http://jms.sciedupress.com Journal of Management and Strategy Vol. 9, No. 2; 2018 Published by Sciedu Press 34 ISSN 1923-3965 E-ISSN 1923-3973 TMT Diversity, Decision Quality and Service Sector Firm Performance: A Research Agenda Beatrice A. Oduor 1 & James M. Kilika 1 1 Department of Business Administration, School of Business, Kenyatta University, Kenya Correspondence: James M. Kilika, Lecturer, Department of Business Administration, School of Business, Kenyatta University, Kenya. Received: March 28, 2018 Accepted: April 11, 2018 Online Published: April 26, 2018 doi:10.5430/jms.v9n2p34 URL: https://doi.org/10.5430/jms.v9n2p34 Abstract This paper reviews the extant theoretical and empirical literatures on TMT Diversity, Decision Quality and firm performance in a service sector setting. The constructs are traced from their theoretical roots and their nature, characteristics and operational descriptions provided. The emerging gaps in knowledge emanating from the theoretical and empirical literature are summarized and a theoretical model linking the constructs proposed. The paper makes several propositions and calls on future research to develop data collection tools for measuring the constructs in the study in empirical work. Keywords: TMT diversity, decision quality, firm performance, service sector, institutional environment 1. Introduction Over the years, Top Management Team (TMT) diversity has continued to be an area of interest to strategic management researchers (Hambrick & Mason, 1984). According to Kor (2006), TMTs have the responsibility of making the general strategic decisions, as the members establish achievable objectives and design a method to be employed to realize the objectives of the organization. The responsibility of the top management lies in the operations of the firm and in ensuring that the firm achieves sustainable competitive advantage (Finkelstein & Hambrick, 1996; Hambrick & Mason, 1984). The importance of TMT members lies on the responsibility they have in the organizations when making strategic decisions (Hambrick, 1994). The extant literature focusing on TMT diversity and firm performance link is based on the assumption that demographic diversity is a prerequisite for the increased cognitive diversity, leading to the improvement of decision quality and ultimately resulting into firm performance. As part of their everyday work, TMTs have to make decisions on organizational issues and assist in resolving strategic, structural and work flow problems. The executive management responsibility is to engage in ratifying longer range decisions which set the firm’s direction (Floyd & Lane, 2000). The effectiveness of the firms strategic decisions mainly depends on an integrated decision making framework capable of responding to the issues facing the firm through an incorporated broad range information to be considered during the decision making process (Hitt & Collins, 2007). Daft (2010) defines firm performance as an efficient and effective way of an organization to optimally exploit its resources of knowledge, people, and raw materials so as to attain its objectives. Flapper, Fortuin and Stoop (1996) describe performance as a process of attaining effective organizational objectives. The importance of top management teams as a determinant of firm performance continues to be the focus of strategic management researchers (Carson, 2004). As markets continue to expand, organizations need to diversify with respect to their employee’s characteristics (Morison, 1992). The cognitive benefits of having a diverse group originates from the impact of diversity on creativity and requisite variety research (Hoffman & Maier, 1961). Even though Top management teams have continued to diversify in numerous dimensions, the implications of the TMT on performance have not been proven in strategic management literature (Nielsen & Nielsen, 2012). Hambrick and Mason (1984) stated that the characteristics and actions of the top management team members are reflected in the performance of the organization. Mutuku, K’Obonyo and Awino (2013) defined TMT diversity in terms of the personality differences expressed in human beings. It has been classified in many categories, among them demographic and mental diversity. Demographic diversity focuses on characteristics such as age, gender, nationality