Top management team international experience and strategic decision-making

Abstract

Purpose This study aims to explore the influence of top management team international experience on international strategic decision-making rationality and, subsequently, its effect on decision effectiveness (decision performance). Design/methodology/approach This analysis is based on survey data of small- and medium-sized international Pakistani firms operating in the IT industry. Findings Results show that top management team international experience is positively related to international strategic decision-making rationality, and the latter partially mediates the international experience – decision effectiveness relationship. Research limitations/implications The study is based on data collected from a single industry and focuses on an international decision that occurred within a time-frame of previous four years. Practical implications Findings suggest that international firms, when composing their top management teams, should favor the inclusion of internationally experienced managers. Originality/value The study of the influence of international experience on the decision-making process in general and decision-making rationality in particular has been largely neglected in extant literature. This paper highlights one way through which the international experience of the top management team as a whole relates to the effectiveness of international decisions. The paper also advances emergent managerial cognition literature focusing on the top management team and not individual decision makers.

Top management team international experience, international information acquisition and international strategic decision rationality

“…However, in the international business literature, this focus on top manager characteristics, the decision-making process and decision rationality is scarce despite its importance for the international strategic decision-making process (Ji and Dimitratos, 2013; Child and Hsieh, 2014; Elbanna et al , 2020). To address this gap, Azam et al (2018) show that the international experience of the TMT is positively associated to international strategic decision rationality and that, in turn, international strategic decision rationality is positively associated to decision effectiveness. Similar to most upper echelons studies, Azam et al (2018) rely on a (logical) proxy (Hambrick, 2007) to represent the two sources of this effect: the direct effect of TMT personal international knowledge and the indirect effect of international information acquired from top managers’ international contacts.…”

“…To address this gap, Azam et al (2018) show that the international experience of the TMT is positively associated to international strategic decision rationality and that, in turn, international strategic decision rationality is positively associated to decision effectiveness. Similar to most upper echelons studies, Azam et al (2018) rely on a (logical) proxy (Hambrick, 2007) to represent the two sources of this effect: the direct effect of TMT personal international knowledge and the indirect effect of international information acquired from top managers’ international contacts. They do not explicitly test whether personal international knowledge and international information have separate effects on international strategic decision rationality.…”

“…They do not explicitly test whether personal international knowledge and international information have separate effects on international strategic decision rationality. In this study, to enhance our understanding of how international experience influences the process of international strategic decision-making and, in particular, decision-making rationality, we build on Azam et al (2018) and test explicitly for whether the positive effect of TMT international experience on international strategic decision rationality comes from: TMT personal international knowledge; and international information acquired from managers’ international contacts. …”

“…In turn, better informed international strategic decisions are more effective (Ji and Dimitratos, 2013) and lead to better firm performance (Jones et al , 1992). Azam et al (2018) suggested that TMT international experience provides the required fit in terms of the international knowledge and information needed for rational and effective international strategic decisions. They found that TMT international experience has a significant positive effect on international strategic decision rationality.…”

Untitled

“…Prior research has shown a number of factors that lead to improving the effectiveness of strategic decisions; these factors include the experience level of the management team (Azam et al, 2018), the ability to manage tension and create managerial acceptance of decisions (Calabretta et al, 2017), the ability to minimize the conflict levels and increase the level of collaboration among the organization's members (Hurt and Abebe, 2015), the ability to identify individual differences and exploit motivations (Borrero et al, 2017), and the ability to create shared values, facilitate information exchange, and encourage cooperative behavior (Gu et al, 2016).…”