Diffusing the Differences : TMT heterogeneity, firm performance, and the moderating role of age

This study revisits the link between top management team (TMT) heterogeneity and firm performance by examining two distinct operationalizations of TMT heterogeneity and investigating the largely unexplored role of TMT member age as a moderator of heterogeneity-performance relationships. First, we draw upon recent advances in team diversity research to suggest that operationalizations of heterogeneity based on dispersion (diversity) and alignment (faultlines) display contrasting relationships with firm performance. Second, we build an argument based on the continuity theory of ageing to suggest that the moderating effect of TMT member age on the heterogeneity-performance relationship is contingent upon the TMT heterogeneity configuration. Hypothesis tests based on a cross-national dataset of 220 large European companies reveal considerable support for our contentions. We discuss the implications of our findings for TMT composition practices and outline avenues for subsequent research.