Review of Managerial Science
https://doi.org/10.1007/s11846-022-00524-w
ORIGINAL PAPER
Functional diversity of top management teams and firm
performance in SMEs: a social network perspective
Lulu Zhou1 · Haiyan Huang2 · Xiaolin Chen3 · Feng Tian4
Received: 29 May 2020 / Accepted: 3 January 2022
© The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2022
Abstract
This paper adopts a social network perspective and divides the functional diversity of top management teams (TMTs) into intrapersonal functional diversity (IFD)
and dominant functional diversity (DFD) to identify the impacts of these two types
of functional diversity on firm performance in Chinese SMEs. It further explores
the moderating effects of the internal network density and external bridging ties of
TMTs. Based on questionnaires collected from 762 newly founded SMEs in China,
the results show that IFD and DFD have positive effects on firm performance, that
the network density within a TMT plays a positive moderating role in the relationship between TMT functional diversity and firm performance, and that the interaction between internal network density and external bridging ties plays a positive
moderating role in the relationship between IFD and firm performance. Thus, it is
recommended that new SMEs build TMTs with diverse functions. Moreover, TMTs
should pay attention to the structural role of internal trust networks and the external
role of bridging ties and give full play to their interactive functions.
Keywords TMT functional diversity · Social networks · Firm performance
* Xiaolin Chen
njchenxiaolin2019@163.com
Lulu Zhou
lulu_513@163.com
Haiyan Huang
huanghaiyan_nj@163.com
Feng Tian
Feng.Tian@newcastle.edu.au
1
School of Economics and Management, Southeast University, No. 2, Sipailou Road,
Nanjing 210096, China
2
School of Business, Nanjing Audit University, No. 86, Yushanxi Road, Nanjing 211815, China
3
School of Marketing & Logistics Management, Nanjing University of Finance & Economics,
No.3, Xianlindaxuecheng Wenyuan Road, Nanjing 210023, China
4
Newcastle Business School, University of Newcastle, University Drive, Callaghan, NSW 2308,
Australia
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L. Zhou et al.
JEL Classification C83
1 Introduction
According to upper echelons theory, top management teams (TMTs) influence
firm performance through strategic decisions (Hambrick and Mason 1984). TMTs
play an increasingly important role in corporate strategic planning, restructuring
and repositioning (Díaz-Fernández et al. 2016; Georgakakis et al. 2017; Tushman
and Rosenkopf 1996), internal and external resource mobilization (Cannella et al.
2008; Collins and Clark 2003), innovation and new product development (Wu
et al. 2019). Hambrick and Mason (1984) believe that differences in TMT composition affect company performance by influencing strategic choices. Kraus and
Bouncken (2014) identify the impact of family involvement in a firm’s top management team on firm performance. The diversity of a TMT refers to the extent to
which the members of a TMT differ in terms of functional experience, age, tenure
and specialty. Cannella et al. (2008) argue that the functional background diversity of a TMT affects firm performance. In addition, Executives can accumulate a
lot of invisible knowledge in their long-term professional experience, which is an
important source of innovation and can also promote the innovation of business
models (Castellani et al. 2021; Chung et al. 2004).
Although the diversity of executive teams is considered an important factor
affecting performance, the literature has drawn inconsistent conclusions in this
context (Homberg and Bui 2013). Some studies suggest that the diversity of executive teams has a positive impact on firm performance (Eisenhardt and Schoonhoven 1990; Norburn and Birley 1988; Hambrick and Cannella 2004; BlancoOliver et al. 2018). For example, Eisenhardt and Schoonhoven (1990) study the
impact of founding TMT diversity on the growth of new technology-based companies. Nevertheless, some argue that there is a negative relationship between the
two (Simons et al. 1999), and others find that there is no relationship between
them (West and Schwenk 1996).
Existing research has greatly enriched upper echelons theory, but the abovementioned studies mainly focus on the executive teams of listed companies, while
few studies focus on the TMTs of small and medium-sized enterprises (SMEs).
However, SMEs account for 99.45% of enterprises in China and account for 60%
of the country’s GDP, 50% of its total taxes, 65% of its technological innovation
and 80% of its new product development (Lv 2015). Moreover, the conclusions of
existing research regarding listed companies may not be applicable to new SMEs.
There are many new SMEs, and they are China’s employment reservoirs and pillars of the national economy. One reason for this lack of research on the TMTs of
new SMEs may be that it is more difficult to collect first-hand data on these teams
than it is to collect those on the TMTs of listed companies. However, the existing research findings regarding listed companies may not be applicable to new
SMEs. Indeed, new SMEs are different from listed companies in many ways. For
example, (1) the average TMT of a listed company has five to thirteen members,
the governance structures of such companies are relatively complete, their social
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Functional diversity of top management teams and firm…
networks are rich, and their resources and information sources are numerous and
stable. However, the TMTs of new SMEs generally comprise two to five members. The various rules and regulations of these companies are in development,
and the resources required for their development are seriously lacking. They often
cannot obtain sufficient resources through formal channels and hence rely on the
social networks of their TMT members to obtain resources and information. (2)
New ventures face a business environment that is more complex than that faced
by listed companies. A new venture’s business direction, business model, and
business development have not yet been finalized, and its performance is still
unstable. There are many strategic decisions that TMTs need to make, which is in
line with the research direction of this article; a new venture has a simple structure, has few organizational levels, and makes strategic decisions that are easy
to implement. Strategic decisions have a more direct and effective impact on the
firm performance of new companies, and this is considered in this article. The
theoretical logic of this research is that the functional diversity of TMTs affects
firm performance by changing the quality of strategic decision-making.
The past and current professional experiences of TMT members generate social
capital (Florin et al. 2003). Social capital (including social networks, trust and
communication) is valuable (Bartsch et al. 2013) because it can help companies
obtain key resources and initiate new business relationships (Burt 1992, 1997).
Studies have shown that TMTs must participate in network construction to be
successful (de Carolis et al. 2009) and to survive in the long run (Huggies 2000).
Wang et al. (2021) examine a sample of 187 Taiwanese electronics companies and
show that the more interlocking directorates exist at the TMT level of a company,
the better the long-term performance of the company will be, emphasizing the
positive role played by external social networks in firm performance. Additionally,
in China, social network relationships are a very important resource and play an
irreplaceable role in enterprise development. To cope with dynamic environments,
TMT members play a unique role in strategic decision-making. However, they also
face increasing challenges in identifying opportunities related to customers, technology, and the environment. They must be in close contact with employees who
have detailed information about internal and external stakeholders and customers
(Castanias and Helfat 2001; Tushman and O’Reilly 1996). Moreover, the hypothesis of network creation proposed by Western scholars emphasizes the role of social
networks in the process of new venture creation (Stam and Elfring 2008; Eggers
et al. 2017). As the decision-makers of companies, the words and deeds of TMTs
are very important to company development. Our research speculates that the
function of TMTs must be affected by their social network relationships, including internal and external networks. This is especially important for newly founded
SMEs.
