The Influence of Top Management Team Heterogeneity on Firms' Competitive Moves

Abstract

The authors acknowledge support from Columbia University's Management Institute. Warren Boeker, Sara Keck, John Michel, Peter Murmann, Michael Tushman, and Ruth Wageman made helpful suggestions on earlier drafts. We are grateful for access to the airline data base jointly assembled by the third author, Martin J. Gannon, Curtis M. Grimm, and Ken G. Smith. This paper explores the executive origins of firms' competitive moves by focusing on top management team characteristics, specifically on team heterogeneity, rather than on the more often studied environmental and organizational determinants of such behaviors. Arguing that competitive actions and responses represent different decision situations, we develop propositions about how heterogeneity may enhance some competitive behaviors but impair others. With a large sample of actions and responses of 32 U.S. airlines over eight years, we find results that largely conform to our propositions. The top management teams that were diverse, in terms of functional backgrounds, education, and company tenure, exhibited a relatively great propensity for action, and both their actions and responses were of substantial magnitude. Heterogeneous teams, by contrast, were slower in their actions and responses and less likely than homogeneous teams to respond to competitors' initiatives. Thus, although team heterogeneity is a double-edged sword, its overall net effect on airline performance, in terms of changes in market share and profits, was positive.*