Top Management Team Structure and Resource Reallocation Within the Multibusiness Firm

Abstract

Drawing on the classic concepts of integration and differentiation from contingency theory, we analyze the impact of influential business unit (BU) executives on the capital resource allocation decisions of the multibusiness firm. Capital resource allocation is one of the most important tasks of the top management team (TMT), yet management scholars have yet to explore the fundamental link between TMT structure and resource reallocation decisions. We hypothesize that greater BU influence within the firm's TMT drives greater reallocation because BU executives are positioned to focus on organizational elements related to differentiation. We also hypothesize contextual factors, based on the multidimensional nature of managerial influence, which act to limit the effect of BU influence. To support this analysis, we develop two unique measures: The first captures the degree of capital reallocation from year to year within the multibusiness firm, and the second measures the relative influence of BU executives. An empirical analysis on the sample of Fortune 1000 firms confirms that BU influence is associated with capital reallocation and that BU influence is moderated by research and development (R&D) intensity and unrelated diversification.

Factors influencing social entrepreneurial behavior: evidence from a developing nation

“…Social entrepreneurs always strive for solving social problems by adopting creative means (Robinson et al , 2009). In different countries and contexts, social entrepreneurs mostly focus on social issues (Shepherd and Patzelt, 2018; Vieregger et al , 2017). Social entrepreneurs are those who recognize a social problem and use entrepreneurial philosophies to organize, create and manage a venture to make social change (Boluk and Mottiar, 2014).…”

Resource Allocation and Strategy

“…The analysis finds that both the smallest and the largest of segments benefit in the capital allocation process, consistent with a complex combination of cognitive and political factors at play, leading to the favoring of extreme relative size types within corporations. Vieregger, Larson, and Anderson (2017) also challenge the notion that capital is spread evenly across a firm's business units. Building on research demonstrating that resource allocation is shaped by organizational power and politics, the authors draw on upper echelons research and classic contingency theory of organizational design to examine the impact of executives having a business unit orientation represented on the top management team.…”

“…Vieregger, Larson, and Anderson (2017) also challenge the notion that capital is spread evenly across a firm’s business units. Building on research demonstrating that resource allocation is shaped by organizational power and politics, the authors draw on upper echelons research and classic contingency theory of organizational design to examine the impact of executives having a business unit orientation represented on the top management team.…”

“…Another aspect is top management team structure. Vieregger et al (2017) examined, also in the context of multiunit firms, the influence of business units within the top management team on resource reallocation. An additional aspect is the size of a business segment relative to the rest of the organization.…”

“…The following two articles focus on aspects of the structural context within which resources are allocated. Like the Vieregger et al (2017) study, Sengul and Obloj (2017) also examine aspects of organizational design in a multidivisional firm, but their focus is on gaining insights into managing the structural context—specifically, the allocation of decision rights and the provision of incentives—to exert influence on resource allocation behaviors of business unit managers. Drawing on the behavioral theory of the firm and behavioral decision theory, the authors hypothesize that business units performing below aspirations are less likely to be given discretion over investment decisions and less likely to be provided with incentives that promote risk taking.…”