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.     

Top management team diversity and innovativeness: The moderating role of interfunctional coordination

Top management team (TMT) diversity has received considerable attention in the academic literature as well as in the corporate arena. Our paper develops a contingent model on how top management team diversity acts as a form of human capital and can have a positive effect on innovativeness when it is effectively leveraged with favorable social capital. Our theoretical underpinning rests on the argument that greater interfunctional coordination is a source of internal social capital, which mitigates the costs while at the same time highlights the benefits associated with TMT diversity. By testing our model with TMT executives, the results generally supported our hypothesis in that the effect of TMT diversity on innovativeness was positive as interfunctional coordination increased. Implications for marketing theory and practice are discussed.     

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.     

TOP MANAGEMENT TEAM STRATEGIC CONSENSUS,DEMOGRAPHIC HOMOGENEITY AND FIRM PERFORMANCE: A REPORT OF RESOUNDING NONFINDINGS

In this study, we hypothesized that relationships among top managers' goals consensus, means consensus, demographic homogeneity and firm performance would be positive and stronger in a stable industry environment than in a dynamic one. Utilizing a more rigorous methodology, the significant findings of earlier studies could not be replicated. Although the questions remain interesting and important ones, we believe pursuing this line of inquiry further will yield results inconsistent at best and fruitless at worst. Therefore, we urge future researchers to cautiously tread the perilous methodologic minefield that led to our nonfindings.     

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.     

Strategic consensus and performance: the role of strategy type and market‐related dynamism

This paper examines the link between consensus among senior managers and performance at the SBU level and considers factors which may moderate the strength of this relationship. Using data from a cross‐national study in three industry sectors, the authors find that consensus increases the performance of the SBU in the case of a differentiation strategy but not in the case of a low‐cost strategy. Additionally, the relationship between consensus on a differentiation strategy and performance is negatively influenced by dynamism of the market. This research thus clarifies and extends prior consensus research by indicating the conditions under which consensus positively affects performance. For managers, our results indicate that investing managerial time in obtaining consensus is more important for a differentiation than for a low‐cost strategy and is particularly important when using a differentiation strategy in a stable environment. Copyright © 1999 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.     

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.     

Top management team functional diversity and organizational innovation in China: The moderating effects of environment

While conflicts (cognitive and affective) have been considered as important process variables to better understand the mixed findings on the relationship between top management team functional diversity and organizational innovation, such an input‐process‐outcome model is still incomplete without considering the environmental factors. This study was formulated to assess the importance of both competitive and institutional environments in moderating such upper echelon effects within a transition economy. The chief executive officers and chief technology officers of 122 Chinese firms were surveyed and both competitive uncertainty and institutional support were found to shape top management team decision making processes and their outcomes. Copyright © 2012 John Wiley & Sons, Ltd.     

Effects of team inputs and intrateam processes on perceptions of team viability and member satisfaction in nascent ventures

A new venture team is a particular type of top management team neglected by the literature. This study investigated the effects of team inputs and processes on team members' perceptions of team viability and satisfaction in nascent ventures. These outcomes are important as they may be antecedents of team perseverance. The study of 51 new venture teams showed that the presence of a distinct leader was positively related to team satisfaction, while member diversity in educational backgrounds was positively related to perceived team viability. Intrateam processes of social integration and open communication were positively related to both perceived team viability and member satisfaction. Copyright © 2006 John Wiley & Sons, Ltd.     

Top management team turnover as an adaptation mechanism: The role of the environment

Based on an organizational adaptation framework, this study examines the influence of three environmental dimensions–munificence, stability, and complexity–on top management team turnover. In addition to investigating the direct influence of these environmental dimensions, indirect effects through firm performance and strategic change are also examined; the indirect effect of environmental complexity through demographic heterogeneity is also studied. Path analysis indicates that the direct effects of the three environmental dimensions predominate. Indirect effects were nonsignificant except for the effect of instability and munificence through strategic change. By expanding the team turnover context to include environmental and strategic dimensions, in addition to previously examined performance and heterogeneity factors, this study enhances our understanding of managerial turnover as a form of organizational adaptation.     

Performance effects of top management team demographic faultlines in the process of product diversification

Expanding into new product areas is an important part of the growth strategy of many firms, but there is still more to learn about how it affects firm performance. We believe that as the top management team (TMT) is responsible for coordinating product expansion, looking there can yield valuable clues. We argue that diversification entails significant additional information processing and that this strains top managerial resources. We hypothesize that task‐related faultlines within the TMT may help it cope with product expansion while bio‐demographic faultlines may hinder it. We find support for these hypotheses on a longitudinal sample of 2,730 expansion steps made by 61 German firms between 1985 and 2007: task related faultline strength increases performance when diversifying, while bio‐demographic faultline strength decreases it. Copyright © 2012 John Wiley & Sons, Ltd.     

