Academic journal article Journal of Business Strategies

Leadership's Activation of Team Cohesion as a Strategic Asset: An Empirical Simulation

Academic journal article Journal of Business Strategies

Leadership's Activation of Team Cohesion as a Strategic Asset: An Empirical Simulation

Article excerpt

Abstract

The current study examined the linkage between leadership, team cohesion, and superior performance using group process and performance data collected from a strategic management simulation conducted over a four-month period. Results showed that organizational leadership was not directly associated with superior performance (SP) of simulated firms. However, leadership was significantly associated with team cohesion, which in turn was significantly associated with SP, suggesting that leadership may strengthen performance indirectly by effectuating key group process mechanisms. Consistent with the Resource Based View of the firm, these findings suggest that leader behavior, through its positive impact on the development of team cohesion, can yield superior performance.

Introduction

Organizational researchers have long studied the effects of organizational leadership on firm performance, producing a rich array of theories and empirical findings (Bass, 1990; House & Podsakoff, 1995; Yukl, 1998). These theories and studies have revealed that the relationship between leadership behavior and specific performance outcomes is complex, and that the specific behaviors that are effective often depends on a variety of variables, including situational factors and follower characteristics (Blake & Mouton, 1985; Hersey & Blanchard, 1988; House, 1971). Although the context-dependency of effective leader behavior may make consistent, direct relationships with firm performance unlikely, it is possible that leadership might still serve to activate group process variables and other intangible factors that may have a more stable, direct, and significant relationship with ongoing firm performance. Thus, consistent with the Resource Based View of the firm (Dierickx & Cool, 1989), leadership could serve to activate resources and core processes crucial to organizational functioning that could, in turn, have a potent effect on firm performance. One such resource could be the cohesion of the top management team (TMT). Indeed, a large number of studies have shown that cohesion often has a strong relationship with group performance (Mullen & Copper, 1994). TMT cohesion may also have the potential to operate as an intangible strategic asset by helping the TMT reach consensus on strategic direction and organizational controls, as well as by thcilitating communication and commitment to shared organizational goals (Smith, Smith, Olian & Sims, 1994).

The current research examines the nature of the relationship between leadership and superior performance. Does leadership directly affect performance? Or does leadership indirectly influence performance through group process resources, such as team cohesion? The major purpose of the study was to examine the possibility that leadership has an indirect effect on superior performance that operates via cohesion. Specifically, we sought to empirically examine the following relationships: (a) the relationship between leadership and the superior performance of simulated firms, (b) the relationship between team cohesion and superior performance, and (c) the relationship between leadership and team cohesion.

Leadership and Firm Performance

Existing research on the relationship between leadership and firm performance has produced mixed results (Bass, 1990; Lieberson & O'Connor, 1972; Salancik & Pfeffer, 1977; Thomas, 1988). This has divided scholars in their contention (Channon, 1979; Hambrick & Mason, 1984; Waldman, Ramirez, House & Puranam, 2001; Weiner & Mahoney, 1981) or opposition, that leadership, in and of itself, has a direct impact on firm performance (Cyert & March, 1963: Hannan & Freeman, 1977; Khurana, 2002; Lieberson & O'Connor, 1972; Salancik & Pfeffer, 1977). Some have argued that the inconsistent findings are due to methodological differences, (Thomas, 1988; Weiner & Mahoney, 1981), whereas others propose that further empirical studies should locus on when and how leadership affects firm performance (Day & Lord, 1988). …

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