There is an ongoing debate about whether or not to promote teachers from within or to hire administrators from external sources. There are pros and cons to each method, and one size most definitely does not "fit all."
The chief advantage here is that the person hired already has a vested interest in the district and is familiar with the culture, vision, and direction of that district. He or she will also know the other staff members and have working relationships with them. It's crucial to nurture such relationships to be successful overall.
Hiring from within also sends a subliminal message that the work environment in the district is healthy. It might also inspire other employees of the district to move up into administration. It's also a great way to reward a diligent teacher. The final advantage is that is saves money for the district overall because there is no need for advertising the position, spending time and man-hours searching for suitable candidates, and going through a lengthy interview process.
Despite all of the above-listed advantages of hiring internally, there are times when it's just not feasible. If, for example, there is corruption of some kind within the present administration, the district would have to hire someone from the outside just to present an air of legitimacy and a willingness to correct the existing problems.
Of course, the district might only be stagnant and in need of a push. The personnel within the district might only be unimaginative and not corrupt or incompetent. The situation within the district, whether because of changing demographics, changing income levels, or any one of a number of other trends, might be drastically different than it was when the last round of principals was hired. Worse still, there might be an economic disaster that befalls the community, such as what happened in Detroit in 2013. The new administrator in the district might need a special set of skills that the present personnel in the district don't have.
The "Bad" Stuff
Both practices have their pitfalls. When hiring internally for school principal jobs, the district might gain a reputation as an "old boys' network," which might discourage outside applicants when such applicants would be preferred. There might also be accusations of nepotism, particularly in tiny districts.
When hiring externally, you might be perceived as ungrateful by the very people from within the district who applied for the job and who have been in the district for a long time. You might also be restricted from hiring externally by an in-place collective bargaining agreement, so it pays to be thorough when doing one's "homework." In either case, you might dissuade some applicants for your vacant school principal jobs from applying. Those applicants might misunderstand the situation and pass over the district because they feel as if there's only room for advancement for external candidates.
In all, there are no easy answers. If you need to hire a principal for your district, then it pays to make the process as transparent, inclusive, and straightforward as possible. The decision on whether to hire from within or without should be made judiciously and with plenty of information and solid reasoning to back up that decision.