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While there is a wealth of research on strategic leadership, the findings are often contradictory (e.g., Carey and Ogden, 2000; Dawley et al., 2003; Hambrick and Mason, 1984; Thomas, 1988). These contradictions are further exasperated when considering organizational performance because of the multifarious measures of performance. We have chosen an initial condition where organizations have flied for Chapter 11 bankruptcy since it is a definitive measure of performance (Daily, 1994). We then examine the potential for leadership's influence on strategic changes to the organization. We assume strategic change to be a necessary precursor for future organizational performance improvements essential for emerging from bankruptcy. We suggest an interactive effect among the different constructs concerning leadership, which may help explain some of the inconsistencies in extant studies. Several of these previous studies on leadership have examined the benefits and drawbacks of hiring an insider versus an outsider in the context of bankruptcy (e.g., Gilson, 1990; Hotchkiss, 1995; LoPucki and Whitford, 1993). Currently, little attention is given to the factors that may affect a CEO's influence within each of these classifications (i.e., insiders and outsiders). Our study addresses this shortcoming by developing a contingency theory of how CEO successor choice, duality, and Top Management Team (TMT) tenure interact to affect post-bankruptcy strategic change. In our context, organizational breadth of diversification reflects strategic change. Our three constructs draw from agency, stewardship, and resource-based theories and were chosen for examination due to the large amount of literature that has linked them to organizational outcomes (e.g., Barker and Patterson, 1996; Boeker, 1997; Boyd, 1995; Finkelstein and Hambrick, 1990; Greening and Johnson, 1996; Pfeffer, 1982; Shen and Cannella, 2002). Figure I illustrates our relevant constructs and their three-way interaction. [FIGURE I OMITTED] In the following sections, we review the findings relating our constructs to organizational change. In the first section, we present the relevant pros and cons of choosing a successor CEO who is an outsider or an insider. We then review the various arguments for and against having a CEO who also holds the position of the Chairman of the Board of Directors (BOD). Next is a review of the mixed influences of a TMT with either high or low team tenure. Finally, we relate all three of these constructs together in order to develop a hypothesis linking them to strategic change following reorganization necessitated by bankruptcy. CEO Successor Choice The CEO is ultimately responsible and accountable for an organization's strategy, design, and performance (Carey and Ogden, 2000; Conger et al., 2001; Kesner and Sebora, 1994). The CEO's role has been described as the most powerful of the power centers in controlling and directing the efforts of the organization toward achieving its goals (Brady and Helmich, 1984). As such, external parties are likely to view succession as a signal about the institution's future (Beatty and Zajac, 1987), and the successes and failures of individual CEOs often translate into the successes and failures of the firm. This makes CEO succession a defining event for virtually every organization (Carey and Ogden, 2000). As important as the CEO is, the BOD can remove the CEO for many reasons. The BOD can be displeased with organizational performance and are holding the CEO accountable for those results (Harrison et al., 1988). They can desire a change agent (Staw et al., 1981), or they may desire to send signals to the shareholders (Carey and Ogden, 2000; Conger et al., 2001). Regardless of the reason, once the BOD decides to replace their CEO, they need to decide on an insider or outsider. An insider has knowledge of the organization already and is also assumed to be in a better position to step in and take control since he or she knows-the-ropes (Zajac, 1990). …
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