Upper Echelon Theory

From the Palgrave Encylopaedia of Strategic Management

Definition: The central premise of upper echelons theory is that top executives view their situations – opportunities, threats, alternatives and likelihoods of various outcomes – through their own highly personalized lenses. These individualized construals of strategic situations arise because of executives’ experiences, values, personalities and other human factors. Thus, according to the theory, organizations become reflections of their top executives.

Abstract: Explicitly set forth by HAMBRICK, DONALD C. (born 1946) and Phyllis A. Mason (1984), upper echelons theory is the idea that top executives view their situations through their own highly personalized lenses. These individualized construals of strategic situations arise because of differences among executives in their experiences, values, personalities and other human factors. Using the upper echelons perspective, researchers have examined the effects of top management team (TMT) composition and processes on organizational outcomes, as well as the influences of chief executive officer (CEO) characteristics on company strategy and performance. Dozens of studies have confirmed the basic logic of upper echelons theory (comprehensively reviewed in Finkelstein, Hambrick and Cannella, 2009), pointing to the conclusion that if we want to understand strategy we must understand strategists.

The Finkelstein et al. 2009 is this –

Finkelstein, S., Hambrick, D. C. and Cannella, A. A. 2009. Strategic Leadership: Theory and Research on Executives, Top Management Teams, and Boards. New York: Oxford University Press.

 

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