Upper-echelon Research Articles

Young or old CEOs: digital transformation level influences IT investment performance feedback of manufacturing firms

PurposeSince IT investment constitutes a significant portion of a firm’s budget, evaluating IT investment performance is important for both research and firms’ operations. In the digital era, there are significant disparities in the effects of IT investment on firm performance.Design/methodology/approachDrawing on the resource-based view and upper echelons theory, we investigate the effect of IT investment on the business performance of manufacturing firms. We also explore the moderating role of digital transformation and dual moderating effect of digital transformation and CEO age in this relationship.FindingsAnalyzing a sample of Chinese manufacturing firms spanning 2016–2020, we find that IT investment by Chinese manufacturing firms has a negative effect on business performance. However, this negative effect is moderated by digital transformation. Furthermore, digital transformation has a more pronounced inverse moderating influence on this negative effect for firms with older CEOs.Originality/valueHence, we reveal that the key factors for reducing the negative effect of IT investment on China’s manufacturing firms are digital transformation and the appointment of older CEOs who actively lead firms’ digital transformation.

TMT environmental cognition and greenwashing behavior: evidence from Chinese firms

The influencing factors of corporate greenwashing have consistently captivated scholarly attention. Drawing from Upper Echelons Theory and Strategic Recognition Theory, this study proposes that the green cognition of top management plays a critical role in shaping greenwashing practices. Furthermore, it is argued that this relationship may be moderated by factors such as political connections and the stringency of environmental regulations. To clarify these issues, this study utilizes a panel model with samples of Chinese listed firms that contain fundamental data and variables from 2012 to 2020. The results show that: 1) TMT environmental cognition restrain greenwashing behavior significantly by promoting genuine environmental efforts. 2) The inhibitory effect of TMT environmental cognition on greenwashing behavior is more pronounced in firms without political connections than those with political connections. 3) TMT environmental cognition has a significantly positive impact on environmental disclosure scores for private owned or political connection firms, except for state-owned or no political connection firms. 4) The level of political connection of firms and the intensity of environmental regulations have respectively strengthened or weakened the link between TMT environmental cognition and greenwashing behavior.

Engineer CEOs and corporate investment efficiency

Purpose This paper aims to examine whether CEOs with an engineering background increase corporate investment efficiency (CIE). The authors further investigate the role of engineering directors on boards of the above association. Design/methodology/approach Drawing from upper-echelon theory, which suggests that corporate outcomes are a reflection of its top management characteristics, the authors hypothesise a positive association between engineer CEOs and CIE and a positive moderation role of the proportion of engineer directors on boards in the above association. The authors examine this link using a sample of Australian Securities Exchange 200 firms from 2015 to 2022. Engineer CEO data is hand-collected from corporate annual report biographies and investment efficiency is a measure that captures whether the investments are maintained at optimal levels relative to industry-year benchmarks, following the approaches of Biddle et al. (2009), Chen et al. (2011) and the average values of both models. Findings The results indicate support for the hypotheses, revealing that firms managed by engineer CEOs have higher investment efficiency than their counterpart firms. This association is exacerbated in the presence of a higher proportion of engineer directors on boards. The results are robust to year and industry-fixed effects, propensity score matching, alternative measures of investment efficiency and robust standard errors. Our results also remain valid for an industry sub-sample using certain industries in which engineering expertise maybe more desirable (e.g. metals and mining). Research limitations/implications By showing that engineer CEOs are significantly associated with CIE, the authors contribute to upper-echelon literature examining the link between CEO characteristics and corporate outcomes, particularly, investment decision efficiency. The influence of engineering background on corporate outcomes is less examined in the literature; thus, the authors contribute to this thin literature. Originality/value The findings are informative to potential investors in evaluating firms’ investment efficiency before investing in firms. For example, firms with engineer CEOs are likely to maintain efficient investment levels in future years.

