Journal of World Business 57 (2022) 101328 Contents lists available at ScienceDirect Journal of World Business journal homepage: www.elsevier.com/locate/jwb Cultural diversity in top management teams: Review and agenda for future research Yuliya Ponomareva a, *, Timur Uman b, Virginia Bodolica c, Karl Wennberg d, e a Department of Business Administration The Autonomous University of Barcelona, Campus de la UAB, Plaça Cívica, 08193 Bellaterra, Barcelona b Jönköping International Business School, Gjuterigatan 5, 553 18 Jönköping, Sweden c American University of Sharjah, University City, PO Box 26666, Sharjah, United Arab Emirates d Department of Management and Organization, Stockholm School of Economics, PO Box 6501, 11383 Stockholm, Sweden e Institute for Analytical Sociology (IAS) Linköping University, 601 74 Norrköping, Sweden A R T I C L E I N F O A B S T R A C T Keywords: Despite its growing social relevance, research on cultural diversity in top management teams (TMTs) has been Cultural diversity sparse and fragmented. To build a firm foundation and facilitate the development of this field, we review and Top management team synthesize 106 key articles published between 1997 and 2021. Our study provides a comprehensive field map Literature review explicating the antecedents and influence of TMT cultural diversity, showing that cultural diversity constitutes a Upper echelons distinct and important aspect of TMT diversity that has significant implications for a variety of outcomes. By Corporate governance Internationalization critically assessing the field, we identify key research gaps and promising areas for future research. 1. Introduction made managing cultural diversity in the executive suite a high-priority issue for organizations (Hunt, Prince, Dixon-Fyle, & Lee, 2018). Cultural diversity defined here as the representation of individuals with Concurrently, growing scholarly interest in cultural diversity has un­ distinctly different group affiliations of cultural significance based on equivocally shown its profound impact on TMTs’ behaviors and strategic racioethnicity and nationality (Cox, 1993) is one of the most important choices, with significant implications for the companies they lead attributes of top management teams’ (TMTs) diversity, yet also one of (Roberson & Park, 2007; Schmid & Dauth, 2014). the least understood. A wealth of research rooted in the upper-echelons Despite considerable progress, the questions of when do TMTs theory (Hambrick & Mason, 1984) has aimed to disentangle the effects become culturally diverse and how this attribute of TMT diversity in­ of other TMT demographic diversity characteristics such as age, gender, fluences organizational outcomes remain ambiguous and debated issues functional background, tenure, and education (Aboramadan, 2020; offering limited directions for either scholars or practitioners. Yet, these Knippen, Shen, & Zhu, 2019; Mohr, Schumacher, & Kiefner, 2022; Shin, questions are vital for corporations since TMTs are central for formu­ Seidle, & Okhmatovskiy, 2016). However, the inherent cultural homo­ lating and executing strategic goals (Hambrick & Mason, 1984). TMT geneity of organizational upper echelons (Perlmutter & Heenan, 1974; cultural diversity is also one of the most obvious and visible aspects of Simmonds, 1966) has long hampered the development of the field, diversity for owners, employees, and other stakeholders (Rattan, 2020; leaving the topic at the periphery of the research agenda (Boone, Lok­ Shore, Randel, Chung, Dean, Holcombe Ehrhart, & Singh, 2011). shin, Guenter, & Belderbos, 2019; Nielsen & Nielsen, 2013). Yet, shifting Because of this visibility, individual perceptions are greatly influenced workforce demographics and the increasing internationalization of by cultural differences, and constitute one of the most common sources businesses during the past two decades have resulted in important of identification and social categorization, with a significant impact on changes in the cultural composition of TMTs. Together with the growing how teams function (Earley & Mosakowski, 2000; Ely & Thomas, 2001; societal significance of cultural diversity among top managers, this has Stahl, Maznevski, Voigt, & Jonsen, 2010). Relatedly, TMT cultural We are grateful for comments from Alan Ellstrand at ICGS 2020 annual meeting. We also thank Sami Elomari, Lofti Karoui, Audra Mockaitis, and seminar audiences at the 7th Critical and Alternative Approaches to Governance Workshop, Barcelona. All errors and omissions remain those of the authors. * Corresponding author. E-mail addresses: yulia.ponomareva@uab.cat (Y. Ponomareva), timur.uman@ju.se (T. Uman), vbodolica@aus.edu (V. Bodolica), karl.wennberg@liu.se (K. Wennberg). https://doi.org/10.1016/j.jwb.2022.101328 Received 28 July 2020; Received in revised form 31 January 2022; Accepted 3 February 2022 Available online 4 March 2022 1090-9516/© 2022 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 diversity has symbolic value for employees and external stakeholders, considerably in terms of the facets of cultural diversity that form the by indicating that career opportunities in the organization are unaf­ focus of the study, their operationalization and measures. To identify fected by an individual’s racial or national background (Shore et al., and synthesize these different approaches to conceptualizing and 2011). studying cultural diversity in the TMT context we adopted a Furthermore, the occurrence of cultural diversity in senior leadership semi-structured literature review methodology, allowing us to embrace is a rapidly expanding reality in corporations around the world. In the U. the complexity of the field when reviewing previous studies of TMT S., people from racial minorities hold about 15% of senior executive cultural diversity (Snyder, 2019; Wong, Greenhalgh, Westhorp, Buck­ positions (Coury, Huang, Kumar, Prince, Krivkovich, & Yee, 2020), ingham, & Pawson, 2013). while the share of executives with foreign nationality in Switzerland has The first stage of data collection was performed by searching the two reached as high as 64%, earning it the title of a “laboratory for the new largest abstract and citation databases of peer-reviewed literature global managerial elite” (Davoine & Ravasi, 2013: 159). Mounting (Scopus and Web of Science). Based on the definition adopted we con­ institutional pressure, as exemplified by the “Black Lives Matter” ducted a Boolean keyword search at the intersection of two strings. movement or leading private equity firms mandating their investments Block 1 contained words related to top management team: “top man­ to increase cultural diversity in top management, has subjected the agement team*” OR “executive board*” OR “top team*” OR “executive TMTs of many corporations to increasing scrutiny (Frost, 2020; Quir­ team*” OR “leader* team*” OR “senior management*.” Block 2 con­ oz-Gutierrez, 2021). In response, multinational corporations implement tained words relevant for cultural diversity based on nationality and changes aimed at enhancing cultural diversity in their upper echelons racioethnicity as well as general terms such as heterogeneity, diversity (Ruigrock & Greve, 2008; Shi et al., 2018). and faultlines to be able to capture studies that explored one or multiple Despite the significance of TMT cultural diversity for organizations aspects of TMT diversity with culture being one of them: “divers*” OR and the growing social relevance of the phenomenon, no comprehensive “heterogen*” OR “differ*” OR “dissimilar*” OR “faultline*” OR “for­ study to date has taken stock of extant knowledge on this distinct and eign*” OR “cultur*” OR “national*” OR “raci*” OR “race” OR “ethnic*” multifaceted aspect of TMT diversity. Prior reviews have mainly atten­ OR “language” OR “linguist*” OR “relig*” OR “region*” OR “trib*” OR ded to workforce cultural diversity (e.g., Hutzschenreuter, Matt, & “citizenship” OR “international*” OR “multi*” OR “global*”. Kleindienst, 2020; Stahl et al., 2010, Takahashi, Ishikawa, & Kanai, In line with similar reviews, and to assure quality control and capture 2012; Tarique & Schuler, 2010) or TMT diversity in general (Ollie, 2010; works of greatest scholarly impact, we limited our search to articles Schoonhoven and Woolley 2005), without distinguishing among published in peer-reviewed journals (e.g., Debellis, Rondi, Pla­ different diversity attributes. Against this backdrop we document the koyiannaki, & De Massis, 2020; Hutzschenreuter et al., 2020). Given theoretical foundations of TMT cultural diversity, what we know about that the aim was to explore the field’s general development rather than its key antecedents and outcomes, as well as whether and under what present findings from a limited set of journals, we did not limit the conditions such diversity is beneficial for organizations and their search to specific journals or years of publication. employees. The search in both databases produced a total of 7424 articles; after To provide a comprehensive overview and synthesis of current the removal of duplicates, the final sample consisted of 4904 manu­ knowledge about cultural diversity in TMTs we conducted a semi- scripts. We assessed titles, abstracts, and keywords for relevance and structured literature review of 106 studies published in 75 journals classified articles into “definite inclusion” (n = 45), “possible inclusion” over the 1997–2021 period. We map the extant literature on the topic (n = 174), and “exclusion” (n = 4685). The 4685 excluded articles were and, based on our analysis, propose an integrated framework to illus­ those where the two search-string terms were not directly related. For trate current knowledge about theoretical mechanisms linking ante­ example, an excluded article might deal with cultural differences among cedents, outcomes and contextual influence of the phenomenon, and employees and the role of the TMT in managing these differences. identify research gaps and emerging