The Effects of Candidates Characteristics and Competency Uncertainty on Outsider Executive Selection Decision

Abstract

Before financial crisis, insiders were preferred as executives. However, the paradigm is changing towards outsider executives, partly because so many insider executives crashed and partly because firms are looking for ways to restart growth. Previous literature on the executive selection has largely emphasized importance of executive to organizational success. However, process of executive selection decision making has not been clearly explained. Outsider executive candidates qualities are less known compared to insiders, thereby causing uncertainty associated with competency. I have speculated candidates characteristics such as type of social tie to selector, and education level which can provide biased information to selection decision maker as means to reduce candidates competency uncertainty. Additionally, candidates gender was considered as a significant factor in executive selection process. This study explores the role of outsider executive candidates competency uncertainty, social tie to selection decision maker, prestige of education and gender in selection making process. Using policy capturing approach with participants with previous executive selection experiences, this study showed significant relationship between candidates characteristics and selection likelihood. But effect competency uncertainty on selection chance was not influenced by candidates social tie and education. Based on the current empirical research, it is indicated that prejudice, although illogical, is prevalent in outsider executive selection decision making process.