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The ability of an organization to anticipate and respond to opportunities or pressures for change, both internal and external, is one of the most important ways in which its competitiveness and viability are ensured. The nature and effectiveness of organizational responses vary in part with how top management triggers and interprets strategic issues (Dutton & Duncan, 1987; Kiesler & Sproull, 1982). Management's role in defining the "developments and events which have the potential to influence the organization's current or future strategy" (Dutton & Duncan, 1987: 280) provides a major link between a firm and its external environment.
This inquiry examined the link between top management teams and corporate strategic change, defined as absolute change in diversification level. By focusing on top management teams, we followed the tenets of the strategic choice perspective (e.g., Andrews, 1971; Child, 1972) rather than the more deterministic assumptions of population ecology (Aldrich, 1979; Aldrich & Pfeffer, 1966; Hannan & Freeman, 1977) or "life cycle" models (Greiner, 1972; Quinn & Cameron, 1983), A firm's top management team--the "dominant coalition" of individuals responsible for setting firm direction (Cyert & March, 1963)--identifies environmental opportunities and problems, interprets relevant information, considers organizational capabilities and constraints, and formulates and implements strategic change (Mintzberg, 1979). Thus, an examination of what influences how executives assess and direct firm strategy is an important area of investigation.
Our interest in the role of top management teams, as opposed to that of individual leaders, is consistent with recent emphasis in the strategy field. In large, complex organizations, managerial responsibilities are unlikely to be the exclusive domain of just one individual (Drucker, 1974). Hambrick and Mason (1984), with their "upper echelon" perspective, proposed examining the relationship between top management teams and the organizational outcomes of strategic choices and performance levels. Similarly, Gupta (1988) suggested that a stronger relationship with strategy will be found if top management teams, rather than CEOs, are analyzed. Recent studies have found a link between top management teams and such organization-level issues as strategic innovation and performance (Bantel & Jackson, 1989; Murray, 1989; Norburn & Birley, 1988; O'Reilly & Flatt, 1989).
In examining the management-strategic change link, this study viewed top teams as decision-making groups. Decisions related to changing strategy result from the interactions of group members;...