The CEO as a key microfoundation of global strategy: Task demands, CEO origin, and the CEO's international background

• Published date: 01 February 2019
• Author: Albert A. Cannella,Sven Kunisch,Markus Menz
• DOI: http://doi.org/10.1002/gsj.1184
• Date: 01 February 2019

SPECIAL ISSUE ARTICLE

The CEO as a key microfoundation of global

strategy: Task demands, CEO origin, and the

CEO’s international background

Sven Kunisch

1

| Markus Menz

2

| Albert A. Cannella Jr.

3

1

Institute of Management, School of Management,

University of St. Gallen, St. Gallen, Switzerland

2

Institute of Management, Geneva School of

Economics and Management, University of

Geneva, Genève, Switzerland

3

Department of Management, Mays Business

School, Texas A&M University, College Station,

Texas

Correspondence

Sven Kunisch, School of Management, University

of St. Gallen, Dufourstrasse 40a, 9000 St. Gallen,

Switzerland.

Email: sven.kunisch@unisg.ch

Research Summary: We explore the selection of new

CEOs with international backgrounds as a key micro-

foundation of global strategy. Building on executive suc-

cession, upper echelons, and international business

research, we argue that firms choose CEOs with interna-

tional backgrounds to match their task demands. We fur-

ther argue that depending on the CEO’s origin from

inside or outside the firm, different task demands matter.

Specifically, we propose that the relationship between

internal (firm-level) task demands and the new CEO’s

international background is more pronounced for inside

successions, whereas the relationship between external

(industry-level) task demands and the new CEO’s interna-

tional background is more pronounced for outside succes-

sions. An analysis of a sample of 363 CEO successions

in S&P 500 firms supports our reasoning.

Managerial Summary: Choosing a CEO with the

“right”experience is a crucial concern for many large

firms. While firms increasing seem to select new CEOs

with international backgrounds, not all firms do so. In

this article, we explore several factors that might influ-

ence this choice. Our results reveal that the predecessor’s

international background, the firm’s level of international-

ization, and the level of internationalization of the firm’s

industry influence whether a CEO with an international

background is selected. Moreover, while for inside suc-

cessions, the firm’s level of internationalization is particu-

larly important, for outside successions, the level of

internationalization of the firm’s industry is particularly

important. Our findings inform those who search, select,

and appoint new CEOs, including boards of directors and

(executive search) consultants.

Received: 31 May 2016 Revised: 24 February 2017 Accepted: 22 August 2017

DOI: 10.1002/gsj.1184

Copyright © 2017 Strategic Management Society

Global Strategy Journal. 2019;9:19–41. wileyonlinelibrary.com/journal/gsj 19

KEYWORDS

CEO succession, global strategy, international

background, microfoundations, upper echelons

1|INTRODUCTION

A crucial concern in global strategy research centers on CEO decisions and actions related to global

operations and competitiveness. These decisions and actions may differ substantially based on the

CEO’s international experience (e.g., Felin, Foss, & Ployhart, 2015; Foss & Pedersen, 2014; Ham-

brick & Mason, 1984). Yet, while scholars have extensively studied a variety of CEO characteristics

(for excellent reviews, see Berns & Klarner, 2017; Busenbark, Krause, Boivie, & Graffin, 2016; Fin-

kelstein, Hambrick, & Cannella, 2009; Giambatista, Rowe, & Riaz, 2005; Kesner & Sebora, 1994),

comparably little is known about the CEO’s international background.

The relatively limited scholarly attention to the CEO’s international background is in sharp con-

trast to the rising importance of this phenomenon (e.g., Favaro, Karlsson, & Neilson, 2013; Karls-

son & Neilson, 2009; Unknown, 2014; Russell Reynolds Associates, 2010; Unruh & Cabrera,

2013). On the one hand, large firms often seem to select new CEOs with international backgrounds.

While in 2002 only 21% of the CEOs of the S&P 500 had international experience (Warner, 2005),

in 2008, 52% of CEOs had international experience, such as spending significant time abroad on an

assignment with substantial responsibilities (Karlsson & Neilson, 2009). According to the leading

executive search firm Spencer Stuart, U.S. firms regard international experience and global perspec-

tive as key requirements for newly appointed CEOs (cf. Unknown, 2004). On the other hand, not all

firms choose new CEOs with international backgrounds. In fact, a recent global CEO succession

study claims that the “newest CEOs have neither the diversity nor the global backgrounds that you

might expect”(Favaro et al., 2013, p. 2). This suggests that either the firms do not find the appropri-

ate candidates inside or outside the firm or they do not value the respective experiences because it is

unclear what exactly the merits are.

Notwithstanding, a new CEO’s international experience appears to be highly relevant as a micro-

foundation of global strategy. The few studies that have explored CEOs’international backgrounds

have focused on the consequences (Carpenter, Sanders, & Gregersen, 2001; Daily, Certo, & Dalton,

2000; Herrmann, 2002; Herrmann & Datta, 2002, 2006; Roth, 1995). Although the knowledge is

not conclusive, collectively these studies suggest that a new CEO’s international experience can

have important consequences. Yet, with the exception of one study by Daily et al. (2000), we lack

studies that go beyond the performance consequences and that provide insights about when and why

firms actually select CEOs with international backgrounds and whether they come from inside or

outside the firm.

Our study is designed to advance knowledge about the role of CEO international background as

a key microfoundation of global strategy. We examine when firms actually select CEOs with inter-

national backgrounds and whether the new CEO’s origin as a key contextual factor impacts that

choice. To proceed, we draw on research from the areas of executive succession, upper echelons,

and international business. We argue that firms appoint CEOs with international experience because

such experience is necessary to effectively handle the managerial task demands associated with the

firm’s internal and external contexts. Combining insights from research on the CEO’s task demands

and the new CEO’s origin, we then propose that firm-related task demands (the firm’s internal

20 KUNISCH ET AL.