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Rethinking the top management team demographic faultlines–firm performance relationship: The roles of TMT temporal stability and TMT hierarchical differentiation

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  • Li, Kaili
  • Liu, Renjing
  • Dong, Jiamin
  • Li, Yi

Abstract

Faultline literature typically adopts social categorization and information elaboration perspectives to examine the relationship between top management team (TMT) demographic faultlines and firm performance, but yields inconsistent findings. This study intends to reconcile these contradictions by utilizing the categorization-elaboration model (CEM) to analyze which perspective dominates this relationship under different scenarios. Using a sample of 1718 Chinese-listed firms from 2009 to 2021, we examine the independent and joint effects of TMT temporal stability (TMT shared experience and TMT membership change) and TMT hierarchical differentiation on the faultlines–performance relationship. The findings indicate that TMT shared experience weakens this negative relationship by enhancing information elaboration, whereas TMT membership change and TMT hierarchical differentiation strengthen it by enhancing social categorization. Additionally, TMT shared experience weakens the negative moderating effect of TMT hierarchical differentiation, whereas TMT membership change strengthens it. Theoretical and practical implications are discussed for better managing faultlines and team characteristics.

Suggested Citation

  • Li, Kaili & Liu, Renjing & Dong, Jiamin & Li, Yi, 2025. "Rethinking the top management team demographic faultlines–firm performance relationship: The roles of TMT temporal stability and TMT hierarchical differentiation," Journal of Business Research, Elsevier, vol. 196(C).
    • Handle: RePEc:eee:jbrese:v:196:y:2025:i:c:s0148296325002668
    DOI: 10.1016/j.jbusres.2025.115443
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