Responding to the research trends underlying the entrepreneurship theories proposed by Ferreira et al. (2019), our study seeks to make new theoretical contributions by considering social network theory in combination with upper echelons
theory. Therefore, this article explores 762 TMTs of SMEs as its research object,
investigates the impact of the functional diversity (IFD and DFD) of the TMTs
of new SMEs on firm performance, and further examines how embedded social
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L. Zhou et al.
networks affect the relationship between the functional diversity of the TMTs of new
SMEs and firm performance. New discoveries may be made by combining social
network theory with upper echelons theory to study new SMEs.
2 Conceptual framework and hypothesis development
2.1 TMT functional diversity and firm performance of new SMEs
The functional background of a TMT includes two dimensions: intrapersonal
functional diversity (IFD) and dominant functional diversity (DFD). The IFD
among the members of a TMT refers to the average number of functions they
perform (Bunderson and Sutcliffe 2002), that is, their "generalism". The level of
experience that senior managers have in relation to each of these functions also
varies, and they may have performed certain functions for longer periods of time
than others. The more experience they have with a certain function, the more
familiar they are with the field, and the more dominant they will be in that field.
The DFD of a TMT refers to the breadth of the functions of its members, that is,
the number of dominant functions they perform or their "professionalism" (Bunderson and Sutcliffe 2002). The literature does not differentiate between the types
of TMT functional diversity but measures them as a whole.
Hambrick and Mason (1984) argue that the value and cognitive basis of TMTs
have an important impact on the process of enterprise strategic decision-making.
The functional backgrounds of top managers are the embodiment of their experience and an important source of knowledge and information that they can use.
These backgrounds may affect their experience, skills, mental models and strategic decision-making (Stam and Elfring 2008) and thereby affect firm performance. This influence features a significant "double-edged sword" (Milliken and
Martins 1996; Cannella et al. 2008).
(1) As far as the "double-edged sword" of IFD is concerned, on the one hand, a
higher level of IFD reflects more cross-functional experience within the focal
TMT, which can improve information sharing, provide additional alternative
decision-making options, and lead to more scientific evaluations of programs,
thus improving the quality of the strategic decision-making of the members of
the TMT (Bunderson and Sutcliffe 2002). Moreover, complementary viewpoints
and skills are helpful in improving corporate performance (Smith et al. 2006).
On the other hand, higher IFD means that senior management team members
have spent less time performing individual functions, which makes it less likely
that they have a deep understanding of the functions they have performed; thus,
they may lack professionalism in those functions. In this case, in the process of
strategic decision-making, the decision-making information held by the various functional departments involved is superficial and unprofessional, and the
presented alternatives are often incomplete, compromised and suboptimal; thus,
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Functional diversity of top management teams and firm…
the quality of decision-making is reduced. Moreover, the cross-functional experience of TMT members involves different workplace cultures and communication
styles, that is, the TMT presents cultural diversity, the diversity of communication methods and multiculturalism has a positive impact on the collaborative
spirit, creativity and innovation spirit of TMT (Bouncken et al. 2016). The diversity of communication styles also has a specific beneficial impact on the team’s
innovation performance (Pesch et al. 2015).
(2) Regarding the "double-edged sword" of DFD in TMTs, on the one hand, high
DFD enables TMTs to hold professional skills related to multiple functions,
mitigates "group thinking” frameworks, provides additional alternative decisionmaking schemes and better evaluation schemes, and improves the quality of
enterprise strategic decision-making (Cannella et al. 2008). On the other hand,
high DFD also means that each team member has obvious path dependence
characteristics, which reduces the effect of information sharing, increases conflict in the decision-making process, increases the difficulty of communication,
reduces strategic consensus (O’Reilly III et al. 1989; Smith et al. 1994), reduces
the speed of decision-making and reduces the quality of decision-making (Chatman and Flynn 2001). Thus, the "double-edged sword" of diversity in executive
teams’ functional experience means that the decision-making quality of such
executive teams and its impact on corporate performance are uncertain.
Compared with listed companies, new SMEs show higher equivocality and
uncertainty in terms of resources, rules, products and business environments
because they are newly founded and small (Cai 2016). In highly uncertain business environments, diverse executive team functions are more conducive to
addressing the various uncertainties faced by companies in the entrepreneurial process. When an enterprise is initially founded, the "double-edged sword"
of diverse TMT functions is relatively positive. Contingency theory holds that
homogeneous teams can solve routine problems quickly, while heterogeneous
teams are better suited to resolving unconventional and new problems (Knockaert et al. 2011). Heterogeneous teams can provide a wide range of knowledge,
skills and perspectives, are more sensitive to changes in the external environment
and are more thoughtful when facing complex problems. As far as IFD is concerned, TMT members with multiple cross-functional experiences can search for
and capture opportunities and information in the market more comprehensively,
combine various new ideas, provide rich information and viewpoints, and deliver
a variety of decision-making solutions for complex, nonstandardized and nonroutine problems (Jehn et al. 1999; Harrison and Klein 2007). A high level of DFD
with the accompanying professionalism can help TMTs quickly and accurately
select feasible alternatives. Within globalization-affected international environments and China’s domestic environment of economic transformation, enterprises
need more TMTs with high levels of heterogeneity in their members’ functional
backgrounds to cope with new problems and challenges. Therefore, given the
background of the current economic and social development in China, the more
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L. Zhou et al.
diverse the functional background of a TMT is, the more comprehensive, profound and systematic its understanding of complex issues is. This understanding
is conducive to making scientific decisions, which is particularly important for
newly founded SMEs. Based on the above analysis, the following assumptions are
proposed.
Hypothesis 1a The IFD of TMTs has a positive impact on the performance of newly
founded SMEs.
Hypothesis 1b The DFD of TMTs has a positive impact on the performance of
newly founded SMEs.
2.2 The social networks and functional diversity of TMTs and enterprise
performance
Social networks affect resource allocation, and enterprises can use social networks
to obtain resources and develop innovation (Dahl and Pedersen 2005; Burt and
Burzynska 2017). The social networks embedded in TMTs can be divided into two
dimensions: internal and external networks. The internal networks of TMTs refer to
the relationship structures and interaction modes between TMT members; the external networks of TMTs refer to the various relationships each TMT member has with
resources outside of the enterprise, such as his or her relationships with former colleagues, government officials, members of industry associations or management at
peer enterprises.