Do external founder CEOs place strategic emphasis on innovation? An upper echelons perspective

AbstractResearch compares the influence of two types of chief executive officers (CEOs) on a firm's innovation strategy: founder CEOs, who founded the firms they lead, and professional CEOs, who worked in corporations at different levels before being selected as CEOs. We introduce a third type of CEO, external founders, who founded other ventures before being appointed as CEOs. Drawing on upper echelons theory, we propose that the unique combination of external founder CEOs' values and knowledge predisposes them to place less strategic emphasis on innovation than founder CEOs do but more than professional CEOs do. Heterogeneity among external founder CEOs may be due to nuances related to their exposure to professional investors in and successful exits from the ventures they founded. We assess our hypotheses empirically using the innovation‐related speech in investor communications and patent applications of 1637 CEOs of 789 S&P 500 firms from 2000 to 2019. We find that external founder CEOs emphasize innovation less than founder CEOs do, but contrary to our hypotheses, also less than professional CEOs do. However, certain nuances in external founder CEOs' founding experience bring their strategic emphasis on innovation close to that of founder CEOs. We extend upper echelons research by providing a fine‐grained view of the role of (founding) experience and its qualitative nuances in shaping CEOs' strategic decision‐making.

Buyer–supplier TMT background misalignment and green innovation performance: the moderating roles of TMT tenure and incentives

PurposeWhile top management teams (TMTs) play an important role in shaping firms’ strategic choices and performance outcomes, studies on green innovation have rarely considered the influence of the TMT demographics of firms and their suppliers. Drawing upon upper echelon theory, this study investigates the impact of buyer–supplier TMT misalignment on green innovation performance, along with potential moderators of this effect.Design/methodology/approachThe empirical setting is Chinese-listed manufacturing firms that are present in both the Chinese Research Data Services Platform (CNRDS) database and the China Stock Market and Accounting Research (CSMAR) database. The study employs panel data regression methods on a dyadic dataset of 530 paired buyer–supplier firm-year observations over the period 2008–2019.FindingsBuyer–supplier TMT misalignment in terms of functional background and educational level is negatively associated with buyer green innovation performance. This negative effect can, however, be mitigated by TMT tenure and long-term incentives in buyer firms.Originality/valueBy introducing the notion of TMT background misalignment to the supply chain, this study advances the understanding of relational TMT demographics in predicting organizational performance and extends upper echelon theory.

From Support to Seat: Top Management Influence and Hr Professionals' Boardroom Trajectory as a Key to Securing Sustainable Development Goals

Objective: The main objective of the article was to investigate the influence of top management on HR professionals’ career progression towards boardroom positions and how HR professionals can play a key role in the board to secure sustainable development goals. Theoretical Framework: Two main theoretical frameworks, i.e. Agency theory of Jensen and Meckling (1976) and the upper-echelons theory of Hambrick and Mason (1984) were presented concerning the significance of HR professionals on board and the significance of the top management's influence on HR professionals to gain a board seat. Method: Reviewing prior literature was the approach employed in this study. The primary sources of information were journal articles in Human Resources Management and Management. Results and Discussion: The study delves into the challenges HR professionals encounter, specifically in their pursuit of boardroom positions and the strategies they can employ to secure a seat through top management influence. Research Implications: The study will enable academia, and professionals to understand the obstacles and approaches to obtaining TMT influence on board nominations, especially for HR professionals, as well as the manner HR may contribute to achieving the SDGs. Originality/Value: According to the author’s assessment of the literature, this paper is the first to examine how top management impacts HR professionals' career trajectories, HR's future, and its potential to contribute to sustainable development goals (SDGs).

The impact of CEO contract duration on corporate misconduct

CEOs play a crucial role in mitigating organisational misconduct. However, previous studies have mainly focused on the CEO characteristics that help firms choose an appropriate CEOs. Less is known about how to manage risk through contract design when appointing a chief executive to reduce misconduct. This study examines how CEO contract duration affects the likelihood of corporate misconduct. We bridge agency and upper echelon theories to hypothesise the impact of CEO contract duration on corporate misconduct. We also examine how CEO compensation and firm ownership concentration moderate this relationship. Using data collected from multiple sources, we analyse the impact of CEO contract duration on corporate misconduct in listed companies from 1994 to 2022. The results show a U-shaped relationship between CEO contract duration and misconduct. Initially, misconduct decreases with longer CEO contracts but begins to increase as the duration extends further. This relationship is strengthened when CEO compensation and ownership concentration decrease. We also investigate the relationship between CEO succession contract duration and the actual tenure situation, and the results are generally consistent with our hypothesis. Overall, CEO succession contract duration at an intermediate level is more effective in reducing corporate misconduct than other contract durations. Our conclusions contribute to the research on the relationship between CEO contract design and corporate misconduct.

