By Chenxi. Li

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A research on the influence of demographic heterogeneity on top

management team’s turnover in Chinese listed firms

By

Chenxi. Li

First Supervisor: S.N. Ponsioen

Co-assessor: Ad Visscher

University of Groningen Faculty of Economics and Business

Master Thesis, MSc. International Business Management

Abstract

This thesis demonstrates that how demographic heterogeneity of top management team influences the turnover behaviors by extending to the Chinese context. We examine turnover from 2010 and 2012 in a sample of 100 largest Chinese listed firms. In this thesis it was argued that TMT age heterogeneity, tenure heterogeneity as well as educational level heterogeneity would be positively associated with the turnover in Chinese top management teams. The results finally identified that only TMT age heterogeneity had a significant link with the turnover behaviors but it was negatively related. There is no significant links between TMT tenure heterogeneity as well as TMT educational level heterogeneity.

Key words: turnover, top management team, demographic heterogeneity, Chinese

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Table of content

2.3 How demographic heterogeneity affects turnover ... 12

2.4 Cultural dimensions in the Chinese context ... 15

2.4.1 Age diversity... 16

2.4.2 Tenure diversity ... 17

2.4.3 Educational level diversity ... 18

3. Method ... 19

3.1 sample and data collection ... 19

3.2 Measurements of variables ... 20 3.2.1 Dependent variable ... 20 3.2.2 Independent variables ... 20 3.3.3 Control variables ... 21 4. Results ... 22 5. Discussion ... 25 5.1 Theoretical implications ... 26 5.2 Practical implication ... 28

5.3 Further research and limitation ... 29

5.4 Conclusion ... 30

1. Introduction

Turnover is frequently researched within the field of organizational behavior and it is among the most important employment relation outcomes for both employees and employers (Batt and Colvin, 2011). As an important index to measure an organization’s internal human resource flow, turnover means the rate at which an organization loses its employees (Wikipedia). By investigating employee turnover, employers can understand the attraction of the firms to employees as well as employee satisfaction to the firms. Although maintaining a certain level of turnover may help a firm take advantage of the survival of the fittest so as to keep vitality and innovation, generally we tend to believe that high levels of turnover will be harmful for the firm’s development, especially in the top management team. According to Shaw, Gupa and Delery (2005), high level of turnover indicates that there is a serious contradiction existing between employers and employees which can lead to increased human resource costs and decreased cohesion within the firm.

5 A large proportion of the existing research focuses on the consequences of top management turnover, for instance works of Staw (1980), and Steers and Mowday (1981). Another part of the research tries to explore the determinants of the executive turnover by looking at, for example, the influence of board composition, ownership structure and innovation capability. This thesis will also focus on the determinants of TMT turnover by looking at a less understood area, namely the effect of the TMT’s personal characteristics (Wagner, Pfeffer and O’Reilly, 1984). By investigating how top managers’ personal characteristics affect their turnover behaviors, we can have a better understanding of the stability of the TMT and thus improve the managerial effectiveness of TMT in the firm. Studying the antecedents of the TMT’s turnover is important for both the firms and the stakeholders, since changing the composition of the team will directly affect the firm’s future development (Steers and Mowday, 1981). This thesis tries to analyze top managers’ demographical characteristics that might cause these top managers to leave their positions.

In fact, the effect of demographic characteristics may be varying in accordance with the alteration of the external environment, for instance, differences in economic development level, legal institutions as well as cultural traditions (Hofstede, 1980).

Therefore the conclusion based on the samples of developed countries may not be valid in the transition economic countries such as China and India (Tihanyi et al., 2000; Glunk et al., 2001). The research by Wiersema and Bird (1993) suggested that ethnological context may help researchers to identify o ther demographic characteristics which are useful in explaining organizational behavior. They encourage other researchers to establish cross- national models and explore empirical analyses on this topic under different national and cultural backgrounds. As mentioned before, most of the existing research on this topic uses the sample of developed countries, thereby lacking attention on emerging or developing markets. As a consequence, this research attempts to make a contribution to extend the existing knowledge on TMT turnover in less-developed country contexts. As individual organizational behaviors are probably influenced by the social and cultural values, that is, social and cultural values are influencing perceptions of what is dissimilar and what is not (Godthelp and Glunk, 2003), it is interesting to see what their impact is on the TMT turnover behavior in less-developed countries or within an emerging market environment.

