IDEAS home Printed from https://ideas.repec.org/a/inm/ororsc/v25y2014i2p633-652.html
   My bibliography  Save this article

It Depends: Environmental Context and the Effects of Faultlines on Top Management Team Performance

Author

Listed:
  • Danielle Cooper

    (Department of Management, College of Business, University of North Texas, Denton, Texas 76201)

  • Pankaj C. Patel

    (Department of Marketing and Management, Miller College of Business, Ball State University, Muncie, Indiana 47306)

  • Sherry M. B. Thatcher

    (Management Department, Darla Moore School of Business, University of South Carolina, Columbia, South Carolina 29208)

Abstract

Informational faultlines, the alignment of team member task-related attributes to form subgroups, are important in explaining team performance. Although informational faultlines may promote specialization and division of labor, they may also increase communication and coordination costs. Integrating work on the categorization-elaboration model, social identity theory, and contingency theory, we posit that facets of a team’s external environment moderate the effects of informational faultlines on performance. Using a sample of 380 top management teams, we examine moderation effects of environmental dynamism, complexity, and munificence. We find that informational faultline strength positively affects firm performance under low environmental dynamism, high complexity, and high munificence, but it negatively affects firm performance under high environmental dynamism, low complexity, and low munificence. We discuss the implications of our findings for theory and practice.

