Management International Review

, Volume 53, Issue 4, pp 513–534 | Cite as

In at the Deep End of Firm Internationalization

Nationality Diversity on Top Management Teams Matters
Research Article

Abstract

  • The purpose of this research is to examine the consequences of top management team (TMT) internationalization: why and under what conditions can TMT nationality diversity be beneficial?

  • On the basis of the upper echelons theory from the strategic leadership literature, the relationship between the TMT nationality diversity and firm performance in the strategic context of firm internationalization is investigated in moderated multiple regressions models (MMR) for a sample of Dutch, Swiss, and UK companies.

  • The study findings suggest that the TMT nationality diversity becomes advantageous only in firms with high degree of internationalization. Companies have to be strongly committed to foreign markets so that the benefits of the TMT nationality diversity can materialize.

  • The arising managerial implication is that the TMT nationality diversity can be a powerful tool in building a firm’s competitive advantage, provided that companies are strongly exposed to the international environment. The study also provides corroborative evidence that the search for moderating and mediating variables in the TMT demography research represents a step in the right direction.

Keywords

Firm internationalization Nationality diversity Top management team Upper echelons theory 

References

  1. Aguinis, H. (2004). Regression analysis for categorical moderators. New York: The Guilford Press.Google Scholar
  2. Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. London: Sage.Google Scholar
  3. Albert, M. (1993). Capitalism against capitalism. London: Whurr.Google Scholar
  4. Athanassiou, N., & Nigh, D. (1999). The impact of U.S. company internationalization on top management team advice networks: A tacit knowledge perspective. Strategic Management Journal, 20(1), 83–92.Google Scholar
  5. Athanassiou, N., & Nigh, D. (2000). Internationalization, tacit knowledge, and the top management teams of MNCs. Journal of International Business Studies, 31(3), 471–487.CrossRefGoogle Scholar
  6. Athanassiou N. A., & Roth, K. (2006). International experience heterogeneity effects on top management team advice networks: A hierarchical analysis. Management International Review, 46(6), 749–770.CrossRefGoogle Scholar
  7. Barkema, H. G., & Drogendijk, R. (2007). Internationalising in small, incremental or larger steps? Journal of International Business Studies, 38(7), 1132–1148.CrossRefGoogle Scholar
  8. Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182.CrossRefGoogle Scholar
  9. Bartel-Radic, A. (2006). Intercultural learning in global teams. Management International Review, 46(6), 647–678.CrossRefGoogle Scholar
  10. Bartlett, C., & Ghoshal, S. (1989). Managing across borders. Boston: Harvard Business School Press.Google Scholar
  11. Becht, B. (2010). Building a company without borders. Harvard Business Review, 88(4), 103–106.Google Scholar
  12. Beck, U. (2008). Reframing power in the globalized world. Organization Studies, 29(5), 793–804.CrossRefGoogle Scholar
  13. Blau, P. M. (1977). Inequality and heterogeneity: A primitive theory of social structure. New York: Free Press.Google Scholar
  14. Bouquet, C. (2005). Building global mindsets: An attention-based perspective. Houndmills: MacMillan.Google Scholar
  15. Brown, P., Beekes, W., & Verhoeven, P. (2011). Corporate governance, accounting and finance: A review. Accounting and Finance, 51(1), 96–172.CrossRefGoogle Scholar
  16. Caligiuri, P., Lazarova, M., & Zehetbauer, S. (2004). Top managers’ national diversity and boundary spanning: Attitudinal indicators of a firm’s internationalisation. Journal of Management Development, 23(9), 848–859.CrossRefGoogle Scholar
  17. Calof, J. L. (1994). The relationship between firm size and export behaviour revisited. Journal of International Business Studies, 25(2), 367–387.CrossRefGoogle Scholar
  18. Carpenter, M. A. (2002). The implications of strategy and social context for the relationship between top management team heterogeneity and firm performance. Strategic Management Journal, 23(3), 275–284.CrossRefGoogle Scholar
  19. Carpenter, M. A., & Fredrickson, J. W. (2001). Top management teams, global strategic posture and the moderating role of uncertainty. Academy of Management Journal, 44(3), 533–545.CrossRefGoogle Scholar
