;Zhang & Rajagopalan, 2010), a mé-dia gerência (Rouleau & Balogun, 2011) ou os agentes de mudança (Schwartz, Chase, Oppezzo, & Chin, 2011;Stensaker & Langley, 2010).…”

The Role of Strategic Flexibility in The Associations between Management Control System Characteristics and Strategic Change

“…However, this study recognizes that strategic change entails the (re)alignment of organizational strengths and weaknesses with prevailing environmental opportunities and threats (Hrebiniak andJoyce, 1985, 1984;Bedner et al, 2012) and therefore relates formal and informal changes to strategy as well as the consequences of their implementation (i.e., changes to resource allocations and to organizational systems, processes, and activities) (Zhang and Rajagopalan, 2010; The role of strategic flexibility as an enabler of strategic change has not been previously examined empirically, having apparently been taken for granted as axiomatic. Arguably, such a role can be inferred from empirical evidence supporting positive associations between strategic change and organizational performance (Baum and Wally, 2003;Virany, Tushman, and Romanelli, 1992;Smith et al, 1991;Smith and Grimm, 1987) and between strategic flexibility and organizational performance (Abbott and Banerji, 2003;Grewal and Tansuhaj, 2001;Yongsun, 1992).…”

Foreign-born CEOs, Country-Specific Skills, Selection, and Strategic Consequences

“…Firms with poor performance are likely to hire an external CEO, with no firm-specific skills, as the latter might be perceived "as more able than insiders to initiate and implement strategic changes" (Canella & Lubatkin, 1993, p. 763). The assumption is that such lack of firm-specific skills brings a fresh perspective or fresh blood to the company Chung & Luo, 2013;Zhang & Rajagopalan, 2010).…”

“…Hence, I propose the following hypothesis: Second, I took the absolute value of this change and standardized the absolute value (mean=0, standard deviation=1) (Zhang & Rajagopalan, 2010a). The selection of a two-year post-succession period was chosen since previous succession research indicates that most strategic actions taken by CEOs occur in the first two years in office (Gabarro, 1987;Shen & Canella, 2002; (Dikova, Sahib, & van Witteloostuijn, 2009).…”

“…This interest in CEO successions and their strategic and performance benefits has also been mirrored in scholarly research. For example, management theorists have paid considerable attention to examining successor origin -be it external or internal to the firm, or external or internal to its industry -and its impact on firm outcomes (e.g., Chung & Luo, 2013;Karaevli, 2007;Miller, 1993;Zhang & Rajagopalan, 2010a). …”