Top Management Team Dynamics as a Microfoundation of Adaptive Capability? This paper examines the effects of subsidiary TMT composition as a microfoundation of firm strategic adaptive capability and performance in a transition economy. Using a unique survey dataset of 107 MNC subsidiary firms in China, the paper investigates a path between TMT functional diversity and firm performance through increased adaptive capability. Unexpectedly, the results show that a functionally-diversity has no positive effect, however when functionally-diverse TMTs engage in debate, there is a significant positive impact on adaptive capability, and through this, performance. Our findings suggest that, as long as TMTs engage in debate, the benefits of functional diversity outweigh the potential costs of conflict and information-withholding leading to a positive and significant impact on adaptive capability. Conversely, without debate, the negative impact of functional diversity overshadows the benefits, and diversity does not contribute to adaptive capability or performance. 1
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Top Management Team Dynamics as a Microfoundation of Adaptive
Capability?
This paper examines the effects of subsidiary TMT composition as a microfoundation
of firm strategic adaptive capability and performance in a transition economy. Using a unique
survey dataset of 107 MNC subsidiary firms in China, the paper investigates a path between
TMT functional diversity and firm performance through increased adaptive capability.
Unexpectedly, the results show that a functionally-diversity has no positive effect, however
when functionally-diverse TMTs engage in debate, there is a significant positive impact on
adaptive capability, and through this, performance. Our findings suggest that, as long as
TMTs engage in debate, the benefits of functional diversity outweigh the potential costs of
conflict and information-withholding leading to a positive and significant impact on adaptive
capability. Conversely, without debate, the negative impact of functional diversity
overshadows the benefits, and diversity does not contribute to adaptive capability or
performance.
Track: Strategy
1
Top Management Team Dynamics as a Microfoundation of Adaptive Capability?
The capacity to transform internal organizational resources in response to
environmental changes is consistently linked to sustained competitive advantage and
therefore fundamental to management research (Hoopes & Madsen, 2008; Teece, Pisano, &
Shuen, 1997). To face this challenge firms must develop dynamic capabilities to reconfigure
and adapt their existing resources (Teece & Pisano, 1998; Teece et al., 1997). Adaptive
capability, a core dynamic managerial capability, reflects an organization’s capacity to
reconfigure resources and adapt processes in an efficient and effective response to a changing
environment (Gibson & Birkinshaw, 2004). It comprises the capacity to search for new
opportunities, process relevant external and internal information and swiftly adapt
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TABLE 1
Variable Means, Standard Deviations and Correlation Coefficients