Dr Anna Grosman and Prof Tomek Mickiewicz: The Impact of CEO Change under Constraints of Complexity

The Impact of CEO Change under Constraints of Complexity- Lunchtime seminar organised by the UCL SSEES Centre for Comparative Studies of Emerging Economies.

Speakers: Anna Grosman (Loughborough University), Tomasz Mickiewicz (Aston University), Xiahui Liu (Loughborough University), and Ekaterina Alexandrova (Higher School of Economics)

We investigate why is it that sometimes the new CEOs brings a positive change to the firm, and sometimes the effect on performance is negative. The literature is inconclusive: CEO’s change may be considered as bad for performance based on disruption theory, or as good for performance based on adaptation theory (when it brings better realignment of firm’s strategy with external environment). We posit that while both effects are present simultaneously, which one will dominate is contingent on complexity. We see complexity as an overarching heuristic concept that helps us to reconcile the phenomena that have not been integrated into one theory framework before. We argue that under conditions of complexity the effects of CEO change are unlikely to be positive, and we see those conditions as related to the attributes of companies, of their operations and the markets they choose, and of relational capital they use to secure resources. Furthermore we argue, that the effects of complexity are best identified under the macro environment characterised by institutional voids. To motivate these propositions we reach beyond the agency theory and stress specificity, bounded rationality, and cognitive limitations. New CEOs facing firms complexity will require time before they can bring in new adaptation strategies, and in the short run the effect of disruption will dominate. The empirical hypotheses we derive are tested utilising a large sample of Russian companies. We find negative short run effects of the CEO change in companies that either export or import, that are located closer to the key international markets, that have foreign ownership links, are larger in size, are part of business groups, and/or government owned.

All welcome to attend, no registration required.