Rookies and seasoned recruits: How experience in different levels, firms, and industries shapes strategic renewal in top management
| Author | Pao‐Lien Chen,Charles Williams,Rajshree Agarwal |
| DOI | http://doi.org/10.1002/smj.2562 |
| Date | 01 July 2017 |
| Published date | 01 July 2017 |
Strategic Management Journal
Strat. Mgmt. J.,38: 1391–1415 (2017)
Published online EarlyView 28 October 2016 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2562
Received 6 March 2013;Final revisionreceived 9 May 2016
ROOKIES AND SEASONED RECRUITS: HOW
EXPERIENCE IN DIFFERENT LEVELS, FIRMS, AND
INDUSTRIES SHAPES STRATEGIC RENEWAL IN TOP
MANAGEMENT
CHARLES WILLIAMS,1,†,*PAO-LIEN CHEN,2,†and RAJSHREE AGARWAL3,†
1Department of Management and Technology and ICRIOS, Bocconi University,
Milan, Italy
2Institute of Technology Management, National Tsing Hua University, Hsinchu,
Tai wa n
3Robert H. Smith School of Business, University of Maryland, College Park,
Maryland, U.S.A.
Research summary: This study explores the effectof knowledge integration on strategic renewal.
In particular,it examines how executives from different levels and sources inuence renewalwhen
added to top management teams (TMT). In contrast to prior work, the study hypothesizes and nds
that new outside rookies—those new to top management and the rm —are associated with higher
rm growth than other types of executives. We also nd that seasoned outsiders —those with prior
TMT experience outside the focal industry— contribute to growthonly when the existing TMT has
a long tenure. The results suggest that the ability of the TMT to integrate new members varies by
executive type and has an important effect on incremental strategicrenewal.
Managerial summary: Conventional wisdom holds that rms are better off hiring those who can
demonstrate prior experience and skill in tasks as close as possible to the job.In the realm of the top
management team (TMT), however, we nd that many rms benet from hiring rookies from other
rms who are new to the top management team level. These candidates bring useful knowledge of
the operations of competitors and other rms, and they are easier to socialize and integrate with
the existing team. While more experiencedsenior leaders may bring valuable strategic knowledge,
this study suggests that only top management teams with long shared experience can weather the
disruption that they cause to realize the potential benets. Copyright © 2016 John Wiley & Sons,
Ltd.
INTRODUCTION
New executives joining top management teams
(TMTs) contribute to discontinuous strategic
change (Boeker, 1997; Wiersemaand Bantel, 1993)
and the construction of valuable capabilities in rms
(Carpenter, Sanders, and Gregersen, 2001), but we
Keywords: strategic renewal; top management team;
knowledge integration; strategic human capital
*Correspondence to: C. Williams. E-mail: charles.williams@
unibocconi.it
†All authors contributed equally.
Copyright © 2016 John Wiley & Sons, Ltd.
know little about how they affectincremental strate-
gic renewal. While incremental renewal may seem
less important than radical change, theory suggests
that it makes substantial contributions to long-term
growth and value (Agarwal and Helfat, 2009). In
addition, it entails difcult trade-offs between ben-
ets and disruptions from new knowledge (Nelson
and Winter, 1982). In this article, we propose that
the acquisition of top executives is a critical mech-
anism for incremental renewal and that the level of
new hires, the tenure of the existing team, and the
stage of industry evolution all shape the costs and
benets of integrating their outside knowledge.
1392 C. Williams, P.-L. Chen, and R. Agarwal
Our theories suggest that incremental renewal,
despite its seemingly ordinary status relative to
radical change, can nonetheless be quite difcult for
rms (Agarwal and Helfat, 2009; Floyd and Lane,
2000; O’Reilly and Tushman, 2008). Theorists
have proposed that incremental renewal requires
the simultaneous management of top-down and
bottom-up processes, so it tends to be unstable
compared to the status quo or more dramatic change
(Floyd and Lane, 2000). This makes incremental
renewal a useful setting to study the acquisition and
integration of new knowledge since the costs and
benets of integration are more visible when nely
balanced.
