Chief strategy officers: Contingency analysis of their presence in top management teams

Drawing upon contingency theory, we analyze the antecedents and performance consequences of chief strategy officer (CSO) presence in top management teams (TMTs). We argue that strategic and structural complexity affects the decision to have a CSO in the TMT and its effect on firm performance. The results of a sample of S&P 500 firms over a five‐year period reveal that diversification, acquisition activity, and TMT role interdependence are positively associated with CSO presence. However, we also find that the structural choice to have a CSO in the TMT does not significantly affect a firm's financial performance. This first systematic analysis of CSO presence informs research on CSOs and contributes to the emerging literature on TMT structure. Copyright © 2013 John Wiley & Sons, Ltd.     

Direct and interaction effects of top management team and board compositions on R&D investment strategy

This paper examines why firms differ in levels of R&D investment intensity by developing and testing a theory of direct and interaction effects of top management team and board outsider composition on R&D intensity. The theory is tested in a longitudinal sample of technology‐intensive firms that completed an initial public offering. The results indicate that both top management team composition and board composition have direct and additive effects on R&D investment intensity. Also, monitoring by outsider directors does not constitute a universally effective governance mechanism with regard to a firm's R&D investment strategy. Firms opt for lower levels of R&D investment intensity when their outsider‐rich board interacts with a team of managers who have high levels of (1) firm tenure, (2) shared team‐specific experience, or (3) functional heterogeneity. When a firm's competitiveness relies on sustained R&D investments, it is important to note these interaction effects and make adjustments to promote a healthy dialogue between managers and the board. Adjustments could be made to the management team composition (e.g., initiating management turnover to reduce firm tenure) or to the bundle of governance mechanisms (e.g., partially substituting board monitoring with other mechanisms). Copyright © 2006 John Wiley & Sons, Ltd.     

CEO political ideologies and pay egalitarianism within top management teams

Research summary : We examine the influence of CEO and compensation committee liberalism on top management teams (TMT ) pay arrangements. Given that politically liberal individuals tend to value egalitarianism, we test whether firms with liberal CEO s tend to (1) reduce pay dispersion among non‐CEO executives; and (2) reduce pay gaps between CEO and non‐CEO executives, and whether compensation committee liberalism moderates these relationships. We find some evidence of a direct effect of CEO liberalism on TMT pay arrangements as well as some interaction between CEO and compensation committee liberalism on the pay arrangements. This study provides a better understanding of the antecedents of TMT pay arrangements and empirical evidence showing the influence of values at the top of organization . Managerial summary : Do the values of the CEO and compensation committee influence the pay of other top managers? Our study provides evidence that political ideology affects top manager pay. We examine whether CEO liberalism produces more egalitarian pay arrangements among top managers, and whether the liberalism of the compensation committee affects that relationship. We find that CEO liberalism reduces differences in the total pay among top managers, but does not influence the difference between CEO total pay and the total pay of top managers. We also find that compensation committee liberalism strengthens the negative influence of CEO liberalism on differences in total pay among top managers. Finally, we find that CEO liberalism reduces the difference between CEO bonus pay and the bonus pay of other top managers . Copyright © 2016 John Wiley & Sons, Ltd.     

Polychronicity in top management teams: The impact on strategic decision processes and performance of new technology ventures

This study focuses on polychronicity as a cultural dimension of top management teams (TMTs). TMT polychronicity is the extent to which team members mutually prefer and tend to engage in multiple tasks simultaneously or intermittently instead of one at a time and believe that this is the best way of doing things. We explore the impact of TMT polychronicity on strategic decision speed and comprehensiveness and, subsequently, its effect on new venture financial performance. Contrary to popular time‐management principles advocating task prioritization and focused sequential execution, we found that TMT polychronicity has a positive effect on firm performance in the context of dynamic unanalyzable environments. This effect is partially mediated by strategic decision speed and comprehensiveness. Our study contributes to research on strategic leadership by focusing on a novel value‐based characteristic of the TMT (polychronicity) and by untangling the decision‐making processes that relate TMT characteristics and firm performance. It also contributes to the attention‐based view of the firm by positioning polychronicity as a new type of attention structure. Copyright © 2010 John Wiley & Sons, Ltd.     

