Top Management Team Variety and Tradeoffs in Strategic Decisions

Abstract

We investigate important but thus far overlooked factors shaping how top management teams weigh risk-reward tradeoffs in strategic alternatives. We frame the study in a setting where firms outsource the development of new component technologies, such that rising variety in the executives’ background and experiences (i.e., TMT variety) affects the scope of their outsourced technology portfolio (i.e., OTP scope). Prior literature suggests that TMT variety engenders a firm to broaden the scope of its outsourcing ties, but a growing tradeoff between the team’s enhanced skill stock and its cognitive challenges lead us to argue the effect actually depends on internal and external contingencies. We argue that component coreness (i.e., whether the new technology sought with alliance partners pertains to a component that is core or peripheral in the overall product architecture) and technological dynamism (i.e., the average level of competitors’ technological innovation) interact to at times reduce and at times in...