Top management team heterogeneity, strategic decision making and the moderating role of TMT behaviour

Abstract

Since the 1980’s upper echelons theory postulated that managerial background characteristics partially predict organisational outcomes, TMT heterogeneity has been a subject of much interest. However, studies which examined the effects of TMT heterogeneity have produced inconsistent results due to a context-agnostic approach adopted in those studies, and a lack of appreciation of interaction effects among multiple diversity dimensions. This study accounts for these shortcomings and adopts a phenomenological research approach to explore how TMT heterogeneity affects strategic decision – a proximal outcome construct – in a context where there is a co-occurrence of multiple diversity dimensions. The study further recognises that the operating environment for organisations is typified by a trend of volatility, uncertainty, complexity and ambiguity which complicates decision making, and explores the effects of TMT heterogeneity in this context. The study finds that heterogeneous TMTs draw on their diverse and broad knowledge base to generate ideas and cross-pollinate in ways that improve the quality of strategic decisions. In instances where heterogeneity caused affective conflict which detracts from the efficacy of decisions, this study finds that the interaction of multiple diversity dimensions can neutralise the harmful effects of conflict, resulting in positive outcomes.