Volume 34, Number 2 125 STRATEGIC REORIENTATION IN FAILING FIRMS: THE CEO PERSPECTIVE Sonia Taneja Texas A&M University – Commerce • Commerce, TX Guclu Atinc Texas A&M University – Commerce • Commerce, TX Mildred Golden Pryor Texas A&M University – Commerce • Commerce, TX ABSTRACT This paper addresses new CEOs in failing firms and their potential positive or negative impact in terms of strategic reorientation and organizational survival. Specifically, the authors recognize the need for new CEOs of failing firms to be able and willing to rapidly make strategic and tactical transformative changes through their decisions and actions. Specific suggestions are made in terms of capabilities and experience needed by new CEOs of failing firms in order for them to positively impact the future of their respective organizations. Keywords: Strategic reorientation; failing firms; CEO power; managerial discretion; INTRODUCTION Organizations are routinely confronted with significant changes that trigger the need for strategic reorientation. Virany, Tushman, and Romanelli (1992) assert that change in any of the key components of a firm’s strategy – structure, controls, and power distribution – constitute strategic reorientation. Lant, Miliken, and Batra (1992) contend that strategic reorientation is a function of past performance, CEO turnover, top management team turnover, and/or environmental changes. Priem, Butler & Li (2013) caution that our traditional view of strategic management needs to be expanded because strategic reorientation may also be driven by the demand side as consumers seek out greater value. Organizational leaders must plan for strategic reorientation in advance of it being urgently needed. Since there are precursors to the need for strategic change, it would be beneficial for academicians and practitioners alike to study those precursors and their probable impacts on organizations. Stacey (1995) proposed an adaptive system in response to strategic processes most commonly referred to as strategic choice and system dynamics. 126 Journal of Business Strategies Successful organizational systems (i.e., successful individual organizations) adapt to the environment based on their upper echelons’ strategic choices (Hambrick & Mason, 1984), a transformational process in which organizational processes are restructured to adapt to the changes in the environment (Zajac & Kraatz, 1993). Also, organizations adapt to environmental changes based on their ecologies, which is an evolutionary process of competitive selection while it is a challenge for the whole organization to transform and adapt to the environmental change (Hannan & Freeman, 1977). These well-established perspectives from which the strategic process of an organization is viewed comprise the system dynamics through which organizations are driven by “negative feedback processes toward predictable states of adaptation to the environment” (Stacey, 1995: 477). The three perspectives relating to the causes of changes in organizational strategies include the following issues: (1) the issue of systemic properties, characterized by how organizations transform or renew themselves based on the human systems, e.g., how organizations change with the change in the CEO (Stacey, 1995; Daily & Dalton, 1995; Dowell, Shackell & Stuart, 2011); (2) the intention vs. emergence issue which questions the extent to which new organizational states (caused by changing organizational strategies) are the outcome of prior shared intentions of the agents within them or the top management (CEO) changes which impact the competitiveness and potential for survivability of the organization (Stacey, 1995; Mintzberg & Waters, 1985); and (3) the free choice vs. determinism and constraint issue which questions whether the change of organizational strategies is based on the environment in which it operates and its capability to choose strategies and their outcomes (Stacey, 1995, Bourgeois, 1984; Mackay & Chia, 2013). We propose that, by utilizing their strategic choices, which is an antecedent for managerial discretion, organizational leaders can expedite and better manage strategic change. This line of research contributes to the extant literature by explaining how organizations can use complex adaptive systems to influence the strategic change process, thereby restructuring the organizations in ways that result in strategic reorientation. Gordon, Stewart, Sweo, & Luker (2000) propose that “Industry turbulence and CEO turbulence (are) necessary precursors to strategic reorientation and suggest that industry turbulence conditions managers’ external attributions for negative financial performance in influencing strategic reorientation” (911). According to Dess and Beard (1984), the three dimensions of organizational environment are munificence (generosity), dynamism (turbulence), and complexity (intricacy). Over the years, researchers