Research Summary
Research Summary
Job Market Paper
Description
When to Take the Leap:
The Antecedents and Consequences of Leapfrog CEOs
Much of the prior research on CEO successions focuses on differences between CEOs appointed from within the firm and those appointed from outside; however, this dichotomy neglects significant heterogeneity in CEOs’ career trajectories. In this study, I examine the environmental antecedents and performance consequences of appointing a “leapfrog” CEO: an internal candidate who is fast-tracked past more senior executives to be appointed as CEO. I propose that under certain conditions, leapfrog CEOs may perform more effectively than traditional-track CEOs because they embody both insider and outsider characteristics. I analyze CEO transitions that occurred between 2001–2013 in large, publicly-traded U.S. firms and find that 16% of transitions involve leapfrog CEOs. Among firms with high pre-succession performance, I find that firms are more likely to appoint a leapfrog CEO when their industry environment is declining – but only when the board engages in CEO succession planning; in addition, I find that leapfrog CEOs are associated with an increase in ROA of approximately 4 percentage points under these conditions and are more likely than other CEO types to shift resources away from legacy businesses. This study offers implications for how firms can use leapfrog CEO successions as a mechanism to adapt to changing environmental conditions and lay the groundwork for strategic change, corporate entrepreneurship, and innovation.
The Antecedents and Consequences of Leapfrog CEOs
Much of the prior research on CEO successions focuses on differences between CEOs appointed from within the firm and those appointed from outside; however, this dichotomy neglects significant heterogeneity in CEOs’ career trajectories. In this study, I examine the environmental antecedents and performance consequences of appointing a “leapfrog” CEO: an internal candidate who is fast-tracked past more senior executives to be appointed as CEO. I propose that under certain conditions, leapfrog CEOs may perform more effectively than traditional-track CEOs because they embody both insider and outsider characteristics. I analyze CEO transitions that occurred between 2001–2013 in large, publicly-traded U.S. firms and find that 16% of transitions involve leapfrog CEOs. Among firms with high pre-succession performance, I find that firms are more likely to appoint a leapfrog CEO when their industry environment is declining – but only when the board engages in CEO succession planning; in addition, I find that leapfrog CEOs are associated with an increase in ROA of approximately 4 percentage points under these conditions and are more likely than other CEO types to shift resources away from legacy businesses. This study offers implications for how firms can use leapfrog CEO successions as a mechanism to adapt to changing environmental conditions and lay the groundwork for strategic change, corporate entrepreneurship, and innovation.