Top Management Team Composition Research Articles

Corporate strategic management: Static and dynamic paradigms

Based on an analysis of the dynamic trend of the environment in which Chinese enterprises operate and the theory of dynamic competition, this paper seeks to propose a new strategic management pattern—the “dynamic paradigm”, which has mainly resulted from an integration of the theoretic contributions of the two strategic management streams. It ultimately aims at enhancing the effectiveness and efficiency of strategic management in an environment full of uncertainties. The dynamic paradigm designed to explore today’s real business world is characterized by: 1) viewing strategic management as a process of both proactive plans and in-the-process reaction, both point and process decision-making and both rational and non-rational decision-making; 2) stressing the roles played by speed and innovation in the dynamic competition; 3) highlighting the inherent ties and the interaction among the three phases of strategic management; 4) emphasizing the critical impacts on the effectiveness and efficiency of strategic management by corporate governance, organizational structure, managerial mechanism, mode of control, composition of top-management team and corporate culture.

Top Management Teams, Business Models, and Performance of Biotechnology Ventures: An Upper Echelon Perspective*

In this paper we introduce a new contingency variable that moderates the effect of top management team composition on organizational performance – the organization's business model. Arguing from an upper echelon perspective and drawing on data from 99 German biotechnology ventures, we show that founder‐based firm‐specific experience of management team members can have either a positive or a negative effect on performance, depending on whether the venture pursues a platform or a therapeutics business model, respectively. Our results also show that managers' experience collected in the pharmaceutical industry has a positive effect on performance, and that this effect is more positive for therapeutics than for platform ventures. We discuss the implications of these findings for the literature on upper echelons and entrepreneurial founding teams.

The Impact of Goal Alignment on Board Existence and Top Management Team Composition: Evidence from Family‐Influenced Businesses*

Using a sample of 714 private family influenced businesses in Germany, we investigate the relationship of goal alignment between owners and managers and the existence of a board of directors. Agency theory and stewardship theory serve as theoretical bases for our study. We find that firms with relatively high levels of goal alignment are less likely to have a board of directors. Our results provide support for the substitution hypothesis of formal by social control mechanisms. Furthermore, the findings show that firms without a board and with relatively low levels of goal alignment have less family members in the top management team. This circumstance might in turn be a trigger for owners to install a board.

Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO

We contrast life-cycle and path-dependent views of entrepreneurial firms by examining the evolution of top management teams. We show how initial conditions constrain subsequent outcomes by demonstrating that the founding team's prior functional experiences and initial organizational functional structures predict subsequent top manager backgrounds and later functional structures. We find that narrowly experienced teams have trouble adding functional expertise not already embodied in the team. We also find that firms beginning with a limited range of functional positions are less likely to develop complete functional structures. Importantly, we do not find functional structure and functional experience to be interchangeable. We find that firms beginning with more complete functional structures are likely to go public faster, and firms beginning with broadly experienced team members obtain venture capital more quickly regardless of the experience and structural composition of the top management team in place at the time of these outcomes. Further, broadly experienced founding teams that build an early team with a full complement of functional positions achieve important milestones faster than firms that start with neither experience nor structure. This suggests that creating positions as “placeholders” in new ventures, where positions are created and filled with the intent of bringing individuals with more relevant experience onboard later, is not obviously a path by which to succeed. By examining the origins of top management team experience and functional structures, we illustrate the lasting imprint of founders on top management team composition and firm outcomes.

Critical success factors for successful implementation of enterprise resource planning systems in manufacturing organisations

This study examines the impact of the Critical Success Factors (CSFs) on the successful implementation of Enterprise Resource Planning (ERP) systems in Malaysian manufacturing organisations. The ERP system is an integrated package of business software that enables companies to manage their resources efficiently (Nah, Zuckweiler and Lau, 2003). The effect of organisational resistance on the aforementioned relationship was also studied, along with user satisfaction and pre-determined goals to evaluate the degree of success of ERP system implementation. Top management involvement, business plans, vision, vendor support, change readiness, teamwork, team composition and communication were found to be critical factors to ensure a smooth introduction for successful ERP implementation. In addition, organisational resistance was found to moderate the relationship between CSFs and user satisfaction.