2.3 The moderating effect of network density within TMTs
As an important concept for describing the characteristics of social networks, network density refers to the ratio of the number of actual relationships between the
members of a network to the number of theoretically possible relationships between
them (Burt 1992). In a high-density network, there are many direct connections
among members. These connections can promote the spread of tacit knowledge in
the network; promote mutual understanding (Rulke and Galaskiewicz 2000), recognition and support among its members (Podolny and Baron 1997; Roberson and
Williamson 2012); and improve the creativity of entrepreneurs, for example, in coworking spaces (Rese et al. 2021). Trust is an important feature of high-density networks, so this paper focuses on trust networks of TMTs.
Trust is a mutual relationship in which an actor believes that another person will
not take advantage of opportunities that are harmful to the actor when they arise
(Luo 2005). Mutual trust among the members of a TMT enables a trust network,
TMT trust network density indicates the degree of mutual trust among the members
of a TMT, and a high level of density entails high mutual trust.
TMT trust network density affects the IFD of TMTs through the role it plays in
firm performance. The higher the trust network density among the members of a
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Functional diversity of top management teams and firm…
TMT is, the more harmonious the relationships between them are. First, mutual
trust between a set of members can stimulate collaborative behavior by improving the communication between them (De Jong et al. 2016), which helps integrate
the rich information brought by high IFD and opportunity (Wang et al. 2020).
Second, mutual trust can help reduce the conflicts that may arise due to inconsistencies in the interpersonal functions of senior management team members,
increase the possibility of reaching a consensus (Collins and Clark 2003), and
further improve the quality and speed of decision-making. Third, trust among
TMT members can help them transform project tasks into internalized personal
goals, improve their communication efficiency, establish effective cooperation
mechanisms and strengthen collective actions (Harashima et al. 2013), thereby
stimulating the emergence of innovation.
Moreover, a high level of trust network density can prevent the generation of a
"stale culture", reduce opportunistic behavior in relation to information exchange
and transaction costs, and ultimately improve the quality of decision-making
(Emmers-Sommer 2004). Especially in the context of the highly collectivist Chinese culture, where people act in the interests of groups but not necessarily themselves, a strong trust network can help reduce group think and blind obedience
to authority and induce individuals to stop ignoring the voices of disadvantaged
people (Cannella et al. 2008). That is, to a certain extent, inhibiting the adverse
effects of IPD on decision-making and performance allows the IPD of a TMT
to enable information sharing and in-depth communication, thereby improving
the quality of decision-making. In short, the IFD of TMTs harnesses the complementarity of various perspectives, skills and mental models. A high level
of trust among TMT members makes it easier for the team to reduce conflicts,
reach consensus (Collins and Clark 2003), and improve the quality and speed of
their decision-making (Lampaki and Papadakis 2019), which may increase firm
performance.
If TMT members are in a low-density trust network, it is easy for them to lack
trust and not accept each other’s opinions or communicate poorly, which results
in inefficient decision-making and even leads to decision-making failure; this can
have a negative impact on business performance. That is, the adverse impact of
the diversity of interpersonal functions is further strengthened.
Therefore, we believe that although a high level of TMT IFD is characterized
by strong cross-functional experience and weak functional professionalism, under
the same conditions, the higher the trust density of a senior management team
is, the more likely it is that IFD will play a positive role and that its negative
role will be restrained. Based on the above analysis, the following hypothesis is
proposed.
Hypothesis 2a TMT trust network density plays a positive moderating role in the
relationship between IFD and the performance of newly founded SMEs.
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L. Zhou et al.
TMT trust network density also affects the role of DFD. The higher the trust
density of a TMT is, the more likely it is that the positive performance effect of
DFD can be brought into play and its negative effect can be restrained.
A TMT with high DFD is characterized by each member having expertise but
not being familiar with the expertise of other members. In terms of decision-making, it is easy for individuals to stick to their own points of view and not easily
accept the views of others in fields they are familiar with. However, when dealing with unfamiliar fields, individuals are more likely to hold their own opinions or not understand others’ viewpoints. People often consider and understand
issues from the perspective of their own expertise, which makes cognitive differences likely and in turn affects the quality and efficiency of decision-making
(Kanchanabha and Badir 2021). TMT cognitive diversity affects organizations’
ability to innovate (Kanchanabha and Badir 2021) and preferences regarding various strategic objectives (Miller et al. 1998); moreover, these differences and variations may affect firm performance (Sagiv et al. 2014), especially in the early
stages of strategic planning activities (Tegarden et al. 2009). Strategic decisions
are complex, vague, unconventional and often full of uncertainty.
TMT DFD can provide a variety of perspectives, inducing deliberate choices and
ultimately leading to better decisions (Olson et al. 2007). In contrast to low levels
of trust network density, a high level of trust network density can improve TMT
members’ knowledge and information sharing, give full play to the strengths of each
member in the decision-making process, and make full use of the decision-making
advantages of a TMT’s main functions. Team-level knowledge sharing is a key
information processing mechanism (Kanchanabha and Badir 2021). A high degree
of trust among members can help give play to the advantages of high DFD and
increase knowledge sharing in higher education industry as well (Lo et al. 2021).
Such team members are more inclined to obtain useful information and insights
from others to make decisions. Cognitive diversity has been proven to improve strategic decisions and actions based on more thoughtful choices, the consideration of
multiple viewpoints, and more creative solutions to strategic challenges (Meissner
and Wulf 2017).
If TMT members have a high level of trust in each other, when they face complex decision-making issues, they experience a low level of worry and fear of uncertainty, and they demonstrate their expertise, express their opinions, work together,
ease decision-making conflicts, and reduce opportunism in decision-making behavior more confidently and relaxedly, thereby offsetting the lack of diversity in the
decision-making of TMT leadership. For example, when there is a lack of trust
between major board members (chairman—general manager) of a TMT, TMT DFD
leads to conflicts between all parties, who each hold a different opinion, and it is difficult to form a unified decision. When two parties trust each other, they trust each
other’s expertise, which helps accelerate decision-making. The stronger the interactions between team members are, the more relevant information the team members
can obtain, the easier it is for them to form a consensus during decision-making, and
the greater the influence of their DFD is (Berger et al. 2014; Magee and Galinsky
2008).
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In addition, when the power distribution within a TMT is unequal, there is a lack
of trust among its team members. People in weak positions tend to reduce their
participation and remain silent (Patel and Cooper 2014), so decision-making represents only the views of the strong. The expertise of members in weak positions
is neglected, and the quality of decision-making is affected. In this situation, TMT
members tend to reduce their participation and remain silent; thus, the positive role
of DFD cannot be realized. Therefore, the following hypothesis is proposed.
Hypothesis 2b TMT trust network density plays a positive moderating role in the
relationship between DFD and the performance of newly founded SMEs.
