Top management team international diversity and the performance of international R&D

Abstract

Research Summary

We investigate how international diversity in Top Management Teams (TMTs) contributes to the effectiveness of geographically dispersed R&D strategies in enhancing innovation performance. Both international work experience and nationality diversity may enhance the effectiveness of geographically dispersed R&D when there is alignment between the countries of work experience and nationality of TMT members, on the one hand, and firms' R&D locations on the other. This influence is stronger for international work experience diversity than for nationality diversity, as the former provides more task-related knowledge to coordinate R&D activities and is less associated with the risk of social categorization. We find partial support for these notions in a panel analysis of the innovation performance of 165 leading MNCs based in Europe, Japan, and the United States.

Managerial Summary

The international experience and nationality diversity of members of the Top Management Team (TMT) of multinational firms may facilitate the implementation of international R&D strategies. If TMT members have knowledge of local circumstances and social networks in the countries in which the firm has international R&D facilities, this can enhance the TMT's ability to allocate and coordinate international R&D tasks more effectively, and to foster firm-wide collaboration and knowledge integration. Hence, the alignment between R&D locations and the international diversity of the TMT may improve the performance effects of international R&D strategies. We find partial support for this conjecture in an analysis of the patent performance of 165 leading MNCs. It is international work experience rather than nationality diversity that brings these performance benefits.