Top management team diversity and strategic change

Abstract

PurposeThe purpose of this paper is to describe the building of a theoretical model to explore how team pay disparity and resource slack moderate the effects of top management team (TMT) diversity on strategic change and if the moderating effects of resource slack differ in firms with a low or high level of pay disparity.Design/methodology/approachNine hypotheses are proposed and tested with a sample from 391 listed Chinese firms. Archival data are collected from annual reports to form the sample. The hypothesized model relationships are tested through regression analysis.FindingsThe findings show that pay imparity negatively moderates the effects of TMT diversity and resource slack also has important moderating effects. Furthermore, the moderating effects of resource slack differ in firms with low and high team pay imparity.Originality/valueTMT demography diversity has an important effect on strategic change. However, two conflicting views exist on the relationship. Although some literature suggests that diversity may be sources of explorative activities such as strategic change, others suggest that diversity may cause integration difficulty and thus has a negative effect on strategic change. This paper contributes to extant debate regarding the effects of TMT diversity on strategic change by including TMT pay imparity and resource slack to explain that the effect of diversity on strategic change is contingent on the level of pay imparity, resources slack, and their interactive effects. This research also contributes to understanding organization slack by reasoning that the moderating effect is contingent on pay imparity level.