Ruth V. Aguilera

Codes of Good Governance Worldwide: What is the Trigger?

This article examines the mechanisms underlying the worldwide diffusion of organizational practices. We suggest that the two main theoretical explanations in the diffusion literature, efficiency and legitimation, can be complementary. More specifically, we argue that endogenous forces seek to enhance the efficiency of existing systems, while exogenous forces seek to increase legitimation. To assess our argument, we explore the worldwide diffusion of codes of good governance. These codes are a set of ‘best practice’ recommendations regarding the behavior and structure of a firm’s board of directors issued to compensate for deficiencies in a country’s corporate governance system regarding the protection of shareholders’ rights. We have collected data on codes of good governance for 49 countries. We operationalize efficiency needs in terms of the characteristics of shareholder protection, and legitimation pressures in terms of government liberalization, economic openness, and presence of foreign institutional investors. Our analysis supports the argument that both efficiency needs and legitimation pressures lead to code adoption. In addition, our empirical results show that countries with legal systems with strong shareholder protection rights tend to be more prone to develop codes, possibly for efficiency reasons. This article contributes to organization theory by illustrating that he diffusion of codes fosters both cross-national corporate governance convergence as well as some degree of country hybridization, particularly depending on the type of code issuer.

An Organizational Approach to Comparative Corporate Governance: Costs, Contingencies, and Complementarities

This paper develops an organizational approach to corporate governance and assesses the effectiveness of corporate governance and implications for policy. Most corporate governance research focuses on a universal link between corporate governance practices (e.g., board structure, shareholder activism) and performance outcomes, but neglects how interdependencies between the organization and diverse environments lead to variations in the effectiveness of different governance practices. In contrast to such closed systems approaches, we propose a framework based on open systems approaches to organizations, which examines these organizational interdependencies in terms of the costs, contingencies, and complementarities of different corporate governance practices. These three sets of organizational factors are useful in analyzing the effectiveness of corporate governance in diverse organizational environments. We also explore the impact of costs, contingencies, and complementarities on the effectiveness of different governance aspects through the use of stylized cases and discuss the implications for different approaches to policy such as soft law or hard law.

Codes of Good Governance

Our review of the literature on codes of good governance highlights the rapid spread of codes of good governance around the world and how academic research has lagged behind in analyzing this topic. Despite the criticism that the codes’ voluntary nature limits their ability to improve governance practices, codes of good governance appear to have generally improved the governance of countries that have adopted them, although there is need for additional reforms. Unfortunately, research on codes of good governance has been studied in silos with little cross-fertilization across the different disciplines. We propose a multi-level framework to discuss three main topics that have emerged within the codes literature: the motivations behind the diffusion of codes across countries and its implications for convergence of corporate governance practices; the content of the code and its “comply or explain” dimension; and the relationship between code compliance and firm performance. We conclude by proposing four areas of future research. Code development, adoption, and compliance are directly related to issues surrounding the governance of the firm, and in particular to all the interactions that a director has inside and outside the firm. Codes are regulations that emerge from policy-making negotiations between the different stakeholders, such as the state (via the stock market regulators) and the investors.

Comparative and International Corporate Governance

In this article, we examine the state of the art in comparative and international corporate governance by identifying the key research questions, main concepts, and paradigms of explanations of cross-country diversity in corporate governance. First, we discuss the multiple definitions of corporate governance across disciplines and explore how this multi-dimensional nature of corporate governance posses challenges when making cross-national comparisons. Second, we review existing comparative research on corporate governance and highlight some of the main characteristics of comparative analysis. Third, we analyze how comparative corporate governance has been understood from four different scholarly perspectives: economics and management, culture and sociology, legal, and political paradigms. We conclude from this third section that future research should make an effort to

The Role of Human Resource Management in Cross-Border Mergers and Acquisitions

Cross-border mergers and acquisitions (M&As) have become the dominant mode of growth for firms seeking competitive advantage in an increasingly complex and global business economy. Although human resource management (HRM) can play a value-adding role in the merger process, existing research and evidence does not clearly demonstrate how it can do so. This paper addresses the neglected human side of M&As by providing a strategic fit framework to assess the link between M&A strategy and HRM strategy. Because cross-border M&As are of an order of magnitude more complex than domestic mergers, we examine contingencies in national contexts that influence outcomes in the merger process. We draw on recent empirical evidence to highlight HRM roles in terms of resources, processes and values that reflect the influence of both strategic fit and national context in the integration stage of cross-border M&A.