Postacquisition turnover among U.S. top management teams: an analysis of the effects of foreign vs. domestic acquisitions of U.S. targets

An analysis of postacquisition top management turnover among 168 cross-border and 102 purely domestic acquisitions, and a control group of 120 nonacquired U.S. firms, revealed that turnover rates in firms acquired by non-U.S. acquirers were significantly higher than in firms acquired by other U.S. firms or the control group. Further, the timing of postacquisition turnover differed in the foreign vs. domestic acquisitions. Finally, the nationality of the foreign acquirer was found to be an important predictor of turnover in certain acquisition categories. Theoretical and practical implications are discussed. © 1997 by John Wiley & Sons, Ltd.     

Top management team incentive heterogeneity,strategic investment behavior,and performance: A contingency theory of incentive alignment

Research summary : We develop and test a contingency theory of the influence of top management team (TMT) performance‐contingent incentives on manager–shareholder interest alignment. Our results support our theory by showing that although TMTs engage in significantly higher levels of acquisition investment when their average incentive levels increase, investors' responses to those large investments are generally negative. More importantly, however, we further find that within‐TMT incentive heterogeneity conditions that effect, such that investors evaluate TMTs' large acquisition investments more positively as the variance in those top managers' incentive values increases. Thus, within‐TMT incentive heterogeneity appears to increase manager–shareholder interest alignment, in the context of large acquisition investments. Managerial summary : We find that as the average value of TMTs' incentives increase, relative to their total pay, they invest more in acquisitions and investors' respond negatively to the announcement of those deals. However, we further show that investors respond more positively to acquisitions announced by TMTs whose members' incentive values vary (some TMT members hold higher incentives and others hold lower). Results imply that when TMT members hold differing incentives levels, they approach investments from divergent perspectives, scrutinize those investments more heavily, and make better decisions, relative to TMTs with similar incentives. They also suggest that boards seeking tighter manager–shareholder interest alignment may benefit from introducing variance into TMT members' incentive structures, as doing so appears to create divergent preferences that can improve team decision making. Copyright © 2016 John Wiley & Sons, Ltd.     

Stacking the deck: the effects of top management backgrounds on investor decisions

Young firms going public are dependent upon the decisions of investors for a successful public offering. Yet convincing investors to invest is not easy, as young firms have limited track records and, thus, face challenges associated with gaining legitimacy in their respective industries. This paper examines ways in which select information about firms undertaking an initial public offering (IPO) can affect investor decisions. Building upon recent research on upper echelons and signaling theory, we propose that the composition of a firm's top management team can signal organizational legitimacy that in turn affects investor decisions. In the context of young firms undertaking an IPO, such signals are critical, especially when objective measures of firm quality are not easily available. We introduce a typology of signals of organizational legitimacy to elaborate on our hypotheses. Analyses of a comprehensive set of data on the career histories of the top management teams of young biotechnology firms show that investor decisions are affected by the extent to which a firm's top management team has employment affiliations with prominent downstream organizations (e.g., pharmaceutical companies), with a diverse range of organizations, and upon the role experience of one key member of the top management team—the Chief Scientific Officer. We assess and find that these effects are not mediated by the prestige of a firm's lead underwriter. We conclude with a discussion of the implications of our study for strategy research on upper echelons and organizational legitimacy. Copyright © 2006 John Wiley & Sons, Ltd.     