Generally speaking, emerging market means those countries with a rapid industrialization process and economic growth. They actually have some characteristics of developed markets but are not developed markets. Such countries are considered to be in a transitional process between developing and developed status. Kvint (1999) indicated that “an emerging market country is a society transitioning

from a dictatorship to a free-market-oriented-economy, with increasing economic

freedom, gradual integration with the global marketplace and with other members of

the global emerging market, an expanding middle class, improving standards of living,

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multinational institutions.” Examples of emerging markets include China, India,

Malaysia, Indonesia, Iran, South Korea, and most countries in Eastern Europe. Among these countries, China is one of the largest emerging countries, and its development path including both national level and corporate level attracts a lot of attentions by scholars over the recent years. Hence, it is interesting to explore the relationship between TMT heterogeneity and their turnover behaviors in the Chinese context.

Overall, this thesis is aiming to examine demographic effects by focusing on the relationship between top management team attributes and team turnover within the Chinese context. Hence the research question of this thesis is:

How does demographic heterogeneity within the top management team influence the top mangers’ turnover behaviors in Chinese listed firms?

The paper is organized as follows: section 2 describes the theoretical background on TMT turnover and demographic heterogeneity as well as how demographic heterogeneity affects TMT turnover. Section 3 examines the relationship between TMT heterogeneity and the turnover behavior using an empirical analysis. Section 4 reports the results of the multiple linear regression analysis. Lastly, the paper ends with a conclusion and provides some suggestions for future research.

2. Literature review

2.1 TMT Turnover

activities such as executives leaving and hiring new members. The decision of TMT turnover is one of the most significant decisions since it influences a firm’s operation, investing as well as financing activities (Xia, Cheng and Dai, 2013).

As mentioned abover, top managers as an important human resource, its quality may directly influence the organizational outcomes. According to the further research by Cheng, Chan & Leung (2010), the performance of TMT well verifies another famous strategic management theory which is resource based view (RBV). RBV suggests that firm’s sustainable competitive advantages are determined by the resources (both tangible and intangible) the firm obtained while human resource is an important intangible asset which makes the firm operate more effectively and efficiently(Hitt et al., 2001). They indicated that the top manager in the firms plays an important role for the firm to operate sustainably and thus generating outstanding performance. It is possible to regard the top management team as an explicit resource after realizing the significance of the top management team to the outcome of a firm. A team composed with different age, social network, tenure, working experiences and educational level may influence the quality of top management team as a whole (Collin & Umans, 2008). That is to say, both the individual members and the whole team can be seen as a valuable and rare resource that would be difficult for others to learn and imitate. Existing studies suggested that innovation activities and strategic reorientation are correlated to the top management team compositio n (Bantel & Jackson, 1989; Keck & Tushman, 1988). For instance, the results demonstrated that educational level of top managers positively relates to the innovation ability in a firm. That is, the more educated teams with diverse functional areas of expertise and experiences, the more innovative the TMT will be.

9 corporate objectives; strategic tasks such as reviewing, approving and evaluating corporate strategies as well as linking to relevant external resources; they also have responsibilities to recruit and remunerate for instance, hiring and firing executives and setting compensation packages. The job titles that are commonly considered existing in the top management team include as following: Chief executive officer (CEO), chief procurement officer (CPO), chief operations officer (COO), chief financial officer (CFO) and so on. TMT composition influences the organization outcomes such as firm performance, strategic change and innovation hence it is necessary to analyze what factors cause TMT turnover behaviors (Collin & Umans, 2008)

When reviewing the early research on executive turnover, most of them usually related executive turnover with firm performance for instance, accounting o r stock price. They indicated that unsatisfied firm performance will be associated with higher levels of executive turnover (Warner, Watts and Wruck, 1988; Barro, 1990). Other research demonstrated that executive turnover was also influenced by factors suc h as industry characteristics, market competition, and corporate ownership structure (Weisbach, 1988; Parrino, 1997; DeFond and Park, 1999; Denis, 1997). These researches mainly focus on firm- level factors but the top manager individual- level characteristics have been overlooked to some extent.

