Does Presence of Foreign Directors Make a Difference? A Case of Indian IPOs

In their pursuit to garner resources and support for their IPO, the issuing firms prepare well on all fronts. Corporate governance, specifically board structures, is a critical issue that affects the decision quality and also influences the investors’ psyche. Building on theories of agency, resource dependency and signaling, this article attempts to study the effects of presence of foreign directors on firm-specific and board-related characteristics of IPO issuing firms. Adding to the scant literature on national diversity, this study concludes that foreign directors do signal a firm’s intent of internationalization and contribute to strengthening corporate governance but national diversity does not translate into IPO returns. Exploring a sample of Indian IPOs issued from April 2001 to March 2017, this study finds that presence of foreign directors on the boards brings about differences in governance mechanisms wherein internationalized boards were found to be stronger on governance front. Larger boards, more committees, less number of related directors, better board interlocking were the benefits that manifested from presence of foreign board members. Issue size and issue price of shares at the time of IPO are found to be significantly higher for firms with foreign directors on their boards reflecting better acceptance among the investors.

The Impact of Board Capital on Internationalization of SMEs: Initial Theoretical Considerations

The study aims to investigate the relationship between Board capital and internationalization of SMEs. The study implements a systematic review and synthesis of scientific literature. The article presents useful insights into the concept of Board capital, Agency, Resource dependency, Institutional theories, and Resource-Based view. These theories give us a better understanding of Board capital, the firm’s management and behavior. The analysis of recent studies suggests that external members of the Board might positively affect internationalization outcomes and be useful in overcoming obstacles during the initiation of international activities. Nevertheless, international entrepreneurship literature is still lacking studies considering Board capital. A deeper investigation of Board capital factors impacting the internationalization of SMEs can be stated as a future research direction.

WHEN ARE MARKETS ILLEGITIMATE?

In this essay I defend an alternative account of why markets are legitimate. I argue that markets have a raison d’être—a potential to be valuable that, if fulfilled, would justify their existence. I characterize this potential in terms of the goods that are promoted by the legal protection of economic agency: resource discretion, contribution esteem, wealth, diffusion of power, and freedom of association. I argue that market institutions deliver these goods without requiring the participants to have shared ends, or shared deliberation about joint ends—indeed, this feature is the source of the market’s distinctive contribution to well-being. I suggest that when markets lack legitimacy, this is because they fail to fulfill their raison d’être, or fail to be recognized as doing so. Thus, the contours of legal protection must be drawn so that these goods are realized together in a recognizable way, without sacrificing one good for the sake of others. Finally, I argue that this account is appealing because it allows regulators to consider a plurality of goods, and because it makes room for the essential role of rhetoric in securing market legitimacy.

CEO turnover and the new leader propensity to open innovation

PurposeIn an increasingly turbulent and competitive environment, open innovation could be critical for a firm’s success, favoring organizational flexibility and accelerating innovation processes. However, sharing innovation projects with external partners often requires changes in traditional organizational behavior and visions of CEOs. The purpose of this paper is to theorize and empirically verify how the CEO turnover and some socially relevant characteristics of the old and the new CEO may impact firms’ propensity toward open innovation under an integrated agency-resource dependence view and social identity perspective.Design/methodology/approachThe empirical analysis was carried out on 264 companies drawn from 16 developed European markets included in the S&P Europe 350 Dow Jones index over the years 2006-2015. To test the predictions, the authors adopted regression analysis by employing the panel two-stages least squares model and the ordinary least squares econometric model.FindingsConsistently with the predictions, the authors found that CEO turnover stimulates open innovation. Particularly, the results suggest that the organizational identity rationale may motivate a divergent propensity between insider and outsider new CEOs, with outsiders more prone to open innovation. The higher tendency of new outsider CEOs to undertake innovation projects jointly with external organizations prevails also within firms that experienced a long tenure of the former CEO, thereby suggesting that a new outsider CEO appears able to renovate corporate strategic directions also in highly orthodox organizational cultures.Originality/valueTo the best of the authors’ knowledge, this is the first study that theorizes why CEO turnover might impact the propensity of the firm toward open innovation. The authors use an integrated agency-resource dependence perspective, and the results from the empirical analysis mostly support the predictions. Moreover, the authors adopt the social identity theory to show that the organizational identification of the CEO matters in the decision of engaging in open innovation.

Effect of Board Social Capital on Innovativeness in the Banking Industry in Kenya

Extant literature on impact of board capital on firm innovativeness, was prior to this research inconclusive, with some studies showing positive, negative or no effect. Anchored on agency, resource dependence and social capital theories, the researcher sought to determine impact of social capital on innovativeness in banks. Kenya has experienced innovations in the banking sector driven by mobile technologies. The researcher hypothesized that social capital positively impacts firm innovativeness. Independent variables were director interlocks, status and prestige of the directors and presence of personal or other affiliations between directors and the bank or chief executive. Two control variables were added, to mitigate their confounding effect on bank innovativeness. A causal research design was selected and purposive sampling undertaken to choose respondents to a questionnaire. Unit of analysis was boards of banks. 32 questionnaires were returned, a response rate of 74%. Data was analyzed using SPSS, after testing for assumptions made. The study found there was statistically significant relationship between director interlocks and status and prestige of the directors and innovativeness of banks. This study resolved disagreement in extant literature, concluding that board interlocks and board status and prestige were found to drive innovativeness. There was no statistically significant relationship between presence of personal or other affiliations between the directors and the bank or chief executive and bank innovativeness. This study benefits management, in providing a selection criteria for directors of entities focusing on innovativeness. Major limitation of the study is the narrow focus on banking sector impacting generalization of the study

Board Interlocks and Firm Performance: Toward a Combined Agency–Resource Dependence Perspective

This study develops a combined agency–resource dependence perspective and applies it to the study of interlocking directorates. It suggests that interlocking directorates may exert either a positive or a negative effect on subsequent firm performance, depending on the firm’s relative resources, power imbalance, ownership concentration, and CEO ownership. A test on a sample of 145 Italian companies provides support for hypothesized effects. This study suggests that integrating agency and resource dependence theories provides a higher-order explanation of firm performance and helps advance both agency and resource dependence theories.

Modeling regulatory and competitive business environments’ influence on tunneling behavior

A comparative country analysis of regulatory and competitive business environments is generated using a synthesized multi-theoretical perspective combining agency, resource dependence, stakeholder, and institutional theories. The model posits that Indonesia, Philippines, China and India suffer from more tunneling behavior. Singapore and other well-known economically developed countries such as Australia, UK and USA are more likely to mitigate tunneling behavior.