have investigated the environment’s impact on structure (Burns & Stalker, 1961; Karaevli, 2007), strategy (Gilley, McGee & Volume 34, Number 2 127 Rasheed, 2000; Miller, 1988), and decision-making processes (Baum & Wally, 2003; Garg, Walters, & Priem, 2003, Priem, Rasheed, & Kotulic, 1995). In this paper, our focus is on CEO changes in failing firms. Over the years, researchers studied the impact of governance changes and firm survival, such as executive and director turnover prior to bankruptcy (Daily & Dalton, 1995) and board structure on the probability of failure (Dowell, Shackell, & Stuart, 2011). Other researchers investigated the effect of power struggle between the boards and the executives on strategic change (Golden & Zajac, 2001) and the need for CEOs to use their discretion as a way to adapt to dynamic occurrences within and outside the organizational boundaries (Peteraf & Reed, 2007). Firms that are failing typically are unable to keep up with the external environment with their routines. Once the status quo is not working, there is a definite need for change. Hence, the first thing many firms do is to change their CEOs. However, research shows that changing CEOs does not always help (Daily & Dalton, 1995). Adopting a configurations perspective and partially echoing what prior researchers observed (e.g., Ketchen, Thomas & Snow, 1993), our contention is that incoming CEOs should be equipped to deal with the existing instability and dynamism. We also suggest that the only way for incoming CEOs to implement radical change is through the use of managerial discretion (Hambrick & Finkelstein, 1987) which actually provides the source of power to initiate strategic reorientation. In addition, adopting an agency perspective regarding the board, we also propose a possible strengthening effect of board power. We aim to contribute to the ongoing debate about the need for powerful CEOs with experience in dynamic environments for firm survival while the board is also powerful to support strategic reorientation. LITERATURE REVIEW Strategic choice/strategic change Early theorists proposed that strategic change is a key element for successful organizational entrenchment (Barker & Duhaime, 1997; Stacey, 1995; Schendel, Patton, & Riggs, 1976; Hofer & Schendel, 1980). If a firm is failing, apparently the current strategy is not working. Then, change is needed to get the firm back on track. Since the turn of the century, we have witnessed an ever increasing interest in strategic change (MacKay & Chia, 2013; Haynes & Hillman, 2010; Franken, Edwards, & Lambert, 2009; Lohrke, Bedeian & Palmer, 2004; Crossan & Berdrow, 2003). Given the important role that strategic reorientations play in turnaround in 128 Journal of Business Strategies declining firms (Lohrke, Bedeian & Palmer, 2004), further assessment becomes imperative. It is necessary to examine the factors that cause organizational leaders to initiate change by utilizing organization’s abilities to achieve strategic reorientation. Various studies have supported the assertion that strategic change enhances performance (Hambrick & Schecter, 1983; Zajac & Kraatz, 1993) while other studies concluded that strategic change reduces performance (Jauch, Osborn, & Glueck, 1980; Singh, House, & Tucker, 1986). Still others, such as Zhang and Rajagopalan (2010), found that the relationship between strategic change and performance is not linear. In fact, the authors postulated that, “The level of strategic change in the pattern of resource allocation will have an inverted U-shaped relationship with firm performance” (Zhang & Rajagopalan, 2010, p.336). In other words, while low levels of change become an adaptive mechanism to align organizational goals with the environment, high levels of change strengthen the disruptive effect which in returns negatively impacts performance. When and to what extent change is needed for a failing firm is the general theme of this study. In the next section, we discuss the importance of strategic precursors that lead to change. Strategic Precursors Our characterization of strategic reorientation follows that of Lant, Miliken, and Batra (1992) who indicate that strategic reorientation is a result of CEO turnover, top management team turnover, and impact of the external environment. There are also other precursors of change. For instance, Priem, Butler and Li (2003) consider consumer demand to be an impetus for strategic reorientation. While, enhancement of customer value perception is an important strategic move, in this paper our focus is on the top executive officer who initiates change as a retrenchment strategy in failing organizations. The level of strategic change reflects the organization’s capabilities to experiment and the risk–taking aspects of the firm’s strategic choices (Carpenter, 2000; Finkelstein & Hambrick, 1990; Zhang, 2006). An important organizational