Leader Succession and Strategic Change: The Role of Leader's Subgroups Size

ABSTRACT Research suggests that new CEO successors drive strategic change through the subgroup of their immediate collaborators. However, it remains unclear how this subgroup is configured. In this research, we address this limitation by introducing a new concept of “CEO's subgroup size” (the number of TMT members in the CEO's subgroup). First, we define and describe this new concept. Second, we investigate how new CEOs with differing succession backgrounds compose their subgroups and the subsequent impact of the CEO's subgroup size on the firm's strategic change. Data from 3545 CEO succession events in Chinese firms indicates that, compared with follower succession, both outsider succession and contender succession are more likely to expand the CEO's subgroup size. Additionally, we found that the CEO's subgroup size positively relates to strategic change under outsider succession but shows an inverted U‐shaped relationship with strategic change under contender succession. We discuss the implications of our findings.