Abstract The New Normal in the international business landscape reflects a world challenged by economic volatility and political hostilities. This suggests increased political risk, even for MNEs operating in developed markets. We use the legitimacy‐based view of political risk to examine how political affinity between host and home markets may contribute to an MNE’s post‐acquisition performance in a developed market. A high degree of political affinity signifies aligned national interests thus reducing legitimacy concerns faced by MNEs during post‐acquisition integration. Based on cross‐border M&A deals focused on U.S. targets completed by MNEs representing 45 countries between 2004 and 2012, we find that MNEs from countries with greater political affinity to the U.S. experience better post‐acquisition performance. We also investigate two country‐level factors that intensify the threat to legitimacy; the MNEs’ home market economic status and the presence of a financial crisis in the host market. Our findings indicate that political affinity mitigates risk for MNEs originated from emerging economies much more than for MNEs originated from developed economies, whereas a financial crisis reduces the benefit of political affinity.
CEO compensation is among the most controversial topics in strategic management research. Extant scholarly work and anecdotal evidence suggest that peer group comparisons may explain how boards of directors justify generous CEO compensation packages to organizational stakeholders. In this study, we extend research on CEO compensation by focusing on the structural positions of firms within the inter-firm compensation peer network. Specifically, using panel data comprised of 447 S&P 500 firms and 2036 firm-year observations covering the 2010–2015 period, we explore the relationship of a firm’s centrality and the structural holes it commands in a peer group network with CEO compensation. Using network theory and methodology, we find that firms that pay high levels of CEO compensation are subjected to a form of social distancing by industry peers, reducing the firm’s centrality in the peer network, while still commanding a network that is rich in structural holes. Moreover, results show that centrality and command of structural holes in the peer network result in lower levels of change in CEO compensation over time.
Extant research on the co-CEO structure is very limited. We extend this area of inquiry by examining the corporate social performance implications of co-CEOs in publicly traded U.S. firms. Drawing from dual leadership theory, we hypothesize that firms led by co-CEOs have higher levels of corporate social performance (CSP) in comparison to firms led by solo CEOs. We further predict that firms led by co-CEOs will perform better in terms of both internal and external dimensions of CSP. Based on a propensity score-matching sample of co-CEOs and solo CEOs for U.S. firms from 1996 to 2014 and KLD ratings, we found strong support for all three hypotheses. Our findings suggest that firms interested in enhanced CSP might consider the benefits of a Co-CEO structure.
Emerging market multinational companies (EMNCs) are attracting increased attention as they play a greater role in the international business environment. These firms are especially noteworthy as they enter developed markets seeking the benefits of acquiring new customers and advanced business practices. Our study examines the influence of political affinity between nations on the success of EMNC’s cross-border acquisitions. Our results indicate a U-shaped relationship between political affinity and EMNC acquisition performance with benefits at the highest and lowest levels of political affinity. This relationship is moderated by EMNC firms’ decisions to cross-list their shares on stock exchanges in the developed market.
This study explores the competing influences of different types of board interlocks on diffusion of a strategic initiative among a population of firms. We examine a broad social network of interlocking directors in U.S. firms over a period of 17 years and consider the likelihood these firms will adopt a strategy of expansion into China. Results show that ties to adopters that unsuccessfully implement this strategy have a nearly equal and opposing influence on the likelihood of adoption as ties to those that successfully implement the strategy. Ties to those that do not implement the strategy also have a suppressive influence on the likelihood of adoption. Further, we examine a firm’s position in the core-periphery structure of the interlocking directorate, finding that ties to adopters closer to the network core positively affect the likelihood of adoption. We discuss the implications of our study for social network analysis, governance, and internationalization research.
Abstract Research Question/Issue The increase in executive pay has been attracting attention to the practice of peer benchmarking, which is commonly used to determine CEO compensation. Using a network approach, we construct and analyze the compensation peer network and examine how the structure of the network influences CEO pay. Research Findings/Insights Using data on public firms in the period between 2006 and 2020, we find that the peer network exhibits strong community structure and that bridging across communities influences CEO pay. Specifically, CEO pay increases by approximately $10 million as the number of bridging ties increases from 30 to 100, which indicates that obfuscation can result in inflated CEO pay and supports the managerial power perspective. Theoretical/Academic Implications We empirically distinguish the predicted effect of peer benchmarking on CEO pay as outlined in the market for executive talent and the managerial power perspectives. We show that firms may avoid scrutiny and offer high CEO compensation when they either have a very small number of targeted bridging ties or a very large number of diffused, nontargeted bridging ties in the peer network. Practitioner/Policy Implications The intent of peer benchmarking was to make CEO compensation practices more transparent, legitimate, and functional; however, our findings indicate that these intentions have not been fully realized and instead benchmarking can be used to inflate CEO pay while avoiding stakeholder scrutiny through obfuscation. These insights provide an opportunity to policy makers to be more effective in encouraging additional transparency and stronger justification for boards' choice of peers.
This study investigates the impact of various top management team characteristics on firm international diversification. Relying on data from 126 firms in the electronics industry, we find that certain top management team characteristics are related to international expansion. Specifically, results indicate that lower average age, higher average tenure, higher average elite education, higher average international experience, and higher tenure heterogeneity are associated with firm international diversification. The study reinforces the importance of top management team composition in internationalization decisions and suggests further research in this context.