2.4 The moderating effect of the external bridging ties of TMTs
The external bridging ties of a TMT refer to the extent to which the TMT maintains contact with others outside of the company (Stam and Elfring 2008). Bridging ties have significant information advantages. Through external network bridging ties, enterprises can obtain diverse information about solutions and ideas that
may not be available internally. If the network density of a TMT increases the
sharing of information between its members, which in turn affects the quality of
its strategic decisions, then the external bridging ties of a TMT solve the problem
TMTs face in relation to sources of information (Stam and Elfring 2008; Few and
Joshi 2013; Nguyen et al. 2021). In contrast to a low level of external bridging
ties, a high level of external network resources enhances the positive relationship
between the diversity of TMT functions and firm performance. In terms of the
relationship between the diversity of interpersonal functions in a TMT and firm
performance, this phenomenon is reflected in two areas:
First, in a TMT, abundant bridging ties provide diverse external information
for company strategic decision-making, including information on the latest technology and management concepts, advanced processes and methods, and effective market information (Stam and Elfring 2008; Brush et al. 2001). The development of a new generation of information technology, such as big data and
artificial intelligence enriched the channels for enterprises to obtain information
also required abundant bridging ties (Hanelt et al. 2021). A high level of intrapersonal diversity within an executive team provides abundant cross-functional experience and absorptive capacity (Eesley et al. 2013). The members of such a team
are able to analyze and screen information from multiple perspectives, implement
more decision-making processes and make more appropriate choices, improving the quality of strategic decision-making. Second, such abundant bridging
ties increase companies’ opportunities to maintain close contact with excellent
companies (Stuart et al. 1999), learn about the practices and experiences of these
companies in addressing similar strategic decision-making issues, etc. Observing
the effects of the decisions of outstanding companies helps TMTs broaden their
visions and prevent or reduce decision-making errors, which also enhances TMT
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L. Zhou et al.
members’ abilities. The positive and negative effects of IFD are also influenced.
Based on the above analysis, the following hypothesis is proposed:
Hypothesis 3a External bridging ties play a positive moderating role in the relationship between IFD and the performance of newly founded SMEs.
Abundant bridging ties can also promote the positive effects of DFD on performance. First, abundant bridging ties can help new SMEs overcome information asymmetry (Shane and Cable 2002) and provide TMTs with diversified
information for decision-making (Burt 1992; Stam and Elfring 2008). The impact
of a high level of external network resources (bridging ties) on the relationship
between executive team-led functional diversity and performance is reflected in
the following two areas.
When executive teams have bridging ties that are richer than those in low-level
external networks, the diversity of the information available to the TMT mitigates
the path dependencies of each TMT member due to the diversity of executive teamled functions, improves information sharing, reduces decision-making conflicts,
and increases decision-making speed, thereby mitigating the negative impact of a
high level of functional diversity on decision-making quality (Chatman and Flynn
2001). On the other hand, TMTs can obtain richer and higher-quality professional
information and expertise from external networks with the same or similar areas of
expertise, and high-frequency communication between executive teams and external
networks can contribute to the creation of new knowledge (Yu et al. 2020), which
can enrich the organizational knowledge pool and provide rich knowledge and information that can be used to optimize decision-making solutions.
A low level of external bridging ties can lead executive team members to hold
narrow visions, exhibit easy self-styledness, and experience increased path dependence in relation to decision-making that focuses only on areas they are familiar
with, and members may reject proposals from other members in areas they are
not familiar with; this results in insufficient enterprise innovation and missed new
opportunities and thus may further strengthen the negative impact of TMT DFD on
decision-making.
Hypothesis 3b External bridging ties play a positive moderating role in the relationship between the DFD of a TMT and the performance of newly founded SMEs.
2.5 The moderating effect of the interaction between internal network density
and the external bridging ties of a TMT
In scenario studies, researchers are increasingly using multifactor structural analysis to study regulatory effects (Wiklund and Sheperd 2005; Mehra et al. 2006). The
combined structural role of multiple factors is more indicative of the behavior and
outcomes of a business than the individual effects of multiple factors (Dess et al.
1997). Recent social network studies suggest that structural analyses of social network characteristics can illustrate their impact on corporate performance better than
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Functional diversity of top management teams and firm…
other types of analysis. For example, in studies of the relationship between entrepreneurship orientation and new venture performance, the interaction (structuralization)
between industry network degree centrality and the industry bridging ties (social
network characteristics) of new ventures has been found to illustrate the change in
the relationship between entrepreneurship orientation and new venture performance
well (Stam and Elfring 2008).
Although moderating effects may partly explain the situational relationship
between TMT functional diversity and performance from the two aspects of internal network density and external bridging ties, separately examining the internal network density and external bridging ties of TMTs without considering their
mutual effects hinders a comprehensive understanding of the problem. Under
both high internal network density and abundant bridging ties, the diversity of
executive team functions (IFD, DFD) may have a greater impact on performance.
The external bridging ties of TMTs provide diversified knowledge and information to enterprises, but TMTs may not make full use of these in their strategic
decision-making. Moreover, the internal network density of a TMT can promote
mutual trust and information sharing and support the full use of existing information for strategic decision-making; however, it fails to provide access to diversified knowledge and information. Therefore, only by integrating these two factors
can we overcome any shortcomings in knowledge and information acquisition
through the external bridging ties of TMTs and resolve any challenges to making
full use of knowledge and information through the internal network density of
TMTs. Strategic decision-making requires not only knowledge and information
but also the sharing and full utilization of knowledge and information (EasterbySmith et al. 2009). Therefore, the following hypotheses are proposed:
internal network density
IFD
H2a
H1a
H2b
external bridging ties
H3a
H3b
firm performance
DFD
H1b
H4a
H4b
internal network density
×
external bridging ties
Fig. 1 Research conceptual framework and hypotheses
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L. Zhou et al.
Hypothesis 4a The interaction between internal network density and external bridging ties plays a positive moderating role in the relationship between the IFD of
TMTs and the performance of newly founded SMEs. The higher the internal network density of a TMT is, the richer its external bridging ties are and thus the more
positive the role of the IFD of the TMT is.
Hypothesis 4b The interaction between internal network density and external bridging ties plays a positive moderating role in the relationship between the DFD of
TMTs and the performance of newly founded SMEs. The higher the internal network density of a TMT is, the richer its external bridging ties are and thus the more
positive the role of the DFD of the TMT is.
Based on the literature review and hypothesis development above, Fig. 1 below
shows the theoretical framework and hypotheses of this research.
3 Methodology
3.1 Data collection
The sample of this study included newly founded SMEs in Jiangsu, Henan and
Guangdong provinces. We used the social network method to measure the internal network density and the external bridging ties of the TMTs of these SMEs.
