Outside vs. inside succession: Environmental and organizational contexts, strategic decision, and firm performance

This study examines the effects of the industry environment, corporate governance, and business strategy on the firm's choice of CEO successors from outside the company or within the firm, as well as the endogenous implications of the succession type for post-succession performance. Our findings indicate that: (1) firms are more likely to select their CEO successors from outside the company than to promote their successors within the firm when they are in less munificent, when the top executives are less entrenched, when the board structure is more independent, and when they pursue a differentiation strategy; (2) firms selecting their CEO successors from inside the company generally perform better than firms selecting their CEO successors outside the company; and (3) firms would make choices of succession type that best correspond to the conditions they encounter.