The role of top management team diversity in shaping the performance of business model innovation: a threshold effect

ABSTRACT Business model innovation is one of the firm’s most important strategic decisions. Top management team (TMT), as the critical decision-makers, has essential influence upon such decisions. However, the role of TMT diversity in shaping the performance of business model innovation is less explored in the literature. Based on a sample dataset of 906 observations of small and medium enterprises from China Startups Stock Market during the period of 2009–2011, we find that TMT diversity exhibits a significant threshold effect on the relationship between business model innovation (in terms of novelty-centred and efficiency-centred business model) and firm performance. More specifically, when TMT functional diversity arrives at a certain level, the positive relationship between novelty-centred business model and firm performance becomes more pronounced. On the other hand, the positive relationship between efficiency-centred business model innovation and firm performance will be more significant when TMT tenure diversity increases to a certain level.

[1]  Mike W. Peng,et al.  Social network contingency, symbolic management, and boundary stretching , 2013 .

[2]  Yasemin Y. Kor,et al.  Experience-Based Top Management Team Competence and Sustained Growth , 2003, Organ. Sci..

[3]  Rodney L. Stump,et al.  The contingent effect of specific asset investments on joint action in manufacturer-supplier relationships: An empirical test of the moderating role of reciprocal asset investments, uncertainty, and trust , 1999 .

[4]  Alan E. Ellstrand,et al.  Composition of the Top Management Team and Firm International Diversification , 2000 .

[5]  B. Hansen,et al.  Testing for two-regime threshold cointegration in vector error-correction models , 2002 .

[6]  R. Amit,et al.  Value creation in E‐business , 2001 .

[7]  A. Bock,et al.  The Business Model in Practice and its Implications for Entrepreneurship Research , 2011 .

[8]  Raphael Amit,et al.  Business Model Design and the Performance of Entrepreneurial Firms , 2007, Organ. Sci..

[9]  Dodo zu Knyphausen‐Aufseß,et al.  Top Management Teams, Business Models, and Performance of Biotechnology Ventures: An Upper Echelon Perspective , 2008 .

[10]  H. Chesbrough.  Business Model Innovation: Opportunities and Barriers , 2010 .

[11]  A. U.S.,et al.  FORMULATION AND ESTIMATION OF STOCHASTIC FRONTIER PRODUCTION FUNCTION MODELS , 2001 .

[12]  R. Amit,et al.  The Business Model: Recent Developments and Future Research , 2011 .

[13]  Andrea Bonaccorsi,et al.  Entry Strategies Under Competing Standards: Hybrid Business Models in the Open Source Software Industry , 2006, Manag. Sci..

[14]  Albert A. Cannella,et al.  Top Management Team Functional Background Diversity and Firm Performance: Examining The Roles of Team Member Colocation and Environmental Uncertainty , 2008 .

[15]  W. Greene,et al.  计量经济分析 = Econometric analysis , 2009 .

[16]  Joel A. C. Baum,et al.  Dancing with Strangers: Aspiration Performance and the Search for Underwriting Syndicate Partners , 2005 .

[17]  D. Teece.  Business Models, Business Strategy and Innovation , 2010 .

[18]  Theresa S. Cho,et al.  The Influence of Top Management Team Heterogeneity on Firms' Competitive Moves , 1996 .

[19]  D. Hambrick,et al.  Upper Echelons: The Organization as a Reflection of Its Top Managers , 1984 .

[20]  J. Tidd,et al.  Creating and Capturing Value from External Knowledge: The Moderating Role of Knowledge Intensity , 2014 .

[21]  M. Sako,et al.  Profiting from business model innovation: Evidence from Pay-As-You-Drive auto insurance , 2013 .

[22]  Wenqing Chen,et al.  Business model ambidexterity and technological innovation performance: evidence from China , 2016, Technol. Anal. Strateg. Manag..

[23]  Lin Cui,et al.  State ownership effect on firms' FDI ownership decisions under institutional pressure: a study of Chinese outward-investing firms , 2012 .

[24]  R. Casadesus-Masanell,et al.  Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models , 2013 .

[25]  T. Simons,et al.  Making Use of Difference : Diversity , Debate , and Decision Comprehensiveness in Top Management Teams , 2017 .