Birds of a Feather Flock Together: The Impact of Top Management Team Faultlines on Environmental, Social, and Governance Performance

ABSTRACTWhile theory and research indicate that top management team (TMT) attributes play a crucial role in shaping responsible practices, how and when TMT faultlines affect environmental, social, and governance (ESG) performance remains an open question. This study aims to fill this research gap by integrating social categorization theory with the faultline literature. Using a sample of Chinese listed firms over a 12‐year period, our findings indicate that TMT faultlines can significantly inhibit ESG performance, and managerial myopia is the primary channel through which the negative effect operates. In addition, our study reveals that negative attainment discrepancy significantly amplifies the inhibitory effect of TMT faultlines on ESG performance. Intriguingly, this inhibitory effect is mitigated in firms with strong Confucian culture. Our study also reveals variations in the impact of TMT faultlines on ESG performance concerning the type of faultlines and the level of industry competition. These findings not only contribute to the literature on TMT faultlines and upper echelons but also provide valuable guidance for managers in adeptly navigating the dynamics of TMT composition.

CEO trustworthiness and investment efficiency: evidence from China

Purpose This study aims to investigate the influence of chief executive officer (CEO) trustworthiness on firm investment efficiency and explores how this relationship varies in different contexts, including product market competition (PMC), institutional investors, media coverage, analyst monitoring and ownership structure. Design/methodology/approach The authors examined a sample of A-Share non-financial firms listed on the Shanghai and Shenzhen Stock Exchanges from 2005–2018 by using panel date regression techniques. The robustness of the findings is affirmed through alternative measures of investment efficiency and various econometric techniques. Further, various endogeneity tests are conducted to confirm that the findings are not affected by potential bias. Findings The authors find a significant positive effect of CEO trustworthiness on firms’ investment efficiency and exhibit that CEO trustworthiness mitigates the issue of underinvestment rather than overinvestment. Further, PMC strengthens the association between CEO trustworthiness and investment efficiency. The influence is more pronounced when institutional investors, media and analyst monitoring are low and in non state-owned firms. Likewise, financial reporting quality is found to be an underlying mechanism for the positive association between CEO trustworthiness and investment efficiency. Research limitations/implications The reliance on a location-specific index of CEO trustworthiness may obscure its true nature, and caution is warranted when generalizing these results to other regions. Practical implications This study suggests that elevating a trustworthy CEO to the firm upper echelon can improve investment efficiency. Policymakers and investors should recognize and leverage the effect of CEO trustworthiness in firms, especially those with weaker governance structures. Originality/value This study enriches the literature about investment efficiency by introducing a novel determinant, CEO trustworthiness and establishes that it acts as an informal social institution that improves firms’ resource utilization in emerging economies with weak governing structures.

Direct and indirect effects of authentic leadership and gender on occupational well-being: mediating role of perceived barriers to career advancement

PurposeDue to dynamic work contexts, mid-level managers struggle to advance their careers in contemporary organisations. Literature has consistently showcased that leadership style and gender significantly impact subordinates’ career and work-related outcomes. This study investigates the relationship between authentic leadership, gender, perceived career barriers and occupational well-being.Design/methodology/approachUsing self-report questionnaires, we collected data from 198 mid-level managers employed in the information technology (IT) sector in Delhi-NCR. We tested two mediation models simultaneously, investigating the mediation of perceived career barriers on occupational well-being. Authentic leadership and gender were the predictors of the first and second models, respectively.FindingsAuthentic leadership was positively associated with occupational well-being but negatively with perceived career barriers. Perceived career barriers partially mediated the link between authentic leadership and occupational well-being. Gender had a significant impact on perceived career barriers. Finally, perceived career barriers fully mediated the association between gender and occupational well-being.Research limitations/implicationsThe study showed that perceived career barriers were predicted by authentic leadership perception. In the face of career-related obstacles, managers with authentic leaders tend to have better well-being at the workplace. Further, perceived career barriers are essential in the relationship between gender and occupational well-being. However, the context of India’s IT sector is unique; therefore, caution must be practised when generalising.Practical implicationsOrganisations must promote authentic leadership at the upper echelons. Such a leadership style helps reduce the hurdles for managers and improves their well-being. Furthermore, addressing gender-specific career barriers, such as lack of cultural fit, is the key to enhancing female managers’ well-being.Originality/valueWe turned towards positive psychology and utilised the construct of authentic leadership to address the issues of career barriers and diversity in IT organisations.