Top management team nationality diversity and firm performance: A multilevel study

This research reexamines the equivocal relationship between top management team (TMT) diversity and firm performance. Combining upper echelons theory with insights from institutional theory, we establish a new, timely dimension of TMT diversity—nationality diversity—and develop an integrated multilevel framework explaining how its performance implications vary across contextual settings. We find that nationality diversity is positively related to performance; and this effect is stronger in (a) longer tenured teams, (b) highly internationalized firms, and (c) munificent environments. More generally, our research demonstrates that the consequences of TMT diversity depend on the (1) specific attributes of diversity being considered and (2) firm and industry conditions under which strategic decisions take place. Copyright © 2012 John Wiley & Sons, Ltd.     

Offshoring and firm innovation: The moderating role of top management team attributes

This study attempts to increase the understanding of how offshoring influences the introduction of new products and services. Focusing on the offshoring of those business functions that provide direct knowledge inputs for innovation (i.e., production, R&D, and engineering), we propose that offshoring has an inverted U‐shaped influence on firm innovativeness. Additionally, we provide an upper echelon contingency perspective by considering the moderating role of two top management team (TMT) attributes (i.e., informational diversity and shared vision). Using a cross‐industry sample with lagged data, we find that offshoring has an inverted U‐shaped influence on firm innovativeness and that this relationship is steeper in firms with high TMT informational diversity and in firms with low TMT shared vision. Copyright © 2012 John Wiley & Sons, Ltd.     

Good learners: How top management teams affect the success and frequency of acquisitions

We develop new theory and hypotheses on how a firm's top management team learns from acquisition experience, why, in consequence, the composition of the team is crucial, and how this affects acquisition frequency and success. We focus on the diversity of the top team and argue that heterogeneous teams, as compared to homogenous ones, acquire less but benefit more from their acquisition experience and are more successful with their acquisitions because they avoid mis‐transferring their experiences. We tested our hypotheses on acquisition frequency and success using longitudinal data on more than 2,000 acquisitions by 25 Dutch companies over four decades (1966 to 2006). Copyright © 2013 John Wiley & Sons, Ltd.     

Predicting who stays and leaves after an acquisition: a study of top managers in multinational firms

This study adds to current explanations of executive fate following a merger or acquisition by examining how executives' perceptions of merger events determine whether they stay or leave. Results indicate that executives' perceptions of the merger announcement, interactions with the acquiring firm's top managers following the merger, and long-term effects of the merger significantly influenced their decision to stay or leave. These perceptions could be used to correctly distinguish between stayers and leavers in almost 80 percent of the cases. In addition, perceptions created when the target company was acquired by a foreign multinational made it more likely that the executive would leave. This finding demonstrates that foreignness continues to be an important determinant of executive perceptions in cross-national mergers and acquisitions. Copyright © 2001 John Wiley & Sons, Ltd.     

The implications of strategy and social context for the relationship between top management team heterogeneity and firm performance

This research reexamines the link between top management team (TMT) heterogeneity and firm performance. Specifically, I theorize that the effects of education, work experience, and tenure on performance will depend upon the top management team's strategic and social context. In a test of such theorizing, I find that (1) the positive relationships between TMT educational, functional, and tenure heterogeneity and performance are contingent on complexity, as indicated by a firm's international strategy and, (2) such relationships are clearly stronger in short‐tenured top management teams. The theory and results presented here provide impetus for future studies, as well as suggest to upper echelon researchers that they think more critically about the conditions under which demographic characteristics are most likely to influence organizational outcomes like performance. Copyright © 2002 John Wiley & Sons, Ltd.     

Top management team compensation: the missing link between CEO pay and firm performance?

In this research we discuss the relationship between CEO and top management team (TMT) member compensation, and explore the implications of TMT pay for firm performance. Specifically, we suggest that firm performance may benefit due to agency and group behavioral issues when top management team member pay is aligned—alignment is defined as the degree to which TMT member pay reflects (1) shareholder interests and (2) key political and strategic contingencies within the firm. In support of our theorizing, we found CEO pay to be related to TMT pay; TMT compensation, in turn, predicted performance (i.e., return on assets and Tobin's q) when aligned with shareholder interests and internal contingencies. Moreover, the effect of CEO pay on future firm performance was dependent on top team pay. Copyright © 2002 John Wiley & Sons, Ltd.     

