Executive Succession, Strategic Reorientation and Performance Growth: A Longitudinal Study in the U.S. Cement Industry

Abstract

This research explores the performance consequences of CEO succession, executive team change, and strategic reorientation in different contexts. Based on team demography and organization learning ideas, we argue that CEO succession or executive team change enhances incremental organization change, while either strategic reorientation or the combination of CEO succession with executive team change triggers discontinuous organization change. We hypothesize that these contrasting intervention modes are appropriate in different contexts. A longitudinal study of the U.S. cement industry from 1918–1986 demonstrates that simple CEO succession is positively associated with subsequent performance when context is stable, but significantly more negatively associated with subsequent performance in turbulent contexts. Executive team change has significant effects on organization adaptation in both stable and turbulent contexts. Strategic reorientations are negatively associated with subsequent performance in stable contexts, but significantly more positively associated with subsequent performance in turbulent contexts. As a set, these results reinforce a demographic approach to succession research and indicate that CEO succession, executive team change, and reorientation are each distinct and important levers shaping organization adaptation. The impacts of these levers are contingent on organization context.