Hostname: page-component-5b777bbd6c-kmmxp Total loading time: 0 Render date: 2025-06-23T07:19:57.484Z Has data issue: false hasContentIssue false
  • English
  • Français

The impact of the top management teams’ knowledge and experience on strategic decisions and performance

Published online by Cambridge University Press:  31 August 2016

Peng-Yu Li
Peng-Yu Li*
Affiliation:
Department of Finance and International Business, Fu-Jen Catholic University, New Taipei City, Taiwan
*
Corresponding author: pyli@mail.fju.edu.tw
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper explores whether top management teams’ (TMTs) knowledge and experience are significant predictors of a firm’s strategic decisions and organization outcomes. The existing research throws little light on how firms with limited resources embedded in TMTs, particularly in emerging markets, innovate and achieve success in foreign countries. We focus on the impact of TMTs’ functional background heterogeneity and international experience on innovation and internationalization, as well as examine the relationship between innovation, internationalization and performance. The proposed relationships are empirically investigated in a sample of Taiwanese-listed companies operating in the electronics industry. The results demonstrate a positive association between a TMT’s functional background heterogeneity and a firm’s innovation. Moreover, a TMT’s international experience relates positively to a firm’s innovation and internationalization, therefore firms with a higher level of innovation achieve a higher level of internationalization.

Keywords

top management teamfunctional background heterogeneityinternational experienceinnovationinternationalization
Type
Research Article
Information
Journal of Management & Organization , Volume 23 , Issue 4 , July 2017 , pp. 504 - 523
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Ancona, D., & Caldwell, D. (1992). Demography and design: Predictors of new product team development. Organization Science, 3, 321–341.CrossRefGoogle Scholar
Athanassiou, N., & Nigh, D. (1999). The impact of US company internationalization on top management team advice networks: A tacit knowledge perspective. Strategic Management Journal, 20, 83–92.Google Scholar
Athanassiou, N., & Nigh, D. (2000). Internationalization, tacit knowledge and the top management teams of MNCs. Journal of International Business Studies, 31(3), 471–487.Google Scholar
Auh, S., & Menguc, B. (2005). Top management team diversity and innovativeness: The moderating role of interfunctional coordination. Industrial Marketing Management, 34(3), 249–261.Google Scholar
Autio, E., Sapienza, H. J., & Almedia, J. G. (2000). Effects of age at entry, knowledge intensity, and imitability on international growth. Academy of Management Journal, 43, 909–924.Google Scholar
Bantel, K. A., & Jackson, S. (1989). Top management and innovations in banking: Does the composition of the top team make a difference. Strategic Management Journal, 10(2), 107–124.Google Scholar
Barkema, H. G., & Shvyrkov, O. (2007). Does top management team diversity promote or hamper foreign expansion? Strategic Management Journal, 28, 663–680.CrossRefGoogle Scholar
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.Google Scholar
Blau, P. (1977). Inequality and Heterogeneity . New York, NY: Free Press.Google Scholar
Bloodgood, J. M., Sapienza, H. J., & Almeida, J. G. (1996). The internationalization of new high-potential US ventures: Antecedents and outcomes. Entrepreneurship Theory and Practice, 20, 61–76.Google Scholar
Boone, C., & Hendriks, W. (2009). Top management team and firm performance: Moderators of functional-background and locus-of-control diversity. Management Science, 55, 165–180.CrossRefGoogle Scholar
Cabrera-Suárez, M. K., & Martín-Santana, J. D. (2013). Top management teams and performance in non-listed family firms. Journal of Management & Organization, 19, 405–423.Google Scholar
Camelo-Ordaz, C., Hernandez-Lara, A. B., & Valle-Cabrera, R. (2005). The relationship between top management teams and innovative capacity in companies. Journal of Management Development, 24(8), 683–705.Google Scholar
Camelo-Ordaz, C., Fernández-Alles, M. L., & Valle-Cabrera, R. (2008). Top management team’s vision and human resources management practices in innovative Spanish companies. The International Journal of Human Resource Management, 19, 620–638.CrossRefGoogle Scholar
Carpenter, M. A. (2002). The implications of strategy and social context for the relationship between top management team heterogeneity and firm performance. Strategic Management Journal, 23, 275–284.Google Scholar
Carpenter, M. A., & Fredrickson, J. W. (2001). Top management teams, global strategic posture and the moderating role of uncertainty. Academy of Management Journal, 23, 275–284.Google Scholar
Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). The upper echelons revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 60, 749–778.Google Scholar
