The joint influence of CEO succession types and CEO-TMT faultline on firm's strategic change

Scholars have long debated the merits of hiring contender and outsider CEOs for achieving strategic change. To further the debate, we propose that whether a contender or outsider CEO generates a greater degree of post-succession strategic change likely depends on his/her fit with the existing members of the top management team (TMT). Drawing on the person–group fit literature and the faultline-based approach, we introduce the concept of the CEO–TMT faultline to assess the CEO's fit with the TMT. We test our research model using a sample of Chinese firms that experienced CEO succession events between 2006 and 2016. We find that the identity-based CEO–TMT faultline impedes contender and outsider successors’ generation of strategic change. Additionally, the knowledge-based CEO–TMT faultline helps contenders generate strategic change, while it hinders outsiders from doing so. Finally, the resource-based CEO–TMT faultline is beneficial for outsider successors to make strategic change.