Suggested Citation

  • Danielle Cooper & Pankaj C. Patel & Sherry M. B. Thatcher, 2014. "It Depends: Environmental Context and the Effects of Faultlines on Top Management Team Performance," Organization Science, INFORMS, vol. 25(2), pages 633-652, April.
    • Handle: RePEc:inm:ororsc:v:25:y:2014:i:2:p:633-652
    DOI: 10.1287/orsc.2013.0855
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/orsc.2013.0855
    Download Restriction: no
    File URL: https://libkey.io/10.1287/orsc.2013.0855?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Michael Boyer O'Leary & Mark Mortensen, 2010. "Go (Con)figure: Subgroups, Imbalance, and Isolates in Geographically Dispersed Teams," Organization Science, INFORMS, vol. 21(1), pages 115-131, February.
    2. Klapper, Leora F. & Love, Inessa, 2004. "Corporate governance, investor protection, and performance in emerging markets," Journal of Corporate Finance, Elsevier, vol. 10(5), pages 703-728, November.
    3. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
    4. Kathleen M. Eisenhardt & Nathan R. Furr & Christopher B. Bingham, 2010. "CROSSROADS---Microfoundations of Performance: Balancing Efficiency and Flexibility in Dynamic Environments," Organization Science, INFORMS, vol. 21(6), pages 1263-1273, December.
    5. Harry G. Barkema & Oleg Shvyrkov, 2007. "Does top management team diversity promote or hamper foreign expansion?," Strategic Management Journal, Wiley Blackwell, vol. 28(7), pages 663-680, July.
    6. Hema A. Krishnan & Alex Miller & William Q. Judge, 1997. "Diversification and top management team complementarity: is performance improved by merging similar or dissimilar teams?," Strategic Management Journal, Wiley Blackwell, vol. 18(5), pages 361-374, May.
    7. Phillips, Katherine W. & Loyd, Denise Lewin, 2006. "When surface and deep-level diversity collide: The effects on dissenting group members," Organizational Behavior and Human Decision Processes, Elsevier, vol. 99(2), pages 143-160, March.
    8. David P. Tegarden & Linda F. Tegarden & Steven D. Sheetz, 2009. "Cognitive Factions in a Top Management Team: Surfacing and Analyzing Cognitive Diversity using Causal Maps," Group Decision and Negotiation, Springer, vol. 18(6), pages 537-566, November.
    9. Brian Boyd, 1990. "Corporate linkages and organizational environment: A test of the resource dependence model," Strategic Management Journal, Wiley Blackwell, vol. 11(6), pages 419-430, October.
    10. Guilhem Bascle, 2008. "Controlling for endogeneity with instrumental variables in strategic management research," Post-Print hal-00576795, HAL.
    11. Wernerfelt, Birger & Montgomery, Cynthia A, 1988. "Tobin's q and the Importance of Focus in Firm Performance," American Economic Review, American Economic Association, vol. 78(1), pages 246-250, March.
    12. Katerina Bezrukova & Karen A. Jehn & Elaine L. Zanutto & Sherry M. B. Thatcher, 2009. "Do Workgroup Faultlines Help or Hurt? A Moderated Model of Faultlines, Team Identification, and Group Performance," Organization Science, INFORMS, vol. 20(1), pages 35-50, February.
    13. Baixauli-Soler, J. Samuel & Sanchez-Marin, Gregorio, 2011. "Organizational governance and TMT pay level adjustment," Journal of Business Research, Elsevier, vol. 64(8), pages 862-870, August.
    14. Michael B. Heeley & David R. King & Jeffrey G. Covin, 2006. "Effects of Firm R&D Investment and Environment on Acquisition Likelihood," Journal of Management Studies, Wiley Blackwell, vol. 43(7), pages 1513-1535, November.
    15. Steven N. Kaplan & Bernadette A. Minton, 2012. "How Has CEO Turnover Changed?," International Review of Finance, International Review of Finance Ltd., vol. 12(1), pages 57-87, March.
    16. S. Trevis Certo & Richard H. Lester & Catherine M. Dalton & Dan R. Dalton, 2006. "Top Management Teams, Strategy and Financial Performance: A Meta‐Analytic Examination," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 813-839, June.
    17. De Dreu, Carsten K. W., 2003. "Time pressure and closing of the mind in negotiation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 91(2), pages 280-295, July.
    18. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, October.
    19. Sherry M.B. Thatcher & Karen A. Jehn & Elaine Zanutto, 2003. "Cracks in Diversity Research: The Effects of Diversity Faultlines on Conflict and Performance," Group Decision and Negotiation, Springer, vol. 12(3), pages 217-241, May.
    20. Eric Molleman, 2005. "Diversity in Demographic Characteristics, Abilities and Personality Traits: Do Faultlines Affect Team Functioning?," Group Decision and Negotiation, Springer, vol. 14(3), pages 173-193, May.
    21. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    22. Sara L. Keck, 1997. "Top Management Team Structure: Differential Effects by Environmental Context," Organization Science, INFORMS, vol. 8(2), pages 143-156, April.
