Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

CEO Successor Characteristics and Issues of the JapaneseManagement System: A Case of the Pharmaceutical Industry
Miyano Horiuchi
Graduate School of Business Administration, Rikkyo University
Nippon Academy of Management
Email: 17wg001k@rikkyo.ac.jp
Abstract
This study tried to figure out the issues of the Japanese management system through chief
executive officer (CEO) characteristics in the pharmaceutical industry. Comparing 164 CEOs in US,
European and Japanese firms from 2001 to 2018, the result illustrated that most of firms promoted
their CEOs internally, however, in Japanese firms, one third of the CEOs were selected from theformer CEO’s family members or an executive who was parachuted from parent firms. In addition,
it took over 22 years to be selected as a CEO in Japanese firms, which made the oldest new CEOsand retiring CEOs in the three regions. As for CEO performance, the result indicated that the older
the CEO that was selected, the lower the performance, and the longer industry tenure, the lower the
performance. These results suggested that the way to select a CEO successor in Japanesemanagement system should be reconsidered to survive in the global market by competing with US
and European firms.
Keywords: CEO Succession, CEO origin, Japanese Management Structure, Pharmaceutical Industry(1) Introduction

At that time when the Japanese industry

The Japanese economy has not been doingneeded to catch up with the industry in otherwell for a while. Since the early 1990s after thenations, such as in Europe and USA, there wereasset bubble burst, most of the industry inclear directions and goals of what to produce,

Japan has suffered a slow growth. The 1990s isdevelop and how to be efficient to achieve goals.

called the Lost Decade for Japan, and in theBusiness owners concentrated their capital to2000s, the situation is still not optimistic.

manage and develop firms to grow. There wasJapanese style management has led tono need to have their own will to find goals atcomplicated problems recently. The life time
employment,

seniority

decision-making
domestic

marketthat time.

rules,

consensus

After the asset bubble burst, Japaneseandheavilysaturatedfirms have had a hard time to keep lifetime–

innovations

of

the

employment. Some financial institutions went

management are needed, however, the changes

bankrupt, and foreign stock ownership ratio

are not enough to correct the Japanese economy.

increased. The cross-shareholding system in17

Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

Japanese firms started to be eliminated.

sense, it is hard for Japanese pharmaceutical

Temporary worker’s market got bigger, thefirms to survive competition if they keep themarket of full-time workers with full benefits

traditional Japanese style management. They

and the contracted workers without benefits got

are required to communicate more often with

mixed up. People have been having a hard time

investors to raise capital, and to acquire firms

to have full benefits as a full-time worker asinternationally to expand their business.

before.

The competition of the market gets severe.

Leveraging the mobility of the labor market,

It means that firms need the better chief

the organization is now facing the time to

executive officer (CEO) 1 to manage strategy

change. To gain talented workers, firms need toand the firm. They need to be a management

have options to give out benefits not only to full-

professional. If Japanese firms keep their CEO

time workers but also to temporary contracted

as a traditional firm owner, the growth andworkers.

development of Japanese pharmaceutical firms

The way to raise the capital from thewill not happen in the future.

financial market has changed. Following theThis issue can apply to any kind of industry

change, fair evaluation of employee has started

in Japan that needs to expand businessto be required, not like the lifetime employment

internationally, not only to the pharmaceuticalsystem that never needed fair evaluation.

industry. The objectives of this study is to

Therefore, although it is still a part of theidentify the characteristics of the managementchange, the Japanese style management is

structurefacing a time to be reorganized.

pharmaceuticalofJapanese

and

firms

through2

WesternCEO

Considering this situation that Japanesecharacteristics, based on the indicators used infirms are facing, this study compares thethe upper echelon theory by Hambrick andmanagement of firms in Japan and other

Mason (1984).

regionsofthePharmaceuticalpharmaceutical
firms

are

industry.

