The shadow of a departing CEO: outsider succession and strategic change in a business group

ABSTRACT

This study examined the influence of both departing and incoming CEOs on strategic change. Highlighting the importance of taking a business group-level approach in the study of CEO succession in emerging economies, the study investigated the interaction effect of departing and incoming CEOs on strategic change in group-affiliated firms in Korea. We distinguished outsider successors into in-group and group outsiders. Our theory and the evidence from a sample of 304 CEO successions suggests that group outsiders significantly differ from in-group outsiders in their reaction to the shadow of departing CEOs, although both are outsiders at the firm level. The negative CEO retention effect on strategic change was attenuated by new CEOs coming from outside the business group. Our findings regarding moderating effects also show that the strategic change effects of outsiders are stronger in the event of a global financial crisis. Our results reveal the contrasting views relating to the group-level transfer of executives, providing insights for both researchers and practitioners.

KEYWORDS:

• Outsider succession
• predecessor retention
• strategic change
• business group
• emerging economies
• global financial crisis

Acknowledgements

We wish to thank Naon Park at KCGS (Korea Corporate Governance Service) for help with data collection. We also acknowledge the insightful comments and suggestions of three anonymous reviewers and the guidance of Ingyu Oh, Associate Editor of Asia Pacific Business Review.

Additional information

Funding

This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea [NRF-2020S1A5A2A01047075].

Notes on contributors

Changsu Kim

Changsu Kim is Professor of International Business at Sogang University, Korea. He earned his PhD at Rutgers University, Newark. His research has been published in the Journal of International Marketing, Journal of Business Ethics, and Journal of Business Research.

Jong-Hun Park

Jong-Hun Park is Professor of strategic management at Sogang University, Korea. He obtained his PhD from the Sauder School of Business at the University of British Columbia. His research has been published in Academy of Management Journal, Journal of International Business Studies, and Journal of Management Studies.

Jiyoon Kim

Jiyoon Kim is a PhD candidate of international business in Business Department at Sogang University, Korea. Her research interests include strategic leadership and international management.

Youngjoo Lee

Youngjoo Lee is Associate Professor of Finance at Sogang University, Korea. She received her PhD from School of Management at the State University of New York at Buffalo. Her research interests are corporate finance, corporate governance and financial institutions, and she has published on these topics.