Intraindustry executive succession, competitive dynamics, and firm performance: through the knowledge transfer lens.

Accessing and using tacit knowledge therefore presents a problem for organizations seeking to supplant or maintain competitive parity with a first-mover. Potentially, this problem can be addressed through intraindustry executive succession, especially in connection with higher-level executives. As discussed earlier, higher-level executives are often in charge of directing and integrating individuals and sub-units with valuable component knowledge. Although technical managers are certainly likely to have component knowledge, they may be less aware of more systemic issues pertaining to the integration of this type of knowledge. Thus, while acquiring technical talent may enable the organization to access valuable component knowledge, actually integrating this knowledge may still require extensive analysis and experimentation which will delay the implementation of an effective response. In contrast, because they possess tacit, architectural knowledge, hiring senior-level managers, with executive decisionmaking responsibility from a rival organization, may speed competitive response. Additionally, tacit knowledge is often "learned by doing" and, therefore, acquired over time. Executives who have spent a significant part of their careers in a rival firm are more likely to acquire the relevant architectural knowledge. Therefore, hiring a rival's executives with greater organizational tenure is also likely to speed potential responses. These assertions are somewhat consistent with Gabarro's (1987) study that found intraindustry successors made more organizational changes during the first three years in their new roles than new executives from outside the industry. Ostensibly, industry insiders were able to make changes more rapidly in their new roles because they possessed more relevant knowledge as compared to executives from outside the industry (Finkelstein and Hambrick, 1996; Gabarro, 1987).

A distinction should perhaps be drawn between the effect of organizational tenure in the intraindustry successor's previous position versus their new role. Within their prior employer, organizational tenure may reflect the executive's affinity for their firm's existing routines and decisionmaking processes. In this context organizational tenure might be associated with the maintenance of the status quo. However, their affinity for their former firm's routines may encourage them to attempt to make their new organization's strategic responses conform more closely to those of their previous employer. Thus, in their new role, tenure with their former organization may induce change rather than the maintenance of the status quo. Therefore, in their new firm, organizational tenure with their prior employer might be associated with more rapid competitive responses.

In addition, the same successor characteristics that enable a speedy response may also lead to competitive responses that are highly imitative. Tacit forms of knowledge, such as architectural knowledge, are learned over time and embedded in routines created by repetition. As such, they become part of an individual's behavioral repertoires, and influence aspects of decision making. Accordingly, these routines may be very difficult to change. The decision-making patterns of new executives may remain similar to those pursued in their former firm. This may result in competitive responses that are highly imitative, as well as rapid.

Proposition 1: Executives with greater seniority and longer organizational tenure possess more tacit, architectural knowledge. Organizations that hire such executives from a rival will tend to respond more quickly and more imitatively to a competitive action.

New executives also have a tendency to recruit members of their former employer's management team (Eisenhardt, 1989; Moffett and Youngdahl, 1999), and the extent to which a company targets the executives of a specific rival by recruiting them in greater numbers may have competitive implications. An important component of tacit knowledge involves group interaction, or routines, that are often guided by nonverbal cues (Berman et al., 2002; Nelson and Winter, 1982). This form of tacit knowledge may not be available to the intraindustry successor in their new role because it is context-specific and dependent upon their social relations with their former employer. However, hiring several executives from a rival may enable the transfer of these tacit group routines necessary to commercialize a particular product, process, service, or project. A study of decision making found that decision speed was more rapid among CEOs that obtained advice from experienced executives, referred to as "counselors," who had worked for these CEOs in previous organizations (Eisenhardt, 1989). Additionally, this tactic potentially surmounts the security measure of disaggregation, and may speed the implementation of a competitive response. Like individual decision-making patterns, group routines develop over time and may become embedded in the group's shared cognitive schema. This may result in competitive responses that are also imitative.

Proposition 2: Organizations that hire a greater number of a rival's executives will tend to respond more quickly and more imitatively to a competitive action.

An organization's ability to access and use the knowledge of "acquired" executives depends, in part, on the relationships that new executives are able to foster with existing members of the organization, particularly the top management team. Because tacit knowledge is difficult to transfer via formal and explicit communication channels, it is likely that more indirect methods must be used. Although tacit knowledge cannot be explicitly articulated, newcomer executives may enable the transfer of tacit elements of architectural knowledge by enacting various behavioral routines formerly carried out with their previous employer. Over time, through observation and practice, these routines can become part of the hiring firm's behavioral repertoires, and may ultimately shape its competitive strategy. Indeed, interpersonal communication channels have been found to be particularly effective for enabling firms to absorb environmental information and respond to competitive threats (Smith et al., 1990).

It is not likely for this to occur, however, unless there is a certain degree of social integration between the new executives and existing members of the organization. Because they utilize common language and cognitive schema, greater social integration often exists within workgroups composed of individuals who are socially similar to one another, as measured by their demographic backgrounds (Katz and Kahn, 1978; March and Simon, 1958). For example, members of such work groups tend to communicate more frequently and report greater work group integration (Zenger and Lawrence, 1989; O'Reilly et al., 1989). Intraindustry successors who are socially similar to senior executives of their new employer, on dimensions other than organizational experience, may therefore encounter greater ease in communication and more frequent interaction with their new colleagues. This may promote the transfer of tacit knowledge and speed up the implementation of competitive responses. Additionally, executives with more social support in their new organization, either by virtue of hiring members of their former firm's executive cohort or by being socially similar to member's of their new organization's management team, will likely encounter less friction with respect to the implementation of their competitive moves. Architectural knowledge possessed by the new executive will probably undergo less transformation as it is transferred to, and absorbed by, the new organization. In sum, social similarity between an intraindustry successor and incumbent management will likely speed competitive responses and make them more imitative, or similar to the precipitating action.

Proposition 3: Organizations that hire a rival's executives that are socially similar to existing members of the organization's top management team will tend to respond more quickly and more imitatively to a competitive action.

The power an intraindustry successor has relative to incumbent managers may also influence their new organization's competitive strategy. Power has been argued to be an important influence on strategic decision making (Eisenhardt and Bourgeois, 1988; Finkelstein, 1992; Hambrick, 1981; Hinings et al., 1974). The strategies pursued by firms are more likely to reflect the preferences of those managers or coalitions with power. For several reasons, when firms attempt to access a rival's knowledge through intraindustry succession, the new executive may assume their new role with a relatively high degree of power and legitimacy. External succession is often caused by poor prior organizational performance (Allen et al., 1979; Boeker and Goodstein, 1993; Cannella and Lubatkin, 1993) that may serve to de-legitimate the firm's past routines and practices and provide the new executive with increased power and a mandate for implementing change (Gabarro, 1987; Hambrick and Fukutomi, 1991; Vancil, 1987). The need for change might also introduce a degree of uncertainty on the part of incumbent managers with respect to future strategies. In general, managers that are able to cope with uncertainty have more power (Finkelstein, 1992; Thompson, 1967). New executives brought aboard a firm because they possess knowledge that will enable a firm to initiate a competitive response may have a relatively high level of power because they are able to reduce some of this uncertainty.