Specifically, the whole network method was adopted to measure the network density within each TMT. The application of this method requires a clear network
boundary. This study treated the TMT of each enterprise as a whole network,
used a questionnaire survey to determine the network structure of the TMTs, and
further obtained the network density value of each with the network analysis software UCNET6. The self-centered network method was used to connect the external bridging ties of the TMTs. A questionnaire survey was administered to each
member of the TMT of each enterprise. To control common method variance in
this data collection, the questionnaire was divided into two sections, namely, A
and B. Questionnaire A mainly involved the overall situations of the enterprises
and their TMT members’ demographic characteristics, educational backgrounds,
and previous work experience and was completed independently by the TMT
members; questionnaire B mainly measured enterprise performance and was
completed by the general manager (CEO) and the finance manager of each enterprise independently. The scale showed good reliability and validity.
We selected small- and medium-sized companies that were founded less than
eight years prior to conduct our research (McDougall and Robinson 1990; Zahra
1993). In this study, with the help of relevant leaders in the research area, we contacted the top managers of each examined enterprise by telephone and confirmed
that the investigation was acceptable to them. Subsequently, we collected data
through e-mails and on-site questionnaires. A total of 1000 questionnaires were
sent out in this study; 141 enterprises were excluded because their questionnaires
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Functional diversity of top management teams and firm…
Table 1 Main characteristics of sample firms (N = 762)
Establish time Company
number
Industry
Company
number
Location
Company
number
99
<3
322
Electronic
information
235
Jiangsu
312
51–100
248
3–5
256
Software
service
121
Henan
239
5–8
184
Mechanics
256
Guangdong 211
Textile
150
Firm size
(person)
< 50
Company
number
101–200
261
201–500
75
500–2000
79
were incomplete, and the final sample comprised 762 enterprises. The valid
questionnaires were distributed across specific areas as follows: 312 came from
Jiangsu Province, 239 from Henan Province and 211 from Guangdong Province.
The effective recovery rate was equal to 76.2%.
Table 1 gives the distribution of the sample enterprises according to the size,
age, and industry of each enterprise.
In this study, we tested for nonrespondent bias. Based on the descriptive data
provided by the Yellow Pages of Enterprises in the Economic Development Zone,
we compared the number of employees and ages of the 762 responding enterprises with those of 238 nonresponding enterprises, and the results of a t test
showed that there was no significant difference between the two types of enterprises. Moreover, we compared the number of employees and ages of the 762
responding enterprises with those of all 1000 enterprises sampled, and the results
of a T test showed that there was no significant difference between the two types
of enterprises; this indicates that the sample had no serious nonresponse bias and
that the data were representative of the sample.
In addition, we tested for the problem of common method variance (CMV).
According to the suggestions of Podsakoff and Organ (1986), we adopted measures
to reduce CMV in the research design, and a Harman single-factor test was used to
identify the severity of CMV in our research. Through principal component analysis, six factors with eigenvalues greater than 1 were identified, and they explained
69.0% of the total variance; of these, the first factor explained 29.3% of the variance.
This result showed that no single factor could explain the vast majority of the variance, so the problem of CMV was not serious.
3.1.1 Survey instrument
3.1.1.1 Firm performance A multidimensional measurement method is generally
considered to be necessary to measure the performance of new ventures (Wiklund
and Sheperd 2005). Subjective measurements are particularly appropriate for new
ventures because their objective financial performance is highly unstable and cannot
13
L. Zhou et al.
effectively reflect their future prospects and actual operating conditions. Ten items
were used to measure enterprise performance (Stam and Elfring 2008), and they were
evaluated based on a comparison with competitors. The ten aspects scored were sales
growth, growth in the number of employees, market share, gross profit, net interest
rate, product (service) innovation, new product (service) development speed, product
(service) quality, cost control, and customer satisfaction. Enterprise performance was
calculated as the average score of the ten aspects. A five-point Likert scale ranging
from "1 = very poor" to "5 = very good" was used to measure these aspects.
3.1.1.2 Intrapersonal functional diversity (IFD) of TMTs IFD is a group-level concept
that is expressed based on the average number of functional background characteristics of the members of a team. IFD is usually measured based on the degree to
which individual executives are "specialists" or "generalists". Based on the method
used by Cannella et al. (2008), the IFD score of the TMT was obtained by averaging
the scores of all the examined senior managers. The concrete formulas used are as
follows:
)/
(
n
∑
∑
n
1−
P2ij
IFD =
i=1
j=1
where ­Pij indicates the amount of time senior manager I spent on function J and “n”
indicates the number of TMT members.
3.1.1.3 Dominant functional diversity (DFD) of TMTs DFD was captured using
Carpenter and Fredrickson’s method (2001). First, the possible functional areas
were divided into eight categories, and then their dominant functions, including
production and operations, research and development (R&D), financial accounting, management, marketing, law, and human resources, were identified. The Herfindahl–Hirschman index (HHI) was calculated, and finally, the DFD of each TMT
was calculated. The formula used is as follows:
DFD = 1 −
n
∑
Si2
i=1
where ­Si represents the proportion of a TMT corresponding to function i. The value
of DFD calculated with this formula ranged from 0 to 1. The closer the value was to
1, the greater the diversity of the focal TMT’s functions were; the closer to 0 it was,
the more experience with one function was shared by all the senior managers.
3.1.1.4 Internal network density of TMTs Network density is the ratio of the
number of actual relationships among a group of TMT members to the maximum possible number of relationships among them. The method of Luo (2005)
was used to measure the density of the TMTs’ trust relationship networks. This
method adopts the whole network questionnaire method but does not use the
13
Functional diversity of top management teams and firm…
Likert scale questionnaire method. Each executive evaluated the other executives
separately and completed a questionnaire for each executive using his or her real
name. For example, in a team with five members, each member evaluated each of
the other four members. The specific items included (1) I think he is honest, (2)
I think he is competent in his work, (3) I think his behavior is stable and reliable,
(4) I think he cares about my interests, and (5) I trust him the most. The network
density values were calculated and averaged to obtain the network density score
of each TMT.
3.1.1.5 External network bridging ties of TMTs Based on the method used by
Collins and Clark (2003), Peng and Luo (2000), and Stam and Elfring (2008),
we asked the respondents to evaluate their relationships with the following ten
categories of personnel: external directors, suppliers, key customers, financial
institutions, law firms, competitors, alliance partners, government agencies,
industry associations, and other key external personnel. Each executive’s external bridging ties score was equal to the average score he or she indicated when
evaluating these ten groups, and the external network bridging ties score of each
TMT was equal to the average of all the corresponding senior managers’ bridging ties scores.
3.1.2 Control variables
Because the size of the sample companies is less than 2000 employees which is classified as SMEs in China and establishment time is less than eight years which refers
to new ventures, the company size, industry and so on are not controlled. This paper
only controls the average age (Age) and the average tenure (Tenure) of the members
of the TMT.