condition that is salient to understand the nature and magnitude of strategic change is executive leadership (Virany, Tushman, & Romanelli, 1992). Upper echelons theory states that organizational outcomes, including both strategic choices and performance levels, can be predicted by the top management characteristics (Hambrick & Mason, 1984). In fact, according to Hambrick and Mason (1984), organizations are reflections of their upper echelons. CEO career experiences, for example, have a high impact Volume 34, Number 2 129 potential on organizational happenings (Greiner, Cummings, & Bhambri (2002); Zhang, & Rajagopalan, 2010). One concept to remember is “managerial discretion.” Hambrick and Finkelstein (1987) define discretion as “latitude of action” (p.369). The potential impact of an executive is determined by the amount of discretion he or she has in an organization. Finkelstein, Hambrick and Canella (2009) propose that environmental, organizational and personal factors determine the amount of executive discretion. One personal characteristic is commitment to status quo. In the case of a failing firm, once a new CEO is brought in, he or she would be reluctant to stick to the status quo. Actually, this CEO is brought in to challenge the status quo that is not working in the first place. Crossland & Hambrick (2011) postulate that “the concept of managerial discretion provides a theoretical fulcrum for resolving the debate about whether chief executive officers (CEOs) have much influence over company outcomes (p. 797). The overall impact of the level of strategic change on an organization’s performance can be observed when a CEO moves from one industry to another. For instance, the recently retired CEO of Ford Motor Corp. was previously the CEO of Boeing Inc. before he joined Ford. During his reign, Ford went through an entire restructuring process. Commensurately, it is beneficial to note that CEO origin has a moderating effect on the impact of strategic change on firm performance (Zhang & Rajagopalan, 2010). As a side note, Barker and Mone (1998) purported that change in CEOs during a turnaround may lead to mechanistic shifts as new CEOs attempt to make decisions and take actions affecting their organizations. They found that “mechanistic structure shifts did restrict firms’ abilities to change their strategic orientations in response to decline” (Barker & Mone, 1998, p. 1227). Another finding of Barker and Mone (1998) was that “replacing the firm’s CEO during turnaround attempts had conflicting and paradoxical effects on firms’ abilities to enact strategic reorientation” (p. 1227). New CEOs are likely to attempt to directly reorient the organizational strategies. For example, Ron Johnson joined J.C Penney’s as chief executive officer. In 2013 (17 months later), he was fired after his controversial attempts to change the retail chain led to a 25 percent plunge in sales (Townsend, 2014). To further explain our contentions, we next offer our propositions. To be specific, we assess the possible impact of CEO power, CEO experience, particularly in the case of dynamic industries, and a possible moderating effect of board power on these relationships. 130 Journal of Business Strategies PROPOSITIONS The effect of new CEO power on strategic change According to Carpenter (2000), strategic change is comprised of two components. The first one is strategic variation, which refers to change from the existing resource allocation structure of the firm, and the second component is strategic deviation, described as the shift away from the firm’s resource commitments determined by the industry norms. These variations and deviations are managed and handled by the ‘board capital’. As a strategic management concept, Hillman and Dalziel (2003) described board capital as the sum of the human and social capital of the board of directors and the board’s ability to provide resources to the organization to capture strategic change. One concept is that CEO power acts as an intermediary and moderates the relationship between board capital and strategic variation and deviation (Haynes & Hillman, 2010). CEO power’s role in strategic decision making (Finkelstein, 1992, Haynes & Hillman, 2010; Pearce & Zahra, 1991), strategic choice (Mackay & Chia 2013; Quigley & Hambrick, 2012; Child, 1972), and strategic change (Krause & Semadeni 2013; Hopkins, Mallette, & Hopkins 2013; Haynes & Hillman, 2010; Hambrick & Mason, 1984) to cope with internal and external sources of uncertainty are well documented in the literature. According to Finkelstein (1992), for organizations, internal sources of uncertainty are top managers and boards of directors, and major external sources of uncertainty include performance and institutional environments. Finkelstein’s (1992) study supports the upper-echelons theory and contends that managerial power affects the relationship between top managers and