the selection step it is the firm’s turn to select the most suitable person in the right job position through formal and informal recruitment procedures. Ult imately in the attrition step, people tend to leave the organization they do not fit the environment and thus it may lead to a more homogenous team than before (Holland, 1985). Individuals are initially attracted by a firm with members who have similar characteristics to them; after entering the team, the link between individuals tend to be judged by the satisfactory to the extent that similarity among them. When individuals find themselves different from others, they may feel uncomfortable and thus they are more likely to leave the team. Based on this argument, Wiersema & Bird (1993) in their empirical study demonstrated that managers in a more diverse environment have a higher intention to leave their positions in the top management team and those people who feel they do not fit the environment will be likely to find another place to stay.

2.2 Demographic heterogeneity

11 characteristics or board characteristics can be seen as one of the antecedents to determine the organizational outcomes such as firm performance or strategic interactions, and in this case—TMT turnover. Normally there are two kinds of characteristics, and one is managers’ value, cognitive models toge ther with personalities (age, gender) while the other one is human capital which are managers’ experiences such as education, working experiences and tenure.

On the base of this theory, personal attributes diversity such as differences in gender, age, tenure and educational level of managers are the important factors influencing organizational outcomes. For example, gender diversity is considered to affect corporate decision making. Adams and Ferreira (2009) in their research on women in the board room and their impact on governance and performance argued that the more diversity in gender in TMT the worse performance the management team will have on average. They explain it might be due to over monitoring and gender diversity is especially helpful in companies with weak governance arrangements. Age and tenure diversity of top managers are also related to risk-taking capabilities and innovation strategies thus can directly affect firm performance and turnover. According to Hambrick and Mason (1984), older top managers have a tendency to be more conservative; however younger managers are easier to accept new ideas, they show less commitment to companies and less interest in career stability. Moreover, managers who worked for a long period are more likely to ha ve commitment to the routines of firm operations and they tend to lose their interests to be creative and critical in their firms over time (Hambrick and Fukutomi, 1991). All in all, individual differences between TMT may result in communication barriers within the team and thus might lead to someone leaving the team. Therefore the study on the TMT demographic heterogeneity is becoming a challenge for an organization.

environmental perceptions as well as improves creativity within a firm (Harrion and Klein, 2007). However, the opposition argues that team diversity may be harmful. They argue that team diversity will lead to increasing communication barriers and decreasing decision making effectiveness and thus increasing conflicts and parochialism within the team as well as reducing the ability to interact between team members (Kirchmeyer and Cohen, 1992; Sutcliffe, 1994). Because of this “dual” affect, the relationship between TMT diversity and organizational outcomes such as firm performance and innovation activities is not unilaterally positive or negative, but rather, depends on the context in which the TMT is (Cannella, Park and Lee, 2008).

2.3 How demographic heterogeneity affects turnover

13 and innovative. But at the same time, it is more difficult for this young manager to communicate with other team members when there is a marked difference in age. If this young manager is unsatisfied with their communication frequency and quality and even communication style caused by generation gap, he would likely be far more inclined to leave the team.

Demography theory suggests that demographic characteristics within an organization have a significant influence on organizational behavior such as strategic choices, firm performance and turnover (Pfeffer, 1993). Organizational demographic theory is concentrating on cohesion as well as homogeneity within teams. It assumes that demographic heterogeneity may lead to individuals feeling uncomfortable within the team since it reduce communication effectiveness, social integration and increase conflicts.

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2.4 Cultural dimensions in the Chinese context

Just as what has been described above, different demographic characteristics could influence the social dynamics such as communication frequency, quality of communication or level of integration, and thus have a further influence on organizational outcomes such as turnover. Therefore, in this section we try to briefly discuss the TMT characteristics in the Chinese listed firms based on Hofstede’s cultural dimensions. According to Hofstede (1991), national cultures are different in terms of five dimensions: power distance, collectivism or individualism, masculinity or femininity, uncertainty avoidance, long term or short term orientation. The following table reports the cultural index comparison between China and the USA.

