When the Former CEO Stays on as Board Chair: Effects on Successor Discretion, Strategic Change, and Performance

Strategic Management Journal, 33: 834–859, DOI: 10.1002/smj.1945, July 2012

52 Pages Posted: 24 May 2012  

Timothy J. Quigley

University of Georgia - Department of Management

Donald C. Hambrick

The Pennsylvania State University - Smeal College of Business

Date Written: December 6, 2010

Abstract

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.

Keywords: Managerial discretion, Executive succession, Board of directors, Upper Echelons, Strategic leadership, Duality

JEL Classification: L2, L22, L63, L64, L86

Suggested Citation

Quigley, Timothy J. and Hambrick, Donald C., When the Former CEO Stays on as Board Chair: Effects on Successor Discretion, Strategic Change, and Performance (December 6, 2010). Strategic Management Journal, 33: 834–859, DOI: 10.1002/smj.1945, July 2012. Available at SSRN: https://ssrn.com/abstract=2065401

Timothy J. Quigley (Contact Author)

University of Georgia - Department of Management ( email )

United States

Donald C. Hambrick

The Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States
814-863-0917 (Phone)
814-863-7261 (Fax)

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