Top Management Team Diversity and Firm Performance: Moderators of Functional-Background and Locus-of-Control Diversity
Past research on the relationship between top management team (TMT) compositional diversity and organizational performance has paid insufficient attention to the nature of TMT team processes in interaction with TMT diversity. We fill this gap by studying how three team mechanisms (collaborative behavior, accurate information exchange, and decision-making decentralization) moderate the impact of TMT diversity on financial performance of 33 information technology firms. We focus on two fundamentally different forms of TMT diversity: functional-background (FB) and locus-of-control (LOC). We argue that the former has the potential to enhance decision quality and organizational performance, whereas the latter might trigger relational conflict, and is, therefore, potentially detrimental to firm effectiveness. The ultimate aim of our study is to analyze which team processes help to transform distributed FB knowledge into high-quality decisions and organizational effectiveness, and which help avoid the potential detrimental effects of LOC diversity. We find that a TMT's collaborative behavior and information exchange are necessary conditions to unleash the performance benefits of FB diversity, but do not interact with LOC diversity. In addition, decentralized decision making spurs the effectiveness of functionally diverse teams, while at the same time reinforces the negative consequences of LOC diversity on firm performance.
Volume (Year): 55 (2009)
Issue (Month): 2 (February)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- B. De Brabander & G. Thiers, 1984. "Successful Information System Development in Relation to Situational Factors Which Affect Effective Communication Between MIS-Users and EDP-Specialists," Management Science, INFORMS, vol. 30(2), pages 137-155, February.
- Jonathon N. Cummings, 2004. "Work Groups, Structural Diversity, and Knowledge Sharing in a Global Organization," Management Science, INFORMS, vol. 50(3), pages 352-364, March.
- Kristina Dahlin & L. Weingart & P. Hinds, 2005. "Team diversity and information use," Post-Print hal-00480406, HAL.
- Christophe Boone & Arjen Witteloostuijn, 1996. "Ceo Locus of Control and Small Firm Performance: an Integrative Framework and Empirical Test," Journal of Management Studies, Wiley Blackwell, vol. 33(5), pages 667-700, 09.
- Diane L. Rulke & Joseph Galaskiewicz, 2000. "Distribution of Knowledge, Group Network Structure, and Group Performance," Management Science, INFORMS, vol. 46(5), pages 612-625, May.
- Gruenfeld, Deborah H & Mannix, Elizabeth A. & Williams, Katherine Y. & Neale, Margaret A., 1996. "Group Composition and Decision Making: How Member Familiarity and Information Distribution Affect Process and Performance," Organizational Behavior and Human Decision Processes, Elsevier, vol. 67(1), pages 1-15, July.
- Boone, Christophe & van Olffen, Woody & van Witteloostuijn, Arjen, 1998. "Psychological team make-up as a determinant of economic firm performance: An experimental study," Journal of Economic Psychology, Elsevier, vol. 19(1), pages 43-73, February.
- S. Trevis Certo & Richard H. Lester & Catherine M. Dalton & Dan R. Dalton, 2006. "Top Management Teams, Strategy and Financial Performance: A Meta-Analytic Examination," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 813-839, 06.