The Relationships between Top Management Demographic Characteristics, Rational Decision Making, Environmental Munificence, and Firm Performance Goll, Irene; Rasheed, Abdul A.
The intervening model ‘posits that team demography influences organizational performance entirely through team processes and that it has no direct effects on performance’. We believe that the integration of these two largely independent, yet complementary research streams can inform our understanding of decision processes and their impact on organizational outcomes.
We do so by
simultaneously investigating the impact of TMT demographic characteristics on rationality in decision making and the moderating role of environmental munificence in the relationship between decision rationality and organizational performance.
In other words, if demographic
characteristics are indeed proxies for other underlying managerial traits, it is easier to collect and measure those characteristics than managerial values or traits.
The upper echelons perspective is firmly based on the assumption that top managers account for what happens in and to an organization
A similar perspective is
presented by Gupta (1984) when he suggests that TMT characteristics are related to strategy and performance.
Priem (1990) proposed a
curvilinear relationship between TMT homogeneity/heterogeneity and firm performance, and suggested environment as a contextual factor affecting this relationship.
the extent of
rationality in organizational decision making and its subsequent impact Consensus binnen TMT
on organizational performance.Diversiteit binnen TMT
The demographic approach has also been criticized for its inability to suggest implementable prescriptive conclusions (Priem et al. 1999). Priem and Walters (1993) emphasize the need to ‘humanize’ upper echelons research by including individual factors such as attitudes, judgments, and choices. Pettigrew (1992) indicts demography-based TMT research for not observing and interviewing TMT members and relying entirely on archival data. Archival data, in most cases, is inferior to the data that could be collected through direct observation and interviewing as done by, for example, Eisenhardt (1989). Similarly, there are definitional problems as to defining who the TMT is. This cannot be resolved by the arbitrary choice of titles or levels of management (Pettigrew 1992).
West, C. T., & Schwenk, C. R. (1996). Top management team strategic consensus, demographic homogeneity and firm performance: A report of resounding nonfindings. Strategic Management Journal, 17(7), 571-76.
Hypothesis I : Overall, there will be a positive
relationship between strategic consensus
Hambrick and Mason (1 984) and Dess and Origer
(1987) argued that differences in TMT’s backgrounds
may be associated with less strategic
consensus and subsequently poorer performance,
due in part to decreased communication and
Hypothesis 2: Overall, there will be a positive
relationship between demographic homogeneity
Positive relationships were hypothesized to exist
between TMT consensus on goals and means,
demographic homogeneity and firm performance.
Further, it was argued that these relationships
would be stronger in a stable industry than in a
dynamic one. The moderated hierarchical
regression technique described above failed to
provide support for these hypotheses, as evidenced
in Table 2.
earlier significant findings.
The complete nonsignificance of the regression
results suggests strongly that the dependent variables
were inadequate1y measured, leaving the
true relationships between independent variables
a d firm performance as yet unknown (
A longitudinal study tapping appropriate
and quantifiable performance measures before and
after examining the extent of firm-specific consensus
would have the potential to make a much
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