CEO succession and organizational transitions: case of state‐owned enterprises

Abstract

PurposeThe aim of this paper is to investigate CEO succession in China's state‐owned enterprises (SOE) from within intra‐industry labor market. One hypothesis looks at the proportion of SOEs in the industry which will be negatively associated with the likelihood of intra‐firm succession. Another proposition claims the performance gap between SOEs and the industry average level is positively related to the likelihood of intra‐firm succession.Design/methodology/approachSecondary source data on 79 CEO successions and descriptive company measures were obtained. Background variables such as ROA and employee number were collected from the Tianjin Statistical Yearbook. Pearson and logistic regression coefficients provided tests of hypotheses.FindingsThe hypotheses are strongly supported given all measures of performance. The likelihood of intra‐firm succession is negatively associated with the proportion of SOEs in a particular industry. The lower the performance of SOEs behind the industry average level, the greater the likelihood of intra‐firm succession.Research limitations/implicationsThe sample size used is moderate. Even though Tianjin is a large industrial center, generalizations to all of China may be limited.Practical implicationsThe results support the overall argument that firms within a gradualist economic transition environment in China will tend to choose an internal CEO succession when firms have a limited qualified managerial supply outside the organization. Future research examining the CEO successor in both SOEs and non‐SOEs will provide a more complete picture of organization management with transitional economies evolving into the largest world‐leading economies.Originality/valueThe data base is unique. The paper looks at the business activities and management processes of China's SOEs for the purpose of understanding the way leadership develops; and the organizational effect it has on top management succession. The research not only contributes to the succession literature but also enables managers and investors to better understand the practice of top management succession in Chinese SOEs.

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“…CEO succession is argued to provide an important mechanism for the organization to overcome inertia (Tushman & Romanelli, 1985;Hannan & Freeman, 1984;Helmich & Gilroy, 2012), to strategically adopt to changing environments (Helmich, 1977;Vancil, 1987), and to symbolically ratify the intentions to change organizational operations and the effectiveness of these operations (Pfeffer, 1981).…”