In the upper echelon theory, Hambrick andlonger-lived,

Mason(1984)

proposed

that

the

firm

compared with the ones in other industries.

performance and the strategic choice could be

Therefore, it is a lot easier to keep the Japaneserelatedstyle management compared with a fast moving

management

industry, such as information technology (IT),backgrounds, educational levels, socioeconomic

services and consumer goods.

roots, financial positions, group characteristics

In contrast,

the investment

with

the
team.

characteristics
Their

age,

of

top

career

towards

were taken as the indicators, and the range of

research and development (R&D) of theindicators were extended by many others after

pharmaceutical industry is enormous, and there

the theory presented.

is a big chance of development failure. In this1 In Japanese firms, a chief executive officer canis defined as a CEO in the Japanese firms.

be called as a representative chairman or a2

president. In this study, the representative

Canada and Australia are categorized as

named in their homepage and the press release

Western.
18

In this study, the firms in USA, Europe,

Journal of Japanese Management Vo.4, No.2, May 2020

Although Hambrick and Mason expanded

ISSN 2189-9592

expanding their facilities and market share

the research object to the top management teamsince the 1950’s.

of the firm, CEO is the final decision maker after

CEO succession results would reflect theall. The CEO characteristics obviously relates

past conditions of the firm (Datta and Guthrie,

the firm’s strategic choices that connects to the1994). Therefore, the condition of the Japanese

firm performance. Therefore, in this study, thefirms might have not changed drastically for a

CEO characteristics were studied.

while.

This study is structured as follows. First, it

Mishina, Hino, Dan, Ashida, Ichinari andreviews the literature of CEO successions, andWang (2010) examined CEO characteristics in

the CEO characteristics in Japanese firms, thenJapanese, American and Taiwanese firms. It

in Western firms. Second, it develops acompared the CEO’s age, gender, educationalframework of the empirical research to study

background, succession origin and functional

CEO

the

background among the three countries. The

pharmaceutical industry both in Japanese andresult showed American and Taiwanese firms

Western firms. Third, it presents the analytic

had a similar way to choose CEO’s especially on

data methodology and findings. Finally, it

their education. While the most of the CEOs in

discusses the implications of this research.

Japanese firms graduated from the brand-

successor

characteristics

of

named universities and obtained only bachelor(2) CEO successions in Japanese firms

degrees, the most of CEOs in American andTanikawa (2015) examined the internal

Taiwanese firms have a masters or doctoral

promotion system of Japanese firms, based on

degree, especially in business.

the hypothesis that Japanese firms choose their

Mishina et. al. (2010) also examined 77

CEO internally unless they have a serious

CEO backgrounds of 2009 both in Japanese andfinancial crisis or face globalization3. As a result,

American firms. The result shows that one out

70% of CEOs were chosen internally in 1,832

of 44 Japanese CEOs were hired externally,

Japanese firms in 2014. In addition, 24.69% of

while 15 out of 33 American CEOs were hired

CEOs were founders of the firm. Tanikawa

externally.

predicted that internally promoted CEOs would

Japanese firms need to reform their CEO

decrease compared with 1950’s, and it did,succession system to make better use of

however the CEOs were still mostly chosenorganization ability.

The

research

concludedthatinternally although Japanese firms were
3 The definition of internally promoted CEO ishand, in the Western studies, an internallydifferent between Japan and the other countries.

promoted CEO means the CEO who were an

In Japan, an internally promoted CEO usually

officer of the hiring firm for more than one year

entered the firm right after he/she graduatedprior to their appointment, and an externalfrom the college (newly graduated – “Shin-

CEO means the CEO who had a prior history as

sotsu”.) The others who entered the firm after

an officer at another public firm, had at most one

job hopping were not counted as an internally

year as an officer at the hiring firm (Nagel, 2015).

promoted CEO (Tanikawa, 2015). On the other19

Journal of Japanese Management Vo.4, No.2, May 2020

Horiuchi (2019) researched educational
backgrounds

of

318

CEOs

in

ISSN 2189-9592

to agency problems even though they chose an

158

optimal successor internally as their CEO.

pharmaceutical firms among six international

Datta and Rajagopalan (1998) examinedregions from 2001 to 2018. The result showedthat 134 CEO successions in US manufacturingthat only 7% of CEOs in Japanese firms had afirms during the period 1977-1987. The result

degree in management while 20% of the CEOs

showed that CEOs with higher educationalin the other regions had at least one additional

levelsdegree. It clearly showed that Japanese firms

differentiation. If the industry growth rate waschose their CEOs not because of theirhigher, the age of the CEO successor was lower.

management skill.

