PSYCHOLOGICAL TEAM MAKE-UP AS A DETERMINANT OF ECONOMIC FIRM PERFORMANCE - AN EXPERIMENTAL-STUDY

The majority of economic theories of the firm, particularly industrial organization (IO), tend to treat decision makers as abstract deperson alized profit-maximizers, as humans without flesh and blood. The prese nt study attempts to explore the economic consequences of human variat ion by examining a key aspect of internal organization, the features o f a firm's top management team (TMT), in relation to organizational pe rformance in a competitive context. Specifically, we will analyze the effects of different team compositions with regard to a well-establish ed psychological trait, namely locus of control (Rotter, 1966). There exists an impressive amount of past research into the effects of leade rs' and individuals' locus of control in decision making and leadershi p situations. From this, hypotheses are derived as to the relative per formance of teams that are predominantly internal, predominantly exter nal or mixed with regard to their members' perceptions of control. We include the impact of environmental dynamism as an interaction variabl e affecting the relationship between team composition and firm perform ance. The study was carried out in the experimental setting of an elab orate multinational business game. Results show that the findings on t he performance implications of locus of control at the individual leve l of analysis are valid at the group level as well, which points to in teresting avenues for future research. Moreover, the findings suggest the potential fruitfulness of cross-fertilizing insights from organiza tion theory and IO. (C) 1998 Elsevier Science B.V. All rights reserved .