themes that can advance the Another excluded article might deal with linguistic differences within development of the field. Three key emerging themes are uncovered in one given country and how executive boards in governmental organi­ our analysis that could advance the future development of the field. zations took this into account when developing specific policies. First, we identify a need for a clearer definition and conceptualization of We read all 219 articles classified as “definite” or “possible” inclusion TMT cultural diversity and its facets. Second, our analysis uncovers a in full. We eliminated 136 articles that did not deal with cultural or need for a more nuanced understanding of theoretical mechanisms that related dimensions of diversity, or focused on cultural diversity in drive the occurrence of TMT cultural diversity and shape its impact on boards of directors rather than TMTs, or collected data based on a the team and organizational outcomes. Specifically, more work is sample of university students. This resulted in a sample of 83 articles. needed to disentangle why culturally diverse TMTs matter for organi­ The second stage of data collection ensured that our search-string zations and how they function. Finally, our review reveals the domi­ procedure did not exclude any relevant articles. We supplemented the nance of a Western perspective on diversity. We urge future research to sample using bibliometric “ancestry sampling,” screening the reference explore the notion of TMT cultural diversity in non-Western business lists of recently published articles in the Boolean keyword search for contexts untapping the role of national institutional context in shaping additional relevant articles (Bodolica & Spraggon, 2018). This proced­ the definition and influence of TMT cultural diversity. ure continued until no further references were revealed, yielding 23 additional articles fitting the inclusion criterion. Our final sample 2. Methods comprised 106 articles (see PRISMA flowchart in Fig. 1). In line with similar reviews (e.g., Bodolica & Spraggon, 2009; Fed­ For our review, we adopted a broad definition of TMT cultural di­ ero, Ponomareva, Aguilera, Saz-Carranza, & Losada, 2020; Malki, versity as a representation of executives with distinctly different group af­ Uman, & Pittino, 2020; Terjesen, Hessels, & Li, 2016), we focused on filiations of cultural significance based on racioethnicity and nationality (cf seven themes: journal outlets, research methods, theories, empirical Cox, 1993.). In line with this definition, a group of cultural significance context, modeling, research questions, and concepts under study. We refers to “an affiliation of people who collectively share certain norms, used a two-step coding method (Nielsen, 2010a) to first analyze fre­ values, or traditions that are different from those of other groups” (Cox, quencies of outlets, research questions and methods, and empirical 1993: 5–6). Based on this definition, TMT cultural diversity based on context. In the second step, we performed a more in-depth analysis of racioethnicity and nationality can be manifested through multiple facets theories, concepts, and research models. Summaries of studies in our including country of birth, citizenship, race and ethnicity but also lan­ sample are presented in Appendix A. guage and geographic background. Given the multifaceted nature of the phenomenon, studies attending to TMT cultural diversity differ 2 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 Fig. 1. Preferred reporting items for systematic reviews and meta-analyses (PRISMA) flow diagram. 3. Descriptive overview of the field = 5), Management International Review (n = 4), and European Management Journal (n = 4), with 3 (2) articles appearing in each of 3 (11) other The first paper we identified appeared in 1997. During 1997–2007, journals. In terms of the field’s impact, only 23 studies (21.7%) have so the field developed rather slowly, with between 0 and 5 articles (1.64 on far received 100+ citations on Google Scholar, while 57 (53.8%) have average) published yearly. Interest grew from 2008 onwards, with be­ garnered fewer than 30 citations. The two most cited articles to date are tween 2 and 12 articles published yearly (6.29 on average). Studies Richard, Barnett, Dwyer, and Chadwick (2004) study of racial diversity included in our review appeared across 75 journals in 18 disciplinary in U.S. banks (999 citations in June 2021) and Kilduff, Angelmar, and fields (see Appendix B). Mehra (2000) study of national diversity among managerial teams in a The quality of these journals, as reflected in Association of Business European executive education program (854 citations in June 2021). School (ABS) rankings,1 varies from 4* (n = 7), 4 (n = 10), and 3 (n = The distribution of papers across journals and disciplines suggests that 18), through 2 (n = 17) and 1 (n = 12), right through to “unranked” (n = TMT cultural diversity research dominates in management, human 11). Most articles appeared in general management journals (n = 24; resource management, and international business journals. We also note 22.6%), with a few published in outlets specialized in human resources growing interest from other disciplines in exploring how TMT cultural (n = 15; 14.2%), international business (n = 13; 12.3%), strategy (n = diversity relates to ethical, psychological, and gender-related topics. An 10; 9.4%), and international management (n = 10; 9.4%). The rest were overview of TMT cultural diversity conceptualizations along with a spread across the fields of business (n = 8; 7.5%), economics (n = 7; geographic setting of studies is available in Appendix C. Research 6.6%), corporate governance (n = 4; 3.8%), leadership (n = 4; 3.8%), methods employed, data source, levels of analysis, and theoretical per­ innovation (n = 2; 1.9%), gender studies (n = 2; 1.9%), and public spectives applied in the literature are summarized in Appendix D. management (n = 2; 1.9%), among others. The most common journals in our review were Journal of World 4. Mapping the field Business (n = 6), International Journal of Human Resource Management (n A central insight from our review is that the conceptualization and terminology used to refer to the nationality and racioethnicity aspects of cultural diversity vary greatly among the studies analyzed, encompass­ 1 A standardized international ranking list of academic journals of relevance ing national, ethnic, racial, cultural, regional, linguistic, and geographic for business schools (i.e. both business and other social-science journals), where characteristics of the TMT (Appendix C). Most articles (n = 65; 61.3%) “top” journals are denoted 4* and others are ranked as 4, 3, 2, 1, or unranked, emphasize study subjects’ nationality, captured through measures such based on a number of quality metrics such as circulation, impact factor, etc. 3 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 as diversity indices based on individuals’ country of birth or citizenship diversity and different levels of outcomes. status, or the proportion of home- versus host-country nationals (“for­ Another major area of research (n = 24; 23%) seeks to explain the eigners”) on the TMT. Far fewer articles look at the ethnicity or racial occurrence of cultural diversity in the TMT. Although this research diversity of the TMT (14 and 10 articles, respectively), while only 4 stream emerged later and grew more slowly than studies on the out­ examine diversity through regional, linguistic, social-class (caste), and comes of TMT cultural diversity, studies have already outlined both the geographic characteristics—an approach frequently used when studying facilitators of, and barriers to, the recruitment of culturally diverse ex­ ethnic diversity in international business, geography, economics, and ecutives at institutional, firm, team, and individual levels. Research has political science (e.g., Alesina & La Ferrara, 2005; Harzing & Pudelko, provided compelling evidence that firm strategy and structure are key 2013). Given the considerable variation in the terminology used to determinants of diversity climate—which, in turn, shapes the perception conceptualize cultural diversity, we use the term “TMT cultural di­ of and openness to diversity. Moreover, this relationships are embedded versity” when we refer to a general finding across studies. However, within the broader societal context. Yet, our field map highlights that when we discuss the findings of a particular study(ies), we use the terms comparatively little is known about the micro-foundations of these used by the authors to refer to the specific facet of TMT cultural di­ relationships—particularly the team- and individual-level dynamics that versity, such as culture, ethnicity, nationality, citizenship, race, regional drive the recruitment of culturally diverse TMT members. background, caste, language, country of birth, geographic background, The third area within the field constitutes studies of TMT cultural or cultural cluster. diversity as a contextual variable (moderator) for other theorized re­ We organize our analysis around the antecedents, outcomes, and lationships (10 papers, 9%). The primary focus in this area has been on contextual influence of TMT cultural diversity. In Fig. 2 we synthesize the how TMT cultural diversity serves as a context (e.g., dimensions of theoretical models (predictors and outcomes) in the studies reviewed organizational structure) for the relationship between strategic choices into a comprehensive field map. Our review reveals that the phenome­ or other executives’ characteristics and organizational outcomes. This non of cultural diversity in TMTs has been examined from a variety of stream highlights the importance of TMT cultural diversity in shaping angles. Most studies in our review, and especially the older ones, the effects of team processes and strategic decisions on firm outcomes. conceptualize TMT cultural diversity as an explanatory factor (n = 75; n Below, we synthesize current insights about the antecedents, outcomes, = 71%), providing compelling evidence for the importance of the and contextual influences of TMT cultural diversity. construct for both financial and nonfinancial outcomes. Evidence sug­ gests that TMT cultural diversity may lead to both positive and negative 4.1. Antecedents of TMT cultural diversity outcomes, yet through different mechanisms. Recent research within the area has increasingly focused on these theoretical mechanisms, focusing Among the core questions posed by scholars in the field are why and on mediating variables such as team processes and team outcomes and when firms appoint culturally diverse members to their TMTs, and what moderating variables such as team, organizational, and environmental might explain greater or lesser progress in TMT internationalization. conditions and their role in the relationship between TMT cultural Hence, studies focusing on the antecedents of TMT cultural diversity at Fig. 2. Mapping the field of TMT cultural diversity: antecedents, outcomes, and contingency effects. 