However,

Mishina and Hino (2011) pointed out that

relatedtosamplemanufacturing

theindustry

firms

product

includedindustry,any

non-diversified,Japanese firms tend to appoint their CEO at antherefore the result did not indicate the history

older age. Many first CEOs, , the founders, hadof firms, which might affect organizationala very long tenure. The successors consequently

inertia (Hannan and Freeman, 1984).

were older when they held the CEO position. To

Furtado and Karan (1994) researched thefollow these kind of the CEO appointments,

relationship of a firm’s performance and thefirms developed an older age promotion system.

origin of CEO successions. The result showed

In the end, the experience of the CEO as top

that external CEOs were hired when the firmmanagement became insufficient and it still

had the poor accounting earnings, but this wascontinues without any change.

limited to the small firms.

These studies showed that the JapaneseOn the other hand, Georgakakis andfirms rarely changed their way to choose a CEO

Ruigrok (2017) researched 109 CEO succession

since the high economic growth era of 1950’s,

events in large international European firms

while firms rapidly expanded their businessbetweenglobally since the 1960’s (Akino, 1997).

externally hired CEOs had the performance

2005-2009.

The

resultshowedadvantage when the three conditions came(3) CEO successions in Western Firms

together. One was that the CEO and top

Lauterbach and Weisberg (1999) examinedmanagement team had similar demographic

165 top management successions in US firms

elements, such as gender, age, and nationality.

during the period 1989-1991. The result showed

The other was that the CEO needed to have athat internal successions were more likely invariety of experience. The last was that the CEOlargershould have been hired from a well-performed

firms,

which hadgood

economic

performance, and offered top management

firm in a stable industry.

positions, such as CEO, rather than managers.

Thus,

CEO

characteristic

studiesin

Also, Lauterback and Weisberg (1999)

Western firms suggest the reason why afound that external CEOs often performed

successor was chosen, the levels of thebetter than internal successions when firms had

performanceoutcomes,poor performance. It concluded that internal

characteristics

cansuccessions weaken the firm, and it might leadsuccessor. In contrast, studies in Japanese firms
20

andproduce

which
a

CEO

successful

Journal of Japanese Management Vo.4, No.2, May 2020

indicatetheconditionsofJapanese

ISSN 2189-9592

characteristics represent an organizational

management systems rather than testing adecision (Datta and Rajagopalan, 1998).

CEO’s performance or success to select a CEO.

The reason of why this study focuses on

These studies of CEO characteristics in each

the Japanese management system is that theregion demonstrate a great difference in a

pharmaceutical market in Japan had beentheory of the management literature.

shrinking compared with the past, and would
continue in the next decades due to an aging(4) Problems of Japanese pharmaceutical firms,

population

and

so

on.

The

needs

for

and CEO successions

internationalization had been identified since

The main proposition of this study is to1990’s (Mahlich, 2007). According to “Theexamine the characteristics of CEOs in the

Global Use of Medicine in 2019 and Outlook topharmaceutical industry of the world leading2023” by IQVIA 7 , the global pharmaceuticalmarkets, in particular Western countries andmarket will exceed $1.5 trillion by 2023 growing

Japan from 2001 to 2018. After the Japanese

at a 3–6% compound annual growth rates over

government announced their direction of

the next five years while Japan’s topline growthpromoting globalization of the market in 20134,

of -3 to 0%, and the medicine spending in Japan

the

of

is expected to decline by -3 to 0% through 2023,

changedlargely due to the effect of exchange rates andsurrounding

pharmaceuticalenvironment

firms

in

Japan

drastically5.

the continued uptake of generics. To survive

Looking into annual securities reports,
many

Japanese

pharmaceuticalsuch an upcoming tough environment, a strong

firms

dominant logic is required, followed by aannounced promotion of globalization in their

qualified CEO as top management (Bettis andbusiness strategies. In 2014 and 2015, 45% of

Parahalad, 1995).

Japanese pharmaceutical firms announced

In this sense, the CEOs in these regions,

expanding their business outside of the country6.

