Cognitive antecedents to international performance - An investigation of associations between top management team characteristics and Norwegian SMEs' exporting success

Abstract

As small and medium-sized enterprises (SMEs) are increasingly taking part in international trade, it is paramount to enhance the understanding of what factors determine their international performance. In SMEs, the top management team (TMT) is assumed to exert significant influence on firm level outcomes, including activities related to internationalization and the success of such efforts. Recognizing, however, that top management's strategic decision-making is subjected to bounded rationality the importance of considering decision-makers' cognition becomes apparent. Because cognitive characteristics influence how information is processed and decisions are made, seeking to understand what factors contribute to the formation of certain TMT cognitive characteristics, and how these traits subsequently affect firm performance, is arguably of great importance.

This thesis aims to enhance the understanding of international performance determinants by investigating the interrelationships between TMT composition, TMT cognitive characteristics and firm outcomes. Specifically, answers to the following research questions are sought: What are the cognitive antecedents to SMEs' international performance? How does TMT diversity influence the TMT's cognitive characteristics? How does TMT diversity influence the international performance of SMEs?

In order to address these questions, this study employs a quantitative research strategy in which survey data obtained from a sample consisting of 236 Norwegian exporting SMEs from multiple industry sectors is analyzed using structural equation modeling. This approach allows for the theoretically founded hypotheses to be tested empirically, and permits a number of interesting conclusions to be drawn, which have implications for theory and practitioners.

In short, the study's empirical findings indicate that the TMT characteristics international orientation and perceived team efficacy are both significant cognitive antecedents to the international performance of SMEs. Moreover, diversity in TMT composition is found to positively affect TMTs' perceived team efficacy, although it has no direct influence on any of the international performance dimensions, nor on the TMTs' international orientation. Importantly, perceived team efficacy appears to be a significant cognitive antecedent to TMTs' international orientation.