When the Former CEO Stays on as Board Chair: Effects on Successor Discretion, Strategic Change, and Performance
Timothy J. Quigley
Lehigh University - Department of Management
Donald C. Hambrick
The Pennsylvania State University - Smeal College of Business
December 6, 2010
Strategic Management Journal, 33: 834–859, DOI: 10.1002/smj.1945, July 2012
Prior research on CEO succession has omitted consideration of a critical institutional reality: some exiting CEOs do not fully depart the scene but instead remain as board chairs. We posit that predecessor retention restricts a successor’s discretion, thus dampening their ability to make strategic changes or deliver performance that deviates from pre-succession levels. In short, a predecessor’s continuing presence suppresses a new CEO’s influence. Based on analysis of 181 successions in high-technology firms, and with extensive controls (for circumstances associated with succession, the firm’s need and capacity for change, and for endogeneity), we find substantial support for our hypotheses. In supplementary analyses, we find that retention has a more pronounced effect in preventing new CEOs from making big performance gains than in preventing big drops.
Number of Pages in PDF File: 52
Keywords: Managerial discretion, Executive succession, Board of directors, Upper Echelons, Strategic leadership, Duality
JEL Classification: L2, L22, L63, L64, L86Accepted Paper Series
Date posted: May 24, 2012
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