4 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 institutional, firm, team, and individual levels of analysis form a major subgroups (Silver 2017). Against this backdrop, firm-level diversity area of research within the field (see “Antecedents” in Fig. 2 for the programs directed at raising the awareness of diversity issues among summary of research models). multiple groups within an organizaiton are key for the increase the level of perceived racial diversity in the executive suite (Allen, Dawson, 4.1.1. Firm-level antecedents of TMT cultural diversity Wheatley, & White, 2008b). Relatedly, the internationalization of other At the firm level of analysis, scholars have explored the extent to powerful internal groups, such as the board of directors, has been shown which the pursuit of an internationalization strategy can explain the to increase the probability of recruiting foreign-national TMT members presence of a culturally diverse TMT. Taking a strategic fit perspective, (Nielsen & Nielsen, 2010). Greve et al. (2015) add further nuance by Greve, Nielsen, and Ruigrok (2009): 220–221) argue that firms tend to examining how firm context can help or hinder the internationalization “match managers to strategies.” As internationalization strategies are of upper echelons. In a sample of 360 multinationals from the often associated with high levels of uncertainty, recruiting nationally Netherlands, Switzerland, the UK, and the Nordic countries, the authors diverse TMT members can be seen as a way to counterbalance such find that multinationals with below-average performance are more uncertainty by enhancing the firm’s knowledge about local environ­ likely to appoint nationally diverse executives to their TMTs, as these ments, conferring legitimacy on international stakeholder groups candidates may bring new knowledge, skills, and networks, and serve as (Greve, Biemann, & Ruigrok, 2015; Nielsen & Nielsen, 2010). This view symbols of change. Together, these studies exemplify a gradual shift in is complemented by the upper-echelons perspective which highlights the focus of research towards contextual and cognitive conditions that the importance of fit between executives’ individual profiles and the help or hinder TMT diversity. type of TMT position (Hambrick & Mason, 1984). As a consequence, international candidates are more likely to be appointed to TMT roles 4.1.2. Institutional-Level antecedents of TMT cultural diversity related to activities that span organizational and geographical bound­ One stream of research probes institutional characteristics as ante­ aries (Greve et al., 2015). cedents of TMT cultural diversity, showing considerable differences in Yet, the speed of firms’ international expansion may not necessarily TMT internationalization across countries (Schmid, Wurster, & Dauth, reflect the speed of TMT internationalization (i.e., increasing cultural 2015) Van Veen and Marsman (2008) find that country-level factors diversity in the TMT). For example, a study of large Swedish and Dutch explain TMT national diversity more strongly than firm-level factors do, firms reveals that despite an increase in the presence of foreign nationals suggesting that the absorption of culturally diverse executives into TMTs on these firms’ TMTs, it has lagged behind the internationalization of is closely related to the structural opportunities for cultural minorities in firms at large (Heijltjes, Olie, & Glunk, 2003). These findings are echoed a country environment. Focusing on country-specific factors in a in a study of Black and minority ethnic group representation in the UK comparative study of large German, Dutch, and UK firms, Van Veen and National Health Service (Johns, Green, & Powell, 2012), and a similar Elbertsen (2008) find that TMTs’ national composition is strongly tied to tendency of TMTs internationalizing more slowly than their firms at country-specific governance regimes, such as recruitment processes or large is noted in Polish listed companies (Dauth & Tomczak, 2016) as corporate governance codes and practices. In such institutional regimes, well as in the world’s largest corporations (Ghemawat & Vantrappen, the domination of the board by national blockholders such as families, 2015). banks, or the state may hinder international executives from building How can we explain the limited support for the strategic-fit and powerful positions, reducing the likelihood of international executive upper-echelons perspectives’ prediction that TMT cultural diversity will appointments. Relatedly, Kenney and Patton (2015) show that European flow from firm internationalization? Research grounded in agency the­ executives vastly outnumber Asian executives in U.S. TMTs, which they ory suggests that the slow progress is due to the costs of international explain as a function of European executives’ tendency to relocate to the expansion: Diversity increases uncertainty, driving up information- U.S. when they have an advanced degree, while Asian executives mainly processing costs and the risks of opportunism (Collings, Morley, & have only undergraduate degrees, which reduces their career advance­ Gunnigle, 2008; Greve et al., 2015; Van Veen, Sahib, & Aangeenbrug, ment opportunities. 2014). When such costs outweigh the potential gains from the presence Studies conducted in both Western European (Van Veen et al., 2014) of foreign nationals on the TMT—as in complex, large-scale projects, and emerging market contexts (Müllner, Klopf, & Nell, 2017) highlight where control and chain of command are paramount—firms often rely the costs of internationalization stemming from greater institutional on home-country executives to staff their subsidiary TMTs (Lakshman & distance, increasing uncertainty, and the tendency to recruit interna­ Jiang, 2016). Recruitment of culturally diverse TMT members could also tional candidates who are more culturally, institutionally, and be hampered by a lack of skilled candidates, leaving key positions open geographically similar to current TMT members. Despite the barriers to to home-country nationals who can channel knowledge from head­ the increase of TMT cultural diversity stemming from inherent quarters to subsidiaries and engage in talent development (Lakshman & country-level differences, some scholars point to a trend towards the Jiang, 2016). Multinationals may also deliberately internationalize their formation of a global labor market for top management elites facilitated TMTs slowly in order to maintain a balance between a unified corporate by the convergence of management models and the increased interna­ culture and regional adaptation (Kundu, Mor, Kumar, & Bansal, 2019). tional mobility of corporate executives, calling into question the future Some studies have sought to nuance this line of argument by positing persistence of national career patterns as antecedents of TMT national that the balance between costs and benefits from TMT cultural diversity diversity (Davoine & Ravasi, 2013). may change over time, suggesting time as a contingency between the respective predictions of the strategic-fit/upper-echelons and agency 4.1.3. Individual- and team-level antecedents of TMT cultural diversity perspectives (Collings et al., 2008; Gong, 2006; Greve et al., 2009). As Antecedents of TMT cultural diversity have also been explained as a the firm accumulates knowledge about host-country settings and de­ joint function of individual- and team-level factors in the management velops capabilities in diversity management, managerial uncertainty is team itself. Examining the link between TMT functional roles and the reduced (Collings et al., 2008) and thus also the costs associated with appointments of non-majority national TMT members, Greve et al. TMT cultural diversity (Greve et al., 2009; Kundu et al., 2019). (2015) find that organizations are more likely to appoint non-majority Research has also examined factors that shape the climate of orga­ nationals to a TMT role, such as geographic responsibility and nizational diversity, including firm-level diversity programs and initia­ boundary-spanning activities, but less so for roles in throughput func­ tives and the internationalization level of other power groups in the tions such as operations, in line with the strategic-fit and upper-echelons organization that can potentially reduce the costs of TMTs’ increased perspectives. Their results also indicate that foreign executives with cultural diversity. Some studies argue that perceptions of racial diversity richer human capital are more likely to join international TMTs, further in the executive suite differ significantly among organizational underscoring the importance of a match between TMT functional 5 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 emphasis and individual candidates’ human capital. TMT cultural diversity has been argued to enhance