Activating the different sides of top management team faultlines in enterprise sustainable development: Is environmental responsibility a burden or boost to small and medium‐sized enterprises in China?

Abstract

Whether environmental responsibility can promote corporate performance has always been a focus of debate in theory and practice. We address the dispute regarding the effect of environmental responsibility by focusing on small and medium‐sized enterprises (SMEs) in China. Furthermore, based on team faultline theory, we argue that top management team (TMT) faultlines and bankruptcy threat combine to affect the relationship between environmental responsibility and long‐term performance in SMEs. Using data from 410 Chinese companies listed on the Growth Enterprise Market (GEM) during 2011–2020, we find that SMEs that engage in more environmental responsibility tend to have worse long‐term performance. Additionally, this relationship varies depending on the conditions of TMT composition (i.e., faultlines) and situation (i.e., bankruptcy threat). Specifically, when the bankruptcy threat is high, TMT faultlines negatively affect the relationship between environmental responsibility and long‐term firm performance. However, TMT faultlines positively affect this relationship when the bankruptcy threat is low. This paper sheds new light on corporate environmental responsibility by adopting a theoretical perspective of TMT faultlines and identifying the specific situations in which TMT faultlines act.

The more the better? Service transition for shaping sustainable development in manufacturing firms and the role of top management team attributes

“…The main reason for this result may be the lack of activation of faultlines, particularly in the case of product‐unrelated service transition (Liu & Van Peteghem, 2022 ). Notably, resource actions in this context can benefit from cognitive diversity and information advantages (Elmagrhi et al, 2019; Chen et al, 2022 ). The negligible moderating effect and opposing result warrant further discussion.…”

“…Following the resource orchestration perspective, Ndofor et al ( 2015 ) argue that TMT faultlines can affect both the conversion of resources to actions and the conversion of actions to performance. Similarly, Chen et al ( 2022 ) suggest that TMT faultlines influence the ability to integrate resources into environmental responsibility decision processes. Moreover, existing studies have confirmed the significant role of TMT faultlines in facilitating green technology innovation (Ma et al, 2021 ).…”

“…This can lead to paralysis in implementing novel or complex resource‐focused actions when emotional conflicts arise. Second, faultlines may foster a “scarcity mindset” within the team, limiting creativity in finding high‐quality solutions to resource challenges and hindering the firm's sustainability practices (Chen et al, 2022 ). Third, the difficulty of reconciling viewpoint heterogeneity adds pressure to the TMT's management attention and increases the risk of diluting the resource base, which is detrimental to achieving SP (Mihalache et al, 2012 ).…”

“…Stability reflects the dynamics and volatility within teams, while faultlines represent multidimensional heterogeneity within teams. These TMT attributes have received considerable attention from management scholars investigating their impact on resource‐related actions (Chen et al, 2022 ; Huang et al, 2022 ; Ndofor et al, 2015 ). While stability facilitates efficiency in resource‐focused actions, faultlines can create knowledge boundaries, emotional conflict, and behavioral disintegration (Cao & Yu, 2023 ; Li & Hambrick, 2005 ).…”

Unravelling trends, patterns and intellectual structure of research on bankruptcy in SMEs: A bibliometric assessment and visualisation

“…A business's bankruptcy has significant consequences for many parties, including clients, vendors, creditors, and employees [ 3 ]. At the same time, small and medium-sized enterprises (hereafter, SMEs) play a vital role in the country's economic development [ 4 ]. They contribute to the employment generation [ 5 , 6 ], innovation [ 7 ], and overall growth of the economy [ 8 ].…”