Research summary:

Drawing on the demographic faultline perspective and the concept of attribute-specific faultlines, we investigate the effect of top management team (TMT) relationship-related (gender, age, educational level) and task-related (functional background, tenure) faultline strengths on strategic change. In a panel study (2003–2015), we find that TMT relationship-related faultline strength (especially educational-level) negatively influences strategic change whereas TMT task-related faultline strength positively affects strategic change. Environmental dynamism reduces the negative effect of TMT gender and educational-level faultline strengths on strategic change while in fact revealing a notable positive effect between TMT age-faultline strength and strategic change. Additionally, environmental dynamism strengthens the positive effects of task-related TMT faultline strength on strategic change. We offer theoretical and practical implications to both the demographic faultlines and upper echelons research domains.

Managerial summary:

Top management teams (TMTs) in firms can fracture into subgroups based on demographic characteristics (e.g., age, gender, and education level) as well as based on task-related characteristics (e.g., functional background, and tenure). We call the former relationship-related faultlines and the latter task-related faultlines. We predict and find that stronger relationship based faultlines hinders between subgroup cohesion, reducing TMTs' ability to initiate strategic change. We also predict and find that stronger task-related faultlines facilitate inter-subgroup knowledge-sharing, improving TMTs' ability to initiate strategic change. We find that environmental dynamism reduces the negative effect of most relationship-related faultlines (except age where this effect is positive) on strategic change, while strengthening the positive effect of task-related faultline strengths on strategic change.