Top Management Teams’ demographic characteristics and their influence on strategic change

Abstract

The purpose of this research is to analyse the relation between the Top Management Teams (TMTs)' socio demographic' characteristics and the corporate strategic change, measured as Carpenter (Strateg Manag J 23:275-284, 2002) through Finkelstein and Hambrick's index (Adm Sci Q 35:484-504, 1990): the strategic variation index and strategic deviation index in the period 2007-2009. While this aim has been studied previously in the Upper Echelon Literature, the results achieved have been considered ambiguous and no concluding by some researchers. Hence this paper admits that this complex relation rooted in this stream thought, needs to be further explored as supported by those authors. The achieved findings not only shed light on the organizational demographics' black box but also enrichment the academic literature in this respect. A sample of 157 big firms from different industrial sector and nationalities with their headquarters in Spain was determined by using both secondary and primary sources due to the legal difficulties imposed by LORTAD which prevents the collection and consult of the top managers' personal information unlike other countries. Lineal regression models were applied to test the hypotheses formulated in the study. By controlling for firm performance and the industrial sector, a higher educational level, shorter firm tenures, higher international experience and a higher professional background greatly influence on corporate strategy changes. Furthermore while the firm performance seems to influence the strategic change, the industrial sector does not contribute significantly on this managerial variable. Few researchers examine the influence of TMTs' characteristics in shaping corporative strategic changes and firm outcomes using samples different from American enterprises. This paper also contributes to the existing literature by proposing different models which explain the strategic changes, measured by different indicators, using more explanatory demographical variables than in other studies and also including control variables related performance and industrial sector to reduce the ambiguity and increase the reliability of the previous researches.

The Moderating Role of Top Management Team Diversity in Strategic Change in a Multicultural Context

“…Facing this earlier posture, there is another more recent and widely accepted perspective that considers that it is necessary to differentiate between different dimensions of TMT diversity. According to this more recent stage, this paper questions the upper echelons assumption of TMT diversity as a general construct and, by following Díaz-Fernández (2004) and Tacheva (2007), it differentiates the influence of the TMT diversity traits on strategic change. According to this more recent stage, this paper questions the upper echelons assumption of TMT diversity as a general construct and, by following Díaz-Fernández (2004) and Tacheva (2007), it differentiates the influence of the TMT diversity traits on strategic change.…”

“…Accordingly, in these papers, first, TMT functional experience diversity is related to a high level of knowledge, capabilities and abilities on the part of managers, acquired in the performance of distinct professional tasks within their organizations (Díaz-Fernández, 2004). It can be defined, as Qian et al noted (2013: 110), following researchers such as Cannella and Lee (2008), 'as the degree to which TMT members differ with respect to their functional backgrounds'.…”

“…Yet, to the best of our knowledge, very few studies have considered the influence of the effects of interaction among the diversity of demographical attributes on firm outcomes and strategy change (Li et al, 2012). It is starting to be widely accepted that it is necessary to both differentiate among the different dimensions of TMT diversity (Díaz-Fernández, 2004;Tacheva, 2007) and, 'regarding each dimension, to distinguish each one from the other and to separately study them' (Tacheva, 2007: 63). Furthermore, as Tacheva claims (2007: 62): 'It is remarkable that upper echelons makes no distinction between different aspects of diversity.…”

“…These interaction effects reveal the internal complexity of the TMTs in making the best managerial decisions. Reinforcing these premises, the results achieved by some researchers had shown that various diversity dimensions have differing effects on group and organizational outcomes (Carpenter and Fredrickson, 2001;Athanassiou and Nigh, 2002;Auh and Menguc, 2005;Boone and Hendriks, 2009;Homberg and Bui, 2013;Díaz-Fernández et al, 2015a, 2015b. Instead, diversity is often treated as a general construct hypothesized as having uniform effects regardless of the particular attributes to which it is empirically applied' (i.e., Hambrick, 1990, 1996;Forbes and Milliken, 1999;Golden and Zajac, 2001).…”

“…Faced with this stance, later researchers in the demographical diversity and strategy field have challenged the assumption that all types of diversity have the same effect on group strategic processes and performance outcomes. It is starting to be widely accepted that it is necessary to both differentiate among the different dimensions of TMT diversity (Díaz-Fernández, 2004;Tacheva, 2007) and, 'regarding each dimension, to distinguish each one from the other and to separately study them' (Tacheva, 2007: 63). Reinforcing these premises, the results achieved by some researchers had shown that various diversity dimensions have differing effects on group and organizational outcomes (Carpenter and Fredrickson, 2001;Athanassiou and Nigh, 2002;Auh and Menguc, 2005;Boone and Hendriks, 2009;Homberg and Bui, 2013;Díaz-Fernández et al, 2015a, 2015b.…”