Operations‐Related Structural Flux: Firm Performance Effects of Executives’ Appointments and Exits
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abstract
Conceptualized as a meta‐construct, operations‐related structural flux (ORSF) refers to appointments and exits—voluntary or involuntary—of operations‐related executives, to and from the firm. This research leverages the contingency theory perspective to show that ORSF’s influence on firm performance is contingent on contextual circumstances of such executive changes, specifically, appointments and exits—voluntary or involuntary. Examining executive turnover data from North American public firms between 2000 and 2016, the authors find that the firm‐level context of operations executives’ turnover is consequential for firm performance. On average, operations appointments are adaptive, but operations exits, including those due to both voluntary and involuntary reasons, disrupt firm performance. However, parallel effects are not evident for marketing‐ and finance‐related appointments and exits. Furthermore, our study reveals that exit of one operations executive hurts firm performance (measured in terms of Tobin’s q) by 3.3%. A post‐hoc analysis finds that firm performance of the sample firms that witness involuntary operations‐related exits (IVOpE)is, on average, 9.2% lower than that of the sample firms that do not witness IVOpE. These results indicate the outsized influence of operations‐related executives, who collectively are generally responsible for much of a firm’s budget, workforce, resources, structures, and capabilities.
