Firms Seek More Change, Less Risk When Women Join Top Management Teams

The first long-term study of multinational companies finds women at top echelons linked to embrace of transformation and strategy shifts among teams.

Story by

Amy White

Silhouettes, including a woman, in an office

Researchers with Lehigh, Maastricht University and University at Antwerp found that firms became more open to change and less open to risk after women joined the C-suite. (Shutterstock/alphaspirit.it)

For the first time, researchers examining the impact on businesses of women serving on senior management teams have explored the specific mechanisms associated with their entry into corporate’s upper echelons. Researchers with Lehigh, Maastricht University and University at Antwerp found that firms became more open to change and less open to risk after women joined the C-suite; and shifted focus from mergers and acquisitions to internal research and development. They found the greatest impact when female executives joined a team that already included at least one woman and when women joined as part of a smaller cohort of new appointees.

Summarized in a Harvard Business Review article, Adding Women to the C-Suite Changes How Companies Think, the findings are described in an article, What Changes After Women Enter Top Management Teams? A Gender-based Model of Strategic Renewal, that appeared online in the Academy of Management Journal.

Headshot of Corinne Post

Corinne Post, professor of management in the College of Business at Lehigh.

The findings are based on a sample of 163 multinational firms belonging to the Organization for Economic Co-operation and Development, including firms in Europe, the United States and Japan, over 13 years. Based on their analysis, researchers found that companies’ openness to risk-taking decreased by 14% while openness to change—potentially leading to transformation—increased by 10% when women were appointed to top management teams, said Corinne Post, professor of management in the College of Business at Lehigh.

“This suggests that adding women to the C-suite does not simply bring new perspectives to the top management team—it shifts how the top management team thinks,” the researchers write in Harvard Business Review. “Our research indicates that female executives don’t just offer specific new ideas to the team; their presence actually makes the (team) collectively more open to change and less comfortable with risk-taking.”

The researchers include Post; Boris Lokshin, associate professor at the department of Organization, Strategy and Entrepreneurship at Maastricht University; and Christophe Boone, professor of organization theory and behavior at the Faculty of Business and Economics, University of Antwerp (Belgium).

The researchers also observed a shift from a knowledge-buying strategy (i.e., a reduced likelihood of engaging in mergers and acquisitions) toward a knowledge-building strategy with the addition of female executives - to the tune of an average 1.1% increase in research and development investments, a substantial increase at the scale of the multinational companies studied.

The study suggests that female appointments to top management teams contribute to cognitive shifts within a team - specifically in risk-taking propensity and change orientation - “presumably because of the values that they bring (or are stereotypically expected to bring) to the top management team and because of the dynamics that unfold when groups diversify,” the researchers write in their Academy of Management Journal paper.

“Taken together, our findings suggest that female top management team appointments contribute to (re)shaping innovation-oriented renewal strategies in multinational corporations in the span of just a couple of years, and especially so when the (team) includes female incumbents,” they said in Academy of Management Journal.

Story by

Amy White

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