    23. Karen A. Bantel & Susan E. Jackson, 1989. "Top management and innovations in banking: Does the composition of the top team make a difference?," Strategic Management Journal, Wiley Blackwell, vol. 10(S1), pages 107-124, June.
    24. Theresa S. Cho & Wei Shen, 2007. "Changes in executive compensation following an environmental shift: the role of top management team turnover," Strategic Management Journal, Wiley Blackwell, vol. 28(7), pages 747-754, July.
    25. Suresh Kotha & Anil Nair, 1995. "Strategy and environment as determinants of performance: Evidence from the Japanese machine tool industry," Strategic Management Journal, Wiley Blackwell, vol. 16(7), pages 497-518.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Popli, Manish & Ahsan, Faisal Mohammad, 2024. "Springboarding and activity load: Constraints on managerial attention and dependency on advisory firms in cross-border acquisitions," Journal of International Management, Elsevier, vol. 30(2).
    2. Choi, Jaeho & Rhee, Mooweon & Kim, Young-Choon, 2019. "Performance feedback and problemistic search: The moderating effects of managerial and board outsiderness," Journal of Business Research, Elsevier, vol. 102(C), pages 21-33.
    3. Yun Song & Hongqu He & Caiyu Yan, 2022. "Impacts of top management team fault‐line on firm's innovation—Financial slack over‐investment and underinvestment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3348-3360, December.
    4. Pearce, Craig L. & Houghton, Jeffrey D. & Manz, Charles C. & Dillon, Pamela J. & Fugate, Mel & Wassenaar, Christina L., 2023. "Time for a group hug? Toward a theory of shared emotional leadership in and of family business," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    5. Khan, Nabila & Dyaram, Lata & Dayaram, Kantha, 2022. "Team faultlines and upward voice in India: The effects of communication and psychological safety," Journal of Business Research, Elsevier, vol. 142(C), pages 540-550.
    6. Kiefner, Valentin & Mohr, Alexander & Schumacher, Christian, 2022. "Female executives and multinationals’ support of the UN's sustainable development goals," Journal of World Business, Elsevier, vol. 57(3).
    7. Nwafor, Onyi & Singh, Rahul & Collier, Cassie & DeLeon, Dereck & Osborne, Jim & DeYoung, Jon, 2021. "Effectiveness of nudges as a tool to promote adherence to guidelines in healthcare and their organizational implications: A systematic review," Social Science & Medicine, Elsevier, vol. 286(C).
    8. Michael C. Withers & Markus A. Fitza, 2017. "Do board chairs matter? The influence of board chairs on firm performance," Strategic Management Journal, Wiley Blackwell, vol. 38(6), pages 1343-1355, June.
    9. Ralf Meinhardt & Sebastian Junge & Martin Weiss, 2018. "The organizational environment with its measures, antecedents, and consequences: a review and research agenda," Management Review Quarterly, Springer, vol. 68(2), pages 195-235, April.
    10. Nicoletta Corrocher & Camilla Lenzi, 2022. "Exploring the sources of knowledge diversity in founding teams and its impact on new firms’ innovation," Journal of Evolutionary Economics, Springer, vol. 32(4), pages 1091-1118, September.
    11. Shuai Chen & Duanxu Wang & Yun Zhou & Ziguang Chen & Daoyou Wu, 2017. "When too little or too much hurts: Evidence for a curvilinear relationship between team faultlines and performance," Asia Pacific Journal of Management, Springer, vol. 34(4), pages 931-950, December.
    12. Shepherd, Dean A. & Breugst, Nicola & Patzelt, Holger, 2023. "A founding-team model of creating a venture's culture," Journal of Business Venturing, Elsevier, vol. 38(2).
    13. Chowdhury, Jaideep & Sahaym, Arvin & Raina, Gurdeep Singh, 2023. "When is the board’s two cents worth more? The relationship between board of directors’ pay and firm performance under contingencies," Journal of Business Research, Elsevier, vol. 167(C).
    14. Greiner, Michael & Lee, Jaegul, 2020. "A supply-side approach to corporate political activity: Performance consequences of ideologically driven CPA," Journal of Business Research, Elsevier, vol. 115(C), pages 25-37.
    15. Goldenstein, Jan & Hunoldt, Michael & Oertel, Simon, 2019. "How optimal distinctiveness affects new ventures' failure risk: A contingency perspective," Journal of Business Venturing, Elsevier, vol. 34(3), pages 477-495.
    16. Richard Sebaggala & Roy Mersland & Bert D'espallier, 2024. "Melting pot versus salad bowl: Exploring the effect of composition diversity on saving groups' performance," French Stata Users' Group Meetings 2024 09, Stata Users Group.
