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1. Introduction
How has Upper Echelons Theory (UET) (Hambrick and Mason, 1984) been evolving over time? Through our critical historical discussion in this article, we aim to provide an updated – and also innovative from some aspects – big picture on this famous approach to strategic management.
In the 1980s, after studying why the most relevant business periodicals worldwide pay attention to the executives’ socio-demographic features, Hambrick and Mason publish a conceptual framework in which “organizations become reflections of their top managers” (1984, p. 193). On the basis of Simon’s bounded rationality (1947), and mostly Cyert and March’s (1963) concept of dominant coalition, for whom the firm’s performance is the result of the top decision makers’ collective choice, Hambrick and Mason posit two intertwined trajectories:
Executives take decisions according to their personal interpretation of reality.
This interpretation derives from these executives’ cognitive processes, beliefs, personality traits and ethical norms of conduct. In this regard, they argue that strategic decisions are a typical example of complex decisions, characterized by the bounded rationality of the decision makers, multiple – and not rarely conflicting – goals and numerous alternatives.
Therefore, Hambrick and Mason design their framework stemming from two additional and connected assumptions:
Again, in line with Cyert and March, they maintain that analyzing all the corporate executives, rather than only the Chief Executive Officer (CEO), can more appropriately shed light on the corporate strategic posture. In this regard, the core explanation is that corporate governance is a multifaceted task, which occurs not only through the most vivid features of executives individually being taken into account but also through considering their combined impact.
Although per se not complete, the socio-demographic characteristics of executives can constitute satisfactory representations of their cognitive schemata. Specifically, the socio-demographic variables initially suggested as representations are:
age;
functional background;
other career experiences;
education;
socioeconomic background;
financial position; and
group characteristics.
Hambrick and Mason then design some conceptual propositions about the supposed relationship between the features above and strategic management. For instance, they propose that corporations guided by young executives are more risk-oriented than their older counterparts; that corporations in which the homogeneity of executive profiles prevails take decisions more quickly than their heterogeneous counterparts; or that well-educated dominant coalitions are more oriented towards...