TMT Heterogeneity in Breakthrough Innovation: The Role of Strategic Decision-making Logics

Abstract

Breakthrough innovation can create new technological trajectories, new markets and even change the competitive landscape, which serves as the driving force of firms’ competitive advantages. Based on Upper Echelons Theory, we focus on how TMT heterogeneity affects breakthrough innovations, and examine how strategic decision-making logics (causation & effectuation) adopted by members of top management teams moderate the relationship between the TMT heterogeneity and breakthrough innovation. By using a sample consists of 227 respondents from China, we use linear hierarchical regression analysis to test the hypotheses on the TMT heterogeneity-innovation relationship. Our findings show that TMT heterogeneity has a positive impact on breakthrough innovation. Both causation and effectuation positively moderate the positive relationship between TMT heterogeneity and breakthrough innovation. In addition, compared with causation, effectuation has a stronger moderating effect on the relationship between TMT heterogeneity and breakthrough innovation. We follow and extend the interpretive logic of strategic decision-making underlined by Upper Echelons Theory in explaining the relationship between characteristics of top management teams and organizational outcomes. Combining perspectives of information processing and core competence, our work mainly reveals the relationship between TMT heterogeneity and innovation, and explore the contingency effect of decision-making logics (causation & effectuation) in that relationship. Our research conclusions help TMTs deeply understand the generation as well as its mechanism of breakthrough innovation, and provide new perspectives and guidelines for them to carry out breakthrough innovation as well.