[26]  Sara L. Keck.  Top Management Team Structure: Differential Effects by Environmental Context , 1997 .

[27]  Takao Kato,et al.  Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges , 2005, Economic Development and Cultural Change.

[28]  Dirk De Clercq,et al.  Changing the business model: effects of venture capital firms and outside CEOs on portfolio company performance , 2015 .

[29]  Edward Giesen,et al.  When and how to innovate your business model , 2010 .

[30]  T. Knudsen,et al.  Entry and exit decisions in flexible teams , 2007 .

[31]  Noel Longhurst,et al.  What influences the diffusion of grassroots innovations for sustainability? Investigating community currency niches , 2016, Technol. Anal. Strateg. Manag..

[32]  Cynthia A. Montgomery,et al.  Are incentives without expertise sufficient? Evidence from fortune 500 firms , 2015 .

[33]  Peter M. Madsen,et al.  Failing to Learn? The Effects of Failure and Success on Organizational Learning in the Global Orbital Launch Vehicle Industry , 2010 .

[34]  B. Hansen.  Sample Splitting and Threshold Estimation , 2000 .

[35]  D. Hambrick.  Upper Echelons Theory: An Update , 2007 .

[36]  Han-Chen Huang,et al.  Top management team social capital, exploration-based innovation, and exploitation-based innovation in SMEs , 2014, Technol. Anal. Strateg. Manag..

[37]  Mason A. Carpenter,et al.  Top management team compensation: The missing link between CEO pay and firm performance? , 2002 .

[38]  G. Battese,et al.  A model for technical inefficiency effects in a stochastic frontier production function for panel data , 1995 .

[39]  Oliver E. Williamson,et al.  Asset specificity and economic organization , 1985 .

[40]  Joseph T. Banas,et al.  Comparing Alternative Conceptualizations of Functional Diversity in Management Teams: Process and Performance Effects , 2002 .

[41]  B. Menguc,et al.  Top management team diversity and innovativeness: The moderating role of interfunctional coordination , 2005 .

[42]  Ilan Oshri,et al.  Business Model Renewal and Ambidexterity: Structural Alteration and Strategy Formation Process During Transition to a Cloud Business Model , 2014 .

[43]  Paul Matthyssens,et al.  Top Management Team Functional Diversity and Firm Performance: The Moderating Role of CEO Characteristics , 2010 .

[44]  Andrea Rangone,et al.  How to get strategic planning and business model design wrong: the case of a mobile technology provider , 2010 .

[45]  P. Matthyssens,et al.  Top Management Team Functional Diversity and Firm Performance: The Moderating Role of , 2011 .

[46]  R. Amit,et al.  The fit between product market strategy and business model: implications for firm performance , 2008 .

[47]  Florian A. A. Becker-Ritterspach,et al.  Changing Business Models and Employee Representation in the Airline Industry: A Comparison of British Airways and Deutsche Lufthansa , 2015 .

[48]  Andrea Bonaccorsi,et al.  Adaptive Entry Strategies Under Dominant Standards - Hybrid Business Models in the Open Source Software Industry , 2004 .

[49]  Christophe Boone,et al.  Top Management Team Diversity and Firm Performance: Moderators of Functional-Background and Locus-of-Control Diversity , 2009, Manag. Sci..

[50]  Liliana Doganova,et al.  What do business models do? Narratives, calculation and market exploration , 2009 .

[51]  Nils Plambeck,et al.  The development of new products: The role of firm context and managerial cognition , 2012 .

[52]  Todd R. Zenger,et al.  Organizational Demography: The Differential Effects of Age and Tenure Distributions on Technical Communication , 1989 .

[53]  Arun Rai,et al.  Research Commentary - Information Technology-Enabled Business Models: A Conceptual Framework and a Coevolution Perspective for Future Research , 2014, Inf. Syst. Res..

[54]  Luis L. Martins,et al.  Unlocking the Hidden Value of Concepts: A Cognitive Approach to Business Model Innovation , 2015 .

[55]  S. Salomo,et al.  How top management team diversity affects innovativeness and performance via the strategic choice to focus on innovation fields , 2010 .

[56]  Raphael Amit,et al.  Business Model Design: An Activity System Perspective , 2010 .

[57]  Deborah G. . Ancona,et al.  Demography and Design: Predictors of New Product Team Performance , 1992 .