People are strange when you're a stranger: senior executives select similar successors

Despite Sweden being considered one of the most equality-minded countries, the uppermost organizational levels are so male dominated that mandatory board of director gender quotas are considered. Homogeneity may only be decreased with difficulty, as it arises through basic social mechanisms such as homosocial reproduction, that is, people prefer and, therefore, recruit people who are similar to themselves. Present structure is perpetuated. Previous research suggests that such reproduction occurs on an organizational, top management and/or interpersonal level. In this paper, simultaneous analyses of these three levels regarding gender, nationality, age and tenure show that homogeneity arises between superior and subordinate. As for top management team composition, there is in general one woman per company, whereas non-Swedes are twice the number of women, cluster together and have line responsibility. Owing to need for critical mass, present composition and position responsibility, we may, therefore, expect gender homogeneity and some nationality heterogeneity to remain.

The effects of executive turnover on top management team's environmental scanning behavior after an environmental change

This study explores how the scope of managerial environmental scanning changes after an environmental shift. Using the context of deregulation in airline industry, I examined both within- and across-sector scanning embodied in the presidents' letters in the annual reports between 1973 and 1986. The results indicate that: 1) top management teams (TMTs) who experienced large turnover in membership tended to have broader scope of environmental scanning, both within and across different sectors; 2) TMT demographic heterogeneity positively moderated such linkage between executive turnover and environmental scanning; and 3) output-orientation in top team members' functional background had a positive main effect on the scope of environmental scanning. The results of this study offer a new insight on the effects of executive turnover and the subsequent changes in TMT composition on environmental scanning.

Attention as the Mediator Between Top Management Team Characteristics and Strategic Change: The Case of Airline Deregulation

We integrate the upper-echelons perspective with the attention-based view of the firm by examining the role of attentional orientation of top management teams (TMTs). In the context of airline deregulation, we find that deregulation caused a shift in managerial attention, but that this shift in attention was the greatest for firms that changed the composition and compensation of their TMTs in ways that favored the deregulated regime. We also find that attention partially mediated the relationship between TMT changes and strategy changes. The results of this study shed light on the transformation of industry attention patterns following an environmental shift, and the role of TMT composition and incentive systems in that process.

Direct and interaction effects of top management team and board compositions on R&D investment strategy

AbstractThis paper examines why firms differ in levels of R&D investment intensity by developing and testing a theory of direct and interaction effects of top management team and board outsider composition on R&D intensity. The theory is tested in a longitudinal sample of technology‐intensive firms that completed an initial public offering. The results indicate that both top management team composition and board composition have direct and additive effects on R&D investment intensity. Also, monitoring by outsider directors does not constitute a universally effective governance mechanism with regard to a firm's R&D investment strategy. Firms opt for lower levels of R&D investment intensity when their outsider‐rich board interacts with a team of managers who have high levels of (1) firm tenure, (2) shared team‐specific experience, or (3) functional heterogeneity. When a firm's competitiveness relies on sustained R&D investments, it is important to note these interaction effects and make adjustments to promote a healthy dialogue between managers and the board. Adjustments could be made to the management team composition (e.g., initiating management turnover to reduce firm tenure) or to the bundle of governance mechanisms (e.g., partially substituting board monitoring with other mechanisms). Copyright © 2006 John Wiley & Sons, Ltd.

