Chapter 6: Examining the Relationships between Top Management Team Psychological Characteristics, Transformational Leadership, and Business Unit Performance
6 Examining the relationships between top management team psychological characteristics, transformational leadership, and business unit performance Suzanne J. Peterson and Zhen Zhang The upper echelons theory suggests that an organization’s strategic choices and subsequent performance are reflections of the characteristics of its top executives, and especially its top management team (TMT; Hambrick and Mason, 1984; Carpenter et al., 2004). Many studies in this area have typically used TMT characteristics such as functional background, education level, age, and tenure to examine their effects on firm performance (e.g., Finkelstein and Hambrick, 1996; Certo et al., 2006; Cannella et al., 2008). Considerably less research has focused on the psychological characteristics of executives, and several authors in this volume seek to remedy that lack. Jones and Cannella develop propositions linking CEO Big Five characteristics to TMT involvement in strategic decision making in Chapter 1, while Sangster, in Chapter 4, reports results of Big Five tests for a sample of US executives. According to Finkelstein and Hambrick (1996), the lack of such research is primarily because assessment of psychological constructs is often problematic due to the difficulty in attaining data from executive samples. In contrast, Priem et al. (1999) argued that a focus on psychological constructs in TMT research is important as these constructs are more directly linked to behavior than the distal demographic characteristics used as proxies. In fact, research on teams lower in the organizational hierarchy shows significant personality effects in work groups (Moynihan and Peterson, 2001), pointing to the importance of studying...
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