CEOs in Times of Disruption: Does CEO Outsiderness Help for Incumbent Firms’ Digital Transformation?

Abstract

While the widespread diffusion of digital technologies forces incumbent firms to drive their digital transformation, many incumbents struggle to overcome inertial forces. In order to drive their digital transformation, incumbents increasingly turn to hiring outsider CEOs. However, while outsider CEOs are known to initiate change, their ability to implement those changes has been up for debate. We argue that in the context of digital transformation, both the initiation and implementation of change are essential for arriving at a new organizational mode suited for operating in a digital business environment. To test our hypotheses, we develop a contingency framework that assesses the influence of CEO outsiderness on the digital transformation of firms dependent on firm-level challenges with regard to initiating and implementing change. Employing a novel ML-based approach to measure digital transformation, our results show that outsider CEOs accelerate the digital transformation of incumbent firms struggling with their initiation, while outsider CEOs do not benefit the digital transformation of incumbent firms that are particularly challenged with their implementation.