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

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  • Thomas Hutzschenreuter
  • Ingo Kleindienst
  • Claas Greger

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.

Suggested Citation

  • Thomas Hutzschenreuter & Ingo Kleindienst & Claas Greger, 2018. "Seeking distinctiveness through divestments: CEO succession and the effect of demographic similarity on the divestment of predecessor's investments," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 39(4), pages 462-474, June.
    • Handle: RePEc:wly:mgtdec:v:39:y:2018:i:4:p:462-474
    DOI: 10.1002/mde.2918
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    Cited by:

    1. Coudounaris, Dafnis N. & Orero-Blat, María & Rodríguez-García, María, 2020. "Three decades of subsidiary exits: Parent firm financial performance and moderators," Journal of Business Research, Elsevier, vol. 110(C), pages 408-422.

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