Does Top Management Team Heterogeneity Pay?

Abstract

The upper echelons theory argues that the characteristics of the senior managers affect firm performance. This study sought to test this proposition by evaluating the effect of top management team (TMT) heterogeneity on firm performance through a cross sectional descriptive survey. Primary data was collected from 53 large food and beverage manufacturing firms using a structured questionnaire and secondary data relating to the firms' financial performance was obtained from the Kenya Revenue Authority. Using ordinary linear regression, the study established that different heterogeneity components had different effects on the various performance perspectives. Age heterogeneity affected financial and customer performance significantly, education level heterogeneity affected customer and internal processes significantly and tenure heterogeneity affected internal processes performance significantly. On the overall, TMT heterogeneity had a significant negative effect on financial, social and internal processes performance. This confirmed the upper echelons proposition and highlighted the harmful consequences of TMT heterogeneity on performance.