CEO Succession Origin and Firm Performance: A Multilevel Study

There has been much controversy concerning the relationship between outside CEO succession origin and firm performance. Some scholars take the organizational-adaptation view to highlight the benefits of outside succession; yet others adopt the organizational-disruption view to pose the selection of an outsider CEO as a disruptive and disadvantageous event for organizations. In this study, we develop an integrated multilevel framework that reconciles these opposing perspectives and examines the conditions under which the benefits of outside CEO succession outweigh the costs. Data from 109 CEO succession events in large international firms show that the performance advantages of outside succession materialize when the new CEO: (a) socio-demographically resembles incumbent executives, (b) possesses variety of experience, and (c) is hired by a well-performing firm operating in a munificent industry. Overall, our research demonstrates that the performance implications of new CEO origin should not be considered in isolation, but in interaction with multilevel characteristics.