Table 2 Descriptive statistics of variables and Pearson correlation coefficient (N = 762)
variable
1. Firm performance
Mean S D
1
2
3
4
5
6
7
3.71 0.58 (0.89)
2. Average
age
42.11 4.57
0.154*** –
3. Average
tenure
4.65 1.68
0.104*** 0.651*** –
4. IFD
0.58 0.17
0.398*** 0.244*** 0.295***
–
5. DFD
0.59 0.19
0.248*** 0.321*** 0.254***
0.203***
6. Network
density
0.62 0.19
0.573*** − 0.018
− 0.089** − 0.118*** 0.107*** –
7. Bridging
ties
3.38 0.63
0.372*** 0.044
0.011
0.194***
–
0.131*** 0.242*** (0.87)
*p < 0.05, **p < 0.01, ***p < 0.001; Two tailed test. Inside () is Cronbach’s α coefficient
13
L. Zhou et al.
Table 3 Moderation effects bootstrap test result
β
se
t
p
Boot95%CI
LLCI
ULCI
Constant
3.0767***
0.1541
19.9593
0.0000
2.7741
3.3793
Average age
0.0171***
0.0043
3.9731
0.0001
0.0087
0.0256
0.0114
− 1.5515
0.1212
− 0.0401
0.0047
0.0906
15.5526
0.0000
1.2315
1.5873
Average tenure time
IFD
− 0.0177
1.4094***
Network density
1.8374***
0.0752
24.4341
0.0000
1.6898
1.9850
Bridging ties
0.2601***
0.0286
9.0973
0.0000
0.2040
0.3162
1.9850
IFD*network density
IFD*bridging ties
IFD*network
density*bridging ties
0.8620*
− 0.1855
0.1225*
0.4152
2.0761
0.0382
0.0469
0.1690
− 1.0976
0.2727
− 0.5172
0.1463
0.0621
1.9729
0.0488
0.0051
0.0571
*p < 0.05, **p < 0.01, ***p < 0.001
Table 4 Moderation effects bootstrap test result
β
se
t
p
Boot95%CI
LLCI
ULCI
Constant
3.0033***
0.1791
17.7722
0.0000
2.6517
3.3548
Average age
0.0164***
0.0049
3.3195
0.0009
0.0067
0.0261
Average tenure time
0.0049
0.0128
0.3820
0.7026
− 0.0202
0.0300
DFD
0.5348***
0.0884
6.0480
0.0000
0.3612
0.7084
Network density
1.5777***
0.0858
18.3879
0.0000
1.4093
1.7462
Bridging ties
0.2934***
0.0292
10.0639
0.0000
0.2362
0.3506
DFD*network density
1.2726**
0.4258
2.9696
0.0031
2.1139
0.4313
DFD*bridging ties
0.0920
0.1586
0.5801
0.5620
− 0.2193
0.4033
− 0.7497
0.7148
− 1.0488
0.2946
− 2.1530
0.6536
DFD*network
density*bridging ties
*p < 0.05, **p < 0.01, ***p < 0.001
4 Results and data analysis
As shown in Table 2, IFD and DFD are significantly positively correlated with
enterprise performance. This shows that there is a relationship between the diversity
of TMT functions and corporate performance.
This study used SPSS 20.0 and its PROCESS macro program to test the proposed
hypothesis, by calculating 5000 bootstrap confidence intervals(Hayes 2012; 2017).
The results of the data analysis are shown in Table 3, the direct effect of interpersonal
functional diversity on performance is 1.4094, and the 95% bootstrap confidence interval is [1.2315, 1.5873] which does not include zero, which shows the direct effect of
interpersonal functional diversity on performance is significant. H1a is supported.
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Functional diversity of top management teams and firm…
IFD and network density has a moderate effect of 0.8620. 95% of the bootstrap confidence interval is [0.0469, 1.9850], does not include zero, which indicate network density plays a moderate role between IFD and performance of SMEs. H2a is supported.
IFD and external bridging ties has interaction effects of − 0.1855, 95% of the
bootstrap confidence interval is [− 0.5172, 0.1463], including zero, which indicate
the moderate effect on external bridging ties on the "IFD—performance of SMEs"
relationship is not significant, assuming that 3a is not supported.
The interaction effect between IFD and network density and bridging ties interactions is 0.0730, 95% of bootstrap confidence interval is [0.0051, 0.0571], does not
include zero, which indicate network density and bridging ties interactions have a
significant moderating effect on the "IFD-performance" relationship, assuming that
4a is supported. The moderation effects are showed in Table 3 below.
The data analysis results in Table 4 below show that the more diversified the
dominant functions of the TMT, the more beneficial it is to improve the performance
of the enterprise, with a direct effect of 0.5348, and a 95% bootstrap confidence
interval of [0.3612, 0.7084], which does not include zero, DFD has a significant
direct effect on the performance of the enterprise, assuming that 1b is supported.
The interaction between network density and dominant DFD is − 1.2726, and 95%
of bootstrap confidence intervals are [− 2.1139, − 0.4313], which does not include
zero, indicate network density has a significant moderate effect on the relationship
between "DFD-performance", assuming 2b is supported.
The interaction of DFD and bridging ties is 0.0920, 95% of the bootstrap confidence interval is [− 0.2193, 0.4033], which doesn’t include zero, indicate the bridging ties on the "DFD—performance" relationship moderating effect is not significant, assuming 3b is not supported.
The interaction effect between DFD and the network density and bridging ties interactions is − 0.7497, and the bootstrap confidence interval of 95% is [− 2.1530, 0.6536],
which contains zero, and the network density and bridging ties have no significant effect
on the relationship between "DFD-performance", assuming that 4b is not supported.
Bridging ties doesn’t have a significant effect on the relationship between the
DFD and the enterprise performance. The interaction effects of the bridging ties,
network density and DFD is not significant, indicating that the external social network of TMT does not improve the role of improving the diversity of the leading
functions of the executive team on performance.
4.1 Endogenous test
Because of the differences in corporate performance, it is possible for founders to
constantly adjust the TMT members in the process of business management, such as
deliberately looking for partners with different or similar functional backgrounds to
improve performance. Therefore, there may be an endogenous relationship between
the diversity of TMT functions and corporate performance. To solve the endogeneity problem, we implemented the Wu-Hausman endogenous test with the education level of the senior management team as a tool variable. The education level of
the senior management team is closely related to the senior managers’ functional
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L. Zhou et al.
experience. However, some studies have shown that there is no significant correlation between entrepreneurs’ education level and firm performance (Hu et al. 2009).
