The Role of External Environment in Upper Echelons Theory

Abstract

Upper echelons research has largely focused on the antecedents and consequences of top management teams (TMTs) from the team and firm levels of analysis. This paper reviews empirical research on TMTs with a specific emphasis on the role of the external environment. Applying institutional and industrial organization theories, a cross-level conceptual model outlining the direct, mediating, and moderating effects of the external environment on upper echelons is developed. This review distinguishes between industry and institutional levels of analysis and three types of environmental characteristics: stable, dynamic, and transformational. The paper further explains the relationships between each category of characteristics and firm upper echelons, and outlines possible avenues for future research.

Commitment to Human Resource Management of the Top Management Team for Green Creativity

“…This theory studies the relationship between the demographic characteristics of TMT and strategic decision-making and the relationship between TMT and the performance of an organization. The core connotation of the upper echelons theory is that the top managers will make a personalized interpretation and understanding of the organization's external environment they are facing, and their behavior is the embodiment and reflection of the individual characteristics, such as values, cognition and experience, thus influencing the strategic choice [25]. Generally speaking, the top manager is the main body of strategic decision-making, which makes bounded rational decisions according to the organization's own characteristics.…”

CFO characteristics and opportunistic accounting choice in public sector organizations

“…Since the original theory paper was published by Hambrick and Mason (1984), upper echelons theory has generated a considerable amount of empirical research analysing the relationship between strategic choice and top executives' characteristics in a number of different settings (for a literature review, see Nielsen 2010;Hiebl 2014;Yamak et al 2014;Plöckinger et al 2016). In general, the basic proposition in upper echelons theory-that is, that top executives' individual idiosyncrasies affect organizational outcomes-has been supported by empirical findings (Nielsen 2010;Hiebl 2014;Yamak et al 2014). Upper echelons theory is also supported in financial reporting, as empirical findings have shown that the CEO's and CFO's characteristics are reflected in the financial reporting information that listed companies (Plöckinger et al 2016) and public sector organizations (Anessi-Pessina and Sicilia 2019) provide to external stakeholders.…”

The Effects of Cohesion and Structural Position on the Top Management Team Boundary Spanning–Firm Performance Relationship

“…Finally, we took steps to examine our predictions using variables measured at different time periods. However, we cannot entirely rule out alternative explanations that firm performance or other factors in the external environment influence opportunities for TMT member boundary spanning or even a TMT’s level of cohesion (Mathieu, Kukenberger, D’Innocenzo, & Reilly, 2015; Mullen & Copper, 1994; Yamak, Nielsen, & Escribá-Esteve, 2013). Notwithstanding these limitations, our study offers a more complete picture of the value of TMT outside directorships for focal firms by taking into account a measure of internal relationships among top managers and their structural positions, revealing that both conditions are integral to understanding the utility of these TMT boundary spanning ties.…”