Antecedents and Consequences of Top Management Team Characteristics

This study examines the effects of top management teams (TMTs) on firm performance while adjusting for the endogeneity. The theoretical model proposes that (1) TMT characteristics are influenced by environment, organizational, and leadership (CEO) characteristics, (2) TMT characteristics significantly influences the firm performance, even after adjusting for the endogeneity, and (3) the relationship between TMT characteristics and firm performance is moderated by managerial discretion and industry characteristics. Using a panel sample of 1,752 firm-year observations from 292 U.S. based manufacturing firms over 6 years, this study tests multiple hypotheses derived from the propositions. Results suggest that TMT characteristics are endogenous selection since they are (1) adaptation to environmental conditions (i.e. industry munificence, industry dynamism, and technological intensity), (2) adjustment to organizational contingencies (i.e. firm size, firm strategy), and (3) outcome of leadership (CEO) power and background (i.e. CEO tenure, stock ownership, duality, and outside background). These findings indicate that firms actively shape and adjust their top executives according to the resource dependency from the industry, contingencies from organizational constraints, and attributes of individual CEOs. This study also finds the support for the upper echelons perspective that TMT characteristics are significantly associated with firm performance, even after adjusting for endogeneity. Specifically, TMT average tenure is positively associated with firm performance whereas TMT tenure diversity is negatively associated with firm performance. Higher proportion of variable pay in executives' compensation structure also has positive impact on firm performance. Furthermore, the effects of gender diversity on firm performance are contingent on the industry discretion level. Overall, the findings of this study support the main argument of upper echelons perspective: "executives do matter in organizational outcomes". Although vast majority of previous studies have examined the effects of TMT characteristics on organizational outcome, for the most part, they have not considered the endogenous nature of TMT characteristics. Such exogeneity assumption might not be valid since the results suggest that TMT characteristics are outcomes of firm's adjustment to the environmental, organizational, and leadership constraints. This study makes important contribution to the current upper echelons research, both theoretically and methodologically.

Grantor dc:publisher

University of Kansas

Year dc:date.issued

2013

Author dc:creator

• Oh, Wonyong

Advisor dc:contributor.advisor

• Barker, Vincent L

• Business
• Management
• endogeneity
• firm performance
• top management team
• upper echelons

Statement dc:rights

• Copyright held by the author.

Language dc:language.iso

en

Dc Identifier Other

http://dissertations.umi.com/ku:12982

OAI identifier oai:identifier

oai:kuscholarworks.ku.edu:1808/37611