A Multi-Level Perspective on the Role of Top Management Characteristics and Governance Mechanisms in Shaping the Twin Transformation of Firms

The world’s population is facing a multitude of environmental and social challenges, such as global warming, climate change, and social divisions within society. Since these challenges affect individuals, communities, and businesses alike, firms have become key actors in addressing them. Against the backdrop of rising societal demands for more sustainable corporate behavior, businesses have increasingly recognized the potential of digital technologies to address grand societal challenges. Businesses are therefore challenged to embed sustainability into their corporate strategies while simultaneously advancing digital transformation, both to address societal objectives and to secure a competitive edge. The simultaneous pursuit of the sustainable and digital transformation—referred to as twin transformation—holds the potential for substantial synergies but also poses considerable managerial and organizational challenges for the top management. The aim of this study is to examine which individual characteristics and capabilities of top management influence decision-making. Drawing on five research papers, this thesis provides insights into how managerial characteristics, governance structures, and managerial cognition shape firms’ engagement in sustainability and digital transformation. The studies examine factors such as chief executive officer (CEO) political ideology, founder status, and elite education, as well as governance mechanisms like corporate social responsibility (CSR) committees and board gender diversity, and their impact on firms’ environmental, social, and governance (ESG) performance. Moreover, the role of managerial cognition in bridging digital technology adoption and competitive advantage in Small and medium-sized enterprises (SMEs) is analyzed. A systematic literature review further advances the emerging field of twin transformation by identifying key enablers at the top management level, thereby offering practical guidance for managers in effectively steering this dual transformation. This thesis contributes to the literature on twin transformation in several ways. First, it moves beyond demographic characteristics and examines more deeply rooted personal values of CEOs to analyze the influence that top management exerts on the sustainable and digital transformation of firms. Second, it highlights the interplay between different governance bodies, such as the CEO, the top management team, and the board of directors, acknowledging that strategic decisions at the top are made collectively and shaped by multiple perspectives. In doing so, the thesis adopts a multi-level approach to understanding firm transformations. Therefore, the study also draws on several management theories, such as upper echelons theory (UET) and the resource-based view (RBV), to explain decision-making in the context of firm transformations. In addition, it engages with seemingly opposing perspectives, including agency theory and stewardship theory, to evaluate which theoretical lenses are most suitable for analyzing sustainable and digital transformations. Third, this thesis examines the emerging field of twin transformation by drawing on research from both the sustainability and digitalization domains, integrating their findings and applying them to the twin transformation context. In doing so, it provides valuable insights into how top management influences twin transformation and offers guidance for managers navigating the dual pursuit of digital and sustainable transformations in order to enhance competitiveness in firms and contribute to addressing societal challenges.