The impact of CEO successor origin on corporate divestiture scale and scope change

The effect of CEO successor origin on strategic change in organizations has been inconclusive. While the conventional view suggests that more changes are likely to occur in firms led by new outside CEOs, recent evidence shows that outside successors often face challenges in affecting changes due to their lack of firm-specific knowledge. Our paper examines how CEO successor origin leads to variations in firms' strategic orientations during portfolio restructuring. Through investigating two dimensions of strategic change in restructuring, we demonstrate that new inside CEOs are associated with a greater scale of divestiture, whereas new outside CEOs are associated with a greater scope change through divestiture. Our results, based on 234 divestiture programs in the United States between 1986 and 2009 demonstrate that both new inside and outside CEOs can affect the changes in restructuring firms, albeit in different ways, depending on the scale and scope change following a divestiture program.