A Model of Succession

Abstract

Leaders matter for the success of the organizations they lead, but so do their potential successors. We study a model in which whether an organization succeeds is a function of the unknown quality of the leader and the leader’s potential successor’s—the follower’s—decision to cooperate. This decision takes place under the shadow of succession; after it is revealed whether the organization succeeded, the organization chooses whether to retain the leader as the head of the organization or replace her with her follower. Recognizing that the follower may have incentives not to cooperate, at the start of the game, the leader may attempt to buy the follower’s cooperation by designing the leader’s policy agenda in a way that is advantageous to the follower. We show that rather than using sabotage to succeed the leader, the follower often uses cooperation–to steal credit for success and to avoid responsibility for failure. We also show that the leader will use agenda design to buy the follower’s cooperation. Finally, we show that if given the choice, the organization may choose a lower quality follower to achieve cooperation; thus, providing a novel explanation for the loyalty-competence trade off.