Top Management Team Incentives and Paradox

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Type and Duration

SNF-Förderprojekt, May 2022 until May 2026


Chair of Entrepreneurship and Strategic Management

Main Research

Growth and Complexity


Organizations face increased pressure to simultaneously address multiple strategic objectives, such as exploration and exploitation or social and commercial value creation. These objectives are paradoxical in the sense that they are interrelated. While one can often not exist without the other, they compete for scarce resources and require different contexts, creating tensions in organizations (Zimmermann, Raisch, & Cardinal, 2018). Managing these tensions is particularly challenging for top management teams (TMTs), which reside at the apex of a firm and make strategic decision that significantly affect the fortunes of their organization (Smith, 2014).
Upper echelon research has, for many decades, shaped our understanding of top management team decision making processes, cognition, and behavior (Finkelstein, Hambrick, & Cannella, 2009; McNamara, Luce, & Tompson, 2002; Pearce & Zahra, 1991). Furthermore, it has also emphasized the role of incentives and compensation schemes in aligning senior executives’ decisions and actions with the priorities of the organization (Devers, Cannella, Reilly, & Yoder, 2007; Gomez-Mejia & Wiseman, 1997; Wowak, Gomez-Mejia, & Steinbach, 2017). However, we know relatively little about how incentives and compensation schemes may be designed to guide the pursuit of paradoxical objectives (Carmeli & Halevi, 2009). Hence, this research project strives to use insights from upper echelon theory to link the still largely disconnected research streams on TMT compensation, and paradoxes through one conceptual and two empirical studies.
The first study aims to develop a comprehensive conceptual understanding of the interplay between different forms of compensation, TMT cognition, as well as the management of paradoxical tensions. While recent studies have provided insights into the role of senior decision makers’ characteristics for the effectiveness of executive compensation (Cho & Hambrick, 2006; Sanders, 2001; Wowak & Hambrick, 2010), these studies largely assume a focus on single-dimensional firm outcomes. This conceptual study strives to develop these insights further. By introducing the multi-dimensionality inherent in paradoxical objectives, it strives to contribute to a better understanding of the effects of compensation as well as of the drivers and impediments of paradoxical thinking and action.
The second study aims to shed empirical light on how senior executives’ compensation influences firms’ ability to simultaneously pursue social and financial outcomes (i.e., hybridity). It thereby differs from prior research (Derchi, Zoni, & Dossi, 2020; Flammer, Hong, & Minor, 2019; Maas, 2018) by distinguishing between several dimensions of what has previously been summarized under social incentives. Furthermore, while prior research focused largely on the interplay between incentives and individual characteristics (Wowak & Hambrick, 2010), we strive to better understand how the firm-level context (in terms of social and economic value orientation) shapes the impact of senior executives’ compensation on hybridity.
Finally, the third study aims to empirically examine the role of CEO and TMT incentives for firms’ ability to simultaneously engage in exploration and exploitation (i.e., ambidexterity). While prior studies primarily looked at either the compensation of the CEO or the entire TMT (Carpenter & Sanders, 2002), we follow recommendations from upper echelon theory (Steinbach, Holcomb, Holmes, Devers, & Cannella, 2017), and look at how CEO-TMT pay diversity impacts exploratory and exploitative firm behavior.
Overall, this project aims to provide empirically grounded in-depth insights into the effects of different compensation schemes on firms’ economic and/or social performance and may thus be instrumenta


  • Zivkovic, D., Zimmermann, A., & Hill, S. A. (2022). CEO and TMT Incentives and Organizational Ambidexterity. Presented at the Academy of Management Annual Meeting, Seattle.