Diversity at the executive suite: A resource-based approach to the customer orientation–organizational performance relationship

Abstract

Taking a resource-based approach and thereby arguing that top management team (TMT) diversity is a tacit knowledge, this paper addresses how TMT experience diversity complements TMT functional diversity in explaining the effect of customer orientation on organizational performance. It is argued that when TMT functional diversity is leveraged with TMT experience diversity, this bundled tacit knowledge operates as a transformational capability, strengthening the relationship between customer orientation and organizational performance. Results from a survey of top management executives at the SBU level support our prediction for a positive three-way interaction between customer orientation, TMT functional diversity, and TMT experience diversity on organizational performance. Our findings suggest that the effect of customer orientation on organizational performance increases when the level of both functional diversity and experience diversity increases. Implications for TMT diversity and implementing customer orientation are discussed.