"Post-succession Strategic Change, Firm Performance, and the Role of New CEOs' Prior Board Experience"

In this study, we examine the relationship between strategic change and firm performance in the context of CEO succession. The literature on dynamic capabilities suggests that a firm’s ability to actively engage in strategic change in response to the evolving environment is critical to the sustainability of its competitive advantage. On the other hand, organizational ecologists have long cautioned about the risk of strategic change as it disrupts organizational routines and reliability. Integrating these two streams of research, we suggest that post-succession strategic change has an inverted U-shaped relationship with firm performance. Moreover, we argue that the new CEOs’ prior experiences on corporate boards before the succession, both at the focal firm and the other firms, moderate this relationship. Specifically, these experiences helps to neutralize the negative effect of strategic change on firm performance. Using data from a sample of the S&P 500 firms over the years of 2003 to 2012, we find empir...