The contingent effects of top management teams on venture performance: Aligning founding team composition with innovation strategy and commercialization environment

How does the relationship between founding team composition and venture performance depend on the venture's strategy and business environment? Using data from a novel survey of 2,067 firms, we show that while diverse founding teams tend to exhibit higher performance, this is not universally true. We find that founding teams that are diverse are likely to achieve high performance in a competitive commercialization environment. On the other hand, technically focused founding teams are aligned with a cooperative commercialization environment and when the enterprise pursues an innovation strategy. These results are robust to corrections for endogenous team formation concerns. The findings suggest that ventures cannot ignore founding team composition and expect to later professionalize their top management teams to align with their strategy and environment. Copyright © 2013 John Wiley & Sons, Ltd.     

A model of person‐pay interaction: how executives vary in their responses to compensation arrangements

A wealth of research indicates that both executive characteristics and incentive compensation affect organizational outcomes, but the literatures within these two domains have followed distinct, separate paths. Our paper provides a framework for integrating these two perspectives. We introduce a new model that specifies how executive characteristics and incentives operate in tandem to influence strategic decisions and firm performance. We then illustrate our model by portraying how executive characteristics interact with a specific type of pay instrument—stock options—to affect executive behaviors and organizational outcomes. Focusing on three individual‐level attributes (executive motives and drives, cognitive frame, and self‐confidence), we develop propositions detailing how executives will vary in their risk‐taking behaviors in response to stock options. We further argue that stock options will amplify the implications of executive ability, such that option‐heavy incentive schemes will increase the performance of talented executives but worsen the performance of low‐ability executives. Our framework and propositions are meant to provide a starting point for future theorizing and empirical testing of the interactive effects of executive characteristics and incentive compensation on strategic decisions and organizational performance. Copyright © 2010 John Wiley & Sons, Ltd.     

Dynamic managerial capabilities: Configuration and orchestration of top executives' capabilities and the firm's dominant logic

This paper contributes to the understanding of the executive team dynamic managerial capabilities by developing theory about the interplay between the firm's dominant logic and dynamic managerial capabilities (including managerial human capital, social capital, and cognition). We underscore the criticality of the two key CEO‐level functions: configuration and orchestration of senior executive team dynamic capabilities. We develop theory on how these functions create and sculpt the management team's absorptive capacity, which in turn shapes the team's adaptive capacity. We present theory about the distributed nature of efforts for organizational renewal where CEO's dynamic managerial capabilities in concerto with senior executive managerial capabilities will drive top management's ability to revitalize the firm's dominant logic and to achieve evolutionary fit. Copyright © 2012 John Wiley & Sons, Ltd.     

Changes in executive compensation following an environmental shift: the role of top management team turnover

In this study we examine the changes in executive compensation at the top management team (TMT) level following an environmental shift. Using the context of deregulation in the airline industry, we find that: (1) a dramatic environmental change that heightens managerial discretion leads to greater pay level and performance sensitivity of TMT compensation; and (2) the greater the magnitude of turnover among TMT members following the environmental shift, the greater the compensation change. Copyright © 2007 John Wiley & Sons, Ltd.     

The impact of U.S. company internationalization on top management team advice networks: a tacit knowledge perspective

This study surveys 37 U.S. multinational corporations (MNCs) to examine the effect of internationalization on one dimension of the top management team’s (TMT’s) character: international business advice network density. This study draws on international business (IB) theory, the resource‐based view of the firm, and philosophy of science and its view of tacit knowledge. Results show that both the firm’s internationalization extent, and the interdependence that exists across its country–market activities, are positively related to the TMT’s IB advice network density. As the extent of the MNC’s business outside the United States grows and the linkages among its IB units intensify, the demand for IB expertise within the TMT increases, TMT members share each other’s knowledge of IB more extensively and the TMT’s IB advice network density increases. Copyright © 1999 John Wiley & Sons, Ltd.