J. Service Scie nce & Management, 2009, 3: 221-229
doi:10.4236/jssm.2009.23027 Published Online September 2009 (www.SciRP.org/journal/jssm)
Developing Human Capital Capabilities of Top
Management Team for CoPS Innovation*
Yuhui GE, Weizhong YANG
School of Management, Shanghai University for Science and Technology, Shanghai, China.
Received May 11th, 2009; revised June 20th, 2009; accepted July 26th, 2009.
ABSTRACT
Top management team (TMT) play key roles in many industries and firms. Human resources is continuously developed
and considered to be a competitive advantage. Traditional research on TMT has, however, paid scant attention to the
human capital capab ilities of TMT needed for firms. Fu rthermore, traditional work on TMT of firms pays limited atten -
tion to its specific traits in complex products and systems (CoPS) innovation. In the present paper, we explore the de-
velopment of human capabilities of TMT observed in CoPS innovation firms. We developed a model for analysis the
human capital capabilities of TMT for CoPS Innovation, and suggested that a dynamic interplay between the develop-
ment of human capital capabilities of TMT and the changing CoPS innovation environment, and human capital capa-
bilities of TMT for CoPS innovation could be developed through team learning. And we formulated an empirical re-
search framework for the analysis o f facto rs affectin g th e human cap ita l capab ilities o f TMT for CoPS inno vatio n. Fo ur
key factors were identified and extracted by using factor analysis, and these resulting factors were related to the per-
formance of CoPS inno vation by using a mu ltiple regression analysis method. The proposed framework iden tified four
blocks of human capital capabilities of TMT for CoPS innovation, namely technology innovation management, risk
management, organization management and relationship network management. The paper argues that TMT for CoPS
innovation firms are only able to effectively harness and develop their human capital capabilities by team learning and
integrating these fou r building blocks within the team.
Keywords: top management team, human capital capabilities, complex systems and products, learning, innovation
performance, factor analysis, regression analysis
1. Introduction
Complex systems and products (CoPS) are a high-cost
and high-tech subset of capital goods; they are produced
on a project basis, often in multi-firm alliances, as
one-offs or small bathes for large business, institutional
and government customers. Examples include aircraft,
telecommunication systems, flight simulators, high speed
trains, air traffic control systems [1]. More and more
emphases have been given on the performance of CoPS
innovation, the ultimate goal of CoPS innovation is not
just technical success, but also economic success. CoPS
innovation requires a large amount of resources, while
the human capital which is considered to be more im-
portant with respect to physical capital investment [2].
People’s intelligence and ingenuity play a vital role in
the process of CoPS innovation, and directly affect the
outcomes of CoPS innov ation. Encouraging the CEO and
senior executives to work as a team has been suggested
as a way of enhancing strategic leadership effectiveness
in complex organizations. Top management team (TMT)
has been put forward as an element ideally suited for
managing increasing complexity, fast changing markets,
cross-functional business expertise, customer focused
innovation and market, and techno logical uncertainty [3].
Chester Barnard’s (1938) classic book The Functions
of the Executive, scholars have attempted to explain how
top management affects organizational outcomes. Cyer-
tand March (1963) introduced the “dominant coalition”
concept and Child (1972) advanced the notion of “strate-
gic choice” to explain how top management influenced
firm survival [4,5]. In contrast, scholars, such as Aldrich
(1979), and Astley and Vande Ven (1983), have argued
that business environments are too complex for manag-
*This research is funded by Humanities & Social Sciences Research
Project, Ministry of Education (No. 06JA630042), and Shanghai Key
Disciplines (Phase 3) (No .S30504).

