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Top management team demographic‐faultline strength and strategic change: What role does environmental dynamism play?

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  • Orlando Curtae' Richard
  • Jie Wu
  • Livia Anna Markoczy
  • Yunhyung Chung

Abstract

Research summary Drawing on the demographic faultline perspective and the concept of attribute‐specific faultlines, we investigate the effect of top management team (TMT) relationship‐related (gender, age, educational level) and task‐related (functional background, tenure) faultline strengths on strategic change. In a panel study (2003–2015), we find that TMT relationship‐related faultline strength (especially educational‐level) negatively influences strategic change whereas TMT task‐related faultline strength positively affects strategic change. Environmental dynamism reduces the negative effect of TMT gender and educational‐level faultline strengths on strategic change while in fact revealing a notable positive effect between TMT age‐faultline strength and strategic change. Additionally, environmental dynamism strengthens the positive effects of task‐related TMT faultline strength on strategic change. We offer theoretical and practical implications to both the demographic faultlines and upper echelons research domains. Managerial summary Top management teams (TMTs) in firms can fracture into subgroups based on demographic characteristics (e.g., age, gender, and education level) as well as based on task‐related characteristics (e.g., functional background, and tenure). We call the former relationship‐related faultlines and the latter task‐related faultlines. We predict and find that stronger relationship based faultlines hinders between subgroup cohesion, reducing TMTs' ability to initiate strategic change. We also predict and find that stronger task‐related faultlines facilitate inter‐subgroup knowledge‐sharing, improving TMTs' ability to initiate strategic change. We find that environmental dynamism reduces the negative effect of most relationship‐related faultlines (except age where this effect is positive) on strategic change, while strengthening the positive effect of task‐related faultline strengths on strategic change.

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  • Orlando Curtae' Richard & Jie Wu & Livia Anna Markoczy & Yunhyung Chung, 2019. "Top management team demographic‐faultline strength and strategic change: What role does environmental dynamism play?," Strategic Management Journal, Wiley Blackwell, vol. 40(6), pages 987-1009, June.
    • Handle: RePEc:bla:stratm:v:40:y:2019:i:6:p:987-1009
    DOI: 10.1002/smj.3009
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    Cited by:

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    2. Back, Pascal & Rosing, Kathrin & Dickler, Teresa Antonia & Kraft, Priscilla Sarai & Bausch, Andreas, 2020. "CEOs’ temporal focus, firm strategic change, and performance: Insights from a paradox perspective," European Management Journal, Elsevier, vol. 38(6), pages 884-899.
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    5. Günter K Stahl & Martha L Maznevski, 2021. "Unraveling the effects of cultural diversity in teams: A retrospective of research on multicultural work groups and an agenda for future research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(1), pages 4-22, February.
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    9. Li, Ganglei & Shao, Yunfei, 2023. "How do top management team characteristics affect digital orientation? Exploring the internal driving forces of firm digitalization," Technology in Society, Elsevier, vol. 74(C).
    10. Pankaj C. Patel & Marcus T. Wolfe & Maria João Guedes, 2023. "The triple‐edged sword of sensitivity of sales, cash flows, and debt to investments: Venture survival and capital investments," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 473-489, January.
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    12. Olsen, Jesse E. & Gahan, Peter & Adamovic, Mladen & Choi, Daejeong & Harley, Bill & Healy, Joshua & Theilacker, Max, 2022. "When the Minority Rules: Leveraging Difference While Facilitating Congruence for Cultural Minority Senior Leaders," Journal of International Management, Elsevier, vol. 28(2).
    13. Linan Lei & Xiaobo Wu, 2022. "Thinking like a specialist or a generalist? Evidence from hidden champions in China," Asian Business & Management, Palgrave Macmillan, vol. 21(1), pages 25-57, February.
    14. Angels Niñerola & Ana-Beatriz Hernández-Lara & María-Victoria Sánchez-Rebull, 2022. "Top Management Team Diversity and International Expansion: Spanish Companies in China," SAGE Open, , vol. 12(1), pages 21582440211, January.
    15. Stefan Schmid & Simon Mitterreiter, 2020. "International Top Managers on Corporate Boards: Dissimilarity and Tenure," Management International Review, Springer, vol. 60(5), pages 787-825, October.
    16. Wu, Jie & Wood, Geoffrey & Chen, Xiaoyun & Meyer, Martin & Liu, Zhiyang, 2020. "Strategic ambidexterity and innovation in Chinese multinational vs. indigenous firms: The role of managerial capability," International Business Review, Elsevier, vol. 29(6).
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    18. Wu, Jie & Wood, Geoffrey & Khan, Zaheer, 2021. "Top management team’s formal network and international expansion of Chinese firms: The moderating role of state ownership and political ties," International Business Review, Elsevier, vol. 30(3).

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