teams’ In addition to the rational logic emphasizing the costs and benefits of information-processing capacity and creativity, improve strategic recruiting culturally diverse TMT members, some studies in our review decision-making, and enhance power vis-a-vis other organizational highlight the role of behavioral processes in executive selection. Draw­ groups (Athanassiou & Roth, 2006; Elron, 1997; Osemeke & Osemeke, ing on the similarity-attraction paradigm, Nielsen (2009) shows that 2017), which can be reflected in positive financial performance out­ more homogeneous TMTs in Swiss firms tend to hire candidates of comes (Allen, Dawson, Wheatley, & White, 2008a; Barta, Kleiner, & similar nationality—yet this tendency weakens with the degree of firm Neumann, 2012; Rodríguez-Fernández, Gaspar-González, & internationalization. Relatedly, Doms and Zu Knyphausen-Aufseß Sánchez-Teba, 2020; Tulung, Nelwan, & Lengkong, 2012). On the other (2014) find that nationally diverse TMTs in France are more likely to hand, these benefits may come at the cost of increased intragroup con­ hire additional non-national executives—while those in Germany or the flict, negative social categorization among team members, and reduced UK are not. In line with this, Stafsudd (2006) does not find support to the cooperation and communication (Barczak, McDonough, & Athanassiou, link between TMT national distance and the nationality of new execu­ 2006; Carson, Mosley, & Boyar, 2004; Gong, 2003a; Schermerhorn & tive recruits in Sweden. However, the study does demonstrate some Bond, 1997), leading to negative performance effects of TMT cultural evidence of homosocial reproduction between the recruiter and the new diversity (Collin, Smith, Umans, Broberg, & Tagesson, 2013; Cook & TMT appointees. Glass, 2009). Some studies do not find any stable relationship between Moving beyond the predominant focus on TMT national diversity, TMT cultural diversity and firm financial performance (Hassan, Mar­ Bloch, Taylor, Church, and Buck (2021) consider the intersection be­ imuth, Tariq, & Aqeel, 2017; Marimuthu & Kolandaisamy, 2009), tween race and gender in their study of Black men and Black women in which—together with variability in measurements, research designs, senior-level management positions in the U.S. Results show that both and sample sizes—challenges the external validity of performance ef­ groups are disproportionately underrepresented in senior management fects of TMT cultural diversity (Sommer, 2009; Umans, 2009). positions compared to white women, yet their chances to accede to se­ Faced with the equivocal evidence, the search for performance ef­ nior management are significantly higher in workplaces with a greater fects has gradually moved away from the dichotomous view of TMT presence of women in general, as well as in workplaces with lower cultural diversity as either a benefit or a cost towards probing when and gender segregation across jobs. Another recent study argues that the how it might affect firm performance. One line of research has theorized tendency towards homosocial reproduction in demographic attributes is and studied the existence of non-linear relationships: Roberson and Park less pronounced for candidates with prior tenure inside the organization (2007) as well as Richard et al. (2004) theorized and found evidence of a (Georgakakis, Greve, & Ruigrok, 2021). Examining non-CEO executive U-shaped relationship where either low or high levels of racial diversity appointments in Germany, the Netherlands, Switzerland, and the UK, were expected to enhance financial performance among U.S. firms, the authors show that nationally diverse executives are more likely to be while Schmid and Dauth (2014) conversely hypothesized an inverted appointed to the TMT when they are promoted from within the firm, U-shaped relationship between TMT internationalization (where na­ while external foreign candidates are usually subject to negative selec­ tional diversity was one of the four dimensions) and firm stock price in tion biases. large German corporations, finding support for higher performance at To summarize, changes in cultural composition in TMTs are high­ the medium level of national diversity. It is worth noting that these re­ lighted as strategic decisions related to the potential benefits and sults may not necessarily be contradictory, as race and nationality transaction costs associated with recruiting culturally diverse execu­ represent distinct dimensions of TMT cultural diversity. tives, as well as cognitive processes in executive selection. However, Another line of research has attended to the underlying theoretical perceived benefits, transaction costs, socio-cognitive processes are mechanisms through which cultural diversity influences various finan­ themselves related to the current cultural composition of the TMT, cial performance outcomes, problematizing the “black box” of organi­ indicating that TMT cultural diversity in organizations is an endogenous zational demography in terms of simple input-output relationships and evolving phenomenon. The tradeoffs between potential benefits and (Lawrence, 1997). Some of this research attends to the role of team transaction costs, as well as attitudes towards diversity and its perceived processes, suggesting that culturally diverse TMTs may function differ­ value, may not operate in isolation, but can instead be subject to stra­ ently from homogeneous ones. The presence of salient differences tegic contingencies faced by organizations in a specific institutional among TMT members may lead to social categorization into ingroup and environment and managerial cognition. Whereas the contextual de­ outgroup members, creating negative stereotypes that impede cooper­ terminants of costs and benefits of increasing TMT diversity have ation and cohesion, ultimately exacerbating interpersonal conflict received comparatively little attention to date, a nascent but rapidly (Bengtsson, Raza-Ullah, & Srivastava, 2020; Julian, Wachter, & Mueller, developing strand of research draws attention to their temporal dy­ 2009; Umans, 2008; 2013). Effective team processes are thus funda­ namics, as well as to the important role of firm and environmental mental to overcome the challenges of culturally diverse teams and contexts in shaping cultural composition in the executive suite. minimize the barriers to performance benefits that stem from diversity (Thomas, Bellin, Jules, & Lynton, 2012; Umans, 2009). Indeed, several 4.2. Outcomes of TMT cultural diversity studies in our review indicate that the negative performance effects of TMT cultural diversity are lower in more behaviorally integrated The largest and most nuanced area of research in our review has teams—that is, teams that are more cohesive, socialized, and able to sought to explain how TMT cultural diversity may influence multiple engage in collective action (Jarzabkowski & Searle, 2004; Lo, Wang, & outcomes at the firm, TMT, and individual levels of analysis. The Zhan, 2019; Nielsen & Nielsen, 2013) Li and Jones (2019)., however, strength and direction of such influences have been found to be subject indicate that processes such as collective competitive action in ethni­ to a number of moderating and mediating factors at individual, team, cally diverse TMTs might enable short-term firm performance but firm, and environmental levels (see “Outcomes” section in Fig. 2). impede long-term performance, by widening the faultlines within the team. This suggests a need for a more nuanced understanding of the role 4.2.1. Financial performance outcomes of TMT cultural diversity of team processes in shaping the short- and long-term performance ef­ The lion’s share of studies in this area focuses on the influence of fects of TMT cultural diversity. TMT cultural diversity on firm financial performance—a crucial variable In addition to the increasing focus on behavioral processes in TMTs, a for strategic leadership research. Primarily building on the upper- string of recent studies has also sought to shift focus to the effects of TMT echelons perspective and social-identity theory (Hogg, Terry, & White, cultural diversity on intermediary outcomes that may subsequently 1995), studies embraced the complexity of TMT cultural heterogeneity affect firm performance. In a study of Chinese listed corporations, Wu, early on, conceptualizing it as a double-edged sword. On the one hand, Richard, Zhang, and Macaulay (2019) found that more nationally 6 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 diverse TMTs initiate such change more often, which subsequently in­ increased cultural friction, curbing the success of international strategy creases firm performance. Further exploring the frequency of strategic (Gomes, Cohen, & Mellahi, 2011; Li, Xin, Tsui, & Hambrick, 1999; change, Kalasin’s (2020) study of TMTs in nine emerging markets shows Singh, Pattnaik, Lee, & Gaur, 2019). that firm size and uncertainty avoidance at national level decrease the The debate over the costs and benefits of TMT cultural diversity for otherwise positive relationship between foreign TMT members and the firms’ success in internationalization or enhanced performance has been frequency of change in the firm. Relatedly, Dahms, Kingkaew, and Ng moderated by research highlighting the importance of contingencies at (2021) explore the influence of TMT national diversity on strategic CSR the institutional, firm, and TMT levels of analysis, shaping how TMT focus and its implications for subsidiary performance. Their results show cultural diversity will play out (cf Nielsen & Nielsen, 2013.; Tacheva & that TMT national diversity is an important determinant of strategic CSR Nielsen, 2020). For example, the negative effects of TMT cultural di­ focus, yet it is not sufficient in itself to achieve high performance. The versity stemming from social categorization have been argued to authors present several configurations where TMT national diversity is decrease over time, since