New CEO Succession Origin and Strategic Change in Turnaround Situations: A Relational Perspective

We study the effect of new CEO succession origin on strategic change in firms facing turnaround situations. Taking a ‘relational perspective’ of CEO succession, we argue that the degree to which outside CEO succession associates with strategic change depends on the relational network between the outside CEO and key incumbent executives prior to succession. Using data from 108 companies with new CEOs in turnaround situations between 1993 and 2015, we find that high CEO outsiderness has a negative effect on strategic change in firms facing turnaround conditions – while this effect is weaker in the later years of the new CEO’s tenure. We further find that outsider CEOs with more connected intra-TMT network brings a higher degree of strategic change to the firm early after succession. Overall, our paper contributes to the extant literature on CEO succession by underscoring the important role of the relational CEO-TMT interface when a new CEO takes charge with the mandate to bring about strategic change (i.e., in turnaround conditions).

, 2021