Impact of TMT faultlines on strategic change: the joint moderating effect of environmental munificence and organizational inertia

In the context of the new normal, strategic change has become the key to build sustainable competitive advantage for enterprises. As the core subject of strategic change, the executive team has a decisive impact on the outcome of change. It is noted that the impact of the executive team faultlines on organizational strategic change has not been sufficiently researched, and there is a particular lack of research on the impact of internal and external contextual conditions and their combinations on the effectiveness of top management team faultlines. Based on faultline theory, this study analyzes data from domestic listed companies between 2016 and 2023 to investigate the direct influence of relationship-related and task-related faultlines in top management teams on corporate strategic change. The study also examines the joint moderating effect of environmental munificence and organizational inertia. The study finds that (1) relationship-related faultline inhibits corporate strategic change, while task-related faultline promotes corporate strategic change. Therefore, when selecting and hiring executives, companies should focus on evaluating task-related indicators such as tenure match and functional background complementarity, and appropriately relax the restriction thresholds for superficial characteristic indicators such as gender, age, and education. (2) environmental munificence weakens the inhibitory effect of relationship-related faultline on strategic change and enhances the promotional effect of task-related faultline on strategic change. Therefore, when the relationship-related faultline of the executive team is obvious and difficult to adjust in the short term, companies can prioritize strategic change in non-manufacturing emerging markets with higher environmental inclusiveness and greater resource abundance. (3) organizational inertia weakens the negative moderating effect of environmental munificence on the inhibition of relationship-related faultline on strategic change. Therefore, firms can reasonably control the degree of organizational inertia through cultural reshaping, regular training and knowledge updating, and system and process optimization. While enriching the results of faultline theory, the findings of this paper also provide guiding suggestions for top management teams to successfully implement strategic change.