The two faces of hierarchy: CEO power and TMT learning diversity in technology venture innovation

Abstract

The relationship between top management team (TMT) members’ learning behavior and the innovation strategy of technology ventures remains unclear, especially when complicated by social hierarchies within the team. We draw on organizational learning theory to theorize that diversity in TMT members’ learning behavior has both positive and negative latent effects that produce an inverted U-shaped relationship between TMT learning diversity and a firm’s radical innovation strategy. Building on the social hierarchy literature, we also suggest that CEO power moderates this relationship by altering the latent forces: structurally powerful CEOs neutralize the benefits of TMT learning diversity, turning the link between learning diversity and radical innovation strategy predominantly negative, whereas prestigiously powerful CEOs neutralize the costs of TMT learning diversity, turning its relationship with the firm’s radical innovation strategy predominantly positive. Longitudinal, multi-source data from 77 TMTs support our model. The findings contribute to the research on learning and social hierarchies by illustrating how hierarchies rooted in different sources of power have different effects on the relationship between TMT learning diversity and innovation strategy.