  20. Carpenter, M. A., Sanders, W. G., & Gregersen, H. (2001). Bundling human capital with organizational context: The impact of international assignment experience on multinational firm performance and CEO pay. Academy of Management Journal, 44(3), 493–511.CrossRefGoogle Scholar
  21. Carpenter, M. A., Pollock, T. G., & Leary, M. (2003). Governance, the experience of principals and agents, and global strategic intent: Testing a model of reasoned risk-taking. Strategic Management Journal, 24(9), 803–820.CrossRefGoogle Scholar
  22. Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. (2004). Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30(6), 749–778.Google Scholar
  23. Certo, S. T., Lester, R. H., Dalton, C. M., & Dalton, D. R. (2006). Top management teams, strategy and financial performance: A meta-analytic examination. Journal of Management Studies, 43(4), 813–839.CrossRefGoogle Scholar
  24. Cox, T., Lobel, S. A., & McLeod, P. L. (1991). Effects of ethnic group cultural differences on cooperative and competitive behavior on a group task. Academy of Management Journal, 34(4), 827–847.CrossRefGoogle Scholar
  25. Daily, C. M., Certo, S., & Dalton, D. R. (2000). International experience in the executive suite: The path to prosperity? Strategic Management Journal, 21(4), 515–523.CrossRefGoogle Scholar
  26. Dunning, J. H. (1988). Explaining international production. London: Unwin Hyman.Google Scholar
  27. Earley, P. C., & Mosakowski, E. (2000). Creating hybrid team cultures: An empirical test of transnational team functioning. Academy of Management Journal, 43(1), 26–49.CrossRefGoogle Scholar
  28. Eisenhardt, K. M., & Schoonhoven, C. B. (1990). Organizational growth: linking founding team, strategy, environment, and growth among U.S. semiconductor ventures (1978–1988). Administrative Science Quarterly, 35(3), 504–529.CrossRefGoogle Scholar
  29. Ely, R. J. (1994). The effects of organizational demographics and social identity on relationships among professional women. Administrative Science Quarterly, 39(2), 203–238.CrossRefGoogle Scholar
  30. Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.CrossRefGoogle Scholar
  31. Fich, E. M., & Shivdasani, A. (2006). Are busy boards effective monitors? Journal of Finance, 61(2), 689–724.CrossRefGoogle Scholar
  32. Finkelstein, S., Hambrick, D. C., & Cannella, A. A. (2008). Strategic Leadership: Theory and research on executives, top management teams, and boards. New York: Oxford University Press.Google Scholar
  33. Gong, Y. (2006). The impact of subsidiary top management team national diversity on subsidiary performance: Knowledge and legitimacy perspectives. Management International Review, 46(6), 771–790.CrossRefGoogle Scholar
  34. Greve, P., & Ruigrok, W. (2008). The rise of an international market for executive labour. In L. Oxelheim (Ed.), Markets and compensation for executives in Europe (pp. 53–78). Bingley: Emerald Group Publishing.Google Scholar
  35. Greve, P., Nielsen, S., & Ruigrok, W. (2009). Transcending borders with international top management teams: A study of European financial multinational corporations. European Management Journal, 27(3), 213–224.CrossRefGoogle Scholar
  36. Gupta, A. K., & Govindarajan, V. (1984). Business unit strategy, managerial characteristics, and business unit effectiveness at strategy implementation. Academy of Management Journal, 27(1), 25–41.CrossRefGoogle Scholar
  37. Gupta, A. K., & Govindarajan, V. (2002). Cultivating a global mindset. Academy of Management Executive, 16(1),116–126.CrossRefGoogle Scholar
  38. Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Review, 32(2), 334–343.CrossRefGoogle Scholar
  39. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.Google Scholar
  40. Hambrick, D. C., Cho T., & Chen, M. (1996). The influence of top management team heterogeneity on firms’ competitive moves. Administrative Science Quarterly, 41(4), 659–684.CrossRefGoogle Scholar
  41. Hambrick, D. C., Davison, S. C., Snell, S. A., & Snow, C. C. (1998). When groups consist of multiple nationalities: Towards a new understanding of the implications. Organization Studies, 19(2), 181–205.CrossRefGoogle Scholar
  42. Harrison, D. A., & Klein, K. J. (2007). What’s the difference? Diversity constructs as separation, variety, or disparity in organizations. Academy of Management Review, 32(4), 1199–1228.CrossRefGoogle Scholar
  43. Haslam, S. A., Ryan, M. K., Kulich, C., Trojanowski, G., & Atkins, C. (2010). Investing with prejudice: The relationship between women’s presence on company boards and objective and subjective measures of company performance. British Journal of Management, 21(2), 484–497.Google Scholar