Hofstede’s Cultural Dimensions China USA

Power distance 80 40

Individualism Vs Collectivism 20 91

Masculinity 66 62

Uncertainty Avoidance 30 46

Table 1: cultural dimension comparison

According to Gudykunst and Ting- Toomey, 1988), it was stated that collectivism is an important distinguishing factor of cultural variability. In addition, network (Guanxi) plays an important role in organizational behaviors in Chinese society (Lin, 2010). It is regarded as the core concept of understating the Chinese society as well as business behaviors (Boardman and Kato, 2003; Luo, 2002). Yeung and Tung (1996) defined

Guanxi as “a general form of social networks and has the implication of gate/pass

and connection. “ Wong and Tjosvold (2010) suggested that Guanxi is helpful to

promote cooperation as well as build trust, thereby facilitating partnership effectiveness amongst the group.

In the following we will discuss three specific TMT heterogeneity in the Chinese context which are age heterogeneity, tenure heterogeneity and educational level heterogeneity. We choose these three demographic characteristics since previous studies suggest that these variables may have significant causal influences on intervening processes of social dynamics, thus it is likely to affect the level of turnover among the group (Pfeffer, 1983; Jackson et al., 1991; O’Reilly et al., 1980).

2.4.1 Age diversity

17 may have a high level of cognitive and affective conflict, hence the executives are more likely to leave the original team.

The Chinese society has experienced many vicissitudes in the 20th century and people born in different years go through totally different lives, which make the social perception caused by the age gap become even more apparent. Based on the analysis above, I assume that the more diversity in age within the top management team in Chinese firms, the more tendencies the managers will leave their positions.

H1: Age heterogeneity in TMT will be positively associated with the turnover in

Chinese top management terms.

2.4.2 Tenure diversity

Tenure refers to the length of time the manager has worked in the top management team. Team members with different tenures may have a different understanding of interpersonal relationships as well as the team operation rules, which makes it difficult to do the right decision- makings for them (Pfeffer, 1983). Managers with similar team tenure are more likely to communicate and agree with each other (Zenger and Lawrence, 1989). Especially in the collectivistic society like China, people tend to pursue harmony and conformity within a group. Therefore, the top management team with the similar tenure generally has high cohesion and high level of trust among group members. Otherwise, the relatively high tenure heterogeneity within TMT members may decrease the trust level, thereby increasing conflicts between group members.

H2: Tenure heterogeneity in TMT will be positively associated with the turnover in

2.4.3 Educational level diversity

Educational level refers to the length of year the manager follows a formal education. Individuals at different educational levels may have distinct ways of thinking and a different ability to process the information as well as to cope with the complex external environment. Managers with a similar education background usually share the common experiences and it makes them feel more comfortable with each other (Wiersema and Bird, 1993). Homogeneity in educational level may help increase the group cohesiveness and integration. China is a country attaching great importance to the education and the degree level seems to be a strong indicator of social class in Chinese society. Because of the huge population base, you should work harder and perform better than others to get the opportunity. As a result, the effect of the educational level used to distinguish between individual ability and the role of identity may be even more prominent in Chinese society. Based on this, the hypothesis is present as following:

H3: Educational level heterogeneity in TMT will be positively associated with the

turnover in Chinese top management terms.

In conclusion, the conceptual model of this thesis is presented as below:

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3. Method

3.1 sample and data collection

In order to examine the effects of TMT demographic heterogeneity on the turnover behavior in the Chinese background, the author selected 100 Chinese listed companies as the sampling model to do the regression analysis. The sample companies consisted of 100 largest stocks with features of good liquidity and representativeness from Shanghai Stock Exchange (SSE). The author collected the data of TMT members in these companies between the year 2010 and 2012.

To guarantee the accuracy and viability of the research, those companies with incomplete data or engaged in the major change of shareholder’s ownership during the research period were removed from the sample. In addition, since top managers aged above 65 tend to leave their positions because of their own health reasons, the research also removed those companies with TMT members above 65 years old so as to reduce the disturbance of irrelative information.

3.2 Measurements of variables

3.2.1 Dependent variable

The dependent variable in this research was TMT turnover. It was equal to the number of managers leaving in the end of the year, divided by the total number of TMT managers in that year. To be specific, it was measured as the proportion of individual exit events from the top management team in the respective observation year during 2010 and 2012 (Godthelp and Glunk, 2003).