How Top Management Teams Use Management Accounting Systems to Implement Strategy

In this paper we investigate how top management teams (TMTs) use management accounting systems (MAS) for strategy implementation. Consistent with upper echelon theory we argue that professional and administrative TMTs differ in their use of MAS, which in turn affects the implementation of strategic policies. We extract three dimensions of MAS use from extant research on the MAS-strategy relationships. We further distinguish between sets of strategic objectives aimed at cost reduction and flexibility enhancement as part of an overall firm strategy. Hypotheses are developed and tested in a survey study among 884 TMT members in all 218 general hospitals in Spain, forming 92 complete TMTs. Overall, we find systematic differences between professional and administrative TMTs in their use of MAS and its effects on strategy implementation. In a secondary analysis, we explore whether the observed differences in the use of MAS are consistent with the coercive-enabling framework recently introduced into the management accounting literature. We find considerable support for the validity of this framework in our sample. Overall, the paper contributes to the growing literature on the role of MAS in supporting strategy implementation. We extend this literature by explicitly recognizing the role of TMT composition in both strategy implementation and the use of MAS and by providing evidence of the validity of the coerciveenabling framework of MAS in a cross-sectional analysis.

Coworker Complementarity and the Stability of Top-Management Teams

We analyze changes in the composition of top management teams when a key member of the team (the chief executive officer [CEO]) departs. We find that the probability of non-CEO top manager turnover increases markedly around times of CEO turnover. Further, the magnitude of this increase depends on the relations between the tenure of the manager and tenures of the departing and incoming CEOs. Departure of a long-tenured CEO has a larger effect on turnover probability for a long-tenured non-CEO manager than for a short-tenured manager. Succession of a long-tenured manager as CEO has a larger effect on turnover probability for a short-tenured non-CEO manager than for a longtenured manager. We argue that these findings are at least partially the result of complementarities across these groups of coworkers that affect the value of employment relationships between senior executives and firms.

A comparative study of new venture top management team composition, dynamics and performance between university-based and independent start-ups

The current study tests for differences in top management team (TMT) composition (education, functional expertise, industry experience, and skill), dynamics (shared strategic cognition, potency, cohesion, and conflict) and performance (net cash flow and revenue growth) between a sample of 102 high-technology university-based start-ups and an otherwise equivalently matched sample of 154 independent high-technology new ventures. The results find university-based start-ups to be comprised of more homogenous TMTs with less developed dynamics than their independent counterparts. Further, university-based start-ups are found to be significantly lower performing in terms of net cash flow and revenue growth than independent new ventures.

Newness and novelty: Relating top management team composition to new venture performance

We distinguish novelty from newness and argue that the tasks of new venture top management teams vary with new venture novelty. We argue that as novelty increases, the information processing requirements on the TMT change as well. Because a team's demographic characteristics influence its information processing abilities, venture performance should reflect, at least partially, the fit between the characteristics of the TMT and the level of venture novelty. Evidence from a large sample of ventures supports this view.

Stacking the deck: the effects of top management backgrounds on investor decisions

Young firms going public are dependent upon the decisions of investors for a successful public offering. Yet convincing investors to invest is not easy, as young firms have limited track records and, thus, face challenges associated with gaining legitimacy in their respective industries. This paper examines ways in which select information about firms undertaking an initial public offering (IPO) can affect investor decisions. Building upon recent research on upper echelons and signaling theory, we propose that the composition of a firm's top management team can signal organizational legitimacy that in turn affects investor decisions. In the context of young firms undertaking an IPO, such signals are critical, especially when objective measures of firm quality are not easily available. We introduce a typology of signals of organizational legitimacy to elaborate on our hypotheses. Analyses of a comprehensive set of data on the career histories of the top management teams of young biotechnology firms show that investor decisions are affected by the extent to which a firm's top management team has employment affiliations with prominent downstream organizations (e.g., pharmaceutical companies), with a diverse range of organizations, and upon the role experience of one key member of the top management team—the Chief Scientific Officer. We assess and find that these effects are not mediated by the prestige of a firm's lead underwriter. We conclude with a discussion of the implications of our study for strategy research on upper echelons and organizational legitimacy. Copyright © 2006 John Wiley & Sons, Ltd.

