Bully the New Guy: CEO Legitimacy and Firm Victimization

Integrating upper echelons perspective and victimization theorizing into institutional theory, this paper investigates the mechanism by which CEO legitimacy causes firm victimization. Drawing on insights from the literature on liability of newness, we suggest that firms with newly inaugurated CEOs may have to pay the illegitimacy penalty in the form of increased competitive attack. An empirical test with a unique dataset of interfirm litigation for top 500 companies in the US confirms that a firm is likely to elicit more rivalry attacks when the tenure of its CEO is shorter. It is also demonstrated that the firm go through less competitive attacks either when the CEO of the firm was promoted internally or when the CEO has higher promotion focus. Our finding highlights the value of looking to the legitimacy aspects of competitive dynamics by illuminating how firms face peer pressure for legitimation and how they can obtain social acceptance.