Blending minds, balancing goals: TMT heterogeneity and sustainable-innovation in family firms

Family firms often prioritize profitability and growth, but balancing these with environmental sustainability is challenging. While TMT heterogeneity shapes various performance outcomes, its role in addressing the profitability–environmental sustainability dilemma in family firms remains unclear. Building on the upper echelons theory, we investigate how TMT heterogeneity drives the simultaneous pursuit of financial and environmental performance, which we refer to as hybrid financial–environmental performance, through sustainable-innovation practices. Additionally, we examine how family-firm governance mechanisms influence these relationships. Analyzing data from two matched samples of CEOs and senior production managers of Australian family firms, we find not only that TMT heterogeneity enhances the adoption of sustainable-innovation practices and leads to hybrid financial–environmental performance but also that the strength of this relationship is contingent on family-member involvement in the TMT and participative decision-making with subordinates. These insights advance our understanding of how family firms balance financial success and environmental responsibility.