  44. Heijltjes, M., Olie, R., & Glunk, U. (2003). Internationalisation of top management teams in Europe. European Management Journal, 21(1), 89–97.CrossRefGoogle Scholar
  45. Hitt, M., Hoskisson, R., & Kim, H. (1997). International diversification: Effects on innovation and firm performance in product-diversified firms. Academy of Management Journal, 40(4), 767–798.CrossRefGoogle Scholar
  46. Hofstede, G., & Hofstede, G. J. (2005). Cultures and organizations: Software of the mind. New York: McGraw-Hill.Google Scholar
  47. Johanson, J. & Vahlne, J. E. (1977). The internationalization process of the firm: A model of knowledge development and increasing market commitments. Journal of International Business Studies, 8(1), 23–32.CrossRefGoogle Scholar
  48. Kilduff, M., Angelmar, R., & Mehra, A. (2000). Top management team diversity and firm performance: Examining the role of cognitions. Organization Science, 11(1), 21–34.CrossRefGoogle Scholar
  49. Kobrin, S. J. (1994). Is there a relationship between a geocentric mind-set and multinational strategy? Journal of International Business Studies, 25(3), 493–511.CrossRefGoogle Scholar
  50. Kostova, T., & Zaheer, S. (1999). Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24(1), 64–81.Google Scholar
  51. Kwee, Z., Van Den Bosch, F. A. J., & Volberda, H. W. (2011). The influence of top management team’s corporate governance orientation on strategic renewal trajectories: A longitudinal analysis of Royal Dutch Shell plc, 1907–2004. Journal of Management Studies, 48(5), 984–1014.CrossRefGoogle Scholar
  52. La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1154.CrossRefGoogle Scholar
  53. Letza, S., Sun, X., & Kirkbride, J. (2004). Shareholding versus stakeholding: A critical review of corporate governance. Corporate Governance, 12(3), 242–262.CrossRefGoogle Scholar
  54. Linck, J., Netter, J., & Yang, T. (2008). The determinants of board structure. Journal of Financial Economics, 87(2), 308–328.CrossRefGoogle Scholar
  55. Luo, Y. (2005). How does globalization affect corporate governance and accountability? A perspective from MNEs. Journal of International Management, 11(1), 19–41.CrossRefGoogle Scholar
  56. Martin, J. D., & Sayrak, A. (2003). Corporate diversification and shareholder value: A survey of recent literature. Journal of Corporate Finance, 9(1), 37–57.CrossRefGoogle Scholar
  57. Martins, L. L., Milliken, F. J., Wiesenfeld, B. M., & Salgado, S. R. (2003). Racioethnic diversity and group members’ experiences: The role of the racioethnic diversity of the organizational context. Group & Organization Management, 28(1), 75–106.CrossRefGoogle Scholar
  58. Maznevski, M. L., & Athanassiou, N. A. (2006). Guest editors’ introduction to the focused issue: A new direction for global teams research. Management International Review, 46(6), 631–646.CrossRefGoogle Scholar
  59. Mellahi, K., & Collings, D. G. (2010). The barriers to effective global talent management: The example of corporate élites in MNEs. Journal of World Business, 45(2), 143–149.CrossRefGoogle Scholar
  60. Michel, J. & Hambrick, D. (1992). Diversification posture and top management team characteristics. Academy of Management Journal, 35(1), 9–37.CrossRefGoogle Scholar
  61. Milliken, F. J., & Martins, L. L. (1996). Searching for common threads: Understanding the multiple effects of diversity in organizational groups. Academy of Management Journal, 21(2), 402–433.Google Scholar
  62. Moerland, P. W. (1995). Alternative disciplinary mechanisms in different corporate systems. Journal of Economic Behavior and Organization, 26(1), 17–34.CrossRefGoogle Scholar
  63. Nielsen, B. B., & Nielsen, S. (2011). The role of top management team international orientation in international strategic decision-making: The choice of foreign entry mode. Journal of World Business, 46(2), 185–193.CrossRefGoogle Scholar
  64. Nielsen, S. (2010a). Top management team internationalization and firm performance: The mediating role of foreign market entry. Management International Review, 50(2), 185–206.CrossRefGoogle Scholar
  65. Nielsen, S. (2010b). Top management team diversity: A review of theories and methodologies. International Journal of Management Reviews, 12(3), 301–316.Google Scholar
  66. Oetzel, J. G. (1995). Intercultural small groups: An effective decision-making theory. In R. L. Wiseman (Ed.), Intercultural communication theories (pp. 247–270). Newbury Park: Sage.Google Scholar
  67. Ohmae, K. (1990). The borderless world: Power and strategy in the interlinked economy. New York: Free Press.Google Scholar