YUHUI GE, WEIZHONG YANG 222
ers to mattering a significant way. In response to this
debate, and spawned by Hambrick and Mason’s (1984)
“upper echelon theory”, a long line of research ensued
linking top management team composition, measured by
demographic age, tenure, and education with organiza-
tional outcomes [6], strategy, strategic change and per-
formance [7,8,9]. The contention of much of this compo-
sition research was that top management’s experiences
and values affects organizational outcomes through stra-
tegic decision- making. During the 90s, and drawing
from team process research, scholars began to examine
attributes of top management process, such as how the
team gets along or the formality of its operation. For
example, Smith et al. (1994) found a positive relation-
ship between top management social integration and
performance and O’Reilly, Snyder, and Boothe (1993)
reported a negative connection between top management
cooperation with the extent of strategic change [10,11].
Like the composition research, the process work con-
tended that the manner by which top management inter-
acted and communicated would influence organizational
outcomes through strategic decision-making. More re-
cent contributions also have demonstrated that both top
management composition and process are related to or-
ganizational outcomes such as innovation and profitabil-
ity. Moreover, there is evidence that demography and
process are interrelated, such that the composition of the
team affects the process of interaction [12]. The work of
foregoing scholars enriches theory on TMT. Scholars
have made big progress in TMT research.
Nonetheless, there are some limitations of the above-
mentioned research. First of all, the relationship between
external influences (e.g. scientific, technological, market,
economic factors, other staff, rules and regulations) and
the internal capabilities of TMT has not addressed the
issue of top management team by the contingency theory
perspective on organizational development and its envi-
ronment. The top management team characteristics, team
dynamics are very different in the CoPS innovation, and
their impacts on performance of CoPS innovation are
also different. Secondly, these TMT researches have
excessively focused on how TMT demographic charac-
teristics or individual personalities, cognitive preference
effect performance, while neglecting the hidden insights
of these digital characteristics. TMT are able to explore,
experiment, innovate and make decision in the supply of
CoPS by building human capital capabilities necessary to
supply CoPS. In the TMT literature a few recent studies
have focused on human capital capabilities (HCC) of
TMT affecting outcomes, especially in the production of
CoPS. Ge Y. H. (2007) first advanced the TMT research
methodology based on human capital, and establishe
model describing the relationship between the factors of
TMT’s human capital value and the enterprise perform-
ance [13]. However, in its initial stage, systematic re-
search on human capital capabilities of TMT for CoPS
innovation is still in exploration phase.
2. Building Human Capital Capabilities of
TMT for CoPS Innovation: A Framework
of Normative Analysis
2.1 Interaction Model of Human Capital
Capabilities of TMT for CoPS Innovation
TMT human capital is scarce in the state of the market,
and its capabilities are indispensable in the management
of CoPS production and can been seen as a variable fac-
tor of production function. In the face of uncertain con-
ditions, they are critical to the ability of the firm to allo-
cate, integrate and coordinate all kinds of resources. The
effectiveness of human capital capabilities of TMT or
TMT effectiveness is related to changes in the external
environment and assumptions about this relationship
have influenced the progress of unstructured tasks.
As Figure 1 shows, the interaction model system is
composed of CoPS innovation activities (including mar-
keting, R& activities and production), TMT, other staff,
and market, organizational and technical environment.
The elements of the model are interactive and influenc-
ing each other, and together promoting and realizing the
CoPS innovation. the crux of the model is TMT, for its
abilities are essential for the CoPS innovation, while the
periphery are CoPS innovation activities other staff, and
market, organizational and technical environment, which
constitute the TMT environment.
We argue that the achievement of CoPS innov ation is,
to a large extent, attributed to the TMT, and human
capital capabilities of TMT are critical for CoPS innova-
tion. A conservative, not innovative TMT are hard to
claim the credit in CoPS innovation. The main functions
of TMT in CoPS innovation are as follows:
 Participating effectively in the selection and bid
of CoPS innovat i on pro ject s.
 Supporting the R&D activities.
 Purchasing resources inside and outside the firm,
and managing and reallocating resources through
the CoPS innovation project life cycle using
milestones and deadlines.
 Working in a dynamic environment, coping with
risk avoidance and control, handling unexpected

