Top management team stability and firm operational efficiency: a structural inertia perspective

Purpose Drawing on structural inertia theory, this study aims to examine the relationship between top management team (TMT) stability and operational efficiency. It considers how TMT stability affects operational efficiency in terms of the balance between the benefits of consistent execution and the costs of constrained routine revision. Design/methodology/approach The conceptual framework is empirically tested using panel data on 3,289 Chinese listed firms from 2011–2022. Fixed-effects models are used for the main analyses, while 2SLS and a control function approach are adopted to help mitigate potential endogeneity concerns. Multiple robustness checks are also conducted. Findings The results reveal an inverted U-shaped relationship between TMT stability and operational efficiency. This curvilinear relationship varies across operating contexts, reaching its turning point at a significantly higher level of TMT stability when customer concentration is higher and at a marginally lower level when industry technological turbulence is higher. Practical implications The findings suggest that TMT stability can both benefit and constrain operational efficiency. Firms should therefore tailor their practices to the operating context, leveraging its execution advantages while mitigating its rigidity costs. Originality/value This study extends operations management research on the managerial antecedents of operational efficiency by introducing a structural perspective on TMT stability. It broadens TMT change research by focusing on the temporal continuity of the TMT. It also advances research on TMT stability and operational efficiency by identifying the operating conditions that shape their inverted U-shaped relationship.