  68. Osterhammel, J. (2005). Colonialism: A theoretical overview. Princeton: Markus Weiner.Google Scholar
  69. Porter, M. (1990). The competitive advantage of nations. New York: Free Press.Google Scholar
  70. Porter, M. (1998). On competition. Boston: Harvard Business School Press.Google Scholar
  71. Pye, A. J., Kaczmarek, S. P., & Kimino, S. (2012). Changing scenes in and around the boardroom: UK corporate governance in practice from 1989 to 2009. In T. Clarke & D. Branson (Eds.), The Sage handbook of corporate governance (pp. 255–284). Sage: London.Google Scholar
  72. Reuber, R., & Fischer, E. (1997). The influence of the management team’s international experience on the internationalization behaviours of SMEs. Journal of International Business Studies, 28(4), 807–825.CrossRefGoogle Scholar
  73. Rugman, A. M. & Collinson, S. (2009). International business (5th ed.). Harlow: Prentice Hall.Google Scholar
  74. Ruigrok, W., & Van Tulder, R. (1995). The logic of international restructuring. London: Routledge.Google Scholar
  75. Ruigrok, W., Peck, S., Tacheva, S., Greve, P., & Hu, Y. (2006). The determinants and effects of board nomination committees. Journal of Management and Governance, 10(2), 119–148.CrossRefGoogle Scholar
  76. Ruigrok, W., Peck, S., & Tacheva, S. (2007). Nationality and gender diversity on Swiss corporate boards. Corporate Governance: An International Review, 15(4), 546–557.CrossRefGoogle Scholar
  77. Sambharya, R. B. (1996). Foreign experience of top management teams and international diversification strategies of U.S. multinational companies. Strategic Management Journal, 17(9), 739–746.CrossRefGoogle Scholar
  78. Shieh, G. (2010). On the misconception of multicollinearity in detection of moderating effects: Multicollinearity is not always detrimental. Multivariate Behavioral Research, 45(3), 483–507.CrossRefGoogle Scholar
  79. Staples, C. L. (2007). Board globalization in the world’s largest transnational corporations 1993–2005. Corporate Governance: An International Review, 15(2), 311–21.CrossRefGoogle Scholar
  80. Sullivan, D. (1994). Measuring the degree of internationalization of a firm. Journal of International Business Studies, 25(2), 325–342.CrossRefGoogle Scholar
  81. Sveiby, K. E. (1997). The new organizational wealth: Managing and measuring knowledge based assets. San Francisco: Berrett-Koehler.Google Scholar
  82. Szilagyi, A. D., & Schweiger, D. M. (1984). Matching managers to strategies: A review and suggested framework. Academy of Management Review, 9(4), 626–637.Google Scholar
  83. Tihanyi, L., Ellstrand, A. E., Daily, C. M., & Dalton, D. R. (2000). Composition of the top management team and firm international diversification. Journal of Management, 26(6), 1157–1177.CrossRefGoogle Scholar
  84. Van Den Bulcke, D., Verbeke, A., & Yuan, W. (2009). Handbook on small nations in the global economy: The contribution of multinational enterprises to national economic success. Cheltenham: Elgar.Google Scholar
  85. Van Veen, K., & Elbertsen, J. (2008). Governance regimes and nationality diversity in corporate boards: A comparative study of Germany, the Netherlands and the United Kingdom. Corporate Governance : An International Review, 16(5), 386–399.CrossRefGoogle Scholar
  86. Van Veen, K., & Marsman, I. (2008). How international are executive boards of European MNCs? Nationality diversity in 15 European countries. European Management Journal, 26(3), 188–198.CrossRefGoogle Scholar
  87. Vermeulen, F., & Barkema, H. (2002). Pace, rhythm, and scope: Process dependence in building a profitable multinational corporation. Strategic Management Journal, 23(7), 637–653.CrossRefGoogle Scholar
  88. Watson, W. E., Kumar, K., & Michaelsen, L. K. (1993). Cultural diversity’s impact on interaction process and performance: Comparing homogeneous and diverse task groups. Academy of Management Journal, 36(3), 590–602.CrossRefGoogle Scholar
  89. Wiersema, M., & Bantel, K. (1992). Top management team demography and corporate strategic change. Academy of Management Journal, 35(1), 91–121.CrossRefGoogle Scholar
  90. Williams, K., & O’Reilly, C. A. (1998). Demography and diversity in organizations: A review of 40 years of research. In B. M. Staw & L. L. Cummings (Eds.), Research in organizational behavior, 20 (pp. 77–140). Greenwich: JAI Press.Google Scholar

Copyright information

© Springer Fachmedien Wiesbaden 2012

Authors and Affiliations

  1. 1.Newcastle Business SchoolNorthumbria UniversityNewcastle Upon TyneUK
  2. 2.Research Institute for International ManagementUniversity of St. GallenSt. GallenSwitzerland

Personalised recommendations