organizational outcomes. Golden and Zajac (2001) discussed the effect of boards on strategic change when CEOs have power vis-à-vis the board. Pearce and Zahara’s (1991) typology relating to CEO-Board power relationships is worthy of noting. In that study, the authors discuss four different types of CEO power/board power configurations. These board types differ based on composition, characteristics, processes in the organization, and decision making styles of the members of the board. Proactive boards exercise more power and they are considered as true instruments of corporate governance. The board power exceeds the CEOs power especially when the board consists of outside directors, and in the case of proactive boards, the board’s impact on firm performance is positive. With the participative board, in decision making, the emphasis is on reaching consensus among directors and members of the top management team. Therefore, Volume 34, Number 2 131 negotiation and compromise are essential for effective control (Haynes & Hillman, 2010). According to Haynes and Hillman (2010), “a CEO’s preferences with respect to strategic change prevail when the CEO is powerful vis-à-vis the board” (p.1151). CEOs may remain committed to the status quo because of industry’s strategic norms (Carpenter, 2000) and because industrywide norms reduce competitive uncertainty (Spender, 1989). Thus, CEOs often remain committed to past strategies (Datta, Guthrie, & Rajagopalan, 2002) and strategic conformity to industry central tendencies (Zhang & Rajagopalan, 2004) because they seek stability in the competitive environment. As a result, “industry effects outweigh the importance of adopting ‘novel strategies’ often associated with the appointment of a new CEO” (Haynes & Hillman, 2010, p. 1151). “Newly appointed CEO’s are known for their proclivity for change, (however) if the CEO is from the firm’s own focal industry, the mandate for change is overridden by the mandate to conform to industry norms” (Haynes & Hillman, 2010: 1151). Another factor which can impact the level of strategic change is career variety of new CEOs. Crossland, Zyung, Hiller & Hambrick (2014) suggest that CEOs with high career variety tend to sponsor rapid change and increased strategic uniqueness so that strategic reorientation is more immediate and transformative. While CEOs may tend to follow the status quo and the industry norms in the case of a powerful CEO, it depends on the strategic choices required by the organization. In such a case, the CEO’s preference for industry norms will impact the strategic change/reorientation and may decide the position of the organization in the industry. This is aligned with Hambrick and Finkelstein’s (1987) managerial discretion concept. The CEO is considered the personification of strategic leadership and is pivotal to the success or failure of an organization (Finkelstein & Hambrick, 1996). CEOs from the outside are sometimes preferred over the inside CEOs succession during the time of performance turnarounds because they can bring in fresh perspectives and new skills and they may be more willing to question existing practices and initiate major changes (Kesner & Sebora, 1994). However, various studies have found that outside CEOs are generally less able to have positive effects on firm performance (Greiner, Cummings, & Bhambri, 2002; Shen & Cannella, 2002; Wiersema, 2002). This relates to the disruption and organizational chaos that is often created by the hiring and onboarding of an outsider as the CEO. Such disruption often impedes any rapid turnaround efforts of a new outsider CEO. Another problem is that “Outsiders are less familiar with an organization’s particular routines and competencies and thus are more likely to either ignore or even challenge these 132 Journal of Business Strategies competencies” (Zhang & Rajagopalan, 2004: 6). Strategic change may be required when there is shift in the dynamics of competitive advantage for an industry as a result of technological breakthroughs that favor new rivals, global changes in labor arbitrage, change in cost structure, or new competitors entering markets from other industries. Some of the changes are instigated by regulatory upheaval, such as the structural changes to the U.S. healthcare market set in motion by the Affordable Care Act. Virtually every CEO of a hospital system in the U.S. is confronting a major disruption to its business model as a result (Irwin, Topdjian, & Ashish, 2013). Quigley and Hambrick (2012) posit that the retention of the former CEO as board chair restricts a successor’s discretion, thereby diminishing the new person’s ability to make changes and thereby decreasing the new CEO’s potential to greatly alter the firm’s performance. Hambrick and Finkelstein (1987) first used the term ‘managerial discretion’ and defined it as top management having latitude (flexibility) in their strategic