team members working together tend to one of the components associated with superior financial performance. develop a common identity while the company develops its interna­ The line of inquiry studying more proximate outcomes of TMT cultural tionalization capabilities (Li, Xin, & Pillutla, 2002). Culturally diverse diversity appears to follow the suggestions of Stahl et al. (2010), who TMTs have also been shown to function better in more international urged researchers to consider intermediary team and firm outcomes that firms, when tasks are innovative and coordinative rather than opera­ lead to superior firm performance in the study of culturally diverse tional (Hyun, Oh, & Paik, 2015), when cultural distance is less salient teams in organizations. (Gong, 2003b), or when a firm exhibits a strong commitment to inter­ Other studies examine the boundary conditions of the relationship nationalization (Kaczmarek & Ruigrok, 2013), as well as when the firm between TMT cultural diversity and firm financial performance, in order operates in a munificent environment and has access to other valuable to demonstrate its embeddedness in specific organizational and envi­ assets such as competence and networks (Agnihotri & Bhattacharya, ronmental contexts. Building on similarity-attraction theory, Umans and 2019; Chhabra & Popli, 2019; Dahms & Kingkaew, 2019). Smith (2013) find evidence for the positive impact of TMT diversity on Several studies in our review examine the link between TMT cultural firm outcomes in the presence of a nationally diverse board of directors diversity and firm innovation performance. Innovation and creativity Richard et al. (2004). study of racial differences in U.S. TMTs further are generally highlighted as theoretically salient outcomes of TMT cul­ illustrates the increased costs of TMT cultural diversity in projects that tural diversity, yet the empirical evidence is mixed: While some scholars have high transaction costs, large investments, and increased uncer­ show positive effects of TMT cultural diversity on innovation perfor­ tainty, requiring increased coordination and trust within the TMT mance (Nathan & Lee, 2013; Wang, Ma, & Wang, 2015), others find Nathan (2016). highlights the importance of the firm’s access to re­ negative (Chuang, Nakatani, & Zhou, 2009) or null effects (Belderbos, sources for its ability to benefit from TMT ethnic diversity by showing Lokshin, Boone, & Jacob, 2020). Notably, the conceptualizations and that knowledge-intensive firms derive a greater positive performance measures of firm innovation performance vary considerably among effect from TMT ethnic diversity when they are located in a major city. studies. Addressing these mixed findings, recent studies have focused on the role of the contextual determinants of the relationship between TMT 4.2.2. Non-Financial outcomes of TMT cultural diversity cultural diversity and firm innovation performance. For example, Boone Going beyond the financial performance outcomes of TMT cultural et al. (2019) argue that whereas more nationally diverse TMTs engage diversity, a string of studies in our review examines its effects on firms’ more in corporate entrepreneurship, which, in turn, enhances firm internationalization strategy (Caligiuri, Lazarova, & Zehetbauer, 2004; innovation performance, firms may find it challenging to reap the ben­ Lee & Park, 2008; Nielsen & Nielsen, 2011; Sommer, 2009). Studies efits of internationally diverse TMTs in the presence of power inequality, building on the resource-based view argue that TMT cultural diversity which amplifies the salience of minority group identities and increases constitutes a valuable resource in the pursuit of international expansion interpersonal conflict, miscommunication, and biases in the team. Other by providing firms with broader information resources, enhancing scholars highlight temporal aspects in the link between TMT cultural teams’ international attention and trust, and representing a wider set of diversity and firm innovation performance. In a longitudinal study of U. skills, which are assumed to be translated into enhanced S. printing and publishing firms, Narayan, Sidhu, and Volberda (2020) decision-making in firms’ internationalization process (Dauth, Pronobis, show that the negative implications of TMT national diversity for & Schmid, 2017; Drechsler, Bachmann, & Engelen, 2019; Lee & Park, innovation tend to decrease over time as team members establish 2008; Pisani, Muller, & Bogăţan, 2018) and ultimately result in greater communication norms, exchange knowledge, and ultimately become firm internationalization (Dauth & Tomczak, 2016; Weusthoff, Grieser, more behaviorally integrated. In line with this, Wrede and Dauth (2020) & Meckl, 2014). Relatedly, studies focusing on subsidiary-headquarters draw attention to temporal dynamics at CEO level, arguing that CEO age relationships have argued that including host-country executives on the attenuates the positive effect of TMT internationalization (where na­ TMTs of foreign subsidiaries reduces the costs associated with expatriate tional diversity is part of the internationalization index) on firm inno­ TMT members, such as the costs of reallocation, salary differences, and vativeness Zhang, Sharma, Xu, and Zhan (2021). further argue that TMT the “liability of foreignness,” as well as alleviating legitimacy concerns, cultural diversity should be considered in conjunction with other di­ enhancing the firm’s raison d’être (Decker, 2018; Kumar & Puranam, versity elements when examining its effects on firm innovation perfor­ 2011). The upper-echelons perspective complements this view, arguing mance. Their longitudinal study of foreign technocrats in Chinese that top executives’ cognitive frameworks are subject to bounded ra­ stock-listed firms indicates that executives’ “minority-in-minority” sta­ tionality, which lays the foundation for firms’ strategic choices. Drawing tus (i.e., belonging to two TMT minority sub-groups, which can poten­ on this perspective, studies show that more nationally diverse TMTs are tially result in a competitive advantage), leads to a double social barrier more likely to initiate internationalization strategies (Nielsen, 2010b) due to outgroup bias, impairing firm innovation. Yet, the presence of a and are also more prone to opt for shared-control modes of entry CEO with foreign experience and technological expertise attenuates the (Nielsen & Nielsen, 2011). negative effect of “minority-in-minority” status, serving as a lever be­ In contrast to the resource-based view and the upper-echelons tween minority and majority groups’ power balance. perspective, research rooted in agency theory argues that appointing TMT cultural diversity has also been examined in relation to access to foreign executives to subsidiary TMTs increases information asymmetry external financing Cook and Glass (2009) report negative stock-market between subsidiary and headquarters, increasing the agency costs of reactions to the appointment of ethnic/racial minority executives host-country managerial opportunism and the need for monitoring based on a sample of mainly U.S. corporations—patterns that were (Gong, 2003b; Sekiguchi, Bebenroth, & Li, 2011). Thus, the benefits especially pronounced in larger and better-performing firms. The au­ associated with TMT internationalization may also come at the cost of thors argue that negative stereotyping by investors could be reduced by 7 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 the presence of corporate diversity initiatives. In contrast, two studies interaction between TMT behavioral processes and TMT cultural di­ examining access to external financing among young UK firms find no versity. Departing from the traditional model of TMT processes as a differences between culturally homogeneous and heterogeneous TMTs reflection of demographic diversity, Mitchell, Boyle, Nicholas, Maitland, (Cumming, Meoli, and Vismara 2021; Mole, Hart, Roper, & Saal, 2008), and Zhao (2016) show that TMT national diversity weakens the positive suggesting that the racial/ethnic prejudice in capital markets may be relationship between TMT decision comprehensiveness and less pronounced for young firms, and/or differ across countries. Further self-reported financial performance, while Keeves, Westphal, and highlighting the importance of the context in determining the effects of McDonald (2017) indicate that TMT members’ ingratiatory behavior TMT cultural diversity on organizational outcomes, empirical studies may trigger CEO resentment—and more profoundly so when TMT find some support for positive effects of TMT cultural diversity on members are racially different from the CEO. nonfinancial performance outcomes in public sector (Fincher & Katsi­ Two studies focus on between-firm differences in mergers and ac­ nas 2006; Rutherford 2016) and nonprofit organizations Fulton (2021). quisitions and compensation structures in leadership teams, with TMT In summary, key insights from this stream of research are that TMT cultural diversity representing one core element. Observing firm char­ cultural diversity has important implications for a variety of firm-, in­ acteristics as a cultural distance between the acquiring and acquired dividual-, and team-level outcomes, and can be both an asset and a li­ firms, Piaskowska and Trojanowski (2014) show that a greater cultural ability for an organization. Moving beyond the debate about whether distance between host and home cultures is negatively related to TMT cultural diversity is helpful or harmful, studies have increasingly ownership stakes taken in acquisition, but less so in acquiring firms with turned to probing underlying theoretical mechanisms and boundary more national diversity in the TMT Zalewska (2014). draws on conditions explaining how diversity will play out. Overall, TMT cultural social-fairness theory to examine how pay disparity in TMTs may affect diversity is more likely to enhance firm outcomes in contexts