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

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.