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Article
Publication date: 10 July 2017

Martin R.W. Hiebl

Informed by upper echelons theory, the purpose of this paper is to synthesize the current knowledge on finance managers in family firms and to suggest valuable future…

Abstract

Purpose

Informed by upper echelons theory, the purpose of this paper is to synthesize the current knowledge on finance managers in family firms and to suggest valuable future research avenues.

Design/methodology/approach

The paper is organized as a theory-informed literature review. Based on a keyword search in electronic databases, 17 journal articles that deal with finance managers in family firms were identified. In light of upper echelons theory, the results of these articles were analyzed and future research needs were identified.

Findings

Overall, the current knowledge on finance managers in family firms is scant and fragmented. At the same time, this paper’s review findings indicate that finance managers can play decisive roles in family firms, which is why we need further research on their roles. Upper echelons theory is suggested in this paper as a theoretical framework that is well suited to guide such further research.

Originality/value

This is the first review of the academic literature on finance managers in family firms. Its main value lies in providing a theory-informed synthesis of current research on this topic and highlighting fruitful future research avenues.

Details

Journal of Family Business Management, vol. 7 no. 2
Type: Research Article
ISSN: 2043-6238

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Book part
Publication date: 29 August 2005

Albert A. Cannella and Tim R. Holcomb

The upper-echelons model of Hambrick and Mason ((1984). Academy of Management Review, 9, 193–206) launched a new area of research and provided the first overall…

Abstract

The upper-echelons model of Hambrick and Mason ((1984). Academy of Management Review, 9, 193–206) launched a new area of research and provided the first overall theoretical framework for use in understanding how the experiences, backgrounds, and values of senior executives in organizations can influence the decisions that they make. The model is typically assumed to be what Rousseau ((1985). In: B. M. Staw, & L. L. Cumming (Eds), Research in organizational behavior (Vol. 7, pp. 1–37). Greenwich, CT: JAI Press) calls “multi-level,” as it describes how both individuals and top management teams (TMTs) make decisions in line with their preferences, biases, and values; the same model is applicable to both individuals and groups. However, the levels issues in the model have never been subjected to rigorous analysis. This chapter juxtaposes levels concepts and theories on the upper-echelons model, in an effort to highlight its strengths as well as its weaknesses. While the majority of researchers use the model to describe team-level decision making, the analysis presented here reveals that the model is inherently individual-level in focus, and several important limitations must be overcome before the model will provide a full explanation of team-level decision making.

Details

Multi-Level Issues in Strategy and Methods
Type: Book
ISBN: 978-1-84950-330-3

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Article
Publication date: 25 June 2018

Wein-Hong Chen, Min-Ping Kang and Bella Butler

Penrose’s argument regarding the managerial constraint on continual expansion over two consecutive periods is termed the “Penrose effect,” a relatively less investigated…

Abstract

Purpose

Penrose’s argument regarding the managerial constraint on continual expansion over two consecutive periods is termed the “Penrose effect,” a relatively less investigated premise in Penrose’s growth theory. The purpose of this paper is to empirically re-examine the Penrose effect from the perspective of upper echelons theory and investigated how top management team (TMT) composition influences the continual growth of a firm.

Design/methodology/approach

This study empirically tested the hypotheses based on a sample of listed manufacturing firms operating in Taiwan, a newly industrialized economy in the Asia–Pacific region. Moderated hierarchical regression analyses were applied to test hypotheses.

Findings

The empirical results suggest that low TMT diversity (in terms of educational, functional and team tenure diversity) is likely to engender a situation in which the Penrose effect might occur. Additionally, the results indicate that the proportion of functional executives plays a significant role in influencing the growth trend over two consecutive periods and may soften the impact of the Penrose effect.

Practical implications

This paper suggests that appropriate structuring of TMTs and appropriate management of their members’ backgrounds and team tenure diversity can help firms overcome the Penrose effect and grow continually. Furthermore, the proportion of functional executives in a TMT is influential.

Originality/value

This paper uniquely contributes to the theoretical and empirical development of Penrose’s growth theory, upper echelons theory and resource-based view concerning managerial resources.

