Square pegs and round holes: Testing the alignment of firm strategy and top management teams in young, high -potential firms
Abstract
This dissertation addressed two questions linking firm strategy and top management team turnover to firm performance, via the following questions: (1) Among young firms in emerging industries, is there greater alignment of top management team (TMT) instability with strategic instability in high-performers? and (2) Among young firms in emerging industries, do selected characteristics of the TMT impact the subsequent instability of membership in the TMT? Two industries, (1) related chemical research, drugs and biotechnology industry; and (2) the computer and communications equipment industry, constituted the empirical setting for the study. TMT instability and strategic instability were operationalized as indexes expressed as standardized values. Alignment, viewed as an interaction effect between strategic instability and TMT instability, was operationalized as the product of standardized values of the two. Firm performance was measured as the average annual market value of the outstanding shares, divided by the firm's total book value. Characteristics of the TMT viewed as impacting TMT instability were: (1) functional heterogeneity; (2) power distribution; (3) joint experience; (4) prior industry experience; and (5) percentage of inside directors. Ten hypotheses were developed to test the association between: (1) strategic instability; (2) TMT instability; and (3) the interaction effect, with firm performance. Ten more hypotheses tested the association between various TMT attributes and TMT instability. Justification for these hypotheses was drawn from prior research in the resource-based theory of the firm, population ecology, information-processing models, upper echelons theory, and expert-novice differences. Ordinary Least Squares (OLS) regression and factor analyses were used to test the above associations. One key finding of the research was the significant difference in the ability of the model to explain firm performance in each of the two industry settings. In the drug industry, the alignment (interaction effect) between TMT instability and strategic instability was viewed as impacting firm performance. In the computer industry no such relationship was indicated. Statistical associations between strategic instability and firm performance were found to be greater and more significant than were the associations between TMT instability and firm performance. The functional heterogeneity-TMT instability association was shown to be statistically significant though others were not.
Degree
Ph.D.
Advisors
Cooper, Purdue University.
Subject Area
Management
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