3.2.2 Independent variables

The independent variables in this research were TMT age heterogeneity, tenure heterogeneity and educational level heterogeneity. The three TMT heterogeneity (age, tenure and educational level) indicators were measured at the end of each yearly interval. According to the previous research, heterogeneity of the top management team was usually measured with the coefficient of variation in terms of age, tenure and educational level (Wagner, Pfeffer and O’Reilly, 1984; Wiersema and Bird, 1993; O’Reilly, Caldwell and Barnett, 1989; Godthelp and Glunk, 2003). It was a normalized measure of dispersion of a probability distribution for interval-scaled data and can be calculated by standard deviation divided by the mean. The coefficient of variation can be used directly to measure the TMT age heterogeneity and tenure heterogeneity since age and tenure was interval-scaled data.

21 following table 2 according to Chinese national educational conditions:

Highest degree Primary school Junior middle school Senior high school Junior college Bachelor degree Master degree PHD degree Year of accepting education 5 8 11 14 15 18 21

Table 2: measurement of executive education level

The formula of heterogeneity measurement used by Wagner, Pfeffer and O’Reilly (1984) is shown below:

－

－

In this formula, n means the number of the top managers in TMT of a sample firm and =1~n. means the value of each member in the corresponding indicators (age,

tenure and educational level). Furthermore, － stands for the average value of the top management team members in the relevant index which are age, tenure and educational level.

3.3.3 Control variables

Although the aim of this thesis is to analyze the effects of demographic characteristics on turnover in the top management team, other causes of turnover should also be tested as a control for alternative explanations for the results. This research used the team size, average team age, average team tenure, and average team educational level of top managers as well as firm performance as control variables.

Team size:

and more communication problems compared to small teams. Moreover, team size directly influences the value of the dependent variable (turnover) together with the independent variables (demographic heterogeneity), so it is used as a control variable in the thesis.

Age, average team tenure and average team educational level:

Age was controlled for because a team with older managers usually tends to have a higher turnover for the reason of retirement or health problems (Mobley, 1979). Average team tenure was controlled for since managers in a top management team for a long time might have less likelihood of turnover. This is because the increased commitments and efforts have been put in the team and make the team be more united and cohesive (Godthelp and Glunk, 2003). Besides, the average team educational level was control for because members with higher educational level tend to have a higher tendency of turnover.

Firm performance:

A lot of researches demonstrated that executive turnover is related with the firm performance, for example Coughlan and Schmidt (1985), Kang and Shivdasani (1995) and Kaplan (1993). They found that poor firm performance would lead to an increased turnover. If the firm performance is not good, it is expected that changing the team composition and looking for other good manager can improve the current situation. Firm performance in this research was measured by ROA (return on assets) for the year 2010 and 2012.

4. Results

23 years. The average educational level, which is transformed into the year of formal education received, is 13.77 years and it is between junior college degree and bachelor degree.

Just as what has been shown in Table 1, we only find that the dependent variable which is turnover correlates significantly with the control variable which is average age. This means that there is indeed a relation between TMT average age and turnover behavior. This result implies that the older the top manager is, the more likely he would leave his position. The correlation can be explained by the retirement effect or health problems. There was no significant correlation between turnover and other variables (average tenure, average educational level, team size, ROA, age heterogeneity, tenure heterogeneity and educational level heterogeneity).

The table 4 reports the multiple linear regression results of the hypotheses. In model 1, only the control variables are entered into the equation: average age, average tenure, average educational level, TMT size and ROA. We find that the effect of TMT average age is significant (β=0.02, p≤0.01), that is, the higher average age within a team, the more likely the turnover behavior will be occurred. As what has been described above, this may refer to a retirement effect or health problems. Furthermore,