YUHUI GE, WEIZHONG YANG 223
Figure 1. Interaction model of human capital capabilities of TMT for CoPS innovation
incidents, and ma nagi ng co nf l i cts [14] .
 Using a number of tools, techniques and con-
cepts–e.g. concurrent engineering, milestone
scheduling and PERT _Program Evaluation and
Review Technique [15].
 Instructing and selecting suitable staff for various
CoPS innovation activit ies, and formatting incen-
tive and restrictive mechanism.
 TMT social integration network are general posi-
tively associated with innovation activities.
Managing social integration network is of great
importance for C oPS.
TMT are responsible for the completion of CoPS in-
novation within costs, on schedule and to specified stan-
dards. The effectiven ess of TMT lies in its human capital
capabilities. If the human capital capabilities are not
concordant with the CoPS innovation, and then the per-
formance of CoPS innovation will be undesirable.
In the other way, in response to increasing complexity
in production, communication and technology, and
achieving high level of CoPS innovation performance,
which is feedback to CoPS innovation activities and
TMT, developing human capital capabilities is the only
way out. The relationship between external influences
and the internal characteristics of TMT can been specifi-
cally addressed by the contingency theory perspective on
human capital capabilities development. To remain ef-
fectively related to rapidly changing environments, firms
are periodically faced with the challenge of re-deploying
their existing resources and changing their internal proc-
esses and capabilities.
2.2 Developing Human Capital Capabilities of
TMT for CoPS Innovation through Learning
Lessons learned from the CoPS innovation project and
recommendations for improvements can be transferred to
TMT. Figure 1 shows a dynamic interplay between the
TMT human capital capabilities and the changing exter-
nal conditions, recognizing that synergetic development
and learning are the main way to improve the perform-
ance of CoPS innovation. Learning are seen as important
in improving organizational performance in relation to
developing capabilities in continuous improvement in
manufacturing [16]; by Bartezzaghi et al. (1997) and
Caffyn (1997) with respect to improving the new product
development process [17]; and by Coombs and Hull
(1997) in relation to the mechanisms through which
knowledge affects possibilities fo r innovation [18].
CoPS innovation performance and changes in the envi-
ronment necessitate systematic changes in the entire or-
ganization – a change in one part of the organization re-
quires complimentary changes in other parts. Providers of
CoPS from project to project have to think and act differ-
ently –they need to enter into new relationships with their
customers, to take on different risks and implement new
means of assuring quality [19]. These require that the firms
and TMT enhance their existing capabilities to include the
ability to R&D, marketing, manufacturing and production,
risk management, and relationship network management. In
addition they need to develop business consulting capabili-
ties– to understand a customer’s business and to offer ad-
vice and solutions that dress the customer’s specific busi-
ness needs; and financing capabilities – to provide the cus-
tomer with help in purchasing new systems and in manag-
ing their installed base of assets.

YUHUI GE, WEIZHONG YANG 224
3. Building Human Capital Capabilities of
TMT for CoPS Innovation: A Framework
of an Empirical Study
This section builds upon scholars’ insights and above
analysis in seeking through an empirical study of 133
respondents to explore the factors affecting human capi-
tal capabilities of TMT within firms producing CoPS by
factor analysis and regression analysis.
3.1 Research Framework
A thorough literature review and Nominal Group Tech-
nique (NGT) were used to identify factors of project
competence in CoPS as recognized by research and prac-
titioners in this field. Then a questionnaire was devel-
oped to identify and rank their associated measured
variables. Using factor analysis, the most important
variables affecting human capital capab ilities of TMT for
CoPS innovation were identified and extracted to new
key factors, and the multiple regression method was ap-
plied on the new key factors to define the contribution of
these factors to the performance of CoPS innovation.
Factor Analysis is a technique for finding a small
number of underlying dimensions from among a large
number of variables. This technique was used in this
study to explore the possible underlying factor structure
of 16 sets of measured variables. By performing factor
analysis, the underlying factor is identified, and data re-
duction is achieved. The factor analysis model is given
by:
EXY   (1)
where, is a matrix of measured variables;
Y
X
is a
matrix of common factors;

is a matrix of weights
(factor loadings); and
E
is a matrix of unique factors,
error variation.
After obtaining the
X
, we related these resulting fac-
tors to the performance of CoPS innovation by using
multiple regression analysis. Using standardized vari-
ables in multiple regression analysis, the estimating
equation is:
FXZ iij   
i
X
(2)
where, is the matrix of common factors reproduced
from measured variables; is one of dimensions that
predicting the performance of CoPS innovation;
j
Z
i

