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Educational background and industry expertise diversity of top management teams and its effect on firm performance in Eurozone companies – an analysis of the effects of educational background and industry expertise
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This thesis investigates the effect of educational background diversity (EDUDIV) and industry
expertise diversity (INDIV) within Top Management Teams (TMTs) on firm performance
measured by Tobin`s Q in 150 Eurozone companies. Using an advancement of the Shannon
Diversity Index, econometric models evaluate three dimensions of the diversity effects: main,
sector-specific, and country-specific. Grounded in Upper Echelons Theory (UET) and Resource
Dependence Theory (RDT), the findings reveal that EDUDIV generally has a positive effect on
firm performance, though this effect varies based on the company´s economic sector. High-tech
(HT) sectors and countries with advanced talent ecosystems, as reflected in the Global Talent
Competitiveness Index (GTCI), particularly benefit from EDUDIV by enhancing strategic
adaptability and fostering innovation. In contrast, INDIV demonstrates a negative relationship
overall, with exceptions in certain economic sectors, specifically within HT areas. The benefits
from diverse perspectives might be outweighed by coordination challenges, resulting in varying
levels of significance. These results underscore the nuanced role of TMT diversity, suggesting
that its effect differs across contexts and excessive heterogeneity can hinder cohesion and
decision-making. This research provides actionable insights for companies and policymakers
seeking to optimize TMT composition to enhance firm performance.
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TMT TMT diversity Board heterogeneity Firm performance Educational background diversity Industry expertise diversity Tobin's Q Eurozone Economic sectors High-tech Low-tech