This research draws on the upper-echelons perspective to examine the effects of CEO–top management team (TMT) exchange quality and TMT personality composition on decision quality through the mediation of TMT psychological empowerment. Using survey data from more than 700 executives in 210 firms in a Middle Eastern country and adopting a split-data approach we find that CEO–TMT exchange quality can advance TMT psychological empowerment. We also find that TMT neuroticism has a negative effect on TMT psychological empowerment while TMT conscientiousness extraversion agreeableness and openness have positive effects. Moreover TMT psychological empowerment plays a mediating role in linking CEO–TMT exchange quality and TMT personality composition with decision quality. Our research contributes to the upper-echelons leader–member exchange (LMX) and decision-making literature by drawing attention to the social dynamics between CEO and TMT members as well as the psychological characteristics and psychological states ofTMT members and their implications for strategic decisions.
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