Narcissistic Chief Executive Officers and Their Effects on R&D Investment and Firm Performance: The Moderating Role of Managerial Discretion.

The impact of the chief executive officer (CEO) narcissism on a firm's performance has gained attention from the academic community. However, the extant literature has largely ignored the mediating mechanism of research and development (R&D) investment and the moderating roles of managerial discretion. Additionally, the measurement of CEO narcissism is rarely disclosed in the public database. Compiling a CEO narcissism index from a video survey, we systematically explore the effect of CEO narcissism on firm performance, the mediating role of R&D investment, and the moderating role of managerial discretion. Based on the upper echelons theory, using a sample of 183 Chinese A-share listed manufacturing firms from 2011 to 2019, we found that CEO narcissism positively and significantly impacts R&D investment and firm performance, and then R&D investment mediated the relationships between CEO narcissism and firm performance. In addition, we found that managerial discretion could affect the relationship between CEO narcissism and R&D investment. Specifically, CEO duality and CEO ownership will strengthen the positive influence of a CEO's narcissism in corporate R&D investment. Our results suggest that CEO narcissism appears to be a stimulus to corporate R&D investment; thus, in recruiting top executives, their psychological traits, especially narcissism, should be given special consideration.

CEO Ability and ESG Responsibility Fulfillment

ABSTRACTDrawing on the upper echelon theory, this paper explores the relationship between CEO ability and ESG responsibility fulfillment. Based on this, it further explores the mediating role of organizational resilience and the moderating role of environmental uncertainty. Using data from Chinese A‐share‐listed manufacturing companies from 2010 to 2020, we find that CEO ability promotes ESG responsibility fulfillment, and organizational resilience mediates this relationship. Furthermore, the promotion effect of CEO ability on ESG responsibility fulfillment through organizational resilience is stronger under high environmental uncertainty. Additionally, the influence of CEO ability on ESG responsibility fulfillment is more pronounced in non‐state‐owned enterprises and low environmental sensitivity industries. Our study opens the “black box” of the mechanism between CEO ability and ESG responsibility fulfillment and provides practical implications for organizations, managers, and policymakers to promote ESG responsibility fulfillment.

How Much Does the CEO’s Age Impact Corporate Performance Under a Changing Environment?

The recent technological innovations and the consequences of the pandemic are rapidly changing the management paradigm. Organizations that seek to survive and remain competitive must adapt to these changes. One strategy to cope with these environmental changes is to hire a younger CEO. This study aims to empirically analyze how the age of the CEO affects the performance of the firm based on upper echelons theory. Using a sample of 706 CEOs of companies listed on the South Korean public stock market (KOSPI) as of 2023, we found that CEO age is positively related to financial performance. We also found that CEO age is negatively related to risk-taking behavior and innovation. These findings have both practical and theoretical implications, suggesting that the recent shift to the relationship between a long-term perspective and innovation have positive implications. Young CEOs often seek these perspectives and are more willing to be aggressive in investment and risk-taking behaviors in the interests offor an innovative business.