is a
matrix of coefficients; an d
F
is a matrix of error varia-
tion.
3.2 Questionnaire Design and Sampling
In this empirical research, we generate 5 sets of factors,
and 16 measured variables. Combining the results of the
literature review with the results of our survey, the over-
all factors affecting human capital capabilities of TMT
for CoPS innovation were identified. 3 dimensions me-
diating variables and 6 measured variables were gener-
ated to measure the performance of CoPS innovation.
A questionnaire survey was then developed and used
as a research tool to asses and rank these variables. The
rating scale was a one-to-ten Likert scale, ranging from
extremely confident (10 points) to not confident at all
(1point), was used to measure subjects’ confidence in
their judgment. 42 firms that producing CoPS partici-
pated in responding to the questionnaire. About 265
questionnaires were sent out along with a letter. This
letter detailed the purpose of this study, and encouraged
the TMT members to participate without disclosing per-
sonal information. The number of returned question-
naires was 165, but after a procedure of pre-filtering,
only 133 we re usable.
3.3 Primary Data Analysis
The data meet Kaiser-Meyer-Olkin’s sample adequacy
criteria (0.851, minimum acceptable level 0.60), as well
as those for Bartlett’s test of sphericity
()
2727.01,0.0001P
 
for the appropriateness of using factorial models. Internal
consistency of measures must be verified, as shown in
Table 1, these estimates of cronbach’s alpha coefficients
and full scale range from 0.53 to 0.86, which are ap-
proaching the threshold of 0.60 suggested by Jöreskog
and Sörbom and thus acceptable. Internal consistency is
implied [20].
The mean, standard deviation and corrected item-total
correlation of the 16 measures for 133 respondents are
presented in Table 1. The item-total correlation shows
acceptable coefficients for all variables (05.0

Pand
higher), ranging from 0.04 to 0.63. The following meas-
ures, resource allocation (Measure 7) and leadership
(Measure 9), yield the highest correlation coefficient.
Human resources management (Item11), communication
and coordination (Measure 10), and resource allocation
(Measure 7) are the major agreements of respondents
(ranging from 5.02 to 5.28). R&D management is com-
paratively the least measured variable, nevertheless they
are significantly correlated () with the underly-
ing construct. Therefore, this indicates their relative
specificity for human capital capabilities construct.
05.0P
3.4 Factor Analysis
There are generally two steps in factor analysis: namely,
the extraction of factors and the rotation of the factors.
The 16 measures were assumed to be independent variables.

YUHUI GE, WEIZHONG YANG 225
Table 1. Frequency and internal consistency of factors s of HCC and performance of CoPS innovation
Constructs (factors) Measured variables Cronbach’s
alpha Frequency (mean±SD)
Corrected
item-total correla-
tion
1. R&D management 5.45±1.89 0.07
2. Technology management 6.12±1.63 0.50
Technology innovation
management (TIM) 3. Commercial innovation
0.53
6.43±1.65 0.55
4. Risk avoidance and control 7.41±1.32 0.45
5. Unexpected incidents handling 7.32±1.37 0.41 Risk management (RM)
6. Conflicts management
0.63
7.32±1.37 0.18
7. Resource allocation 7.44±1.31 0.65
8. Team work 7.17±1.66 0.52
9. Leadership 7.30±1.78 0.70
10. Communication and coordination 7.69±1.39 0.58
Organization manage-
ment (OM)
11. Human resources management
0.86
7.61±1.28 0.55
12. Planning 7.17±1.61 0.59
Operational process (OP) 13. Execution 6.45±1.60 0.58
14. Business relationship network 6.50±1.69 0.58
15. Internal social integration 7.09±1.37 0.46
Relationship network
management (RNM) 16. Government relationship network
0.62
6.49±1.49 0.04
1. Patents increasing 6.67±1.45 0.58
R&D performance (RDP) 2. Increasing new products 0.73 6.63±1.59 0.58
Production
& manufacturing per-
formance (PMP) 1. Improving cost efficiency 6.88±1.32
1. Increasing growth rate 6.88±1.66 0.68
2. Increasing market share 7.05±1.57 0.65
Business performance
(BP) 3. Improving overall profitability
0.83
7.05±1.60 0.72
Table 2. Rotated component matrix after varimax rotation from PAC of factors of HCC of TMT for CoPS innovat
Factor 1 Factor 2 Factor 3 Factor 4
Variables Technology
innovation
management
Risk man-
agement Organization management
Relationship
network man-
agement
2
h
1. R&D management 0.66 0.54
2. Technology management 0.71 0.66
3. Commercial innovation 0.71 0.71
4. Risk avoidance and control 0.68 0.54
5. Unexpected incidents handling 0.70 0.58
6. Conflicts management 0.79 0.63
7. Resource allocation 0.76 0.62
8. Team work 0.75 0.57
9. Leadership 0.65 0.62
10. Communication and coordination 0.76 0.60
11. Human resources management 0.55 0.45
12. Planning 0.74 0.60
13. Execution 0.70 0.55
14. Business relationship network 0.69 0.70
15. Internal social integration 0.62 0.57
16. Government relationship network 0.82 0.71
Eigen value 4.33 2.00 1.68 1.63 8.64
% of variance explained 27.08% 12.51% 10.47% 10.17% 61.23%
2
h=final communality estimates

