The CEO as A Key Micro-Foundation of Global Strategy: Task Demands, CEO Origin, and the CEO's International Background

Research Summary:
We explore the selection of new CEOs with an international background as a key microfoundation of global strategy. Building on executive succession, upper echelons, and international business research, we argue that firms choose CEOs with an international background to match their task demands. We further argue that depending on the CEO’s origin from inside or outside the firm different task demands matter. Specifically, we propose that the relationship between internal (firm-level) task demands and the new CEO’s international background is more pronounced for inside successions, whereas the relationship between external (industry-level) task demands and the new CEO’s international background is more pronounced for outside successions. An analysis of a sample of 363 CEO successions in S&P 500 firms supports our reasoning.

Managerial Summary:
Choosing a CEO with the “right” experience is a crucial concern for many large firms. While firms seem to increasingly often select new CEOs with international backgrounds, by far not all firms do so. In this paper, we explore the factors that might influence this choice. Specifically, we find that the predecessor’s international background, the firm’s level of internationalization, as well as the firm’s industry internationalization have an influence on the selection of a CEO with an international background. While for inside successions the firm’s level of internationalization is particularly important, for outside successions, the level of internationalization of the firm’s industry is particularly important. Our findings inform those who search, select, and appoint new CEOs, including boards of directors and (executive search) consultants.