choice and decisions in organizations. Rajagopalan and Finkelstein (1992) and Finkelstein and Boyd (1998) further concluded that the greater the level of discretion, the greater the amount of compensation paid to CEOs. Strategic orientation, environmental change, and reward systems in managerial discretion ultimately affect firm performance. The task environment, the organization, and the managerial capabilities of the CEO are the main determinants for CEO compensation and the discretion emanating from them (Hambrick & Finkelstein, 1987; Finkelstein & Boyd, 1998). The CEOs who stay on as board chair are often committed to their prior decisions (Hambrick, Geletkanyez, & Fredrickson, 1993; Quigley & Hambrick, 2012). Researchers have studied factors that affect managerial discretion (Crossland & Hambrick, 2011; Finkelstein & Boyd, 1998). Hambrick and Finkelstein (1987) introduced the concept (theoretical construct) of managerial discretion to bridge the gap between two views about how top executive influence their organization so that they are either “inertial or highly adaptive” (p. 369). Variation in managerial discretion could potentially be used to assess the suitability of the inertial and strategic-choice views. The polar extremes of executives are described by Hambrick and Finkelstein (1987) as “the Titular Figurehead and the Unconstrained Manager” (p. 369). We propose that, for new CEOs in failing firms, power is a critical ingredient for CEO and firm survival. Turnarounds in failing firms cannot be expected as a result of simply changing CEOs. While the bases of CEO power may vary, the results of CEO power are more predictable. In a recent study, Berns and Klarner (2017) reported that, contender CEOs, those who arrive after the current ones are forced to leave, are more likely to initiate change and likely to succeed. In addition Volume 34, Number 2 133 that, Dowell and Shackell (2011) reported increased probability of survival with greater CEO power. We consider managerial discretion as being the foundation for CEO power, and in return propose that, CEO changes in failing firms can only be successful if the new CEO is powerful as stated in the following proposition: Proposition 1. CEO changes in failing firms can only increase the chances of firm survival if the new CEO is powerful. Various scholars and researchers such as Finkelstein (1992); Nelson (2003); Fischer and Pollock (2004); and Mackey (2008) further added to the extant literature that the strong position of the CEO in the firm improves the survival prospects of the organization. Finkelstein (1992) and Fisher and Pollock (2004), for instance, observed that the independent position of the CEO in an organization positively affecting the survival prospects for firms facing significant financial distress. Powerful CEOs will have more impact in an environment that is characterized by low munificence and high uncertainty. Such environments offer less with too many unknowns that requires a power source to hold the company together by initializing radical moves to cope up with such windy conditions. Position of the CEO gives him/her an ability to take extreme decisions (Adams, Almeida, & Ferreira, 2009). These extreme decisions change the firm’s strategy and in return have an impact on firm’s survival (Dowell, Shackell, & Stuart, 2011). Wielding power may not have much impact during periods of organization stability and success. However, as the organization is failing, the CEO capability to utilize power becomes more significant. When an organization faces financial problems, internal or external environmental turbulence and other issues of distress, it is advantageous to have a powerful CEO who can use that power to avoid the stigma of failure and increase the probability of success by making radical decisions. Dowell, Shackell, and Stuart (2011) concluded that the greater the level of financial distress, the more the CEO power decreases the probability of failure. Research has documented that firms experience many radical changes in systems, governance mechanisms, and business cycles due to change in CEO power (Boone, Field, Karpoff, & Raheja, 2007). Firms which are not in equilibrium due to internal or external changes need new governance mechanisms; and failing firms need changes in governance mechanisms to significantly increase their prospect of survival (Dowell, Shackell, & Stuart, 2011). For firms facing a crisis, the powerful CEOs are beneficial. They respond faster to the environmental factors and enact necessary changes as required for the firm’s survival and sustenance (Dowell, 134 Journal of Business Strategies Shackell, & Stuart, 2011; Boyd, 1995; Finkelstein & D’Aveni, 1994). Powerful CEOs have a greater incentive to maintain their reputation as a successful CEO rather than bearing the stigma as having had more responsibility for the firm’s failure (Sutton & Callahan, 