Seeking distinctiveness through divestments: CEO succession and the effect of demographic similarity on the divestment of predecessor's investments

Thomas Hutzschenreuter, Ingo Kleindienst and Claas Greger

Managerial and Decision Economics, 2018, vol. 39, issue 4, 462-474

Abstract: Why do successor CEOs divest those organizational units that they divest shortly after taking office? In order to contribute to this question, we take a behavioral perspective and develop a theoretical framework that draws on pioneering work in social psychology, in particular, research on individuals' need for distinctiveness and argue that demographic similarity to their CEO predecessors may evoke negative affect as it threatens CEO successors' need for distinctiveness. Assuming that CEOs are high need for distinctiveness individuals, we argue that negative emotions associated with similarity to their CEO predecessors are likely to force CEO successors to engage in behavioral coping strategies aimed at restoring a sense of distinctiveness. In particular, we predict and empirically observe that demographic similarity increases the likelihood that in their pursuit of distinctiveness, CEO successors deliberately divest specific organizational units, namely, those that their CEO predecessors had invested in.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:39:y:2018:i:4:p:462-474

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