Negative performance feedback and structural changes within top management teams

Official URL: https://www.xcdsystem.com/aom/program/A5p5d1k/index.cfm?pgid=891&sid=31066&abid=83627

The research on top management teams (TMTs) has mostly focused on the composition, processes, incentives, and leaders of TMTs, with limited attention to the structural aspects. In this study, we develop a comprehensive model for TMT structural reconfigurations by integrating the TMT structural interdependence framework with the behavioral theory of the firm. By characterizing decision makers as boundedly rational that rely on performance feedback, we investigate how negative performance feedback influences TMT horizontal, vertical and reward interdependence. After analyzing data from 260 Standard and Poor (S&P) firms between 2007 and 2018, we find that when firms face negative performance feedback, its TMT horizontal interdependence decreases but its TMT vertical and reward interdependence increases. Additionally, we discover that TMT horizontal and reward interdependence are impacted more from social and vertical interdependence more from historical aspirations. The findings of this study introduce important contributions into the literatures on top management teams and behavioral theory of the firm.