Western countries and Japan, should be

Announcing the globalizing strategies bothcompared to find the better characteristics tofor research and development and the drug

advance in the industry on their own. To

sales, the question is whether the managementcompare them, the CEO age, origin, firm andsystem in Japanese firms could change. The

industry tenure are examined following theseselection of a CEO successor and required

three hypotheses.

4

The Japan Revitalization Strategy (Cabinet

6

Decision on June 14, 2013)5

securities reports of 62 publicity listed Japanese

According to Data Book 2019 by Japan

Pharmaceutical

Manufactures

The data was collected from the annual

pharmaceutical firms in 2014 and 2015.

Association,

7 IQVIA is formerly Quintiles and IMS Health,three of top eight Japanese pharmaceutical

Inc., is an American multinational company

firms have over 60% oversea sales in 2017,serving health information technology andwhich is increased by 15% to 20% compared toclinical research.

2013.
21

Journal of Japanese Management Vo.4, No.2, May 2020

1. CEO AgeISSN 2189-9592

On the other hand, Zajic (1990) had

The aging population has been a problem in

empirical analysis and the result indicated thatJapan since 1970’s, and in 2018, the populationinternal CEOs had higher-performing firms.

aged 65 and over was 28.1 percent of the total

However, the data of this study of CEOs and the

population8.

firms occurred in 1987, so the study needs to be

According to the report of Tokyo

Shoko Research, the average age of CEOs in

updated.

Japan was 61.73 in 2018, which was the oldest

Therefore, CEO performance could besince the research was started in 2009. Also, it

different depending on tenure, however anreports that there was a correlation between theinternal CEO could perform better.

firm performance and the age of the CEO. The

H2: Internal CEOs performs better in theirolder the CEO, the lower the firm performancelater tenure than External CEOs.

became9.
Shimizu (2013) researched CEO ages and3. Firm Tenure and Industry Tenure

firm value of the 2209 Japanese firms of four

In this study, it takes the definition of theyears in 2001, 2004, 2007 and 2010. The resultinternal CEO as the CEO who transferred into

showed that there was a negative correlation

the firm and worked in another position for a

between the age of CEOs and firm value, andwhile, for more than one year prior to their

the higher negative correlation if the firm had aappointment. It means that each CEO may

higher percentage of foreign investors.

have a different tenure length, both in the firm

These studies indicated that the age ofand the industry.

CEOs and the performance could be related
negatively.

This

study

examines

The

the

CEOs

shouldbeopen-minded

regarding firm, however, they become close-

performance of each CEOs and their ages.

minded as their tenures continue (Hambrick

H1: The age of CEOs is negatively correlated

and Fukutomi, 1991). It indicates that if thewith their own performance.

CEO candidate stayed at the firm or theindustry longer before being promoted to a CEO,2. Internal Promotion

the person may develop a close-minded strategy,

Zhang and Rajagopalan (2010) reported

which leads to the lower performance.

that there was no significant difference in firm

Karaevli (2007) examined that the relationshipperformance between internal and externalof the firm performance and external CEOs for

CEOs, but in a later year of tenure, there was a

30 years in the airline industry and chemicaldifference. External CEOs got a relatively lower

industry.

performance in their later tenure, while internal“outsiderness” of the CEO did not affect the firm

CEOs kept the level of their performance

performance.

The result indicated thatthecontinuously.
8

Staticsof

BureauofJapan,agein2018),

Tokyo

Shoko

Research,https://www.stat.go.jp/english/data/jinsui/2018https://www.tsr-

np/index.html#a15k30-a [2020/1/23 access]net.co.jp/news/analysis/20190214_01.html

9 2018 nen Shacho no Nenrei Chosa (The CEO[2020/1/23 access]22

Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

On the other hand, Richard, Wu andone in Canada, one in Australia, 20 European

Chadwick (2009) reported that there was afirms11 and 31 Japanese firms that were listed

positive relationship with CEO industry tenure

in SPEEDA12. These firms were publicly listed,

and the firm performance, and a negativeand had at least 20% of sales of prescription

relationship with CEO firm tenure. Theydrugs (not in generic drugs), according to thetargeted the bank industry, and gained samples

SPEEDA industry categories.

by questionnaires.

