Institutional entrepreneurship and digital transformation: The role of outsider CEOs

The widespread diffusion of digital technologies forces incumbent firms to drive their digital transformation. Digital transformation not only involves a change in strategy but also requires new institutional logics for firms helping to operate in digital business environments. Firms increasingly hire outsider CEOs to cope with this development, but the necessary institutional change questions whether outsider CEOs can indeed realize digital transformation. We draw on the institutional entrepreneurship perspective to make sense of the role of outsider CEOs in digital transformation. We theorize that digital transformation awareness stemming from prior experience with digital transformation enables outsider CEOs to act as institutional entrepreneurs and realize digital transformation. We further argue that outsider CEOs with digital transformation awareness particularly benefit firms facing abrupt rather than accumulative digital transformations. To test our hypotheses, we introduce a novel, machine-learning-based digital transformation measure. Panel data regressions provide support for our predictions. Our findings contribute to a more nuanced understanding of the role of outsider CEOs as change agents.