Table 3 Means, Standard Deviations and Correlations

Mean S.D. 1 2 3 4 5 6 7 8 9 1.TURNOVER 0.15 0.14 1.00 2.AVERAGE_AGE 47.18 2.87 0.12* 1.00 3.AVERAGE_TENURE 3.91 1.50 0.02 0.08 1.00 4.AVERAGE_EDU 13.77 4.02 -0.09 0.01 -0.04 1.00 5.TEAM_SIZE 7.11 2.69 0.07 0.13* 0.07 0.06 1.00 6.ROA 0.02 0.02 -0.01 0.07 -0.03 -0.03 0.07 1.00 7.AGE_HETER 0.08 0.05 -0.02 0.05 0.13* -0.02 -0.12* 0.14* 1.00 8.TENURE_HETER 0.66 0.26 -0.04 -0.08 -0.20** -0.04 -0.02 -0.06 -0.08 1.00 9.EDU_HETER 0.50 0.13 0.00 0.05 0.10 0.04 -0.02 0.06 0.15** -0.08 1.00

we also find a significant link between TMT size and managers turnover behaviors (β=0.02, p≤0.01). That is, the larger size the TMT, the more likely turnover occurs. The influence of the control variables which are average age and team size on turnover stayed consistent throughout our entire analyses.

Model 2, model 3 and model 4 report the results of the three hypotheses with regard to TMT age heterogeneity, tenure heterogeneity and educational level heterogeneity respectively. The result of model 2 shows that TMT age heterogeneity has indeed an effect on turnover (β=-0.49, p≤0.05). The negative and significant B coefficient indicates that the more diverse a top management team is in terms of age, the less likely the team member is to leave the team. Contrary to our hypot hesis 1 which is TMT age heterogeneity will affect turnover behaviors positively, we find that TMT age heterogeneity is negatively related with top managers turnover behaviors. Thus, hypothesis 1 is not supported. In Model 3 we test the hypothesis 2 which is the influence of TMT tenure heterogeneity and find that there is no significant relationship between TMT tenure heterogeneity and turnover (β=-0.06, p=n.s.). Similarly, no significant link is found between TMT educational level heterogeneity and turnover (β=-0.08, p=n.s.). Therefore, we can conclude that both hypothesis 2 and hypothesis 3 are not confirmed according to our regression results.

Table 4: Multiple Linear Regression Results

Variable Model 1 Model 2 Model 3 Model 4

25 EDU_HETER -0.08 R-squared 0.49 0.50 0.50 0.49 Adjusted R-squared 0.22 0.24 0.22 0.22 S.E. of regression 0.13 0.12 0.13 0.13 Sum squared resid 3.11 3.02 3.07 3.08 Log likelihood 259.88 263.90 261.68 261.05 F-statistic 1.81 1.88 1.82 1.81 Prob(F-statistic) 0.00 0.00 0.00 0.00 *p≤0.05,**p≤0.01,***p≤0.001

5. Discussion

The aim of this thesis was to answer the research question “how does demographic

heterogeneity within the top management team influence the top managers’ turnover

behaviors in Chinese listed firms?” As what has been mentioned in the introduction

part, we notice that most of previous studies on the top manager’s turnover behavior are focusing on the individual level such as individual attitudes and intentions (Baysinger and Mobley, 1982; Terborg and Lee, 1984). Although individual attributes play an important role on TMT turnover behaviors, the group- level variables may also be considered in decisions to stay or leave. As an extension of previous research to the Chinese context, this thesis investigated the group level heterogeneity variables as predictors of TMT turnover behaviors in Chinese listed firms. When specific to the Chinese context, we do find some empirical results which are different from other western countries, thereby indicating that it is necessary to do this research.

behaviors in Chinese top management teams. The results show that except for the TMT age heterogeneity, no significant relationship is found between the top manager’s turnover behaviors and their tenure heterogeneity as well as educational level heterogeneity. However, in contrast with our original hypothesis in terms of TMT age heterogeneity, we did find that TMT age heterogeneity is negative ly related to turnover, indicating that the higher the age diversity, the less likely that turnover behavior within the TMT occurs. This result toward the age heterogeneity is different from the previous western-based studies which suggest that age heterogeneity is positively related to TMT turnover or just no significant relationship.