1987). Their association with the failure stigmatizes CEOs of failed firms (Semadeni, Cannella, Fraser, & Lee, 2008). The actions of top management and boards have a direct and profound impact on corporate strategy (Haveman, 1993). In short, the failing firm needs powerful CEOs and they tend to initiate radical change to turn the company around. The above discussion leads to the below proposition: Proposition 2. New powerful CEOs of failing firms are more inclined to execute radical change. Impact of new CEOs from dynamic industries Dynamism is about the stability of the environment in which the firm operates. If changes are taking place rapidly in the environment, due to uncertainty, strategic decision makers’ jobs become even more complicated (Dess & Beard, 1984). In such a turbulent atmosphere, the CEO is challenged to deal with constant change (Galbraith, 1979; Wholey & Brittain, 1989). Such an environment turns planning into a more complicated task (Aldrich, 1979). For instance, it has been documented that managers operating in such environments are expected to implement broader ranges of strategic options (Carpenter & Westphal, 2001; Karaevli, 2007). If a CEO is experienced to deal with turbulence, a major characteristic of environmental dynamism, he or she can carry that experience forward to manage firms in similar situations. By nature, firms that are failing deal with tremendous amount of turbulence. Thinking about the internal routines in failing firms and their apparent failure to deal with the external environment, a CEO who is well equipped with how to deal with turbulence and is willing to use managerial discretion, might be a source of competitive advantage from a resource based view (Barney, 1991). In other words, the CEO’s social and human capital becomes an important resource for a failing firm so the chances of survival increase. Hence, we offer the following proposition: Proposition 3. New CEOs with experience in dynamic industries will increase the chances of survival for failing firms. Volume 34, Number 2 135 Moderating role of board power Upper-echelons theory highlights that organizational outcomes are affected by the performance of their top managers (Hambrick &Mason, 1984) and also posits that top management people have to have managerial discretion in strategic decision making. Some top managers will have more discretion compared to others depending on the type of organization; hence, managerial characteristics may not always be predictive of organizational outcomes (Finkelstein & Hambrick, 1990). Finkelstein and Hambrick (1990) concluded that “(1) Organization with long-tenure teams exhibit organizational performance that closely adheres to industry averages, while short-tenure teams are associated with deviations in performance levels; (2) Top management-team tenure is more strongly related to strategies and performance in high discretion organizations (within an industry) than in low-discretion organizations” (p.489). Moving on to Pearce and Zahra (1991) typology of board versus executive power, participative type boards, which signifies both parties to be powerful, is the best configuration for organizational outcomes. Thinking about failing firms and the argument we made previously regarding the need for powerful CEOs and the use of managerial discretion, the other major player of the dominant coalition, board of directors, should enhance the impact of CEOs power on organizational outcomes, which in the case of failing firms refers to chances of survival. Looking at prior research, several studies assessed the possible moderating effect of CEO power on the relationship between board and organizational outcomes. For instance, Combs, Ketchen, Perryman and Donahue (2007) proposed that CEO power interacts with board composition and firm performance. In a more recent study, Chen (2014) proposed that board capital and R&D intensity relationship is positively moderated by CEO power. Haynes, Campbell and Hitt (2014) on the other hand, demonstrated the need for powerful boards to minimize the effect of CEO greed while forcing the powerful CEO to work better which then translates into better organizational outcomes. To our knowledge, previous studies did not look at the possible moderating effect of board power on CEO power and firm survival relationship in the case of failing firms. If the CEO is expected to be powerful, particularly in the case of failing firms, paring him or her with a powerful board would not only result in more efficient strategic decision making process but also enhance the current corporate governance structure. We offer the following proposition to be further tested by empirical data: 136 Journal of Business Strategies Proposition 4. The relationship between powerful CEOs and increased chances of survival will be moderated by board power such that the more powerful the board, the greater the