Top Management Teams’ demographic characteristics and their influence on strategic change

Abstract

The purpose of this research is to analyse the relation between the Top Management Teams (TMTs)’ socio demographic’ characteristics and the corporate strategic change, measured as Carpenter (Strateg Manag J 23:275–284, 2002) through Finkelstein and Hambrick’s index (Adm Sci Q 35:484–504, 1990): the strategic variation index and strategic deviation index in the period 2007–2009. While this aim has been studied previously in the Upper Echelon Literature, the results achieved have been considered ambiguous and no concluding by some researchers. Hence this paper admits that this complex relation rooted in this stream thought, needs to be further explored as supported by those authors. The achieved findings not only shed light on the organizational demographics’ black box but also enrichment the academic literature in this respect. A sample of 157 big firms from different industrial sector and nationalities with their headquarters in Spain was determined by using both secondary and primary sources due to the legal difficulties imposed by LORTAD which prevents the collection and consult of the top managers’ personal information unlike other countries. Lineal regression models were applied to test the hypotheses formulated in the study. By controlling for firm performance and the industrial sector, a higher educational level, shorter firm tenures, higher international experience and a higher professional background greatly influence on corporate strategy changes. Furthermore while the firm performance seems to influence the strategic change, the industrial sector does not contribute significantly on this managerial variable. Few researchers examine the influence of TMTs’ characteristics in shaping corporative strategic changes and firm outcomes using samples different from American enterprises. This paper also contributes to the existing literature by proposing different models which explain the strategic changes, measured by different indicators, using more explanatory demographical variables than in other studies and also including control variables related performance and industrial sector to reduce the ambiguity and increase the reliability of the previous researches.