Narrowing the eco-innovation gender divide: insights for transition economies

ABSTRACT This paper aims to address the gender imbalance in eco-innovation within firms, particularly focusing on the role of top managers. Drawing on Upper Echelon Theory and Social Identity Theory, the study investigates the influence of female CEOs on the promotion of eco-innovation and examines how knowledge factors influence this relationship, especially within transition countries. Using a comprehensive cross-sectional dataset from the World Bank and EBRD (BEEPS), the research analyses over 12,000 firms operating across 28 European and Central Asian transition economies. The findings show that firms led by a female CEO are less likely to engage in eco-innovation. However, the moderating effect of knowledge can complement CEO actions, though this effect varies by macro-area. The study suggests tailored strategies, emphasising the need for knowledge-sharing networks, targeted investments in human capital, and a collaborative organizational culture. These strategies represent concrete steps to enhance management capabilities and mitigating the costs and uncertainties associated with eco-innovation process in specific socio-economic contexts

CEO Power on Earnings Management and the Role of Earnings Targets: A Proposed Research Framework

Research aim: This paper aims to present a conceptual framework for CEOs that abuse their power to manage earnings, and the pressure of attaining earnings targets moderating the effect of this power abuse on earnings management (EM). Design/ Methodology/ Approach: To develop the proposed conceptual framework, this study performed a comprehensive literature review consisting of theoretical discussions and comparative arguments. The development of the framework also involved analysing and summarising the contributions, limitations, and suggestions from previous studies. Following this approach, the conceptual framework was built addressing issues related to CEO power, EM, and earnings targets. Research finding: Based on the propositions, the proposed research framework expects a significant positive effect of CEO power on EM, and that the pressure of attaining earnings targets will significantly moderate the CEO power and EM nexus among Malaysian listed firms. Malaysian CEOs with more power are expected to manage earnings more easily, and the pressure of attaining earnings targets is expected to influence powerful CEOs to manage earnings. Theoretical contribution/ Originality: The proposed conceptual framework adds new perspectives to the existing literature by explaining the linkages between CEO power, earnings targets, and EM based on agency theory and upper echelons theory. Moreover, the harmonisation between the Type I agency problem and upper echelons theory is a novel contribution. The framework highlights the influence of the pressure of earnings targets on powerful CEOs’ EM practices. Moreover, two conditions for considering the effect of earnings targets are proposed. Practitioner/ Policy implication: Malaysian audit firms and listed companies can shape their accounting and monitoring strategies based on the eight formulated propositions. Moreover, this paper will also enable Malaysian regulators and standard setters to revise the existing Malaysian Code on Corporate Governance (MCCG). Research limitation: This is only a conceptual paper that requires an empirical study with quantitative data to test the propositions and validate the proposed conceptual framework. Hence, the anticipated practical implications are subjected to future empirical validation. Keywords: CEO power, Earnings management, Earnings target, Agency theory, Upper echelons theory Type of article: Conceptual paper JEL Classification: M12, M41

Family successor CEO and innovation investment: a study based on the theoretical upper echelons and conflict theory

PurposeGrounded in upper echelons theory (UET) and conflict theory, the purpose of this study is to analyzes the innovative behavior of family firms from the perspective of the cognitive differences between successors and senior managers.Design/methodology/approachThis research employed a sample listed family firms in China. The obtained results were subjected to hierarchical regression analysis, complemented by rigorous model robustness testing through propensity score matching and regression with substitution variables.FindingsSuccessors engender task conflicts with family members in the top management team (TMT) due to cognitive differences, thereby stimulating corporate innovation. Conversely, successors engender relationship conflicts with non-family members in the TMT, impeding innovation. Furthermore, the performance expectations and the gender of the successor CEO also influence the relationship between cognitive differences and innovation between the successor and the TMT.Originality/valueThis study's originality and value lie in its innovative application of UET and conflict perspectives to dissect the intricate layers of intergenerational cognitive differences and their impact on the innovative behavior of family firms. It augments our comprehension of how the internal dynamics within family firms shape strategic innovation decisions.