The test results show that there is no significant endogenous effect of the education
level of TMT on firm performance (Wu-Hausman test F (1, 1293) value is 0.36,
p = 0.57). Therefore, we believe that the conclusion of this paper is reliable.
5 Discussion and conclusion
This study finds that the functional diversity of the TMTs of newly established
SMEs has a positive effect on their performance. The network density within a
TMT plays a positive role in moderating the relationship between the diversity of
TMT functions (IFD, DFD) and firm performance. This demonstrates that a hightrust TMT plays a positive role in supporting the benefits of diverse TMT functions.
However, the bridging ties of a TMT have no significant moderating effect on the
relationship between TMT functional diversity (IFD, DFD) and firm performance.
There are several possible reasons for this. First, although bridging ties can bring the
advantages of diversified information to a TMT, these advantages represent only an
opportunity and may not be translated into actual advantages. Second, the effectiveness of the diversified information brought by bridging ties may not be high or this
information may not be necessary for enterprise development. It can be inferred that
not all external network resources have a positive effect on organizations and that
these external network resources can play their roles only under certain conditions
(Huang et al. 2019). This is also consistent with the findings of other studies, such as
Yu and Liu (2006), who show that in the absence of a good market mechanism and
a sound legal system, enterprises can utilize external social networks to seek scarce
resources and thus gain an advantage in relation to the realization of strategies. The
weakening of the role of external network resources also shows to some extent that
China’s business environment is gradually developing in a positive direction, and the
survival and development environment of new enterprises is improving.
Coleman (1990) argues that the function of social capital changes across targets
and that established social capital can have a positive impact on some actors while
harming others. An overreliance on certain social networks in accessing enterprise
resources reduces the creativity of organizational members, i.e., social networks will
have a personal lock-in effect (Weber and Weber 2011). When a TMT relies too
heavily on external network resources, the negative effects of functional diversity in
the TMT are reinforced (Putnam 2000). It is also believed that only those who are
within a social network can use the corresponding relationships and benefit from it.
Overembedding business managers into certain social networks can bring resources
to a business, but it also limits the roles of other factors (Adhikari and Goldey 2020;
Portes and Sensenbrenner 1993), e.g., the advantages of the functional diversity of
TMTs. In addition, even if a TMT has a rich external social network, the willingness
of its top managers to use their social capital to serve the enterprise will be affected
by many factors, such as their compensation and motivation.
13
Functional diversity of top management teams and firm…
This research also finds that the interactions among the IFD, internal network density and external bridging ties of TMTs have significant impacts on firm performance.
That is, the interaction between the internal network density of a TMT and its external
bridging ties has a positive moderating effect on the relationship between IFD and firm
performance. However, the interactions between the DFD, internal network density and
external bridging ties of a TMT have no significant impact on performance. The above
conclusions show that the information advantage brought by bridging ties can play an
active role only within a high-trust TMT with high IFD. The members of a TMT with
high IFD have a variety of functional experiences, but the professionalism associated
with each function is not high. The knowledge held by such members within specific
fields is not sufficiently deep, but their search for external information can compensate
for their lack of professional competence; moreover, a high level of trust within such
a TMT makes it easy to reach a consensus in decision-making. That is, bridging ties
provide the information needed for decision-making, and a high level of trust resolves
the possible differences of opinion among members, improves the speed of decisionmaking, and improves performance. In the case of a high level of DFD, even in a TMT
characterized by a high level of trust, the positive effect of bridging ties on performance
does not always allow TMT members to succeed. The possible reasons for this are as
follows. First, the information obtained by a TMT through external bridging ties may
be redundant, costing manpower, material resources and financial resources. In TMTs
with high DFD, each senior manager has a high level of expertise and relies more on
his or her own expertise or on that of the whole team than on external information in
decision-making, especially when the trust within his or her TMT is at a high level;
thus, the positive effect of bridging ties on performance cannot be realized. Second,
to obtain external resources and information, executives need to spend time, energy
and money participating in social activities and maintaining the normal use of their
social networks, which increases enterprise costs and requires time and energy from
executives. The cost of building a social network increases transaction costs (Liu 2006;
Huang 2019). Studies have confirmed that social activities distract entrepreneurs from
internal management and impair corporate performance (Ocasio 1997; Uzzi 1997).
Moreover, a study by Portes and Sensenbrenner (1993) finds that companies, while
enjoying the resources given to them by strong relationships, also have obligations and
responsibilities that cannot be escaped. A closed network of strong relationships may
evolve into a burden rather than offering effective help (Huang 2019). All these factors
weaken the active role of external social networks. It is also necessary for new companies to consciously construct, maintain, utilize and manage entrepreneurial networks
based on their own national culture, level of national development and characteristics
(Gregori and Parastuty 2021). In countries with a high degree of uncertainty avoidance,
to reduce risks and uncertainties, new companies tend to use entrepreneurial networks
to obtain external resources and improve their ability to identify, reorganize, and use
these resources (Stam and Elfring 2008). Entrepreneurial networks within lower power
distance cultures are more likely to integrate connections from various social classes,
and the value of their entrepreneurial networks is thereby increased (Shu et al. 2018).
However, because Chinese culture has a high-power distance (Hofstede 1983), the role
of external bridging ties may be hindered. Nevertheless, as they are influenced by the
country’s collectivist culture, members of such networks in China are more inclined to
13
L. Zhou et al.
help and support each other, which can effectively mobilize resources and achieve a
common growth of interests. This research also proposes that only when the members
of a new team establish a culture of equality, mutual benefit and long-term trust and
establish a collective vision can external bridging ties play a strong role in regulating
the diversity of interpersonal functions and firm performance.
6 Theoretical contributions
The theoretical contributions of this study are as follows. (1) Based on the results of
Cannella et al. (2008), this study divided the functional diversity of TMTs into IFD
and DFD and analyzed the effects of these two types of functional diversity to better
capture the impact of these types of functional diversity on performance and the applicable boundary conditions. Previous studies have used a single dimension to measure
the diversity of executive teams’ functional backgrounds, most often measuring the
average number of executive team members engaged in specific functions. For example, Qian et al. (2013) use CEOs to classify the main functional expertise of individual
TMT members as finance/accounting, marketing/sales, production/operation/supply
chain management, engineering/R&D or management and then use Blau’s heterogeneity index to quantify the functional diversity of TMT members (Blau 1977); a higher
index reflects higher functional diversity. Research on the overall diversity of TMT
functions can conceal the role of other career experiences of senior managers. (2) This
study dialectically analyzed the functional diversity of TMTs. That is, the diversity of
TMT functions can act as a double-edged sword, and its impact on firm performance
is affected by situational factors, which explains the inconsistent findings of previous
studies on TMT functions. (3) This study categorizes the networks embedded in TMTs
as internal and external networks. Much attention has been given to the performance
effects of the external characteristics of TMTs on the diversity of TMT functions; for
example, Qian et al. (2013) study the relationship between the diversity of TMT functions and innovation based on the competitiveness of enterprises’ environments and
the support of enterprise systems. This study finds that the internal networks embedded in TMTs have a more significant impact on the relationship between the diversity of TMT functions and performance than the external networks embedded therein.