YUHUI GE, WEIZHONG YANG 226
Principal component analysis (PCA) was used to explore
the factor structure of factors of human capital capabili-
ties of TMT for CoPS innovation.
Table 2 shows that 61.23% of the total variance is at-
tribut ed to the first 4 f actors, wh ere these fact ors have an
eigen value greater than 1.00. The remaining factors ac-
count together for 38.77% of the variance. The scree plot
also verifies the above findings. Thus 4 factors should be
considered adequate to represent the data. Once a set of
common factors have been identified, there remains the
question of how the individual variables relate to those
common factors. A varimax rotation method was used in
this study to explore the relationship. The factor rotation
results indicate the new factors and their variables related
to each factor. It also shows the strength of correlation
between the new factors and their variables. Inspection
of communality esti mates () reveals a very high value
(>0.50) for all va riables [21].
2
h
As a result, the factor analysis technique reduced the
16 variables to 4 new factors. These new factors can be
renamed as shown in Table 2, measured variables 12 and
13 of operation process construct and variables of or-
ganizational management construct can be integrated as
one factor, named organizational management.
3.5 Regression Analysis
We turned to a regression analysis, which would allow
us to test empirically which factors of human capital
capabilities of TMT for CoPS innovation are closely
correlated with the performance of CoPS innovation,
which are not.
The performance of CoPS innovation was assessed
judgmentally by mediating variables R&D Performance,
production & manufacturing performance, and business
performance. Each mediating variables are predicted by
several manifest variables. Figure 2 shows the concep-
tual model that describing the interrelationship between
two sets of constructs—the human capital capabilities of
TMT and the CoPS innovation perfor mance. The first set
is comprised of technology innovation management
(TIM), risk management (RM), organization manage-
ment (OM), operational process (OP), and relationship
network management (RNM) deemed to conducive to
higher level of performance of CoPS innovation, where-
as the second sets of constructs represent R&D perform-
ance (RDP), Production & manufacturing performance
(PMP), and Business performance (BP) of human capital
capabilities of TMT.
The 4 new factors of human capital capabilities of
TMT were unitized as independent variables to deter-
mine usefulness for predicting changes in the independ-
ent variables, R&D performance, production & manu-
facturing performance and business performance. Table
3 summarizes the results obtained in the regression
analysis with the SPSS 15.0 for windows software.
Based on the aforementioned regression analysis, the
following reduced model [Equations (1) and (2)] was
postulated as a pr ediction tool.
R&D performance = -2.84﹢0.50*F1 (Technology
innovation management) ﹢0.21*F2 (Risk management)
﹢0.19 *F3 (Organization management) ﹢0.13*F4
(Relationship netwo rk management ).
Production & manufacturing performance = -2.96﹢
0.31*F1 (Technology innovation management) ﹢
0.09*F2 (Risk management) ﹢0.34*F3 (Organization
management) ﹢0.25*F4 (Relationship network man-
agement).
Business performance = -2.62﹢0.26*F1 (Technology
innovation management) ﹢0.18*F2 (Risk management)
﹢0.20 *F3 (Organization management) ﹢0.18*F4
(Relationship netwo rk management ).
Significant standardized regression coefficients con-
firmed the positive relationship between factors of hu-
man capital capabilities of TMT and performance of
CoPS innovation.
The explanatory power of the model was also shown
in Table 3. The values of 2
R
(0.35, 0.28, and 0.17) are
sufficient to represent the most important factors affect-
ing performance of CoPS innovation.
3.6 Developing Blocks of Human Capital
Capabilities o f T MT f o r C o PS Innovation
Given the results from factor analysis, regression analy-
sis, the proposed model identified 4 building blocks of
human capital capabilities of TMT for CoPS innovation,
namely technology innovation management, risk man-
agement, organization management and relationship
network management. These building blocks are highly
related to performance of CoPS innovation, and they are
strongly correlated with each other.
However, the relationship between the building blocks
should be pointed out. Fo r instance, we acknowledge the
relationship between organization management capabili-
ties and risk management capabilities, but also that ex-
isting logics of organization management capab ilities has
effects on the risk management capabilities. Similar rela-
tionships are found between other human capital capa-
bilities.
We argue that the TMT who are in charge of CoPS
innovation must produce a dynamic fit between the
building blocks of human capital capabilities. Furtherm or e,