Details

Management Decision, vol. 57 no. 1
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 5 March 2018

Won Seok Lee, Choongbeom Choi and Joonho Moon

This study aims to investigate how upper echelon theory accounts for franchising by selecting the top management team to proxy for the upper echelon and using age, tenure…

Abstract

Purpose

This study aims to investigate how upper echelon theory accounts for franchising by selecting the top management team to proxy for the upper echelon and using age, tenure, education, equity ownership and stock options as its main attributes.

Design/methodology/approach

The sample was drawn from the Execucomp and Compustat databases and from other publicly accessible resources (e.g. LinkedIn and Business Week, in addition to Annual 10-K reports). A total of 29 restaurant companies were used for data collection, which covered the period of 2000-2013. A panel feasible generalized least squares (FGLS) regression was used to analyze the data.

Findings

The study found a significant moderating effect of the degree of internationalization on the relation between the attributes of the upper echelon (e.g. tenure, education and share ownership) and franchising decisions.

Research limitations/implications

The results verified that top managers in the restaurant industry with more tenure and share ownership become more risk averse when they operate under riskier conditions, whereas highly educated restaurant top management teams tend to take more risks in strategic decision-making.

Originality/value

This study expanded internationalization research to upper echelon theory and into the arena of franchising.

Details

International Journal of Culture, Tourism and Hospitality Research, vol. 12 no. 1
Type: Research Article
ISSN: 1750-6182

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Article
Publication date: 8 June 2015

Fabian Hattke and Steffen Blaschke

The purpose of this paper is to evaluate the influence of top management team diversity on academic excellence in universities. Academic excellence is conceptualized as…

Abstract

Purpose

The purpose of this paper is to evaluate the influence of top management team diversity on academic excellence in universities. Academic excellence is conceptualized as successfully gaining funds for inter-organizational research collaborations, interdisciplinary graduate schools and high-ranked scientific reputation.

Design/methodology/approach

The study applies upper echelon theory to universities. Three hypotheses are developed: (overall) top management team heterogeneity is positively associated with successful funding of excellence clusters, (overall) top management team heterogeneity is positively associated with successful funding of graduate schools and (overall) top management team heterogeneity is positively associated with academic reputation. The empirical study is based on a cross-sectional dataset with a time lag, covering characteristics of 75 German public universities from 2008 to 2013. Multiple-regression analysis is applied to test the hypotheses.

Findings

Our results indicate that disciplinary and educational diversity of upper echelons has a positive effect on the outcomes. Other top management team characteristics (age, gender, etc.) show no significant effects. Besides top management team composition, we find that a high number of faculties and a broad inclusion of internal status groups (students, tenured faculty, academic and administrative staff) and external stakeholders in decision making processes may enhance academic excellence of universities.

Research limitations/implications

First, the study contributes to the body of literature concerned with higher education. It is situated at the crossroads of management studies and higher education research, unlocking strategic management theorizing for the public context. Furthermore, the study contributes to the body of literature on strategic leadership in pluralistic organizations. It highlights the importance of heterogeneous governance structures and modular organization designs for achieving academic excellence.

Practical implications

The paper may inform practitioners in administrative or leading positions and policy-makers concerned with higher education. The more diverse a top management team is in terms of multiple disciplinary backgrounds, the more likely they succeed in driving the university toward academic excellence.

Originality/value

The study is among the first to evaluate the influence of top management teams in universities with a quantitative research design.

Details

Team Performance Management: An International Journal, vol. 21 no. 3/4
Type: Research Article
ISSN: 1352-7592

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Article
Publication date: 10 May 2019

Junli Yu, Shelagh M.R. Campbell, Jing Li and Zhou Zhang

The Chief Financial Officer (CFO), despite being a critical organization member responsible for ensuring quality of financial reporting, audit and compliance, is…

Abstract

Purpose

The Chief Financial Officer (CFO), despite being a critical organization member responsible for ensuring quality of financial reporting, audit and compliance, is under-researched. Grouped as a member of top management teams (TMS) in studies, factors influencing decision making in this group rely on static measures of characteristics without regard for dynamic and longitudinal influences of career trajectories and industry occupational group memberships. The relationship between the high-tech industry as a site of notable reported internal control (IC) weakness and influences on CFOs requires closer examination. The paper aims to discuss these issues.