chances of firm survival. CONCLUSIONS AND RECOMMENDATIONS When organizations are failing, the prevailing judgment seems to be “Change the CEO and do it now.” While we agree that change is needed, we propose that certain features of the CEO should be in place for successful entrenchment. First of all, contrary to the well-known contentions of popular governance theories, such as agency theory, a very powerful CEO is needed for turning around the company. This power is the source for challenging the status quo. If a firm is failing, radical change is needed and this change can only happen through dramatic moves impacting the current company structure. Only a powerful CEO can do that. In other words, a CEO who is willing to exercise discretion, can make an impact as urgently needed for a failing firm. In addition, we consider CEO’s experience with dynamic industries to be a determinant factor. In dynamic environments, there is too much turbulence that requires the upper echelons to be on edge all the time. The situation of a failing firm is not very different regardless of the environment in which it operates. Hence, a CEO with knowledge of how to deal with turbulence is more likely to change the picture for a failing firm. Finally, we proposed a possible moderating effect of board power on the relationship between powerful CEO and chances of survival. We believe that a powerful board will complement the overall entrenchment strategy developed by a powerful CEO. Besides, governance mechanisms would work better with such a pairing. All of these propositions are testable with empirical data. Future researchers may consider utilizing secondary data sources to verify our propositions. Also, we believe that our propositions have both practical and theoretical implications. From a theoretical perspective, we contend that CEO being highly powerful is not such a bad thing in the case of failing firms. This is a challenge to some of the fundamental theories of corporate governance. In addition the need for experience with dynamic industries is consistent with the configurations view. Positive impact of the use of managerial discretion and the presence of a powerful board are also consistent with some of the seminal work in corporate governance literature. From a practical perspective, our recommendation to failing firms is to bring in a powerful CEO with experience in dynamic industries, then pair the new executive with a powerful board, and wait for him/her to implement change to save the failing firm. Volume 34, Number 2 137 In this paper, we offer four propositions to be considered and tested by future researchers. It is natural for firms to go down. However, in many instances some of these firms can be saved by having the right people in place. Determining who might be the right person has always been an area of interest for organizational researchers. With this study, we aimed to contribute to this long-time ongoing discussion. 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When the known devil is better than an unknown god: An empirical study of the antecedents and consequences of relay CEO successions. Academy of Management Journal, 47: 483–500. BRIEF BIOGRAPICAL SKETCH OF AUTHORS Dr. Sonia Taneja (PhD) is an Associate Professor of Management, in the College of Business at Texas A&M University-Commerce. Dr. Taneja’s primary research focus and publications are in the areas of strategic management and various other management topics from the strategic perspective such as Empowerment from the Gender Perspective, Crisis Management, and Management History. She has published in a number of scholarly peer-review journals including Journal of Management History, Journal of Business Strategy, International Journal of 144 Journal of Business Strategies Sustainable Strategic Management, Journal of Applied Business and Economics, and Delhi Business Review. Dr. Guclu Atinc is an Associate Professor of Management at Texas A&M University-Commerce. His research interests include corporate governance and research methods in social sciences. He currently serves on editorial boards of several national and international journals. His work appeared in numerous outlets such as Organizational Research Methods, Journal of Organizational Behavior, Journal of Business Research and Management Decision, among others. Dr. Mildred Golden Pryor is Professor of Management at Texas A&M University-Commerce where she has received many excellence awards for her teaching and research. She has received a number of excellence awards for her research from professional organizations. She also won top excellence awards during her 17 years in industry. Dr. Pryor has published many articles in a variety of scholarly journals, and she is on the editorial board for several journals. Her research interests include: Strategic Management, Quality Management, Leadership, and related topics.