R&D team diversity and performance in hypercompetitive environments

Research summary : This article examines the effects of an R&D team's composition on its performance outcomes in hypercompetition. The fundamental feature of firms in hypercompetitive settings is that they are constantly challenged to improve their competitiveness in a relentless race to outperform one another. Analyzing a unique data set from the Formula 1 motorsport racing industry, we find an inverse U‐shaped relationship between team diversity in task‐related experience and performance an important result that diverges from well‐established theories developed in more stable environments. Fundamentally, we show that the role of R&D team experience diversity varies depending on the size of the organizations in which R&D teams operate. While we find a moderating effect for firm age, this effect is not as robust as that of firm size. Managerial summary : This article examines the relationship between R&D team composition and performance in fast‐moving environments. Firms in these environments are constantly challenged to improve their competitiveness by outperforming one another. Analyzing a unique data set from the Formula 1 motorsport racing industry, we find that a team's diversity in job‐related experience increases its performance up to a certain extent. Once R&D teams become too diverse, performance decreases because communication and coordination become more difficult. We also show that the role of R&D team diversity varies depending on the size of the organizations in which R&D teams operate. Overall, our findings provide several novel implications for the strategy, innovation, and team literatures. Copyright © 2016 John Wiley & Sons, Ltd.     

Does top management team diversity promote or hamper foreign expansion?

Prior research suggests that top management team (TMT) diversity increases strategic innovation. We extended this argument to the case of entering new geographic areas. In addition to exploring the cognitive implications of TMT diversity, as done in prior research, we explored when diversity may lead to the formation of subgroups within TMTs hampering communication and the propensity to enter new geographic areas. We also examined how these positive cognitive and negative social implications change over time as TMT members interact over the years. The hypotheses were tested using ordinal probit analysis and data on 2,159 expansions of 25 companies over a period of more than three decades. Copyright © 2007 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.     

Structural interdependence within top management teams: A key moderator of upper echelons predictions

Studies of the effects of top management team (TMT) composition on organizational outcomes have yielded mixed and confusing results. A possible breakthrough resides in the reality that TMTs vary in how they are fundamentally structured. Some are structured such that members operate independently of each other, while others are set up such that roles are highly interdependent. We examine the potential for three facets of structural interdependence—horizontal, vertical, and reward interdependence—to resolve ambiguities regarding effects of TMT heterogeneity. Based on a sample of TMTs in technology firms, we find that the three facets of structural interdependence are potent moderators of two classic predictions: the positive association between TMT heterogeneity and member departures, and between TMT heterogeneity and firm performance. Copyright © 2014 John Wiley & Sons, Ltd.     

Why top management team characteristics matter when employing a chief operating officer: a strategic contingency perspective

Critics of the CEO/COO duo have stressed that this arrangement burdens the firm with increased costs and decreases the CEO's effectiveness. This study adopts an upper echelon perspective to argue that the presence of a COO may also create TMT‐level information‐processing benefits that can improve firm performance in certain conditions. Data from a sample of 153 firms in five industries highlight a strong positive relationship between the presence of a COO and two established measures of firm performance: return on assets and market‐to‐book ratio. The data also suggest that those relationships are contingent on the broader characteristics of the TMT. Copyright © 2009 John Wiley & Sons, Ltd.     

The impact of strategic dissent on organizational outcomes: A meta‐analytic integration

Research summary: Strategic dissent represents divergence in ideas, preferences, and beliefs related to ideal and/or future strategic emphasis. Conventional wisdom in strategic management holds that such differences in managerial cognitions lead to higher‐quality strategic decisions, and thus to enhanced firm performance. However, 4 decades of empirical research have not provided consistent findings or clear insights into the effects of strategic dissent. Hence, we analyze the relative validity of predictions about these effects from both social psychological theories of group behavior and information processing perspectives on decision‐making. Then, we conduct a meta‐analytic path analysis (MASEM) based on current empirical evidence. Synthesizing data from 78 articles, we put to rest the notion that strategic dissent leads to positive outcomes for organizations and estimate how negative its effects actually are. Managerial summary: Top management teams (TMTs) set the tone and direction for their firms in important ways. Top managers, however, often disagree over fundamental issues related to strategy. Such strategic dissent affects how important decisions are made, and thus how the firm performs. In more specific terms and contrary to popular belief, strategic dissent creates not only dysfunctional relationships among top managers, but also disrupts the process by which these managers exchange, discuss, and integrate information and ideas in making strategic decisions. In short, firms have not yet generated value through numerous perspectives, ideas, and opinions among their top managers. We discuss interventions that could prove helpful in efforts to benefit from having diverse cognitions in a TMT.