YUHUI GE, WEIZHONG YANG 227
Figure 2. Interrelationship between human capital capabilities of TMT and CoPS innovation performance
Table 3. Regression coefficients (N=133) T
Variables R&D performance Production & manufacturing per-
formance Business performance
Standardized
coefficients (Beta) Standardized coefficients (Beta) Standardized coefficients (Beta)
Technology innovation man-
agement 0.50 0.31 0.26
Risk management 0.21 0.09 0.18
Organization management 0.19 0.34 0.20
Relationship network manage-
ment 0.13 0.25 0.18
2
R
0.35 0.28 0.17
t-value >1.84 >1.19 >2.19
Sig. >0.00 >0.00 >0.02
a change in one building block capabilities might have
severe consequence on one or more of the other building
blocks. For instance, the risk avoidance and control ca-
pabilities would have effect on the efficiency of R&D
management. Moreover, some CoPS innovation projects
generated might lack necessary leadership capacity be-
cause of the complexity and uncertainty of them.
In the business CoPS innovation projects we can find
some clear examples of this, for instance, key project
leaders lack the necessary knowledge about a certain
category of client. In other cases, leaders lack the neces-
sary skills for dealing with a new (and more uncertain)
technology. Additionally, we can observe that an in-
crease in project leadership capacity also had some ob-
vious effects on a series of capabilities, ranging from
human resource management to unexpected incidents
handling.
4. Conclusions
TMT in CoPS innovation, featuring as working in high

YUHUI GE, WEIZHONG YANG 228
degree of complexity and uncertainty and adapting in the
changing environment, is open system. Its work envi-
ronment plays a role in the formation and application of
human capital capabilities of TMT, in turn; human capi-
tal capabilities of TMT for CoPS innovation have a posi-
tive influence on its working environment and the per-
formance of CoPS innovation. Different types of human
capital capabilities of TMT are corresponding to diverse
environmental characteristics. Several implications are
drawn from this study.
 Human capital capabilities of TMT is an indis-
pensable element s for C oPS i n no vat i on;
 The development of human capital capabilities of
TMT is confined to CoPS innovation environ-
ment;
 Human capital capabilities of TMT for CoPS In-
novation would be developed t hro ug h learning;
 Human capital capabilities of TMT for CoPS in-
novation consists of four building blocks: tech-
nology innovation management, risk manage-
ment, organization management, and relationship
network m anagement;
 These building blocks are highly related to per-
formance of CoPS innovation, and they are
strongly correlated with each other, changes in
one building block of human capital capabilities
of TMT might have severe consequence on the
other building blocks.
 Human capital capabilities of TMT is constituted
in the fit and dynamics between the identified
building blocks ; and
TMT for CoPS innovation firms are only able to ef-
fectively harness and develop their human capital capa-
bilities by team learning and integrating these four
building blocks within the team.
The development of human capital capabilities of
TMT for CoPS innovation elaborated upon in this paper
thus rests upon these elements. We are, no doubt, aware
of the problems in drawing such a result. The proposi-
tions given in this paper should be tested and compared
between firms and industries in order to further our un-
derstanding of human capital capabilities of TMT for
CoPS innovation and its development.
5. Acknowledgements
The authors are also grateful to anonymous referees for
their helpful comments and insights. This research is
funded by Humanities & Social Sciences Research Pro-
ject, Ministry of Education (No. 06JA630042), and
Shanghai Key Disciplines (Phase 3) (No. S30504).
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