Bundles of Firm Corporate Governance Practices: A Fuzzy Set Analysis

Manuscript Type: Empirical exploration of theory-informed propositions. Research Question/Issue: We explore how the combinations of firm-level corporate governance (CG) practices embedded in different governance national systems lead to high firm performance. Research Findings/Insights: Using fuzzy set/Qualitative Comparative Analysis, we uncover a variety of findings. First, we show that within each of the stylized national CG models, there are multiple bundles of firm-level governance practices leading to high firm performance (i.e., equifinality). Second, we provide evidence of complementarity as well as functional equivalence between CG practices. Finally, we demonstrate that there can be heterogeneity (“differences in kind”) in firm governance practices within each stylized model of CG. Theoretical/Academic Implications: We build on the configurational and complementarity-based approaches to make the following theoretical claims. First, governance practices within firm bundles do not always relate to each other in a monotonic and cumulative fashion as this entails higher costs and possibly over-governance. Second, practices in bundles do not need to be aligned towards the insider or the outsider model (similar in kind). We argue that non-aligned practices can also be complementary, creating hybrid governance forms. Third, we predict functional equivalence across bundles of CG practices which grants firms agency on which of the practices to implement in order to achieve high performance. Practitioner/Policy Implications: We contribute to comparative CG research by demonstrating that there are multiple governance paths leading to high firm performance, and that these practices do not always belong to the same national governance tradition. Therefore, our findings alert of the perils of ‘one size fits all’ governance solutions when designing and implementing CG policies.

Connecting the Dots: Bringing External Corporate Governance into the Corporate Governance Puzzle

AbstractCorporate governance (CG) research has largely focused on internal governance mechanisms (i.e. the board of directors, controlling owners, and managerial incentives). However, much of this ...

Embracing Causal Complexity: The Emergence of a Neo-Configurational Perspective

Causal complexity has long been recognized as a ubiquitous feature underlying organizational phenomena, yet current theories and methodologies in management are for the most part not well-suited to its direct study. The introduction of the Qualitative Comparative Analysis (QCA) configurational approach has led to a reinvigoration of configurational theory that embraces causal complexity explicitly. We argue that the burgeoning research using QCA represents more than a novel methodology; it constitutes the emergence of a neo-configurational perspective to the study of management and organizations that enables a fine-grained conceptualization and empirical investigation of causal complexity through the logic of set theory. In this article, we identify four foundational elements that characterize this emerging neo-configurational perspective: (a) conceptualizing cases as set theoretic configurations, (b) calibrating cases’ memberships into sets, (c) viewing causality in terms of necessity and sufficiency relations between sets, and (d) conducting counterfactual analysis of unobserved configurations. We then present a comprehensive review of the use of QCA in management studies that aims to capture the evolution of the neo-configurational perspective among management scholars. We close with a discussion of a research agenda that can further this neo-configurational approach and thereby shift the attention of management research away from a focus on net effects and towards examining causal complexity.

TOP MANAGEMENT TEAM TURNOVER IN MERGERS & ACQUISITIONS

This paper reviews the evolving literature on top management team effects in mergers and acquisitions (M&As). Existing research has focused on understanding why incumbent top managers depart at higher rates than normal following an acquisition and why high turnover rates have negative postacquisition performance effects. We explore two new areas of inquiry. First, we discuss the role of newly hired executives – executives hired after the acquisition. Our research indicates that executives who join target companies after an acquisition also depart more quickly than executives who join companies not previously involved in an acquisition. Acquisitions appear to create long-term instability in the target firm’s top management team – both incumbent and new-hire executives depart at higher rates than normal well into the future. Integration of the target firm often intensifies instability within the target company’s top management team. This instability affects performance and leads to further integration efforts as the firm attempts to improve performance. These additional integration activities, in turn, lead to even higher subsequent executive turnover. Second, we examine the topic of director turnover and propose a theoretical framework for understanding the relationship between acquisitions and director retention. Future research that considers the role of directors as well as executives may lead to deeper insight into the nature of turnover and integration effects in mergers and acquisitions.

Are Boards Designed to Fail? The Implausibility of Effective Board Monitoring

Abstract In this review, we challenge the idea that directors are well positioned to be effective monitors of management. Moving beyond the logic of incentives and ability, we conceptualize a model based on the premise of boards as groups of individuals obtaining, processing and sharing information and explain how variation in information-processing demands at the director, board and firm level may challenge effective monitoring. We draw on multiple theoretical perspectives to identify these barriers to effective board monitoring. Our goal in reviewing these barriers is to help us take stock of existing research in corporate governance and to better explain board behavior beyond traditional agency and resource dependency accounts. We also aim to uncover gaps in the conceptual and empirical research and suggest areas of fruitful future research.