Transformational Leadership's Role in Promoting Corporate Entrepreneurship: Examining the CEO-TMT Interface

Abstract

Research about transformational CEOs' impact on firm-level outcomes, particularly corporate entrepreneurship, has been equivocal, partially because the underlying mechanisms remain largely unexplored. Given that the individuals most closely influenced by a firm's CEO are its top management team (TMT) members, we focus on the CEO-TMT interface as a salient intervening mechanism. We posit that transformational CEOs influence TMTs' behavioral integration, risk propensity, decentralization of responsibilities, and long-term compensation and that these TMT characteristics impact corporate entrepreneurship. Data from 152 firms supported most of our hypothesized links, underscoring how the CEO-TMT interface helps explain transformational CEOs' role in promoting corporate entrepreneurship.

Sustainability in SMEs: Top Management Teams Behavioral Integration as Source of Innovativeness

“…We selected SMEs as the context for our study because SMEs have fewer external influences (e.g., boards, capital markets, and stakeholders) than bigger firms [64]. As a result, the key members of their upper echelons, TMTs, play a more pivotal role in shaping the firms' strategies and outcomes than in other firms [65].…”

How CEOs And TMTs Build Adaptive Capacity In Small Entrepreneurial Firms

“…However, strategic leadership scholars have noted differences in the nature of work and level of responsibility between CEOs and other executives (Hambrick and Mason, 1984). This has led to more intense study of the direct interface between CEO leadership and TMT processes (GarciaMorales et al, 2008;Ling et al, 2008). Hypothesis 2b: There is a positive relationship between TMT behavioural integration and strategic decision comprehensiveness.…”

“…Thus, high TMT BI (manifested in increased collaboration and information-sharing among TMT members) is likely to encourage the search and exploration of alternative solutions as well as increased openness to the views and perspectives of other TMT members. Finally, joint decision-making, which is another vital facet of BI, ensures decision-making completeness (Ling et al, 2008). In joint decision-making processes, team collaboration and information-sharing are facilitated and reinforced.…”

“…Transformational CEOs are known to demonstrate charisma, articulate an inspirational vision, encourage intellectual stimulation, and exhibit individualized consideration in their interactions with followers (Bass, 1999;Bass and Avolio, 2000). This helps them to bolster communication within their TMTs (Ling et al, 2008) and increase the quality and quantity of the information exchanged. The influence of a transformational leader is likely to be even more significant in smaller firms (see Lubatkin et al, 2006), especially because they are more likely to play both strategic and operational roles and they have day-to-day contact with most (if not all) of the organization's executives and employees.…”

“…Scholars have also underscored the importance of investigating the role of transformational CEOs in shaping and facilitating processes in TMTs of small firms (Ling et al, 2008) since these organizations lack resources and formalization. Small entrepreneurial firms often rely more heavily on the leadership of the CEO and the TMT in subsequent decisionmaking processes than larger, more mature, organizations (Lubatkin et al, 2006).…”