where 1) firm financial performance in a sample of UK firms, finding that pay the negative effects of such diversity can be effectively reduced and 2) dispersion is negatively related to performance but that the presence of TMT diversity constitutes a valuable resource for the firm. overseas TMT members could alleviate this relationship. To summarize, differentially from the dominant approach that 4.3. TMT cultural diversity as a contingency models TMT diversity as a determinant of TMT processes (Lawrence, 1997), this stream of research conceptualizes TMT cultural diversity as a While most studies have sought to theorize a direct or mediated in­ continency factor, moderating TMT processes’ effect on team and fluence of TMT cultural diversity on a number of financial and nonfi­ organizational outcomes. Findings suggest that TMT cultural diversity nancial outcomes (see Section 4.2), a nascent but growing area of alone or in combination with other organizational factors may serve as research considers TMT cultural diversity as a contingency factor that an enabler or disabler of the relationships between organizational serves to moderate the relationship between various individual-, team-, strategy, CEO characteristics, TMT structure and behavioral processes, and firm-level factors and outcomes (see Fig. 2 for details). for organizational and team-level outcomes. One question posed by authors is how the cultural homogeneity or heterogeneity of the TMT indirectly shapes the performance effects of 4.4. An integrated framework of TMT cultural diversity firm strategy (Hutzschenreuter & Horstkotte, 2013; Ruigrok, Georga­ kakis, & Greve, 2013; Song & Lee, 2020). While studies drawing upon Based on our comprehensive survey of the literature, we develop an the upper-echelons perspective (Song & Lee, 2020) argue that cultural integrated framework of the field (Fig. 3) that synthesizes the current diversity brings socio-cognitive benefits to TMT decision-making, re­ knowledge about theoretical mechanisms linking antecedents, outcomes flected in the superior financial performance of the firm’s internation­ and contextual influence of TMT cultural diversity. The integrated alization strategy, they also caution that these empirical findings are framework reveals that the notion of TMT cultural diversity based on contingent upon the performance measures adopted. Building on the nationality and racioethnicity can manifest itself through different yet faultline literature Hutzschenreuter and Horstkotte (2013) argue that overlapping facets. In regards to the antecedents of TMT cultural di­ cultural diversity may lead to the formation of faultlines within a TMT, versity, we distinguish two main categories: (boundedly) rational which activate negative stereotypes and biases that, in turn, reduce the drivers denoting the tradeoffs between expected costs and benefits of performance effects of a diversification strategy Ruigrok et al. (2013). TMT cultural diversity and socio-cognitive drivers denoting perceptions provide an alternative explanation, highlighting the importance of fit and attitudes towards diversity. These two drivers are not independent, between TMT cultural diversity makeup (global vs. local orientation) instead the assessment of the trade-offs may depend on the context and and firm internationalization strategy (global vs. regional), providing individual cognition, and thus is boundedly rational. Furthermore, the further support for the strategic fit perspective. influence of TMT cultural diversity on firm financial and nonfinancial The moderating role of TMT cultural diversity has also shown to performance outcomes is mediated through the interaction of organi­ influence the effect of CEO characteristics on organizational outcomes. zational capabilities, strategic choices and team processes. Namely, the This stream of research attends to whether the power imbalance be­ presence of TMT cultural diversity or homogeneity may lead to different tween the CEO and the rest of the team is amplified or reduced by cul­ intermediary outcomes — team processes as well as organizational ca­ tural differences or similarities between the two. Studying whether pabilities and strategic choices —, which jointly reflect in different internally or externally recruited CEOs are differentially related to organizational outcomes. The influence of TMT cultural diversity on subsequent firm financial performance, Georgakakis and Ruigrok (2017) intermediary outcomes is a subject of a variety of contextual factors at show that CEO-TMT demographic similarity, including national simi­ individual, team, firm, and environmental levels. Finally, our integrated larity, increases the likelihood that firms with externally recruited CEOs framework reveals that the relationship between TMT cultural diversity will deliver higher financial performance. A study focusing on CEOs’ and firm outcomes may not be unidirectional but rather cyclical, i.e. the personality traits indicates that while CEO openness to change and occurrence of TMT cultural diversity may change the context the firm is self-transcendence have a positive relationship with openness and flex­ operating in, eventually facilitating or inhibiting TMT diversity to occur ibility in strategy-making, TMTs’ diversity in terms of geographic in the future. background may impede this relationship (Hoffmann & Meusburger, 2018). Finally, a study on the interaction between CEOs’ “racial status” 5. Research gaps and suggestions for future research and TMTs’ racial diversity finds that the presence of racially diverse teams induces CEOs with high racial status to engage in collective action Based on our comprehensive review of the field of TMT cultural di­ with their TMT (Iyer & Achia 2021). versity, we argue for theoretical development and further studies in the Only two studies focusing on contingencies have explored the following three areas which we highlight in red in Fig. 3: (1) more 8 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 Fig. 3. Integrated framework of research on TMT cultural diversity. unambiguous definition of TMT cultural diversity and its facets; (2) hard to assess the generalizability of results obtained without testing and theoretical and methodological extensions of our knowledge about the retesting comparable research models across distinct aspects of TMT antecedents and influences of TMT cultural diversity; and (3) examining cultural diversity. Further, approaching TMT cultural diversity as a cross-national differences in the definition, presence, and influence of unidimensional concept may also omit vital nuances regarding the TMT cultural diversity. theoretical mechanisms behind the antecedents and influences of TMT cultural diversity. Future studies should thus be more explicit in defining 5.1. Clearer definition of the basis for TMT cultural diversity and its and delineating the aspects of TMT cultural diversity. Conceptualizing it boundaries as a composite rather than a unidimensional concept and striving for more consistent definitions would help scholars to tap into causal link­ The emphasis of our literature review is on two broad aspects of ages and theoretical mechanisms that are specific to different di­ cultural diversity: nationality and racioethnicity. Our survey uncovers a mensions of cultural diversity. variety of cultural identities within and at the intersection of these two Given the multifaceted nature of TMT cultural diversity, future broad aspects pertaining to differences among TMT members in terms of studies could also explore its other aspects, taking into consideration culture, ethnicity, racioethnicity, language, nationality, citizenship, TMT members’ sense of identity with their national culture, citizenship, race, regional background, caste, country of birth, geographic back­ or birthplace. The assumption that citizenship or place of birth consti­ ground, and cultural cluster (see Fig. 3). Yet, extant research is sur­ tutes a core cultural environment of individuals may be increasingly prisingly vague about how TMT cultural diversity and its facets are tenuous in today’s global society where biculturalism or multicultur­ defined, and the exact differences between the terms used. Only 9 alism is becoming more common (Lakshman, Bacouël-Jentjens, & studies (8%) in our review focus on more than one basis/facet of TMT Kraak, 2021; Zander, Mockaitis, & Butler, 2012), especially among cultural diversity, while the majority implicitly assume that the concept high-ranking business professionals—for example, in the form of mul­ is unidimensional. tiple ancestries, growing up in multicultural environments, and holding The distinct concepts that form part of the larger construct of TMT multiple citizenships (Balachandran, Wennberg, & Uman, 2019). Future cultural diversity may not be identical, but instead vary in their influ­ research on TMT cultural diversity may thus consider alternative di­ ence on TMT behaviors and processes, ultimately affecting organiza­ mensions of cultural diversity more closely tied to an executive’s per­ tional outcomes. Some studies in our review show opposing findings sonal identity, such as mother tongue or language (Alesina & La Ferrara, when focusing on different dimensions of TMT cultural diversity. For 2005; Harzing & Pudelko, 2013; Tenzer, Pudelko, & Zellmer-Bruhn, example, Roberson and Park (2007) and Richard et al. (2004) focus on 2021). Research could also compare perceptional measures of culture TMT racial diversity, finding a U-shaped relationship with performance and diversity (“How different do I feel from the majority group?”) with in a U.S. sample, while Schmid and Dauth (2014) find an inverted secondary or self-reported cultural categories based on national back­ U-shaped relationship focusing on nationality in an European sample. ground (Shemla, Meyer, Greer, & Jehn, 2016). These contradictory findings raise two important questions that have not Another way to clarify construct