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

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.

Effects of Leader Networking Behaviors and Vertical Faultlines on Support for Innovation

“…Two variables of the strength of vertical faultlines—between employees and junior leaders and between junior leaders and senior leaders in a work unit—were calculated following Shaw’s (2004) procedure and Chung et al’s (2015) approach to conceptualizing the strength of attribute-specific faultlines (see also Jiang et al, 2012; Kunze & Bruch, 2010; Richard et al, 2019). We adopted this approach because it is the most appropriate approach to measuring faultline strength based on a focal attribute (i.e., job hierarchy levels).…”

Metacritiques of Upper Echelons Theory: Verdicts and Recommendations for Future Research

“…In line with these findings, there is now a considerable body of work that examines how TMT characteristics interact with one another or serve as moderators of the relationship between CEO orientation and firm outcomes (e.g., Buyl, Boone, & Hendriks, 2014; Ferguson, Cohen, Burton, & Beckman, 2015; Heyden et al, 2013; Raes et al, 2011). The work on TMT fault lines—or “conceptual divide[s] that may separate a TMT into subgroups and thus [affect] the structure of diversity within a team” (Hutzschenreuter & Horstkotte, 2013: 705)—has been especially influential in this regard (e.g., Ling, Wei, Klimoski, & Wu, 2015; Ou, Seo, Choi, & Hom, 2016; Richard, Wu, Markoczy, & Chung, 2019). As an example, Georgakakis, Greve, and Ruigrok (2017) found that different aspects of the CEO-TMT interface have a significant influence on the relationship between TMT knowledge-based fault lines and firm performance.…”

A congruence perspective on how human and social capital affect learning capability and innovation

“…Finally, we contribute to the recent development of learning capability and innovation, and expand the relationship to the complex context. Prior researches focus on the role of external environment (as environmental competitiveness) [58] or internal environment (environmental dynamism) [59] in the organizational management, and they are reflected simultaneously in few studies. Actually, in the practices of organizational management, organizations often face two types of environment with opposite tensions or paradoxes [50].…”