The effect of top management team demographic composition and CEO power on corporate turnaround performance under environmental stability and turbulence

Past corporate turnaround research has extensively explored internal (strategic misalignment) and external (changes in the munificence and dynamism of the environment) causes of decline and organizational responses in the form of turnaround strategies. Despite the large number of empirical studies, there is a very limited research emphasis on the role of Top Management Teams (TMTs) in the turnaround literature. This is ironic given the substantial public praise and criticism directed toward top executives in declining firms attempting turnaround.;In this dissertation, I addressed this gap between research and anecdotal evidence by examining the relationship between the demographic composition of TMTs (i.e. tenure, education and functional background heterogeneity) and corporate turnaround performance in declining firms attempting turnaround. Similar to TMT demography research, TMT power dynamics and its effect on turnaround performance has been one of the most understudied areas in the turnaround literature. To close this gap in the turnaround literature, this dissertation explored the role of CEO power as a major part of TMT power dynamics in declining firms attempting turnaround.;Four hypotheses were proposed on the relationship among TMT demographic composition, CEO power and turnaround performance using environmental stability/turbulence as a moderator variable. I tested these hypotheses using data collected from 98 U.S. manufacturing firms that experienced performance decline and turnaround during 1990-2000. The results of hierarchical Moderated Regression Analysis (MRA) indicate that the effect of TMT demographic composition and CEO power on turnaround performance varies depending on the particular environmental context declining firms operate in. More specifically, I found that: (1) TMT average tenure tends to decrease the extent of turnaround performance as the degree of environmental turbulence increases, (2) contrary to established logic, TMT average education is negatively related to turnaround performance in turbulent environments but has positive association with turnaround performance in stable environments, (3) the effect of CEO power on turnaround performance varies depending on the environmental context. While CEO power is positively related to turnaround performance in stable environments, it was found to have a negative association with turnaround performance in turbulent environments. Implications for research and practice are discussed.