Toward a Model for Relating Executive Career Experiences and Firm Performance

Within certain constraints, it is widely accepted that decision makers have significant influence on a firm's performance (Astley and Van de Ven, 1983). According to March and Simon (1958), decision makers bring their own set of givens to the decision-making forum. Further research developed by Hambrick and Mason (1984), commonly referred to as upper echelons theory, suggests that the values, knowledge, and beliefs espoused by a firm's top leaders are reflective of various observable characteristics, such as age, education, and career experiences (Finkelstein and Hambrick, 1990; Michel and Hambrick, 1992; Wiersema and Bantel, 1992). In their earlier work, Hambrick and Mason (1984) noted that research on the upper echelon may help to guide the development or molding of a firm's top executives. Indeed, we suggest that upper echelon theory provides an entree for examining the career development of top management team (TMT) members and its effects on team composition and strategic decision making. Unlike prior research, which has focused on group-level TMT heterogeneity (e.g., Bantel and Jackson, 1989; Murray, 1989), the model and research propositions presented in this article center on the intra-personal heterogeneity of TMT members. We examine the use of job rotation as a means of developing intra-personal heterogeneity in TMT members to influence firm performance by improving TMT decision-making processes. As conceived here, intra-personal heterogeneity is the degree to which a TMT member has accumulated an array of knowledge, skills, and insights from his/her prior career experiences. Intra-personal heterogeneity can be developed with lateral career moves that expose managers to a variety of roles within the firm. While the value of job rotation strategies has long been espoused in promoting employee learning, career satisfaction, and interpersonal collaboration effectiveness (Campion et al., 1994; McCall et al., 1988; London, 1989), no clear link to firm performance has been made. This article hypothesizes that link. In doing so, the somewhat disparate literatures of human resource management and strategic management are applied in a complementary fashion. We begin with a review of upper echelons theory, followed by an examination of job rotation strategies and their influence on TMT heterogeneity. A model is then generated, linking intra-personal heterogeneity and firm performance via an enhanced TMT dominant logic and reduced cognitive biases. Lastly, implications for future research and practice are discussed. Theoretical Background Upper Echelons Theory Hambrick and Mason's (1984) upper echelons theory suggests that top managers' background characteristics, such as their career experiences, education level, socioeconomic background, and tenure, affect the strategic behavior of the organization. For instance, in a study of hospitals, Kimberly and Evanisko (1981) found that an executive's level of education is related to the firm's receptivity to innovation. Likewise, management research consistently associates managerial youth with corporate growth (Child, 1974). Other research findings indicate that executives with longer industry tenure or company tenure are more likely to be committed to the status quo and engage in persistent strategies (Finkelstein and Hambrick, 1990; Hambrick et al., 1993). Entrepreneurs tend to originate from lower socio-economic backgrounds and pursue aggressive strategies (Collins and Moore, 1970). Of particular interest in this article are career variables, such as functional background, which have also been investigated from the upper echelons perspective (e.g., Gupta and Govindarajan, 1984). For example, Dearborn and Simon (1958) found that when given a case study, executives defined the major issues in the study conforming with their primary functional area's goals. This suggests that executives can suffer from selective perception. …