definition and boundaries of TMT been addressed in extant research. First, what are the differences in cultural diversity is by studying how it differs from other types of TMT influence of the various dimensions of TMT cultural diversity? And demographic diversity such as gender, age, and education. Whereas second, how do such differences relate to the context where a particular extant research treats TMT cultural diversity as a distinct type of TMT dimension of cultural diversity has been studied? If conceptual differ­ demographic diversity, it remains unclear how it differs from other types ences in definitions of TMT cultural diversity are not acknowledged and of diversity. A more nuanced sense of the differences among multiple problematized, knowledge accumulation becomes problematic, as it is elements of TMT demographic diversity and their impact on 9 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 organizations could help us understand the distinct nature of the phe­ cultural diversity. While some studies acknowledged this possibility and nomenon and allow us to define it more precisely. employed longitudinal designs to partly examine these patterns, our In sum, we encourage future research to define the basis of TMT review highlights that research to date has made no attempt to jointly cultural diversity and its boundaries more clearly, and to be sensitive to theorize such simultaneous causality, and largely relies on cross- potential differences among the various conceptualizations of cultural sectional or short panel data samples (Appendix C). Yet, this approach diversity when formulating theoretical models and designing empirical does not fully capture the reciprocal and dynamic nature of teams studies. We also stress the need for comparative research exploring the (Mathieu, Kukenberger, D’innocenzo, & Reilly, 2015). Exploring the differences and similarities among different conceptualizations and potentially recursive nature of effects of TMT cultural diversity on both definitions of TMT cultural diversity. firm- and team-level outcomes can provide a more complete under­ standing of its effects on organizations, and thus represents an attractive 5.2. Theoretical and methodological extensions of TMT cultural diversity opportunity for further advancement of the field. To this purpose, future studies could theorize and empirically investigate the temporal dy­ While the literature has generated rich insights about TMT cultural namics of this relationship (e.g Marques-Quinteiro, Rico, Passos, & diversity and its influence on a variety of outcomes at the individual, Curral, 2019.), relying more on longitudinal, experimental, team, and firm levels, we still know relatively little about why firms hire quasi-experimental, or qualitative process-tracing approaches to assess culturally diverse executives and how those appointments influence firm the causal paths by which cultural diversity affects communication, outcomes. To gain a more complete understanding of the antecedents decision-making, and strategic goal-setting within TMTs, as well as and outcomes of TMT cultural diversity, future research could focus on organizational outcomes such as financial performance, internationali­ (1) the cross-fertilization between two broad theoretical logics applied zation, and innovation. Finally, in order to gain further insights into how in the field—rational and cognitive; (2) more explicitly theorizing and culturally diverse TMTs function and evolve over time researchers could empirically testing causal linkages between the variables identified in revisit ethnographic type of inquiry (e.g Hertz & Imber, 1993.; Thomas, our synthesized framework (Fig. 3); and (3) exploring intermediary 1993), that might uncover additional insights about TMT cultural di­ outcomes of TMT cultural diversity, instead of more “distal” firm per­ versity as a phenomenon (cf Priem, Lyon, & Dess, 1999.). formance outcomes. Below we explain each of the three suggested paths Third, most studies in the field still focus on the implications of TMT in detail. cultural diversity for firm performance. While an increasing number of The theories applied in the literature on TMT cultural diversity could studies have begun to draw attention to intermediary outcomes shaping be grouped into two broad sets of logics: rational and cognitive. Ac­ the performance effects of culturally diverse TMTs (Boone et al., 2019; cording to the rational logic emphasized by agency theory, the resource- Tasheva & Nielsen, 2020; Umans, 2013), such research remains rela­ based view, internationalization theory, and partly the upper-echelons tively scarce. The understanding of intermediary outcomes holds perspective, the recruitment of culturally diverse TMT members de­ promise to strengthen extant theoretical models of the performance pends on the tradeoffs between the benefits from enhanced information- impact of TMT cultural diversity, as it may reveal the theoretical processing capacity, legitimacy, and resources brought by culturally mechanisms through which culturally diverse TMTs shape performance diverse team members and the transaction costs stemming from the outcomes. We thus encourage future studies to explore the presence of uncertainty as well as the risk of opportunism. The cognitive decision-making consequences of TMT cultural diversity in terms of logic emphasized in social-identity theory and the similarity-attraction strategic choices, actions, and capabilities, shifting the focus away from paradigm complements the understanding of the slow progress to­ financial performance to more mid-range outcomes. This research gap wards the internationalization of TMTs, highlighting the importance of motivates new research questions such as how the presence of culturally socio-cognitive processes such as biases, team processes and power dy­ diverse TMT influences the formulation of specific international human namics that may further impede the recruitment of culturally diverse resource management policies related to attracting, retaining, devel­ executives. The notion of cognitive logic is relevant to the understanding oping, and positioning international recruits at entry-level, mid-ranking, of outcomes of TMT cultural diversity, as the TMT’s ability to derive and executive positions in multinational and culturally heterogeneous efficiency benefits from diversity largely depends on effective team organizations. Another area of questioning concerns the extent to which processes and the overall diversity climate within the team and orga­ cultural heterogeneity may substitute for other diversity attributes, at nization (Klein & Harrison, 2007). To date, the two broad streams of either the TMT or the organizational level of analysis. research (rational and cognitive approaches to antecedents of TMT Fourth, our review highlights that organizations need specific stra­ cultural diversity) have been developing largely independently, with the tegies, practices, and policies to maximize the potential benefits of TMT majority of studies applying one or other of the lenses (see Appendix D cultural diversity while minimizing its potential costs as they shape team for theories applied in sample articles). Yet, rather than being inde­ processes such as behavioral integration pertaining to communication, pendent, the two logics are likely to be considered simultaneously when cohesion, interpersonal conflict, and social categorization (Chanland & undertaking decisions, and thus are interrelated. By combining and Murphy, 2018; Thomas et al., 2012). In addition, given the importance contrasting multiple theoretical lenses, researchers could seek to probe of team processes for outcomes of TMT cultural diversity (Gong, 2003a; the validity of multiple theories explaining the same phenomenon. Jarzabkowski & Searle, 2004), further examination of the causal Creating predictions informed by both rational and cognitive logics mechanisms underlying such processes, and the interdependencies be­ could be a way forward to achieve a more nuanced understanding of tween them, is vital for the development of the field and a fuller un­ TMT cultural diversity and its effects. Potential research questions in this derstanding of the phenomenon. To date, most literature on the topic vein could be to address how TMT diversity climate influences the has assumed, rather than inductively explored, the presence of specific perceived costs and benefits of TMT cultural diversity. processes in culturally diverse TMTs, and further assumed that these Second, a theoretically salient topic with little empirical research processes occur in silos. Yet, recent studies indicate that there is an concerns the potential of symmetric causation in the links between TMT interdependence of team processes in culturally diverse teams, and cultural diversity and its outcomes. Our synthesis of studies in Fig. 3 previous assumptions on what happens in the black box of these team indicates potentially bidirectional links between TMT cultural diversity processes might be oversimplified (Stahl & Maznevski, 2021). We thus and various outcomes, where some of the outcomes may in turn increase encourage future studies to account for these potential interrelation­ or decrease the presence of culturally diverse executives on TMTs. For ships, viewing team processes as bundles rather than isolated phenom­ example, firm performance has been theorized and empirically exam­ ena—and, in doing so, attain a more complete understanding of the link ined as both a predictor and an outcome of TMT cultural diversity. The between TMT cultural diversity and its outcomes. same logic applies to the relationship between team processes and TMT 10 Y. Ponomareva et al. Journal of World Business 57 (2022) 101328 5.3. From a western to a global focus influential executives, they might have influence on different business domains, which stresses the need for future studies to consider institu­ Our review highlights the importance of