prescription drug sales and R&D were the main

H3: The CEO’s industry tenure has a positive

business focus of each firm. This study focused

relationship with the CEO performance.

on 18 years from 2001 to 2018, which spans theIt means that2010 problem of the pharmaceutical industry13.
(5) Methodology

CEOs of each firm in 18 years were studied

In this study, classifying and typifying

at S&P Capital IQ Platform 14 (hereinafterCEOs in each region based on the data, it triedreferred to Capital IQ) and a firm’s own website.

to find out the management structure difference

The names of 164 CEOs were found, and data

between Japan and Western countries. For thewas collected about age of onset as a CEO, age

Western countries, it divided into two regions,of retirement as a CEO at the firm, their

USA

and

succession origins, their firm term and industry

European countries. Therefore, firms in threeterm, and their performance. In 164 CEOs, 74

regions, Japan, USA and Europe, wereCEOs were from Japan, 34 from USA, and 56

compared. Then, it tested the hypotheses to findfrom European countries.

(plus

CanadaandAustralia)

out any relationship between CEO successor
characteristics and their performance.

2. Measures

1. Data and Sample

Age to Become a CEO: Most of the CEO’sbirth year was able to find over the internet byThis study was based on 164 CEOs in 62

their names. The birth year was subtracted

pharmaceutical firms that mainly handle

from the first year of tenure to find the age ofmolecular drugs10. They consist of nine US firms,

accession to CEO of the firm.

Mainline molecular pharmaceutical firms do

13 Most of the drugs in the table were developed

not include biopharmaceutical firms because

and launched in 1990’s, which is the time ofmost of biopharmaceutical firms focus only on

Japanese bubble economy. When we look at the

R&D, and they don’t have manufacturing

years of patent expiry, it shows the expiries

facilities.

happened right before and after 2010. That is10

11

20 European firms consist of four fromcalled “2010 problem of the Pharmaceutical

Germany, three each from England, Ireland andIndustry” in Japan.

Denmark, two from Switzerland, one each from

14

Italy, Bulgaria, France, Finland and Spain.

services company that acts as the research

12SPEEDA: Asia’s Leading Platform for

Capital IQ: A technology and financial

division

Analyses on Companies, Industries and M&AofStandard

https://www.capitaliq.com/

Deals, https://www.ub-speeda.com
23

andPoor's,Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

Age to Retire as a CEO: The birth year was
subtracted from the year of retirement as thereflect the strategy such as mergers andCEO of the firm.

Since it is difficult to compare the CEOs in theacquisitions as the result of the performance.

Succession Origin: By taking the definition

large period, CAGR for sales is used in thisin Western firms, an internal CEO was definedstudy.

as one who had been employed by the firm for at

The performance of the CEO in 2000 would

least 2 years before becoming the CEO of thehave been represented at the balance of 2001.

firm. If the CEO was hired just for the position,

This study made the balance of 2001 as theor became the CEO within a year since entering

starting period of CAGR. CAGR was calculated

the firm, they were defined as an external CEO.

as below.

Just for additional information, if the CEO wasa family member of the former CEO, orparachuted from their parent firm, it was noted.

To test the hypotheses 1-3, a correlation

Firm Tenure: It is the number of years with

was established for describing the relationshipthe firm until they became the CEO since they

between two mutually numerical dependent

were hired by the firm.

variables. A multiple regression was used to

Industry Tenure: It is the number of years
that the CEO had spent in the pharmaceuticalmeasure the relationship of internal or externalCEOs and the other variables.

industry.

CEO Performance: In this study, the(6) Resultscompound annual growth rate (CAGR) for sales

1. Descriptive Statics and The Management

during the tenure of each CEO was used to

Structure Difference by Regions

examine CEO performance. Generally, stock

The first step in the analysis was toprices are the central measure of CEO

generate the descriptive statics and to compare

performance. However, stock prices can be

the variables by regions. Table 1 shows theinfluenced by various factors other than CEO’s

descriptive statics of the sample data. It clearly

capability. Having the assets growth does notindicates that Japanese CEOs had the highest

mean that the firm’s stock price growth. Profit isnumber across the variables. The CEOs inalways controllable even though operating

Japanese firms started their position at

profit.

