Top Management Team Diversity, Innovation, and Firm Performance in Vietnam: Evidence from a Transition Economy

Abstract

Purpose. This study examines how functional and educational diversity within top management teams (TMTs) influence firm performance in Vietnam, with innovation as a mediating mechanism and business environment volatility as a moderating factor.

Design. Using from a comprehensive data from 320 executives across 136 firms in Vietnam. And employing partial least squares structural equation modelling (PLS-SEM), we provide robust empirical evidence that extends upper echelons theory (UET) beyond Western context.

Findings. The results indicate that TMT diversity enhances innovation, which subsequently improves firm performance. The mediating role of innovation is confirmed, and its positive effect is amplified under volatile environmental conditions.

Research limitations/implications. The study is limited by its single-country, cross-sectional design and the binary measurement of environmental volatility, which may restrict generalisability. Future research should adopt longitudinal or comparative designs and employ more nuanced measures of environmental turbulence to deepen insights into the TMT diversity-firm performance nexus.

Practical implications. The findings highlight that private firms in emerging markets can leverage TMT diversity more effectively by embedding innovation into governance and decision-making structures, especially in dynamic and uncertain contexts.

Social implications. By showing how TMT diversity fosters innovation in turbulent business environments, the study highlights that diverse TMTs can enhance the competitiveness of emerging market firms, support the creation of more resilient employment, and contribute to sustainable economic development under volatile conditions.

Originality/value. This study provides large-scale evidence from Vietnam, clarifying how TMT diversity operates in transition economies. It contributes to the literature on TMTs and innovation in emerging markets by introducing perceptual measures of educational diversity and showing the contingent value of innovation under volatility.