Academic journal article Academy of Entrepreneurship Journal

Acquiring Top Management Team, Core Competence through Absorptive Capacity and Entrepreneurial Orientation

Academic journal article Academy of Entrepreneurship Journal

Acquiring Top Management Team, Core Competence through Absorptive Capacity and Entrepreneurial Orientation

Article excerpt

INTRODUCTION

In the dynamic environment, Top Management Team (TMT) plays a pivotal role to the success to the present and to the future of the firm. Ever since Hambrick and Mason (1984) proposed the upper echelon theory did we realize that the importance of TMT decision-making would strongly influence the organizational outcomes. Smith and Tushman (2005) integrated the role of the TMT on business operation. From then on, issues of how TMT affect business decision making and strategic planning has been highly recognized. Past researches have showed that TMT have an important impact on shaping the organizational culture. Organizational culture follows the corporate belief, core value and further affects organization decision-makings. However, each firm forms different culture types for having different top management team traits, vision and facing external environment. Thus, the roles of TMT are various, but the major role is to be the decision-maker (Hamrbick & Mason, 1984) and to create the vision, the belief of the firm. TMT are also sensitive to environmental scanning for which they decide the interior strategy, effective strategic planning, control to face the uncertainty and the change under the dynamic, fast moving environment. Therefore, TMT need to foresight, lead the organization to learn at any time, to enhance the organization core competence in order to compete with rivals and maximize the management performance.

Since Hambrick and Mason (1984) propose upper echelons theory that the upper echelons of an organization plays more decisive roles in the business operations process and management performance, most of previous studies of TMT are basically focused how TMT demographic characteristics or individuals' personalities, cognitive preference and risk-taking or risk-avoidance effect performance (e.g., Hambrick & Mason, 1984; Bantel & Jackson, 1989; Murry, 1989; Iaquinto & Fredickson, 1997; Pegels et al., 2003). Thus, the research of process from TMT toward performance is still vague and there are little studies examining the interrelationships among demographic characteristics, entrepreneurial orientation, absorptive capacity and core competence as an integrated framework.

For example, demographic characteristic among TMT members have played a significant role on a firm's decision choice. Age heterogeneity as well as tenure heterogeneity is likely to differ in their attitudes, values and perspective which could result in conflict of opinions so that it would hinder the cohesiveness among TMT members (Pfeffer, 1983). On the other hand, TMT diversity, the dissimilar opinions could accelerate effective group discussion and lead to high quality decision (Bantel and Jackson, 1989; Bose, 2015). Waller et al. (1995) propose that there is an association between functional background of TMT members and organization effectiveness. Tihany et al. (2000) argued that high educated members in TMT will search more eagerly for information thus can generate better strategies.

Furthermore, firms with better learning abilities tend to more actively gain knowledge and this knowledge could be very important to support a firm's outcomes. Covin and Slevin (1989) stated that management performance will relate to the tendency of a firm toward entrepreneurial process such as the methods, practices and decision-making styles that managers can act entrepreneurially. Core competence is uniqueness to a firm, and can provide better suggestion to key decision and thus create better outcomes (Petts, 1997; Yang, 2015). Chanvarausth and Ravichandran (2003) noted that a firm processing better learning ability would create better profit. Hence, we can know that learning ability, the attitude toward entrepreneurial activities, and the competences would determine the firm's performance.

From the above, TMT will have influence on absorptive capacity, entrepreneurial orientation, and core competence. Kisfalvi and Pitcher (2003) state that such as age, educational background, tenure and demographic variables of upper echelon examine the relationships between strategic variables such as innovation, diversification and so on, but find that demographic proxies for team diversity do not have consistency. …

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