    17. Linyuan Zhang & Jee Young Seong & Doo-Seung Hong, 2022. "Interactive Effects of Person–Group Fit and Team-Member Exchange in Predicting Continuous Improvement," Sustainability, MDPI, vol. 14(24), pages 1-9, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Hutzschenreuter & Julian Horstkotte, 2013. "Performance effects of top management team demographic faultlines in the process of product diversification," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 704-726, June.
    2. Veltrop, D.B. & Hermes, C.L.M. & Postma, T.J.B.M. & de Haan, J., 2012. "A tale of two factions," Research Report 12001-HRM&OB, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. repec:dgr:rugsom:12001-hrmob is not listed on IDEAS
    4. Haan & Postma & Hermes & Veltrop, 2012. "A Tale of Two Factions: Exploring the Relationship between Factional Faultlines and Conflict Management in Pension Fund Boards," Research Report 12001-HRMOB, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. Shuai Chen & Duanxu Wang & Yun Zhou & Ziguang Chen & Daoyou Wu, 2017. "When too little or too much hurts: Evidence for a curvilinear relationship between team faultlines and performance," Asia Pacific Journal of Management, Springer, vol. 34(4), pages 931-950, December.
    6. Juan Pablo Diánez-González & Carmen Camelo-Ordaz, 2016. "How management team composition affects academic spin-offs’ entrepreneurial orientation: the mediating role of conflict," The Journal of Technology Transfer, Springer, vol. 41(3), pages 530-557, June.
    7. Andrea Calabrò & Rosalia Santulli & Mariateresa Torchia & Carmen Gallucci, 2021. "Entrepreneurial Orientation and Family Firm Performance: The Moderating Role of TMT Identity-Based and Knowledge-Based Faultlines," Entrepreneurship Theory and Practice, , vol. 45(4), pages 838-866, July.
    8. Sabina Nielsen, 2010. "Top Management Team Internationalization and Firm Performance," Management International Review, Springer, vol. 50(2), pages 185-206, April.
    9. Ralf Meinhardt & Sebastian Junge & Martin Weiss, 2018. "The organizational environment with its measures, antecedents, and consequences: a review and research agenda," Management Review Quarterly, Springer, vol. 68(2), pages 195-235, April.
    10. Shan Xue & Yi Tang & Yuehua Xu & Chu-Ding Ling & Xiao-Yun Xie & Shenjiang Mo, 2024. "How boards’ factional faultlines affect corporate financial fraud," Asia Pacific Journal of Management, Springer, vol. 41(1), pages 351-376, March.
    11. 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).
    12. Andreea N. Kiss & Dirk Libaers & Pamela S. Barr & Tang Wang & Miles A. Zachary, 2020. "CEO cognitive flexibility, information search, and organizational ambidexterity," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2200-2233, December.
    13. Krishnan, Hema A. & Park, Daewoo, 2005. "A few good women--on top management teams," Journal of Business Research, Elsevier, vol. 58(12), pages 1712-1720, December.
    14. Ramos-Garza, Claudia, 2009. "TMT strategic consensus in Mexican companies," Journal of Business Research, Elsevier, vol. 62(9), pages 854-860, September.
    15. Nuscheler, Daniela & Engelen, Andreas & Zahra, Shaker A., 2019. "The role of top management teams in transforming technology-based new ventures' product introductions into growth," Journal of Business Venturing, Elsevier, vol. 34(1), pages 122-140.
    16. Kholekile L. Gwebu & Jeffrey Sohl & Jing Wang, 2019. "Differential performance of science park firms: an integrative model," Small Business Economics, Springer, vol. 52(1), pages 193-211, January.
    17. Joyce Rupert & Astrid C. Homan & Karen A. Jehn & Robert Jan Blomme, 2019. "Diversity Composition and Team Learning: The Moderating Role of Error Culture," Group Decision and Negotiation, Springer, vol. 28(4), pages 695-722, August.
    18. Chalevas, Constantinos G., 2011. "The Effect of the Mandatory Adoption of Corporate Governance Mechanisms on Executive Compensation," The International Journal of Accounting, Elsevier, vol. 46(2), pages 138-174, June.
    19. Patricia Pitcher & Anne D. Smith, 2001. "Top Management Team Heterogeneity: Personality, Power, and Proxies," Organization Science, INFORMS, vol. 12(1), pages 1-18, February.
    20. Díaz-Fernández, M. Carmen & González- Rodríguez, M. Rosario & Simonetti, Biagio, 2020. "Top management team diversity and high performance: An integrative approach based on upper echelons and complexity theory," European Management Journal, Elsevier, vol. 38(1), pages 157-168.
    21. André Grow & Andreas Flache, 2011. "How attitude certainty tempers the effects of faultlines in demographically diverse teams," Computational and Mathematical Organization Theory, Springer, vol. 17(2), pages 196-224, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ororsc:v:25:y:2014:i:2:p:633-652. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.