Internal candidates are typically seen as continuity candidates who will continue largely down the path the organization was already on. If companies want to change direction, external candidates are generally seen as more likely to engineer such a change.

Research from Cambridge Judge Business School suggests this might not always be the case, however, and that when internal candidates have sufficiently diverse management experience they’re more likely to pursue growth opportunities.

Experience matters

The research focused on when managerial experience from within the firm proved helpful and when it didn’t. It found that internal CEOs tend to pursue growth-related opportunities when their firm-specific experience is combined with experience from different industries and regions. This diversity of experience allows them to overcome the trap of following the status quo that often besets internal candidates.

“Versatile experience is likely to broaden the perception of new opportunities and enrich managerial ability of CEOs with in-depth firm knowledge,” the researchers explain. “These CEOs perceive lower risk of failure and are more willing to pursue growth where resource reconfiguration is needed.”

The key is to have a diverse range of experiences in different contexts combined with experience within the firm. If the new boss lacks any of those things, then growth-related strategies don’t tend to be pursued.

“Versatile experience increases the versatility of CEOs’ human capital only when it is combined with firm-specific experience. This means that at least some of the versatile experience should be gained in the focal company (in-firm context),” the authors conclude. “If all of a CEO’s versatile experience is gained externally (in another firm), the CEO suffers from insufficient knowledge of the company and the synergistic effect disappears.”