The impact of managerial characteristics on business strategies under the environmental change: an investigation of the Israeli diamond industry

The changing business environment has required firms to adopt new strategies to facilitate efficient organizational adaptation. Previous upper echelons studies suggested that the demographic characteristics of top managers influence their choice of strategies, and ultimately the firms' performance. These studies tended to examine firms in a homogenous way. The characteristics of family-owned firms, together with the unique external environment within which they operate, have been largely ignored. This study aims to fill this gap and examine the relationships between the top managers’ characteristics and their choice of exchange strategy within the diamond industry in light of the environmental changes. This paper illustrates the evolutionary stages of the diamond industry and how players adjust their strategies in-line with the environment. We interviewed 100 diamond firm managers to gather the empirical data. The results have shown that certain managerial characteristics, such as family background and marketing experience, have positively influenced the choice of using the arm’s length market exchange strategies. Our findings have also reflected that the relationship between managers’ characteristics and strategic choice is social and normative. Many managers follow the family or community traditions and imitate other key industry players in order to achieve legitimacy from the stakeholders and improve competitiveness.