Top management and innovations in banking: Does the composition of the top team make a difference?

TLDR

The study examined the social composition of top management teams in 199 banks, assessing average age, tenure, education level, functional and demographic heterogeneity, as well as bank size, location, and team size. Banks with more innovative practices are led by teams that are more educated and functionally diverse, and these relationships persist after controlling for organizational size, team size, and location.

Abstract

The relationship between the social composition of top management teams and innovation adoptions was examined in a sample of 199 banks. The following characteristics of top management teams were examined: average age, average tenure in the firm, education level, and heterogeneity with respect to age, tenure, educational background, and functional background. In addition, the effects of bank size, location (state of operation), and team size were assessed. Results indicate that more innovative banks are managed by more educated teams who are diverse with respect to their functional areas of expertise. These relationships remain significant when organizational size, team size, and location are controlled for.