Top management team attributes and corporate entrepreneurship: A meta‐analysis

AbstractHow do the attributes of a firm's top management team (TMT) influence corporate entrepreneurship across organizational and national contexts? Drawing on upper echelons theory and the managerial discretion perspective, this meta‐analytic study examines the dynamic relationship between TMTs' attributes and corporate entrepreneurship, focusing on the moderating role of managerial discretion arising from organizational and national‐level factors. To provide insights into the micro‐foundations of firm behavior, we explore how key TMT attributes—diversity, size, transformational leadership, tenure, general human capital, and entrepreneurial human capital—affect corporate entrepreneurship. A comprehensive meta‐analysis of 57 primary studies reveals that the effect of a TMT's attributes is context‐dependent and is significantly influenced by the approach to managerial discretion taken by the country in which the firm operates. By showing that transformational leadership and the TMT's entrepreneurial human capital and size affect corporate entrepreneurship, while attributes like tenure, diversity, and general human capital have limited or no impact, our findings challenge the prevailing view that a standardized approach to the TMT's composition drives corporate entrepreneurship. The study also underscores the role of the national‐level managerial discretion and finds that firms in institutional environments that feature low managerial discretion must align their TMT strategies with local institutional contexts to maximize their corporate entrepreneurship. These findings advance upper echelons theory by demonstrating that managerial discretion acts as a boundary condition in shaping how the TMT's attributes influence corporate entrepreneurship based on the national context. This research contributes to the fields of strategic and innovation management and offers practical insights for leaders who seek to harness the full potential of their TMTs.

France in the EU Economic System: The Peerless Second

France and Germany have historically played pivotal roles in formulating and advancing the economic policy of the European Union. The conceptual frameworks of German ordoliberalism and French dirigisme underpin the dual foundations of European economic integration. The United Kingdom’s departure from the EU has reconfigured the composition of the Union’s core, amplifying Germany’s significance. This shift simultaneously elevates the Franco-German partnership while rendering France’s position within the Union increasingly contingent upon its tangible economic strength. This article seeks to examine the evolving role of France within the EU’s economic architecture, identify critical long-term trends, and forecast possible realignments in the balance of power within EU economic governance. The analysis includes an overview of France’s intellectual and executive contributions to European economic and monetary policies, followed by a comparative assessment of international statistical data, emphasizing GDP dynamics, demographic trends, per capita income, trade balance, and R&D investment.The findings reveal that, despite being the EU’s second-largest economy, France has exerted a disproportionate influence on the Union’s economic governance, surpassing that of any other member state. French representation in the upper echelons of EU economic and financial policymaking has been unmatched. In the contemporary geopolitical landscape, French dirigisme is experiencing a resurgence of relevance.Nevertheless, France’s share of the EU’s overall GDP has been progressively declining, even as its demographic contribution to the Union has grown. With respect to per capita income, France ranks 10th among EU member states, marking the lowest position among the core economies. The aftermath of the global financial crisis and the eurozone debt crisis has led to a significant erosion of France’s international competitiveness. Should these trends persist, projections indicate that France’s GDP per capita will fall below the EU average by the end of the decade, potentially signaling a shift from core to semi-peripheral status. This development would exacerbate the asymmetry within the Franco-German axis, complicating efforts to recalibrate EU economic governance and policy direction.

The road less travelled: An exploratory study of the association between top management team dissimilarity and innovation capability

Abstract This study extends the upper echelons literature by shedding light on the role of top management team (TMT) dissimilarity, a specific conceptualization of team diversity. TMTs are typically composed of members from different functional areas who have unique information and values. The perception of the degree to which TMT members view themselves as dissimilar from other team members affects the TMT’s decision-making and, therefore, organizational outcomes. However, research does not address this perspective of TMT diversity. We examine how informational and value dissimilarity among TMT members is associated with incremental and radical innovation capability. We survey top managers from various industries and use partial least squares structural equation modeling analysis to explore the association between TMT dissimilarity and innovation capability empirically. The findings show that informational dissimilarity is positively associated with incremental innovation capability. Value dissimilarity is negatively associated with incremental innovation capability, whereas it is positively associated with radical innovation capability.

Local government performance: promoting trust in local government and reducing trust gap

ABSTRACT This study elaborates the link between local government performance and the trust gap between higher trust in national government and lower trust in local government. The data in this paper come from China, which is characterised by an apparent trust gap between upper and lower government echelons. Ten national surveys are used for preliminary statistics, three of which are used for regression analysis and robustness testing. This paper finds that good local government performance can significantly increase trust in local government and thus narrow the trust gap between central and local government. In addition, by comparing the effect of cultural factors and local government performance on narrowing the trust gap, this paper finds a more critical role for local government performance. Therefore, in order to promote the balance of trust between national and local government, the focus should be particularly on improving local government performance.