Abstract
Research highlights the role of the shareholding proportion of the largest shareholder (TOP1) in the relationship of top management team (TMT) heterogeneity and corporate innovation performance. The empirical study makes use of a panel smooth transition regression model (PSTR) to investigate the nonlinear relationship between top management team (TMT) heterogeneity and corporate innovation performance in listed companies of household appliance industry. Data from a sample of 18 China listed household appliance industry from 2004-2014 provides us with a good opportunity to explore empirical evidences for the relationship. Following this idea, we propose to detect innovation performance by focusing on the proportion of the largest shareholder. We reveal that as the shareholding proportion of the largest shareholder becomes different, a nonlinear transition is found in relationship between TMT heterogeneity and innovation performance. The result shows that the model is divided into low regime and high regime at the point of TOP1 = 0.3144. Since equity structure and equity concentration varies in different regimes, the influence of TMT heterogeneity on corporate innovation performance has nonlinear changes as well.
Highlights
Since Hambrick and Masonproposed Upper Echelon Theory, there have been many researches focused on the theory [1]
We reveal that as the shareholding proportion of the largest shareholder becomes different, a nonlinear transition is found in relationship between top management team (TMT) heterogeneity and innovation performance
This study aims to add to the literature by providing evidence about how the shareholding proportion of the largest shareholder influence the relationship of top management team (TMT) heterogeneity and corporate innovation performance
Summary
Since Hambrick and Masonproposed Upper Echelon Theory, there have been many researches focused on the theory [1]. In order to make more all-sided and in-depth analysis on TMT characteristics as well as their influence on corporate, the concept of heterogeneity, which is used to measure the convergence of knowledge and capabilities and members’ specific characteristics caused by the difference of members’ characteristics (including demographic characteristics, cognitive difference, social values and work experience), is introduced into TMT researches. As TMT members’ values and cognitive abilities are difficult to be measured directly, scholars in empirical studies use demographic characteristics (age, tenure and educational background) and their heterogeneity as substitute variables to investigate TMT influences on strategic decisions and performance, for example, Pelled chose educational background heterogeneity [2] and Jehnchose information heterogeneity [3]. This study analyzes data of 18 listed companies in China appliance industry from 2004-2014 to investigate the nonlinear relationship between TMT heterogeneity (education, age and tenure) and innovation performance under different shareholding proportions of the largest shareholder, by use of panel smooth transition regression models (PSTR) of Gonzalez et al [4]
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