Top Management Team Diversity and Strategic Innovation Orientation: The Relationship and Consequences for Innovativeness and Performance

Abstract

A firm's strategic innovation orientation, which is aimed at discovering and satisfying emerging customer needs with novel technological solutions, has repeatedly been shown to be crucial for firm innovativeness and firm performance. Despite its apparent importance, relatively little research has addressed antecedents of a firm's strategic orientation that help explain heterogeneity in innovation strategies across firms. Especially the influence of top management teams (TMT) should be critical, since innovation strategies are shaped at the top management level. Building on the theory of upper echelon, this study investigates how TMT characteristics affect a firm's strategic innovation orientation, and how this relates to innovation outcomes and firm performance. Hypotheses are tested on a sample of goods manufacturers using a combination of survey data, document analysis, and objective capital market data for firm performance. Results indicate that TMT diversity, measured as heterogeneity in educational, functional, industry, and organizational background, has a strong positive effect on a firm's innovation orientation. A strong proactive focus on emerging customer needs and on novel technologies then lead to a portfolio of new products with higher market newness and technology newness, which both increase firm performance. The results therefore emphasize the importance of TMT characteristics as antecedent for innovation strategy and innovation outcomes.

The role of project portfolio management in fostering both deliberate and emergent strategy

“…Portfolio budget is measured as natural logarithm of the overall budget of the portfolio (measured in millions of Euros). Furthermore, we control for the innovativeness of the portfolio, which has been shown to affect performance (Talke et al, 2011). Portfolio innovativeness (Cronbach's Alpha = 0.84) is measured as the average technological innovativeness of projects in the portfolio with three items taken from previous literature Talke et al, 2011).…”

“…Furthermore, we control for the innovativeness of the portfolio, which has been shown to affect performance (Talke et al, 2011). Portfolio innovativeness (Cronbach's Alpha = 0.84) is measured as the average technological innovativeness of projects in the portfolio with three items taken from previous literature Talke et al, 2011). Finally, we control for portfolio management formalization (Alpha = 0.93) that we measure with four items taken from Teller et al (2012).…”

Generational Involvement in the Top Management Team of Family Firms: Exploring Nonlinear Effects on Entrepreneurial Orientation

“…TMT diversity should indeed lead to better problem solving and higher creativity and innovation because of the constructive dialogue built around top manager's multiple ideas, knowledge and perspectives not available in homogeneous TMTs (Talke, Salomo & Rost, 2010;Talke et al, 2011). The most prominent benefit of a heterogeneous group is thus related to knowledge diversity (Milliken & Martins, 1996), defined as the different expertise and perspectives possessed by individuals in a given domain to perform a task or activity in a team (cf.…”

The Effects of a CEO’s Technical Background and Cross-functional Coordination on Technological Innovation Performance: The Mediating Role of Technological Innovation Orientation

“…From such a viewpoint, technological innovation orientation can be conceptualized as comprising two aspects: proclivity to technological leadership, which represents the firm's tendency to pursue its proactive leadership role in technological development, and openness to technological innovation, which indicates the general inclination of members to share the value of the firm's technological leadership role and pursue technological innovation activities (Moon, 2013). As such, technological innovation orientation is not confined to the functional boundary of technology development or R&D, but bears the characteristics of organizational culture shared by organizational members across all functions and levels (Hurley & Hult, 1998;Siguaw et al, 2006;Talke et al, 2011).…”