Cassiman, B., & Golovko, E. (2011). Innovation and internationalization through exports. Journal of International Business Studies, 42, 56–75.CrossRefGoogle Scholar
Castanias, R. P., & Helfat, C. E. (2001). The managerial rents model: Theory and empirical analysis. Journal of Management, 27, 661–678.Google Scholar
Castanias, R. P., & Helfat, C. E. (1991). Managerial resources and rents. Journal of Management, 17, 155–171.Google Scholar
Caves, R. (1974). Multinational firms, competition and productivity in host-country markets. Economica, 41, 176–193.Google Scholar
Certo, S. T., Lester, R. H., Dalton, C. M., & Dalton, D. R. (2006). Top management teams, strategy and financial performance: A meta analytic examination. Journal of Management Studies, 43, 813–839.Google Scholar
Chang, S. J., & Rhee, J. H. (2011). Rapid FDI expansion and firm performance. Journal of International Business Studies, 42, 979–994.Google Scholar
Chatterjee, S., & Wernerfelt, B. (1991). The link between resources and type of diversification: Theory and evidence. Strategic Management Journal, 12(1), 33–48.Google Scholar
Collins, J. M. (1990). A market performance comparison of US firms active in domestic developed and developing countries. Journal of International Business Studies, 21, 271–287.CrossRefGoogle Scholar
Contractor, F. J., Kumar, V., & Kundu, S. K. (2007). Nature of the relationship between international expansion and performance: The case of emerging market firms. Journal of World Business, 42, 401–417.Google Scholar
Contractor, F. J., Kundu, S. K., & Hsu, C. C. (2003). A three-stage theory of international expansion: The link between multinationality and performance in the service sector. Journal of International Business Studies, 34, 5–19.Google Scholar
Coviello, N., & Munro, H. (1997). Network relationships and the internationalisation process of small software firms. International Business Review, 6(4), 361–386.Google Scholar
Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm . Englewood Cliffs, New Jersey: Prentice-Hall, Ins.Google Scholar
Delios, A., & Beamish, P. (1999). Geographic scope, product diversification and the corporate performance of Japanese firms. Strategic Management Journal, 20(8), 711–727.3.0.CO;2-8>CrossRefGoogle Scholar
Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19, 1–31.CrossRefGoogle Scholar
Filatotchev, I., & Piesse, J. (2009). R&D, internationalization and growth of newly listed firms: European evidence. Journal of International Business Studies, 40, 1260–1276.Google Scholar
Finkelstein, S., & Hambrick, D. C. (1990). Top management team tenure and organizational outcomes: The moderating role of managerial discretion. Administrative Science Quarterly, 35, 484–503.Google Scholar
Geringer, J. M., Beamish, P. W., & daCosta, R. C. (1989). Diversification strategy and internationalization: Implications for MNE performance. Strategic Management Journal, 10, 109–119.Google Scholar
Geringer, J. M., Tallman, S., & Olsen, D. M. (2000). Product and international diversification among Japanese multinational firms. Strategic Management Journal, 21, 51–80.Google Scholar
Gomes, L., & Ramaswamy, K. (1999). An empirical examination of the form of the relationship between multinationality and performance. Journal of International Business Studies, 30, 173–188.Google Scholar
Grant, R. M. (1987). Multinationality and performance among British manufacturing companies. Journal of International Business Studies, 18, 79–89.Google Scholar
Grant, R. M., Jammine, A. P., & Thomas, H. (1988). Diversity, diversification, and profitability among British manufacturing companies, 1972–1984. Academy of Management Journal, 31, 771–801.Google Scholar
Hambrick, D. C., & Fukutomi, G. D. (1991). The seasons of a CEO’s tenure. Academy of Management Review, 16(4), 719–742.Google Scholar
Hambrick, D., & Mason, P. (1984). Upper echelons theory: The organization as a reflection of its top managers. Academy of Management Review, 9, 193–343.Google Scholar
Hambrick, D. C., Cho, T. S., & Chen, M. J. (1996). The influence of top management team heterogeneity on firms’ competitive moves. Administrative Science Quarterly, 41, 659–684.Google Scholar
Heijltjes, M., Olie, R., & Glunka, U. (2003). Internationalization of top management teams in Europe. European Management Journal, 21, 89–97.CrossRefGoogle Scholar
Herrmann, D., & Datta, D. K. (2005). Relationships between top management team characteristics and international diversification: An empirical investigation. British Journal of Management, 16, 69–78.CrossRefGoogle Scholar
Hitt, M. A., Bierman, L., Shimizu, K., & Kochhar, R. (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource based perspective. Academy of Management Journal, 44, 13–28.Google Scholar
Hitt, M. A., Hoskisson, R. E., Johnson, R. A., & Moesel, D. D. (1996). The market for corporate control and firm innovation. Academy of Management Journal, 39, 1084–1119.Google Scholar
Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (1994). A mid-range theory of the interactive effects of international and product diversification on innovation and performance. Journal of Management, 20, 97–326.Google Scholar
Hitt, M. A., Hoskisson, R. E., Ireland, R. D., & Harrison, J. S. (1991). The effects of acquisitions on R&D inputs and outputs. Academy of Management Journal, 34, 693–706.Google Scholar
Hitt, M. A., Hoskisson, R. E., & Kim, H. (1997). International diversification: Effects on innovation and firm performance in product-diversified firms. Academy of Management Journal, 40, 767–798.Google Scholar
Hitt, M. A., Lee, H., & Yucel, E. (2002). The importance of social capital to the management of multinational enterprises: Relational networks among Asian and Eastern firms. Asia Pacific Journal of Management, 19, 53–72.Google Scholar
Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Beverly Hills, CA: Sage.Google Scholar
Hutzschenreuter, T., & Horstkotte, J. (2013). Managerial services and complexity in a firm’s expansion process: An empirical study of the impact on the growth of the firm. European Management Journal, 31, 137–151.Google Scholar
Hymer, S. (1960). The international operations of national firms: A study of direct investment. Cambridge, MA: MIT Press.Google Scholar
Jackson, S. E. (1992). Consequences of group composition for the interpersonal dynamics of strategic issue processing. In P. Shrivastava, A. Huff, & J. Dutton (Eds.), Advances in strategic management, 8, pp. 345–382). Greenwich, CT: JAI Press.Google Scholar
Jehn, K. A., Northcraft, G. B., & Neale, M. A. (1999). Why differences make a difference: A field study of diversity, conflict and performance in workgroups. Administrative Science Quarterly, 44(4), 741–763.Google Scholar
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica: Journal of the Econometric Society, 47(2), 263–291.Google Scholar
Kim, W. C., Hwang, P., & Burgers, W. P. (1993). Multinationals’ diversification and the risk-return trade-off. Strategic Management Journal, 14, 275–286.Google Scholar
Kim, W. C., & Mauborgne, R. (2002). Charting your company’s future. Harvard Business Review, 80, 76–85.Google Scholar
Kor, Y. Y. (2006). Direct and interaction effects of top management team and board compositions on R&D investment strategy. Strategic Management Journal, 27(11), 1081–1099.Google Scholar
Kor, Y. Y., & Mahoney, J. T. (2005). How dynamics, management, and governance of resource deployments influence firm-level performance. Strategic Management Journal, 26, 489–496.Google Scholar
Kotabe, M. (1990). The relationship between offshore sourcing and innovativeness of us multinational firms: An empirical investigation. Journal of International Business Studies, 21, 623–638.Google Scholar
Kotabe, M., Jiang, C. X., & Murray, J. Y. (2010). Managerial ties, knowledge acquisition, realized absorptive capacity and new product market performance of emerging multinational companies: A case of China. Journal of World Business, 46, 166–176.Google Scholar
Lall, S. (1996). The investment development path: Some conclusions. In J. H. Dunning, & R. Narula (Eds.), Foreign direct investment and governments: catalysts for restructuring (pp. 423–441). London: Routledge.Google Scholar
Lee, H., & Park, J. H. (2006). Top team diversity, internationalization and the mediating effect of international alliances. British Journal of Management, 17, 195–213.Google Scholar
Lee, J., & Habte-Giorgis, B. (2004). Empirical approach to the sequential relationships between firm strategy, export activity, and performance in US manufacturing firms. International Business Review, 13, 101–129.Google Scholar
Leonidou, L. C., & Katsikeas, C. S. (1996). The export development process: An integrative review of empirical models. Journal of International Business Studies, 27, 517–551.Google Scholar
Li, P. Y., & Meyer, K. E. (2009). Contextualizing experience effects in international business: A study of ownership strategies. Journal of World Business, 44, 370–382.Google Scholar
Li, T. (1999). The impact of the marketing – R&D interface on new product export performance: A contingency analysis. Journal of International Marketing, 7, 10–33.Google Scholar
Lu, J., & Beamish, P. (2001). The internationalization and performance of SMEs. Strategic Management Journal, 22(6–7), 565–586.Google Scholar
Luo, Y., & Tung, R. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38, 481–498.Google Scholar
Mathews, J. A., & Zander, I. (2007). The international entrepreneurial dynamics of accelerated internationalization. Journal of International Business Studies, 38, 387–403.CrossRefGoogle Scholar
Meyer, K. E., Mudambi, R., & Narula., R. (2011). Multinational enterprises and local contexts: The opportunities and challenges of multiple embeddedness. Journal of Management Studies, 48, 235–252.Google Scholar