5.1 Theoretical implications

27 Furthermore, the conflicts within the group will be reduced in a top management team with aged managers, because young group members in China tend to respect the aged managers and believe in the decisions they make. In this way, turnover in top management team with high age heterogeneity tend to decrease. However, if a top management team composed with people of similar age, there may be a lot of conflicts existing within the group since none of them could convince the others. Some people tend to leave the group either because they think they can learn nothing from others or the disagreements of managerial opinions cause them to leave. (Lei and Chen, 2008)

We assumed that tenure heterogeneity in TMT would be positively associated with the turnover behaviors in Chinese top management teams. Nevertheless the results report that there is no significant relationship between TMT tenure heterogeneity and the top manager’s turnover. Previous studies found different results in terms of TMT tenure heterogeneity. For instance, Wagner (1984) found that TMT tenure heterogeneity is related with turnover level of the top management team. Our results are consistent with the study of Wiersema and Bird (1993) and Wiersema and Bantel (1993) in which is no such effect between TMT tenure heterogeneity and turnover is found. The lack of significance for TMT tenure heterogeneity might exist due to methodological differences. Since we control for team’s average age, average tenure, average educational level, team size as well as ROA to test our hypotheses, while in the study of Wagner (1984), they only use firm performance and the firm age as control variables.

the top management team is 47 so that they are a group of people born in 1960s. For the historical reasons in Chinese society (Cultural Revolution between 1966-1976), the educational level of this generation is generally not high. The college entrance examination was canceled during that 10 years which lead to those people have no opportunities to go to university. The average educational level is very low during that period because of the social unrest. So the effect of educational level is not that obvious in that generation of people. Besides, according to Hofstede, China is a country with high score of collectivism, which means the network or Guanxi is very important in people’s life and work. In such background, the effect of educational level seems to be relatively unimportant. Sometimes, once you have the crucial Guanxi with one of the top managers, yo ur educational level is not that important at all and you can enter the team directly. This may partly explain the non significant influence of TMT educational level heterogeneity on turnover behaviors from another point of view. Along with the rapid growth and development of higher education in China nowadays, younger managers tend to be more educated. Therefore we can probably assume that educational level heterogeneity would have an effect on TMT turnover in the future.

5.2 Practical implication

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5.3 Further research and limitation

Although the results report that TMT heterogeneity effects are not that strong except for the TMT age heterogeneity, the present thesis does provide some evidences that group- level variables have an influence on the top manager’s turnover behaviors. Previous research has identified that turnover behaviors may be influenced by at least 26 separate variables related to economic factors, organizational factors, job characteristics and individual characteristics (Mobley, 1982; Cotton a nd Tuttle, 1986). Therefore, further research could investigate other possible variables that could affect the turnover behaviors. The level of economic development, for instance, could vary across geographical regions and provide different job opportunities which could in turn affect the turnover. People are less likely to leave their jobs when the economy went bad since they fear that they would not find another job (O’Reilly, Caldwell and Barnett, 1989).

What’s more, it is possible to extend this line of research in many different paths. For example, the further research could investigate other organizational process and outcome such as promotion, innovation and strategic change. For example, one could extend the research by examining the relationship between TMT demographic heterogeneity and organizational innovation. One could argue that organizational innovation is also affected by the diversity of the top management group and investigate the positive or negative relationships. Besides, we try to explore the demographic effects in emerging markets so as to compare with the U.S. context and we only selected Chinese firms in this thesis. We do find some different results which indicate the necessity of the research. The further research could also focus on other emerging markets for instance India or Brazil to see what the differences exist between these countries and it is interesting to explore what social or cultural factors caused the different results in these different ethnological contexts.

demographic differences such as age, tenure and educational level. This is because the demographic information of TMT is relatively easy to access. However, some scholars have highlighted that it is necessary to go beyond demographic attributes (Priemet al., 1999; Lawrence, 1997). Some other types of diversity for example cognitive diversity (Miller et al. 1998), experience diversity might also have an influence on TMT turnover behaviors. As such, future research could aim to incorporate also the less visible characteristics of team diversity to get an even more comprehended understanding of the impact of team diversity, in this case—turnover.

5.4 Conclusion

In this thesis it was argued that TMT age heterogene ity, tenure heterogeneity as well as educational level heterogeneity would be positively associated with the turnover in Chinese top management teams. The results finally identified that only TMT age heterogeneity had a significant link with the turnover behaviors and it was negatively related. The TMT tenure heterogeneity and educational level heterogeneity were provided insignificant results for those hypotheses. The important of the effects of demographic dissimilarity is under no doubt. The current study contributed a more comprehensive understanding of how TMT diversity impacts turnover behaviors by including the cultural context. In addition, the current study is helpful for predicting TMT turnover behavior in the TMT and also provides some practical suggestions for the executive recruitment in the Chinese firms.

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