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Institutionalized Action and Corporate Governance: The Reliance on Rules of CEO Succession

William Ocasio
Administrative Science Quarterly
Vol. 44, No. 2 (Jun., 1999), pp. 384-416
DOI: 10.2307/2667000
Stable URL: http://www.jstor.org/stable/2667000
Page Count: 33
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Institutionalized Action and Corporate Governance: The Reliance on Rules of CEO Succession
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Abstract

This paper follows an institutional theory of action in exploring the consequences of formal and informal rules on the chief executive officer (CEO) succession process. An analysis of the competing risks of insider versus outsider CEO succession in U.S. industrial corporations provides evidence that boards rely on both past precedents and formal internal labor markets for executive succession and the selection of insiders versus outsiders as CEOs. To exclude alternative explanations that view rules as epiphenomenal, I examine the moderating effects of performance, late CEO departures, the founder's power, and board structure on reliance on rules. The results show substantial inertia in the rules of CEO succession, consistent with an institutionalized action perspective. The findings suggest that rules both enable and constrain board decision making.

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