their older age, the oldest was at 76, and ends

The sales growth reflects CEO’s strategy

their position at the oldest in the comparison.

rather than the various market factors. It canTable 1: CEO characteristics of the pharmaceutical industry: 2001-2018
Age to Become the CEO
Total
Japan
Area USA
EuropeAge to Retire as the CEO

Firm Tenure

Industry Tenure

Mean S.D. Min. Max. Mean S.D. Min.
53.06 7.80
32
76 61.59
7.13
42

Max. Mean S.D. Min. Max. Mean S.D.
81 15.78 14.53
042 21.10 13.04

55.27

8.87 36.00

76.00 65.41

6.55 42.00

81.00 22.61

14.80 0.00

52.71

6.68 32.00

63.00 59.50

6.18 45.00

68.00 12.29

12.85 0.00

50.38

5.98 38.00

63.00 57.89

5.91 42.00

72.00

10.81 0.00

24

8.88

Min.
0

Max.
56

42.00 24.50 14.31

0.00

56.00

33.00 22.68 10.18

0.00

39.00

36.00 15.66 11.06

0.00

36.00

Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

Table 2: Breakdown of CEO Origins by Regions
Internal

External

Sum% /Total

Total(N=164)

119

72.6%

JPN

64

5

5

Area USA

24

10

0

31

22

3

EuropeSum

Unknown% /Total

37

22.6%

Sum

% /Total8

4.9%

Table 3: The Detailed Breakdown of CEO Origins by Regions
Internal

Internal &Internal &FamilyParachuted
14
5

Japan

45

USA

24

0

Europe292External &FamilyExternal

External &Parachuted

Unknown

3

1

1

5

0

10

0

0

0

0

22

0

0

3

In Japanese firms, if the CEO was old atfirm tenure of 22.61 years. For the USA, 12.29

accession, he had the shorter tenure 15 . A few

years, and the shortest was 8.88 years in Europe

Japanese CEOs were promoted to the position

This result indicates that Japanese firms

over 69 years old, and retired after a few years.

preferred a CEO promoted internally as well as

However, the average CEO tenure was theworking for the same firm for a long time, which

longest in Japanese firms when comparing thecorrelates to the age of accession and retirement

age to become the CEO and the age to retire asas the CEO. If the three regions are compared,

the CEO.

the USA firms appear to prefer CEOs who knew

In contrast, the CEOs in European firms

the firm well rather than being a new employee.

stayed in their firms and the industry for the

In contrast, European firms had only about 8

shortest in these regions. The mean age toyears, which meant that no matter how long the

become a CEO was 50.38 years old, which was

person was in the firm, they had a chance tothe youngest among three regions.

become a CEO if they had the necessary ability.

The mean age to retire as a CEO was 65.41

Regarding industry tenure, in Europe andyears old in Japanese firms while the mean of

the USA, it was at least 15 years of industry

other two regions was under 60 years old. It is

experience in the pharmaceutical industry. The

obvious that Japanese firms tend to have older

means of the industry tenure was 22.68 in USA

CEOs, and they keep their position till they get

and 15.66 in Europe. It means that the CEOsaround 65 years old. It might relate to theneeded around 7 to 10-years’ experience in theofficial retirement age of Japanese firms. They

industry before joining the firm, and spent

set the retirement age at 65 years old.

another 8 to 10 years before becoming the CEO.

The mean of the firm tenure was different

On the other hand, Japanese CEOs had theby each region. Japanese CEOs had the longest

almost same firm and industry tenure. It means

15 No female CEO was found in Japanese firms

in the data.
25

Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

that most of them did not work in any other firm

similar CEO successor origins, no matter if they

nor the industry before becoming the CEO ofwere hired internally or externally, there was no

their firm. Compared with USA and Europe, it

relationship with the other stakeholders such as

took more than double to become the CEO.

a family member and a parent firm. On the

Table 2 shows the breakdown of CEO

other hand, Japanese firms mainly hired CEOs

origins. The Japanese firms had the mostinternally but one third of the CEOs wereinternal CEOs, and European firms had therelated with the family and parent firms.

most external CEOs. USA firms made their
CEO profile available, therefore there was no
unknown.

