Top management team diversity and firm performance: Exploring new constructs and moderators

The study of managerial elites has been dominated by the upper echelons perspective, which holds that executives play a key role in shaping organizational outcomes (Hambrick & Mason, 1984). Following nearly three decades of research, the upper echelons perspective has produced a vast number of empirical studies that have investigated the impact of top management team (TMT) characteristics on the strategies and performance of companies. A question that has recently gained momentum within the realm of upper echelons research is how TMT diversity affects strategy and performance outcomes at large, multinational companies. While numerous upper echelon studies have found effects of TMT diversity on organizational strategy and performance outcomes, empirical research in this area has also yielded many inconsistent results (Certo, Lester, Dalton & Dalton, 2006).
Four dominant explanations for the lack of consistent results have emerged: (1) The team processes that transform the demographic profiles of TMTs into strategic actions and performance outcomes are insufficiently understood (Hambrick, 2007; Lawrence, 1997); (2) Researchers have used different conceptualizations to define and measure the construct of diversity (Bell, Villado, Lukasik, Belau, & Briggs, 2011; Harrison & Klein, 2007; Van Knippenberg & Schippers, 2007); (3) The effects of TMT diversity on firm strategy and performance outcomes are contextually dependent and must be conditioned on moderating effects at the team-, firm-, and industry-level (Carpenter, 2002; Keck, 1997); and (4) Longitudinal studies are required to understand how changes in diversity configurations affect performance over time (Horwitz & Horwitz, 2007; Joshi, Liao, & Roh, 2011).
In this project, we investigate these four dominant explanations in greater depth. The first step in this process is to integrate multiple theoretical perspectives on team diversity that have been employed in existing research on TMTs, and to combine this with a panel of TMT data collected from large multinational firms. This will help us to understand how and why diversity emerges in TMTs as well as how TMT diversity evolves and changes in organizations over time. Subsequently, we will build on this enhanced understanding of the origins of TMT diversity and employ both quantitative and qualitative research approaches to address the inconsistent findings in past research on TMT diversity and firm performance outcomes.
Detailed information on all TMT members, company characteristics, performance measures, and industry characteristics is being collected from the public domain for the largest 100 publicly listed companies in Switzerland, Germany, the Netherlands, and the UK (i.e. 4*100 companies) at the year-ends 2005, 2007, 2009, and 2011. The panel structure of the data will allow for a longitudinal quantitative examination of TMT diversity, using different operationalizations of the team diversity construct. Simultaneously, we conduct an in-depth qualitative study, investigating the process and performance effects of diverse team constellations at corporate- and/or subsidiary-level TMTs of at least one large Swiss listed company.
The anticipated contribution of this study is at least threefold. First, the study will reconcile inconsistencies and divergence within the existing TMT diversity literature by investigating how different operationalizations of diversity affect firm performance outcomes. Second, the impact of contextual settings and temporal dynamics in TMTs will be closely examined to improve our understanding of the triggers of diversity-performance effects. Third, TMT case studies will shed light on the link between the origins of TMT diversity, team diversity configurations, and the team process outcomes that ultimately affect firm performance.