Does Managerial Experience Affect Strategic Change?

To what extent is strategic change driven by new managers? We investigate this by analyzing industry switching rates of establishments after new managers have been recruited. We use matched employer-employee data of the workforce of Sweden between 1993 and 2010. Our identification strategy relies on the exogenous departures of managers and a local supply shift instrument to predict the background of a new manager. Hiring new managers as such does not seem to affect strategic change. However, new managers from unrelated industries significantly increase the likelihood that the establishment changes its main activity. Moreover, these activities tend to be closely related to the new manager’s prior background. Hence, managers not only influence the strategic direction of the establishment that hired them, but the fact that they tend to steer establishments into industries in which they had previously worked suggests that managerial skills and know-how are to some extent industry specific.