Upper Echelons Research Revisited: Antecedents, Elements, and Consequences of Top Management Team Composition

This study reviews recent research building on Hambrick and Mason’s [Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9: 193–206] upper echelons (UE) perspective with the aim of identifying challenges and opportunities for future UE-based organizations research. Our review highlights a number of central facets of the UE perspective: It is at once a theoretical framework predicting that organizations will be a reflection of their top management teams and a methodology that relies on executive demography as a measurement proxy for underlying individual and group cognitions and behaviors. In proposing new research directions, we challenge organizations researchers to (1) reconsider the universality of the top management team (TMT) construct, (2) carefully explore the practical and theoretical meaning of TMT demographic characteristics vis-à-vis the deeper constructs they are presumed to proxy, (3) integrate other determinants of managerial cognition and behavior into UE theorizing, and (4) revisit the roles of causality and intertemporal dynamics among the antecedents, consequences, and composition of top management teams.

Harnessing Diversity and Collective Action in the Top Management Team

Diversity has become an important issue at all levels of the company from the boardroom to the back office. It is increasingly apparent that diversity is vital to productivity, with academic research indicating an important link between diverse top management team (TMT) composition and corporate performance. However, the nature of this link remains elusive, as there is little accessible research that can help top teams to evaluate how diversity impacts on their strategic capacity. This paper seeks to fill this gap by developing a conceptual framework, illustrated with case examples, to explain the relationships between TMT diversity and TMT collective action. As collective action is difficult to attain from top teams that are high in diversity, six practical processes are developed from this framework for establishing and exploiting top team strategic capacity. The paper concludes by outlining the theoretical implications of the framework.

Co-Worker Complementarity and the Stability of Top Management Teams

We investigate the hypothesis that complementarities across co-workers (which may arise from matching or investments in specifc skills) affect the value of employment relationships between senior executives and firms. We analyze the changes in the composition of top management teams when a key member of the team (the CEO) departs. Our empirical analysis establishes several facts that are consistent with co-worker complementarity being an important determinant of management team stability.

Top management teams of international joint ventures in Thailand: the effects of Heterogeneity on group processes and goal attainment.

The relationship between top management team composition, group processes, and the effects of those processes on goal attainment were examined for International Joint Venture (IJV) teams in Thailand. For these culturally diverse teams, heterogeneity was defined by demographic (member age, length of team tenure, education level, functional expertise) and cultural characteristics (country of education, nationality, affiliation with a parent organisation, and primary language spoken.) Overall, demographic heterogeneity most heavily influenced levels of trust, decision quality and decision implementation among team members. Cultural heterogeneity influenced the frequency of communication.

Internationalization of Top Management Teams in Europe

One issue in the international business literature that has been virtually ignored is the internationalization of top management teams. This study examines the extent of national diversity in the composition of top management teams in two highly internationalized European countries, Sweden and The Netherlands. Results indicate that the national diversity of top management teams in these countries has not progressed to the same level as the internationalization of the companies at large.

Moderator-Mediator Distinction: An Application on Top Management Team Literature

The purpose of this paper is to distinguish between the properties of moderator and mediator variables. Specifically, we differentiate between two often-confused functions of third variables: 1) the moderator function, which partitions a focal independent variable into subgroups that establish its domains of maximal effectiveness in regard to a given dependent variable, and 2) the mediator function, which represents the generative mechanism through which the focal independent variable is able to influence the dependent variable of interest. Although these third variables are different, it is not at all uncommon in organizational research to use the terms moderator and mediator interchangeably. The function of this article is to clarify the importance of respecting the distinction between the use of them. As an example of the differences between moderation and mediation variables, we suggest an application on top management teams (TMT) literature. More specifically, we offer four different kinds of hypothesis to be tested between two variables: TMT composition and firm performance, taking into account the moderation or mediation function of a third variable: intrateam conflict.