Performance Outcome of Leadership Succession at Foreign Subsidiaries in Japan. Does Nationality Matter?

Leadership succession has been an important topic for research and management practice because of its effect on firm performance. This study integrates leadership succession and expatriate staffing literatures by investigating performance outcomes of leadership succession at foreign subsidiaries in Japan. We distinguished four types of CEO successors: expatriate followers (expatriate succeeds another expatriate), localizers (local manager succeeds an expatriate), local followers (local manager succeeds another local manager), and ambassadors (expatriate succeeds a local manager). Our theory and evidence from 2,113 firm-year observations, including 521 successions, suggests that successor types have direct and moderating effects with contextual firm-level factors on subsidiary performance. We extend agency theory by showing that both local and foreign subsidiary CEOs pursue their own, unique interests affecting firm performance in different ways.