Design/methodology/approach

The study draws together the upper echelons theory and occupational communities (OCs) to explore the impact of shared values and behavioral norms from different sources on executive decision making. Internal and external sources of OC are proposed and their influence on activities with respect to corporate IC is tested. The sample of 1,573 firm/year observations includes high-tech firms listed on major US exchanges was developed using data from five distinct databases. Executives’ biographic information was manually collected.

Findings

Results indicate that senior financial executives belong not only to their firm and its culture but also to OCs that extend beyond the firm. Membership in professional credential granting occupational groups has less impact on effective IC than experience in the high-tech industry. In combination, multiple OCs show evidence of compound and counteracting effects on IC. The OC that arises in the high-tech industry makes a measurable positive difference in the quality of IC in sample firms, in contrast with the OC among credentialed accounting and financial professionals.

Research limitations/implications

This quantitative study of OC reveals the differential impact of different sources of OC and contributes to the literature on TMS a new framework for examining decision making. OC is typically studied through qualitative methods and, thus, potential exists to further explore the specific nature and dynamics of the OCs identified in this study.

Practical implications

The study highlights the role of broad affiliations and networks among senior financial executives which may have bearing on their ability to effectively manage IC. The role of these networks may also partially explain instances of CFO failure and thus dismissal. Knowledge of the role of OC may help boards of directors in the selection and promotion of senior financial officers of the firm.

Originality/value

The paper offers a different perspective on professional accounting expertise in one specific industry where incidence of IC weakness is high relative to other industries. Study results expand recent research on TMS to include sociological impacts of cohort groups. Despite generally weaker IC in the high-tech sector, this study demonstrates the value of exploring group membership within the industry as an important predictor of behavior. The result is a new perspective to CFO decision making which illustrates the relevance of OCs among upper echelons. The implications of findings for CFO recruitment and promotion are borne out in recent instances of senior financial executive failure in the sector.

Details

Accounting, Auditing & Accountability Journal, vol. 32 no. 4
Type: Research Article
ISSN: 0951-3574

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Book part
Publication date: 29 August 2005

Albert A. Cannella and Tim R. Holcomb

We thank Carpenter and Dalton and Dalton for their insights on our earlier chapter, and on the promise (and perils) of upper-echelons research in general. We set out to…

Abstract

We thank Carpenter and Dalton and Dalton for their insights on our earlier chapter, and on the promise (and perils) of upper-echelons research in general. We set out to closely examine the levels issues in Hambrick and Mason's ((1984). Academy of Management Review, 9, 193–206.) original upper-echelons model, and the research initiatives that have applied this theoretical framework. We are encouraged by the initial reception that we have received from these authors. We continue to believe that top management teams (TMTs) are an important level of analysis for strategic leadership research, though the original upper-echelons model proposed by Hambrick and Mason cannot be directly applied at the team level. Our reply highlights several joint and individual concerns raised by the articles. We close by reiterating our call for continued analysis of the upper-echelons model.

Details

Multi-Level Issues in Strategy and Methods
Type: Book
ISBN: 978-1-84950-330-3

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Book part
Publication date: 27 June 2013

David A. Waldman and Mansour Javidan

The primary purpose of this chapter is to examine some old truths about leadership at the CEO level, and to summarize a new perspective based on charismatic leadership…

Abstract

The primary purpose of this chapter is to examine some old truths about leadership at the CEO level, and to summarize a new perspective based on charismatic leadership theory that could help cast light on this important area of strategic management. In so doing, we attempt to move charismatic leadership theory in some new directions by bridging micro-and macro-level conceptualizations. The upper echelons perspective from the strategic management literature is first summarized. We then identify problems in conceptualization and measurement that have served to limit the usefulness of this theoretical approach with regard to understanding the leadership role and effects of CEOs. We present two alternative new models that incorporate the constructs of strategic change, CEO charisma, and perceived environmental uncertainty. Data are also presented, suggesting mixed support for the models. Suggestions are made with regard to future quantitative and qualitative research.

