Multinationality and performance: the mediating role of Top Management Team national diversity

Abstract

Despite the abundant research on multinationality and performance there is little consensus on this relationship. This paper is a response to both the lack of managerial influence, and to the lack of attention to mediating variables in prior multinationality–performance research. Upper echelons theory states that the demographic characteristics of top managers influence a firm’s strategic direction, and therefore outcomes such as firm performance. Thus, we argue that the national diversity within top management teams provides useful knowledge that improves the performance of multinational companies. Also, if the multinationality of companies is one of the causes of increasing national diversity within top management teams, then diversity should mediate the multinationality-performance relationship. We examine these relationships in a sample of the largest Western-European multinationals. The findings show a positive relationship between multinationality and performance. We also find evidence for a mediating effect of top management team’s national diversity within the multinationality–performance relationship.