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

This improved decision process might influence strategic outcomes. Balanced power dynamics may require a compromise between the executive's new vision for the firm and its traditional approach to competitive strategy. In effect, this might result in the development of a new set of routines and capabilities as the knowledge carried by the new executive blends and combines with the knowledge base of their new firm. Indeed, new combinations of resources and capabilities are thought to be at the core of creativity and innovation (Nahapiet and Ghoshal, 1998). This blended knowledge base might result in more creative and unique competitive responses that are significantly different from those endemic to either the industry as a whole, or the specific firm. In other words, within the context of more balanced power structures, strategic decision making will become less associated with simply implementing, or failing to implement, the intraindustry successor's strategies carried from their prior role. Instead, more balanced power structures may result in both the formulation and implementation of substantially new competitive strategies.

Accordingly, this suggests that the power dynamics associated with intraindustry succession have a curvilinear relationship with long-term firm performance (see Figure 2). Low long-term performance is likely to result when the new executive has either very high or very low power. However, at intermediate levels of power (balanced power structures) both the executive's and the firm's knowledge base may combine to enable the firm to formulate and implement more unique, and potentially innovative, responses. In the long run, the firm may then be able to differentiate itself from, and possibly outperform, its rivals.

Proposition 6: Competitive responses are more unique (less imitative) when power is balanced between an intraindustry successor and a firm's incumbent management coalition. This results in a convex, curvilinear relationship between the relative power of an intraindustry successor and the level of long-term firm performance. Long-term firm performance is highest when such an executive has an intermediate level of power.

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SUMMARY AND CONCLUSION

The discussion above attempts to highlight the phenomenon of senior executives' inter-organizational mobility, and develop a research agenda pertaining to its potential impact on knowledge transfer and competitive dynamics. Drawing from research in the areas of executive succession, knowledge management, and competitive dynamics, several potentially important issues are developed. First, consistent with prior research, it suggests that executive succession is an important mechanism for organizational learning and adaptation. In particular, it focuses on the role of executives from rival firms, or intraindustry successors. Because they carry potentially valuable architectural knowledge, senior executives from rival firms may be especially attractive succession candidates for firms seeking access to a new product market or technology. Organizations that hire senior-level executives, with longer tenure, in greater numbers, and who are socially similar to members of their new firm's top management team may be more likely to achieve this objective rapidly. The risk of using executive succession in this way, however, is that it may also lead to strategic similarity, intense rivalry and reduced long-term performance among industry incumbents. Thus, while intraindustry succession can serve as an effective learning mechanism, it might also diminish the potential for firms to achieve a long-term advantage. Further, these relationships might be influenced by the power dynamics associated with the integration process that the new executive undergoes. That is, the tendency for intraindustry succession to intensify rivalry might depend upon the interaction between the executive and their new firm's in-place management cohort. Certain forms of interaction might, in effect, blend the knowledge carried by intraindustry successors with an organization's existing capabilities and routines. This can potentially render competitive responses unique rather than imitative and, accordingly, allow a firm to differentiate itself from its rivals. Over time, this might also enable a firm to outperform those rivals.

Another way of viewing this is that hiring an intraindustry successor might subject a firm to a certain degree of "strategic risk." In general, research has shown that executive succession involves risk for the organization as a whole and tends to increase organizational failure rates (Carroll, 1984; Haveman, 1993). Specifically, it is argued that intraindustry succession could, under certain conditions, lead to increased imitation, intense rivalry and lower levels of organizational performance. In other words, if one considers the potential effect of intraindustry succession on competitive strategy, it could subject the firm to the increased risk of failure or poor performance.

Implications for Research

These ideas have implications for both future research and practice. First, future research regarding the performance consequences of executive succession might benefit from considering the role of knowledge carried by the new executives. A significant body of research has been directed toward understanding the post-succession performance impact of inside versus outside succession. As discussed above, the results of this research have been mixed. This article suggests that the relationship between changes to a firm's executive ranks and subsequent firm performance may be more complex. There may be intermediate factors, such as the knowledge carried by the new executive, that influence this relationship. For example, management research has increasingly focused on the significance of social capital and network theory for organizational advantage (Nahapiet and Ghoshal, 1998). The degree to which a new executive carries relationships with customers, suppliers, regulators, and rivals may have important competitive implications (Groysberg et al., 2006). Accordingly, more research is needed to identify the types of knowledge carried by different categories of executives, including their social and network capital, and the strategic implications of any related knowledge transfer.

Perhaps even more relevant is the notion that post-succession performance may also depend upon the strategies, or the actual courses of action, that new executives implement. Given the significance of imitation and rivalry for long-term firm performance, this article explored the potential influence of intraindustry succession on firms' competitive actions. In general, however, executive succession researchers may want to consider further the competitive strategies that new successors actually follow subsequent to assuming their new roles. As the literature review above indicates, some research has already investigated the changes that new executives make to firm strategy. However, more research appears warranted, particularly with respect to how these changes relate to firm performance. In other words, it may not only be the nature of a successor's origin that influences future performance, but also what strategies they subsequently put into action.

The concepts developed above may also have implications for future research in knowledge and innovation management. It has long been established that personnel flows between organizations have an effect on the adoption and diffusion of innovation. However, less is known about how this process affects rivalry and the long-term firm performance of specific firms. Although there are certainly important social welfare benefits associated with the diffusion of innovation, important questions exist regarding how this process helps or harms organizations' performance over the long run. Rather than a certain measure of uniqueness vis-a-vis rivals, the diffusion of an "innovation" may promote imitation and homogeneity that diminishes the potential for competitive advantage. This suggests that perhaps more research should be directed toward understanding how personnel flows between organizations and any related knowledge transfer not only enable a firm to adopt an "innovation," but also how this phenomenon impacts its ability to differentiate, or distinguish itself from rivals.

The theory developed in this paper suggests that such a capability is influenced by the integration process that the new employee undergoes. Although there has been a significant body of research documenting the role of employee mobility and innovation adoption, very little research has investigated how the integration of these employees affects the likelihood, as well as the character, of newly adopted innovations. Socialization research, which explores how the process used to integrate new employees influences the degree to which they are innovative in their new roles, might provide a useful venue for such research (Allen and Meyer, 1990; Ashforth and Saks, 1996; Van Maanen and Schein, 1979). Perhaps this also suggests that the integration process experienced by new employees hired from rival firms can be viewed as a "dynamic capability," which refers to skills and competencies used by organizations to absorb information from, and respond to, a rapidly changing environment (Teece et al., 1997).

Implications for Practice