In this paper, we propose to investigate the impact of TMT functional diversity and orientation on divestiture decisions and performance of the firm. We integrate also the matching effect between the CEO and the TMT functional orientations. To do so, we focused on a sample of 731 French SMEs to understand to which extent functional diversity and the type of functional orientation impact the decision to divest or not and post divestiture performance. We aim also to see if performance depends on the match between the functional background orientation of the CEO and his team or not. In doing so, we find that TMT functional diversity will have a negative effect on divestiture decision and homogenous TMT are more likely to divest than heterogenous TMT. Our results show also that TMT with output functions are more disposed to divest than another one. This is attributable to their specific conception of the risk taking and their proactive approaches whereby a firm is often perceived as a bundle of assets to be bought and sold. Third, we find also that divestiture undertaken by TMT with output functional background outperform divestiture undertaken by TMT with throughput functional background. This result joins previous research whereby the fit or a positive association between executive functional experience and strategy will produce performance. Finally, we find that the relationship between TMT functional diversity, divestiture decision and firm performance is strengthened when the CEO’s functional orientation match with the other TMT members. The shared functional experience of CEO with the other member of team enhance cohesiveness, collaboration and communication between members and impacts positively performance.
