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The underperformance of family CEO successors relative to professional CEOs has been repeatedly documented. We show that this underperformance is entirely driven by family successors who are recruited from within the firm and find that two-thirds of such successors do not have outside work experience. Family successors with outside work experience, however, perform on par with professional CEOs. Variation in the extent of successors’ outside work experience explains a substantial part of the performance gap. A similar performance gap exist between unrelated CEOs that are recruited internally and unrelated CEOs recruited from outside.

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