Toward an upper-echelons view of firm-level entrepreneurship

Date of Completion

January 2004


Business Administration, Management




Firm-level entrepreneurship is an important contributor to firm survival and performance (Stevenson & Jarillo, 1990; Tushman, 1997). It includes innovation, venturing and strategic renewal (Zahra, 1996). Although researchers have examined various determinants of firm-level entrepreneurship, this study will be the first to comprehensively investigate the influence of top management teams (TMTs). ^ Drawing upon Hambrick's (1994) framework, this study examines top teams from four conceptual aspects: composition (the collective value of TMT members), process (the nature of interaction among top managers), incentive (the compensation contract that TMT members receive), and the CEO (the leadership styles of CEOs). These four aspects are characterized by TMT risk propensity, TMT behavioral integration, TMT long-term incentive compensation, and CEO transformational leadership respectively. It is hypothesized that these four specific TMT characteristics individually, and interactively, affect firms' engagement in entrepreneurial activities. ^ Data was collected from 109 small, privately-held firms in a Northeastern state in the U.S. The results provided partial support for the hypotheses. Results show that CEO transformational leadership, TMT risk propensity, and TMT long-term incentive compensation have strong, positive effects on firm-level entrepreneurship, whereas TMT behavioral integration has a marginal, negative effect on it. Furthermore, TMT behavioral integration is found to interact with TMT long-term incentive compensation and CEO transformational leadership. ^ By investigating the characteristics of TMTs that are related to firm-level entrepreneurship, this study seeks to enrich the literature on both entrepreneurship and upper-echelons theory. It extends entrepreneurship literature by explaining entrepreneurial initiatives from the TMT perspective rather than the more common perspectives of environment and organization. It enhances the literature on upper-echelons by developing more precise specification of the TMT aspects included in Hambrick's (1994) framework. It also provides more specific assertions about the interactions among these aspects, which have previously been discussed only separately. Further, unlike many current upper-echelons studies which rely on demographic information, this study directly measured top managers' perceptions and behaviors through a multiple-respondent survey. In doing so, it has the potential to provide a more accurate assessment of TMTs' effect on firm-level outcomes, particularly, on firm-level entrepreneurship. ^