Structured research has also found that the external networks embedded in TMTs can
play a role only with the support of internal trust networks.
7 Practical implications
Based on the above conclusions, this paper proposes the following policy
recommendations.
First, newly established SMEs should build multifunctional TMTs, giving full
play to the advantages of diversity in TMT functions. Moreover, great importance
should be attached to the impact of situational factors on the relationship between
the diversity of TMT functions and firm performance. One of the important causes
of the controversy over the role of diverse TMT functions in firm performance is
13
Functional diversity of top management teams and firm…
that some studies do not take into account the role of various scenarios or examine differences in the situational factors affecting choice. Outcomes vary with situational factors. For example, the density of the trust network within a TMT has a
positive moderating effect on the relationship between the diversity of TMT functions and performance. Making full use of the resources of a TMT, such as its IFD
and DFD, is a feasible way to improve the performance of an enterprise and enhance
the mutual trust among its TMT members. Bridging ties, as a separate situational
variable, have no significant moderating effect, but their value cannot be ignored.
Based on the results of structural research, when the IFD of a TMT is high and an
atmosphere of mutual trust has been formed within it, the information advantage
brought by bridging ties can be fully realized. Therefore, the internal and external
networks of a TMT are important information sources and utilization methods for
enterprises. To improve their performance, firms should not only consider the individual role of each factor but also pay attention to the structured roles between them
and give full play to their interactive functions.
Second, when making strategic decisions, firms should fully understand the
"double-edged sword" of TMT diversity. When making strategic decisions regarding market positioning, business goal setting, R&D goal setting and resource allocation, the TMT of a new venture should pay considerable attention to how to function as a TMT, for example, how to utilize IFD and DFD. They can neither blindly
believe in the positive role of functional diversity nor ignore its existence. To prevent negative impacts, firms need to actively create favorable conditions, give full
play to the positive role of diversity in their senior management teams, and restrain
the negative impact of such diversity.
Third, firms must pay attention to the coordination between the internal networks and the external networks of their TMTs. Currently, new ventures in China
must overcome an overemphasis on the external relationships of TMTs and a tendency to neglect the cultivation and utilization of internal trust relationships. The
external bridging ties of TMTs are very important for Chinese companies in the
country’s transitional economy, and they can help enterprises obtain various types
of information, such as information on remedying the adverse effects of market
and institutional information transparency on enterprises and tracking the latest technological developments. However, whether this information can be fully
absorbed and utilized depends on the existence of effective information sharing
and decision-making mechanisms, and mutual trust between TMTs is the key to
promoting these mechanisms (Hambrick et al. 2007; Veltrop et al. 2017; Westphal
and Stern 2006). Therefore, top managers, especially the founders of enterprises,
should not only attach importance to the external resources that an entire TMT
can bring but also work to form a trusting atmosphere within their TMTs. Under
specific circumstances, the role of mutual trust and concerted effort within a TMT
in the development of an enterprise is even more important than the role of seeking external resources. Inconsistencies among the members of an entrepreneurial
team lead to further inconsistencies, and examples of entrepreneurial failures are
not uncommon.
13
L. Zhou et al.
8 Limitations and future research directions
This study inevitably has several limitations. First, the sample of this study was not
obtained through random probability sampling but by selecting newly founded SMEs
in Jiangsu, Henan and Guangdong provinces. Therefore, this nonrandom sampling
method may have reduced the external validity of the conclusions of this study and
limited the ability of its results to be generalized to other regions of China. Second,
there are still problems to be solved in relation to performance measurement. This study
used subjective performance indicators. Although some studies have shown that these
indicators are highly correlated with objective financial indicators, the addition of some
objective performance indicators may be more illustrative and convincing. Third, this
study considered only the moderating role of the trust networks within TMTs. Future
research should consider additional factors that affect the role of diversity in TMTs,
such as the role of friendship networks within TMTs. In addition to network density,
other network characteristics, such as network concentration, could have a moderating
effect, and these are worthy of further consideration in the future. Our sample includes
newly founded SMEs that include both start-ups and nonstart-ups, and it would be very
interesting to research start-ups in the future. Finally, the generalizability of our findings
may be limited by our sample, which consisted of respondents from SMEs in China.
Future research should explore whether the results of this study can be replicated using
data collected from other large-scale enterprises in a cross-cultural context.
9 Appendix 1: Questionnaire A
9.1 IFD of the TMT and dominant DFD of the TMT (Carpenter and Fredrickson
2001)
Please fill in the proportion of time you spent participating in the following functions according to the actual situation. And select your leading function and tick the
box before the option.
Proportion of time
engaged in the function
□Production and operations
□R&D
□Financial accounting
□Management
□Marketing
□Law
□Human resources
□Others
13
Functional diversity of top management teams and firm…
9.2 Internal network density of TMT (Luo and Jar‑Der 2005)
Each executive evaluates the other executives separately and fills in a questionnaire for each executive using his or her real name. According to the standard of
"1 = strongly disagree" to "5 = strongly agree", please choose the appropriate number from 1 to 5, which is consistent with your description of the actual situation.
Standard of measurement
1
2
3
4
5
Index
I think he is honest
I think he is competent in his work
I think his behavior is stable and reliable
I think he cares about my interests
I trust him the most
9.3 External bridging ties of TMT (Stam and Elfring 2008)
According to the standard of "1 = no communication" to "5 = very extensive communication", please select the appropriate number from 1 to 5 to evaluate the
relationship with the following ten categories of personnel.
Standard of measurement
1
2
3
4
5
Index
External directors
Key customers
Alliance partners
Financial institutions
Law firms
Suppliers
Competitors
Government agencies
Industry associations
Key external personnel
13
L. Zhou et al.
10 Appendix 2: Questionnaire B
10.1 New ventures’ performance (Stam and Elfring 2008)
The following are the ten dimensions of new business performance against competitors. Please choose a description that fits your understanding of the actual situation.
We uses a five point Likert scale to measure from "1 = very poor" to "5 = very good".
Standard of measurement
1
2
3
4
5
Index
Sales growth
Growth in employee numbers
Market share
Gross profit
Net interest rate
Product (service) innovation
New product (service) development speed
Product (service) quality
Cost control
Customer satisfaction
Funding The funding was provided by National Natural Science Foundation of China (Grant No.
71872042) and Key Project Philoshophy and Social Science Foundation of University of Jiangsu Province (Grant No. 18GLA003).
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