Milliken, F. J., & Martins, L. L. (1996). Searching for common threads: Understanding the multiple effects of diversity in organizational groups. Academy of Management Review, 21(2), 402–433.Google Scholar
Mitchell, W., Shaver, J. M., & Yeung, B. (1992). Getting there in a global industry: Impacts on performance of changing international presence. Strategic Management Journal, 13(6), 419–432.CrossRefGoogle Scholar
Musteen, M., Francis, J., & Datta, D. K. (2010). The influence of international networks on internationalization speed and performance: A study of Czech SMEs. Journal of World Business, 45, 197–205.Google Scholar
O’Reilly, C., Snyder, R., & Boothe, J. (1993). Effects of executive team demography on organizational change. In G. Humber, & W. Glick (Eds.), Organizational Change and Redesign: Ideas and Insights for Improving Performance (pp. 147–175). New York, NY: Oxford University Press.Google Scholar
Qian, C., Cao, Q., & Takeuchi, R. (2013). Top management team functional diversity and organizational innovation in China: The moderating effects of environment. Strategic Management Journal, 34(1), 110–120.Google Scholar
Rivas, J. L. (2012). Diversity and internationalization: The case of boards and TMTs. International Business Review, 21, 1–12.Google Scholar
Russell, C. J., & Dean, M. A. (2000). To log or not to log: Bootstrap as an alternative to the parametric estimation of moderation effects in the presence of skewed dependent variables. Organizational Research Methods, 3(2), 166–185.Google Scholar
Sambharya, R. B. (1996). Foreign experience of top management team and international diversification strategies of US multinational corporations. Strategic Management Journal, 17, 736–746.Google Scholar
Santos, J., Doz, Y., & Williamson, P. (2004). Is your innovation process global? MIT Sloan Management Review, 45(4), 31–37.Google Scholar
Sapienza, H. J., Autio, E., George, G., & Zahra, S. A. (2006). A capabilities perspective on the effects of early internationalization on firm survival and growth. Academy of Management Review, 31, 914–933.Google Scholar
Simon, H. A. (1957). Administrative behavior: A study of decision-making processes in administrative organization. New York, NY: Macmillan.Google Scholar
Simons, T., Pelled, L. H., & Smith, K. A. (1999). Making use of difference: Diversity, debate, and decision comprehensiveness in top management teams. Academy of Management Journal, 42, 662–674.Google Scholar
Simsek, Z. (2007). CEO tenure and organizational performance: An intervening model. Strategic Management Journal, 28(6), 653–662.Google Scholar
Smith, K. G., Smith, K. A., Olian, J. D., Sims, H. P., O’Bannon, D. P., & Scully, J. A. (1994). Top management team demography and process: The role of social integration and communication. Administrative Science Quarterly, 39, 412–438.Google Scholar
Tallman, S., & Li, J. (1996). Effects of international diversity and product diversity on the performance of multinational firms. Academy of Management Journal, 39, 179–196.Google Scholar
Tan, D. C., & Meyer, K. E. (2010). Business groups’ outward FDI: A managerial resources perspective. Journal of International Management, 16, 154–164.Google Scholar
Tan, J., & Peng, M. W. (2003). Organizational slack and firm performance during economic transitions: Two studies from an emerging economy. Strategic Management Journal, 24, 1249–1263.Google Scholar
Teece, D. J. (1980). Economies of scope and the scope of the enterprise. Journal of Economic Behavior and Organization, 1(3), 223–247.Google Scholar
Tihanyi, L., Ellstrand, A. E., Daily, C. M., & Dalton, D. R. (2000). Composition of the top management team and firm international diversification. Journal of Management, 26, 1157–1177.Google Scholar
Tjosvold, D., Poon, M., & Yu, Z. Y. (2005). Team effectiveness in China: Cooperative conflict for relationship building. Human Relations, 58(3), 341–367.CrossRefGoogle Scholar
Walsh, J. P. (1988). Selectivity and selective perception: An investigation of managers’ belief structures and information processing. Academy of Management Journal, 31, 873–896.CrossRefGoogle Scholar
Wang, Y. K. (2015). The impact of prestigious top management team on international alliance formation: Evidence from Taiwanese electronics firms. Journal of Management & Organization, 21(6), 835–852.Google Scholar
Wiersema, M. F., & Bantel, K. A. (1992). Top management team demography and corporate strategic change. Academy of Management Journal, 35, 91–121.Google Scholar
Williams, K. Y., & O’Reilly, C. A. (1998). Demography and diversity in organizations: A review of 40 years of research. Research in Organizational Behavior, 20, 77–140.Google Scholar
Xie, X. Y., Wang, W. L., & Qi, Z. J. (2015). The effects of TMT faultline configuration on a firm’s short-term performance and innovation activities. Journal of Management & Organization, 21(5), 558–572.Google Scholar
Zahra, S. A., Ireland, D. R., & Hitt, M. A. (2000). International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management Journal, 43, 925–950.Google Scholar