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Executive Succession, Strategic Reorientation and Performance Growth: A Longitudinal Study in the U.S. Cement Industry

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Michael L. Tushman at Harvard University
Michael L. Tushman
Lori Rosenkopf
Lori Rosenkopf
Lori Rosenkopf
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Abstract

This research explores the performance consequences of CEO succession, executive team change, and strategic reorientation in different contexts. Based on team demography and organization learning ideas, we argue that CEO succession or executive team change enhances incremental organization change, while either strategic reorientation or the combination of CEO succession with executive team change triggers discontinuous organization change. We hypothesize that these contrasting intervention modes are appropriate in different contexts. A longitudinal study of the U.S. cement industry from 1918--1986 demonstrates that simple CEO succession is positively associated with subsequent performance when context is stable, but significantly more negatively associated with subsequent performance in turbulent contexts. Executive team change has significant effects on organization adaptation in both stable and turbulent contexts. Strategic reorientations are negatively associated with subsequent performance in stable contexts, but significantly more positively associated with subsequent performance in turbulent contexts. As a set, these results reinforce a demographic approach to succession research and indicate that CEO succession, executive team change, and reorientation are each distinct and important levers shaping organization adaptation. The impacts of these levers are contingent on organization context.
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... By employing expectation states theory logic, we theorize how each type of CEO succession with gender change influences strategic change, and ultimately, long-term firm performance by interacting with the characteristics of the environment (e.g., Triana, Richard, and Su, 2019). In environmental contexts in which men are favored by gender inequality, a femaleto-male CEO succession could be expected to elicit support for the newly appointed CEO to adapt to the organization quite easily and direct strategy (Helmich and Brown, 1972;Tushman and Rosenkopf, 1996). Then, pertaining to environmental contexts characterized by greater gender parity (Post and Byron, 2015), we propose that such contexts may mitigate the societal disadvantages hampering female CEOs and facilitate a setting in which they will be willing and able to change firm strategy. ...
... Although previous studies have made great efforts to establish the relationship between CEO succession-especially male-to-female-and firm performance (Bilimoria, 2006;Carter et al., 2003;Erhardt et al., 2003;Stets and Burke, 2000), some found a positive relationship (Abdullah, Ismail, and Nachum, 2016;Tushman and Rosenkopf, 1996), others a negative one (Shen and Cannella, 2002;Zhang and Qu, 2016), and others still mixed results (Georgakakis and Ruigrok, 2017;Lyngsie and Foss, 2017). Further, almost no effort has been devoted to understanding how CEO succession affects firm performance via intervening processes, which may resolve the confusing findings (Baron and Kenny, 1986;Miller and Triana, 2009;Schepker et al., 2017). ...
... Moreover, top management team (TMT) size has been shown to affect firm strategic change, as it influences the communication among and perspectives of its members (Tushman and Rosenkopf, 1996). We therefore controlled for TMT size, which we measured as the natural logarithm of the number of each firm's TMT members (Chatterjee, 2017). ...
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