It

indicated

that

the

2. CEO Successor Characteristics and CEO

firms

Performance

communicated well to the stakeholders without

Table 4 shows the correlations. There was ahiding any career history of the CEOs.

negative correlation between the age to become

Overall, most of the CEOs were internal

the CEO and CEO performance (r=-0.229). It

CEOs. However, as Table 3 shows, Japanesemeans H1 was supported, the older the CEO,firms were unique. There were 14 internal andthe lower the CEO performance although tablefamily origin CEOs. It meant that the CEO’s

5 shows the age was not significant for CEO

family member was working for the firm for a

performance.

while, then they succeeded them in the CEO

The other finding was that there was aposition after their relative resigned. Obviously,

negative correlation with industry tenure andit indicates that most of Japanese firms still

CEO performance (r=-0.178). It indicated that

depend on family style business while firms

the longer industry tenure, the lower the CEO

need a strong presence for investors, in contrast

performance, which did not support H3.

to the way that European and USA firms were

To test H2, the multiple regression analysis

taking.

was used. Table 5 shows the result. It showedThus, by observing the data of CEO origins,that there was no relationship with an internal,

it shows the difference among these threeor an external CEO and the performance. Thus,

regions. Japanese firms preferred CEOs who

H2 was not supported.

stay in the firm for a long time and promote
them internally, and it takes more than 22 years(7) Conclusion

on average. Accordingly, the age of the CEO wasThis study classified the CEOs in threehigher both to start and retire. US firms

leading pharmaceutical markets, Japan, USA

preferred CEOs who were in the same industry

and Europe, and compared their characteristics.

for more than 22 years on average, but firm

Also CEO performance was examined throughtenure was half of the industry tenure.

the characteristics to find out any relationship

European firms preferred the CEOs with muchwith their performance.

shorter tenure both in the firm and the industry.

The literature regarding CEO successions

72.6% of CEOs were internally promoted,of each region was reviewed. The Japanese

however, the characteristic itself was different

firms had not changed their way to select a CEOamong the regions. USA and European firm hadsince the 1950’s, and the analysis in this study
26

Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

showed the exact same way persists in thewhich was directed to expand their business2000’s, even in the pharmaceutical industry

internationally.

Table 4: Correlations
1

2

3

4

1 Age to Become the CEO
2 Age to Retire as the CEO.484**

3 CEO Performance-.229**-0.159.451**.317**-0.112

.611

**

**

-.178*

4 Firm Tenure
5 Industry Tenure.317.626****. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

Table 5: Multiple Regression Analysis Summary
VariableAge to Become the CEO

B-0.511

Beta-0.275

Age to Retire as the CEO-0.361-0.1480.266

Firm Tenure
Industry Tenure(before becoming CEO)Internal

0.328

0.296

0.205

-0.142-0.118

0.580

2.978

0.059

0.813

External
8.693
a. Dependent variable: CEO Performance

0.149

0.567

In contrast, the literature of Western firms

p
0.150

deemed critical to survive among international

mostly examined the CEO characteristics to be

firms.

a successful successor. Taking some of theOn the other hand, when reviewing theresults of the studies, this study built

analysis, there was no relationship with CEO

hypotheses

origin and the performance. It meant thattoexamine

them

in

the

pharmaceutical industry in 2000’s.

whether the CEO was internal or external was

As a result, Japanese firms mostly chose

not a reason for low performance. Long industry

older, internal CEOs with longer industry

tenure had a relationship with performance,

tenure, which reveals a lack of experience intherefore, the lack of the knowledge of theother environments. Also one third of the CEOs

business outside the industry would be a reason

were chosen from among the former CEO’sof the low performance.

family or stakeholders of the parent firm. The

Growing firms expand the scale of theJapanese firms were continuously operated byorganization, and make functioning complicated.

someone who was close-minded. It might have

Therefore, the manager will not be able toworked well when the pharmaceutical industry

manage the firm efficiently by expanding andtargeted only domestic markets. However, inincreasing the complexity, if he/she who has

2000’s, the expansion to a global market wasinvolved himself/herself only in a specific27

Journal of Japanese Management Vo.4, No.2, May 2020

ISSN 2189-9592

business. In short, a management professional

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