institutional context in tional variations in governance systems when examining TMT cultural shaping the trade-offs between the costs and benefits of TMT cultural diversity in cross-national samples (Spraggon & Bodolica, 2011). diversity (Fig. 3). While most empirical studies on the subject have been Moreover, whether the TMT is positioned at the subsidiary level, in conducted in a single-country context—mainly advanced Western small and medium enterprises, or in privately held corporations might economies such as the U.S. or Western European countries, with some affect the discretionary power of managers (i.e., the degree of overall evidence from emerging markets in Asia, Africa, and India (see Appen­ influence it might possess, or be assigned), which opens up avenues for dix C for data distribution by countries)—we still know little about the further research on TMT cultural diversity considering governance and systematic differences across countries. Ethnic, religious, and linguistic ownership dynamics (Ponomareva, Shen, & Umans, 2019). Overall, this diversity in TMTs might be more common in historically multi-ethnic points to several avenues for future research to examine the contextual societies with high levels of ethnic, linguistic, and religious fractional­ determinants of TMT discretion and differences in corporate governance ization (Alesina & Ferrara, 2005). Yet, few of the countries occupying systems, as well as differences across levels of analysis—whether in the the top positions in ethnic (e.g., Uganda, Liberia, Madagascar), linguistic subsidiaries or headquarters of international organizations, state-owned (e.g., Tanzania, South Africa, India) and religious (e.g., the U.S., enterprises, or privately-held corporations (Dupuis, Bodolica, & Sprag­ Australia, Lebanon) fractionalization scales are represented in our gon, 2021). sample. Given the rapid globalization in Eastern Europe, Latin America, Africa, the Middle East, and the rest of Asia too, a broader empirical 6. Conclusion focus is warranted. The way culture is manifested in (business) interactions is socially Our review of 106 published studies on cultural diversity in TMTs constructed (Bird & Mendenhall, 2016), and thus may vary considerably reveals the importance of TMT cultural diversity for a variety of orga­ in its conceptualization, presence, and influence across institutional nizational, team, and individual-level outcomes. Despite the increasing contexts. For example, while national diversity has been the predomi­ attention being paid to the phenomenon, current research examining the nant way of examining cultural diversity in Western European contexts, antecedents, outcomes, and contextual determinants of TMT cultural North American studies often focus on racial differences within a diversity remains fragmented, with inconclusive findings primarily broader concept of cultural diversity. These dimensions may be less emanating from Western contexts. Our analysis reveals three broad relevant in emerging markets or other contexts where nationality or areas that warrant scholarly attention, pertaining to the need for (1) a birthplace may not the most salient indicators of culture. Such contexts clearer definition of TMT cultural diversity; (2) a more nuanced un­ may necessitate conceptualizations of intra-national diversity (Sasaki & derstanding of theoretical mechanisms explaining the occurrence and Yoshikawa, 2014), such as caste, regional family background, or reli­ organizational implications of TMT cultural diversity; and finally (3) gion, to name a few. These variations in the conceptualization of TMT deeper understanding of how cross-national differences shape the cultural diversity highlight the importance of congruence between the conceptualization, occurrence, and impact of TMT cultural diversity. A conceptualization of TMT culture and the institutional, historical, and more complete understanding of these three emerging areas within the political context of specific countries (Decker, 2018; Gomes et al., 2011). field of research on TMT cultural diversity becomes especially relevant Applying more interpretivist and constructivist perspectives to TMT in today’s context of rapid globalization of the workforce and more cultural diversity could help us to delineate the links between how culturally varying staff in firms across the globe. The extent to which cultural diversity is perceived and manifested in different institutional TMTs can keep growing more culturally diverse, the best way to manage contexts, resulting in a more nuanced understanding of what TMT cul­ that diversity, and with what results all represent important questions tural diversity is and how it influences organizations. for both research and managerial practice. We hope that this review will The focus on cross-country differences as roots of cultural diversity spawn a new wave of future studies on TMT cultural diversity, so that we may become less salient in today’s increasingly diverse nations and in can further nuance and develop our understanding of the individuals at cities that act as global hubs for international firms. In cosmopolitan the apex of today’s organizations. context of global cities characterized by the presence of “transnational elites” (Chakravarty, Goerzen, Musteen, & Ahsan, 2021), the cultural Supplementary materials composition of TMTs in firms or subsidiaries may warrant alternative ways of looking at culture and cultural differences that account for the Supplementary material associated with this article can be found, in “super-diversity” of the geographic and economic context (Vertovec, the online version, at doi:10.1016/j.jwb.2022.101328. 2007). 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Range Planning, Journal of Management and Governance. Thomas, R. J., Bellin, J., Jules, C., & Lynton, N. (2012). Global leadership teams: Diagnosing three essential qualities. Strategy and Leadership, 40, 25–29. Tulung, J. E., Nelwan, O. S., & Lengkong, V. P. (2012). Top management team and Timur Uman (PhD, Lund University) is a Professor in Accounting and Control at company performance in big countries vs small countries. Journal of Economics, Jönköping International Business School. His research is on corporate governance and Business and Accountancy Ventura, 15, 59–70. accounting with specific interest in team diversity and team processes in top management Umans, T., & Smith, E. (2013). Isolated islands in the upper apex of organisations: In teams and corporate boards. Uman’s research has appeared in journals such as Strategic search of interaction between the board of directors and the top management team. Entrepreneurship Journal, Corporate Governance: An International Review, Small Business Corporate Ownership & Control, 10, 80–90. Economics, Public Management Review, Accounting, Auditing & Accountability Journal, Umans, T. (2008). Ethnic identity, power, and communication in top management teams. Journal of International Accounting and Auditing and Taxation. Baltic Journal of Management, 3, 159–173. Umans, T. (2009). Research angles on cultural diversity in top management teams. Virginia Bodolica (PhD, HEC Montreal) is The Said T. Khoury Chair of Leadership Studies Problems and Perspectives in Management, 7, 90–105. and a Professor of Management at American University of Sharjah. Her research is on Umans, T. (2013). Top management team’s cultural diversity and firm performance: The strategic management, corporate governance and leadership with specific emphasis on the mediating role of ambidextrous orientation. Corporate Ownership & Control, 11, interaction between corporate governance mechanisms and organizational outcomes. 882–891. Bodolica’s research has been published in journals such as The Academy of Management Van Veen, K., & Elbertsen, J. (2008). Governance regimes and nationality diversity in Annals, Strategic Management Journal, Strategic Organization, Journal of Business Ethics, corporate boards: A comparative study of Germany, the Netherlands and the United Journal of Business Research, and Business Ethics: A European Review. Kingdom. Corporate Governance An International Review, 16, 386–399. Van Veen, K., & Marsman, I. (2008). How international are executive boards of European MNCs? Nationality diversity in 15 European countries. European Management Karl Wennberg (PhD, Stockholm School of Economics) is a Professor at the Department of Journal, 26, 188–198. Management and Organization at Stockholm School of Economics. His research deals with Van Veen, K., Sahib, P. R., & Aangeenbrug, E. (2014). Where do international board entrepreneurship, organizational dynamics (the birth, entry, and growth of firms), and members come from? Country-level antecedents of international board member diversity in organizations. He is a senior editor at Entrepreneurship Theory & Practice, a selection in European boards. International Business Review, 23, 407–417. visiting editor at Strategic Entrepreneurship Journal and on the editorial board of Journal Vertovec, S. (2007). Super-diversity and its implications. Ethnic and Racial Studies, 30, of Business Venturing, Industry & Innovation and the Academy of Management Journal. 1024–1054. He has published over 50 scholarly articles in journals such as Management Science, Journal Wang, X., Ma, L., & Wang, Y. (2015). The impact of TMT functional background on firm of International Business Studies, Academy of Management Perspectives, Research Policy, performance: Evidence from listed companies in China’s IT industry. Nankai Business Entrepreneurship Theory and Practice, Journal of Business Venturing, Strategic Entrepreneurship Review International, 6, 281–311. Journal, Journal of Management, Long Range Planning, and PNAS and in a number of books. Weusthoff, S., Grieser, J. M., & Meckl, R. (2014). The cultural diversity of German companies’ executive boards and the success of their internationalisation. British Journal of Economics, Management and Trade, 4, 1083–1101. 14