In this study,we focus on the level of prior experi-
ence of executive hires as an overlooked character-
istic that affects the rewards from and challenges of
integrating new executives. Tying together insights
from literatures on strategic renewal, upper eche-
lons, and industry evolution, we develop a theo-
retical framework to compare the effects of new
TMT members from ve different backgrounds: (1)
rookie executives from inside the rm, (2) rookie
executives from industry competitors, (3) rookie
executives from outside the industry, (4) seasoned
executives from inside the industry, and (5) sea-
soned executives from outside the industry.1These
ve types represent different knowledge connec-
tions, adaptability, and compatibility with existing
teams.
We posit that rookie outside executives —those
new to top management and the rm— are an
important vehicle for incremental renewal for
two reasons. First, these executives bring new
operational and functional knowledge that help
a rm refresh its capabilities at the operational
and intermediate levels. Second, they are easier to
integrate with the existing team since they are more
open to socialization and integration at the TMT
level. Seasoned executives,on the other hand, bring
a high-level, strategic perspective, but can be more
disruptive to existing teams because of their author-
ity and commitment to prior team-specic practices.
The integration challenges that seasoned executives
present can be mitigated for more positive value,
though, when the power dynamics of the existing
1We use the term rookieto denote executives without prior expe-
rience in top management experience— similar to athletes newto
the top level of a sport, such as the Champions League in Euro-
pean football or the Major Leagues in American baseball— while
we use seasoned to refer to executives with prior experience in a
top management team.
TMT minimize the disruption and facilitate the
adaptation of knowledge. Specically,TMTs whose
members have a longer tenure together will be
more likely to achieve a positive effectfrom adding
seasoned outsiders. Finally, we predict that the
effect of outside industry executives on rm growth
will shift as an industry ages: rookie outsiders
will contribute less valuable knowledge, while the
positive impact of seasoned outsiders will rise.
We examine these hypotheses in the context of
the emerging U.S. cellular industry from 1983 to
1998. Consistent with our predictions, we nd that
rms see higher growth after adding outside rook-
ies from within the industry, and this result is robust
to several alternative specications and approaches
to endogeneity. We also nd that seasoned exec-
utives from outside the industry are more disrup-
tive and difcult to integrate, accounting for the
overall negativegrowth effects associated with their
addition. However, these outside seasoned execu-
tives are associated with a more positiveeffect when
they join longer tenured teams, though these results
are potentially endogenous. Finally, we nd that
the value of knowledge from outside the industry,
in terms of rm growth, depends on an industry’s
age: Over time, seasoned outside industry exec-
utives are associated with more positive growth,
while the positive effectof rookies from other indus-
tries declines.
In bringing together the upper echelons and
strategic renewal literatures, we advance scholarly
thought in several ways. First, the study contributes
to knowledge theory by exploring factors that affect
the cost of integrating new knowledge, which have
not generally been studied. As such, it is an empir-
ical illustration of Penrose’s core proposition that
the cost of integrating new resources is a prime
driver of the growth capacity of rms. For the liter-
ature on strategic renewal, our results show that the
challenges of incremental renewal can be mitigated
by knowledge acquisition strategies that reduce the
cost of integrating outside knowledge, as in the
case of hiring rookie executives. In addition, the
ndings serve as a counterpoint to recent studies
in strategic human capital that document disadvan-
tages associated with outside hiring in professional
services contexts (Bidwell, 2011; Groysberg, Lee,
and Nanda, 2008). Finally,by examining the contin-
gent role of individual level TMT knowledge as the
industry evolves, we broaden a literature predomi-
nantly focused on the rm and capabilities level of
Copyright © 2016 John Wiley & Sons, Ltd. Strat. Mgmt. J.,38: 1391–1415 (2017)
DOI: 10.1002/smj
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