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TMT experience, requisite variety, and firm performance

The intent of this workstream is to better understand the interrelationship between top management team experience distributions, the pattern of competitive actions that a firm develops and executes, and the consequences for firm performance.

Our first investigation, set in the context of the 3D printing industry, has recently been published in the Academy of Management Journal. In short:

This study develops and tests a thesis derived from the law of requisite variety. We contend that the greater the experiential variety of a top management team, the more likely the complexity and consistency of the firm’s competitive repertoire will be calibrated to relevant external variety. In addition, for firms that achieve such calibrated repertoires, we expect that their financial performance will be superior to that of their peers. We then integrate these arguments and examine whether top management team experiential variety indirectly, through calibrated repertoires, contributes to firm performance. Analyzing hand-collected data for firms operating in the 3D printing industry over the past three decades (1986-2017), we find support for the overall thesis and associated hypotheses. The discussion section elaborates on the study’s contributions, limitations, and future research potential.

(Abstract)

One of the more interesting findings is that teams who are able to appropriately parlay their greater reserves of experiential variety into competitive repertoires that match the complexity of the environment receive a dividend in the form of enhanced performance. The Figure below sketches the effect that we find:

A copy of a recent presentation based on an earlier draft of that paper is located here.

If you would like further details about the study or the setting, feel free to contact me here: bfox [at] bentley [dot] edu.