Details

Transformational and Charismatic Leadership: The Road Ahead 10th Anniversary Edition
Type: Book
ISBN: 978-1-78190-600-2

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Article
Publication date: 8 April 2014

María Carmen Díaz-Fernández, María Rosario González-Rodríguez and Marek Pawlak

The importance of the performance of a firm and the essential role played by the management in their accomplishment has been discussed and recognised by many researchers…

Abstract

Purpose

The importance of the performance of a firm and the essential role played by the management in their accomplishment has been discussed and recognised by many researchers from Drucker to Upper Echelon Theory. Nonetheless, currently, anybody has been able to determine the precious and reliable parameters which let the firm achieve required-level performance. The confusion around this objective is still sufficient and the controversial has being growing widely over time, being the findings achieved contradictory, insufficient, imprecise and unreliable. Regarding the demographical literature findings focus on the premises previous related to Upper Echelon Theory. The purpose of this paper is to go further and try to test how, not only the level, but also the diversity of constructs like top management teams (TMT)'s demographic characteristics influence the firm performance accomplished by the managers by applying a Hierarchical Linear Regression Model.

Design/methodology/approach

Based on primary data from two Spanish databases – SABI, CNMV – and secondary data, a sample size of 147 TMTs in large companies from 18 industries sector with headquarters in Spain over a four years period (2004-2007) were obtained. The analysis focused on the total TMT for each firm. To test the relationship between the company performance and the demographic constructs, a more recent methodology based on hierarchical linear models (HLMs) using a longitudinal dataset of multinational big firms with headquarters in Spain was applied.

Findings

After applying the statistical techniques the results show a partial confirmation of the hypotheses formulated in the theoretical model proposed. First, the analysis evidences that company size is both highly correlated with TMT size and their demographic variables in terms of diversity. Second, the HLM shows that TMT's education-level diversity has a negative and significant impact on corporate performance and no significant effects for functionality and education background diversity have been found. Based on the accomplished findings, organisations appear to be more concerned about the employee's education level rather than their education background. Moreover, the model further supports that companies seem to be more aware of industry experience diversity than functionality diversity, also confirming a greater influence of the more international experience diversity of TMT on corporate performance.

Originality/value

This study offers a significant contribution not only by specifying a three-level hierarchical regression models regarding diverse approaches to measure the performance variable as dependent variable but also by considering as predictors not only the level of the demographic variables but also their diversity. This knowledge is relevant for entrepreneurial purposes since it highlights the achievement of high performance. The results allow us to explain which constructs influence the achievement of firm performance. Thus, this knowledge could be relevant to the entrepreneurs to encourage the firm survival and growth. Furthermore, focused on an ambitious purpose, it reveals the parameters needed to achieve to get the optimums performance level. Hence, the present study contributes an attempt to advance the literature on TMT composition by applying multi-level theory given the nested structure of the data set. The paper is one of few studies which apply panel data to analyse the influences of TMT characteristics on corporate performance and one of the first focused on Spanish entrepreneurial context.

Details

Industrial Management & Data Systems, vol. 114 no. 3
Type: Research Article
ISSN: 0263-5577

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Article
Publication date: 8 June 2015

Martin Weiss, Dirk Schneider and Jekaterina Lebid

This paper aims to develop a conceptual foundation of a fit between top management teams (TMTs) and their company’s corporate strategy. The authors fortify the importance…

Abstract

Purpose

This paper aims to develop a conceptual foundation of a fit between top management teams (TMTs) and their company’s corporate strategy. The authors fortify the importance of the concept of fit if the impact of upper echelons on organizational performance is trying to be explained. Yet, a constitutive concept of fit for the corporate strategy, a particularly important dimension of strategy, was previously neglected.

Design/methodology/approach

In a conceptual/theoretical approach, the authors selected demographic managerial characteristics from previous empirical studies from the research stream on upper echelons and combined them with other promising characteristics. To analyze them in respect to the requirements of low and highly diversified companies, the authors applied the concept of the dominant logic, an important theory in the field of corporate strategy.

Findings

The authors establish two distinct profiles of TMT members for low and high degrees of diversification and provide guidance on how to measure the TMT-corporate strategy fit – for individual TMT members and for the entire TMT – as a degree of fit on a ratio scale.

Originality/value

This work constitutes the first exhaustive concept of a TMT-corporate strategy fit. It provides a profound research foundation for scholars in the field of TMTs and the upper echelons theory as well as a promising and complementary perspective for practitioners when assessing their TMT composition.

Details

Team Performance Management: An International Journal, vol. 21 no. 3/4
Type: Research Article
ISSN: 1352-7592

Keywords

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