Previous research on the effects of top management team diversity on corporate
performance has yielded mixed results; some studies find a positive relationship,
others find a negative relationship, whereas yet others find no significant relationship
at all. This paper pays specific attention to the time and context dimensions of the
effects of upper echelons diversity and provides a multilevel theoretical approach and
empirical test of the controversial relationship. Drawing upon group diversity, upper
echelons and contingency theories, influences of contextual factors are hypothesized
at three distinct levels: team context, organizational characteristics and industry
dynamics. Three level hierarchical linear modeling was conducted on a longitudinal
dataset of 131 Swiss publicly listed companies representing 16 industries. The results
suggest that TMT nationality diversity is positively related to firm performance. Some
support was found for a positive effect of TMT diversity in international experience
on performance. No evidence, however, was found for such effects of functional
diversity and diversity in industry experience. The study findings further support a
positive main effect of team tenure as well as an interaction effect between nationality
diversity and TMT tenure. Industry growth had some positive moderating effect on
the relationship between TMT tenure and corporate performance. The results suggest
that applying a multilevel theoretical and empirical approach, bridging time dimension
with team, organizational and industry levels of analysis, will improve our current
understanding of the relationship between TMT diversity and corporate performance.