Metacognition, entrepreneurial orientation, and firm performance : An upper echelons view

Upper echelons theory suggests that cognitive diversity in top management teams (TMTs) affects firms’ operation and performance. Prior research in this stream has focused primarily on lower-order cognitive factors, such as beliefs, perceptions, and preferences, rather than higher-order ones, known as metacognitive abilities. This study is an early, perhaps the first, attempt to begin this line of enquiry. Adopting a multidimensional view of entrepreneurial orientation, we propose that diversity in the metacognitive ability of top teams has different impacts on each dimension of the team’s entrepreneurial behavior and through this firm performance. Our empirical analysis, based on data from 105 TMTs of Australian small- and medium-sized enterprises (SMEs), partially supports our theorization. We found that while metacognitive diversity is positively associated with the innovative endeavors of TMTs, it has no significant effects on their risk-taking and proactive behaviors. We found additional evidence that each aspect of the TMT’s entrepreneurial orientation has a different implication for firm performance. Overall, our research offers novel and more nuanced insights into how and when diversity in the metacognitive ability of TMTs matters for the performance of the firm.