Outsiders in Executive Succession: Institutional, Industrial, or Sectoral?

Abstract

An important consideration in the executive succession process is the successor’s origin. Traditionally, this has been defined as the difference between being promoted from within the organization—an insider—versus being externally recruited and hired—an outsider. More recently, this approach has been challenged by scholars who instead point to industry experience as the identifying characteristic of an insider. Specific to public organizations, scholars have theorized that the fit between the publicness of the organization and the prior public sector work experience of the new manager is a key distinguishing factor of the insider/outsider distinction. Among these differing conceptualizations of outsiders, which matter most for organizational performance? Using the presidential hires of public, doctoral-granting institutions of higher education in the U.S. from 2010-2018, this paper tests three measures of outsiders—institutional, industrial, and sectoral—in the executive succession process and their effects on organizational performance. Findings provide some evidence that only sectoral outsiders have any meaningful (positive and significant) influence on performance. However, being an outsider by all three definitions is associated with a large drop in performance two years after hire.