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We provide an institutional theory perspective to examine societal legitimacy in the context of capital market development. While prior research has focused on the importance of formal institutions, firms are embedded within broader socio-economic structures associated with informal institutions. Using content analysis and a unique dataset of 3244 newspaper articles between 2004 and 2013, we develop a dynamic measure capturing the public perception of capital markets as a proxy of informal institutions. We run a Prais–Winsten regression with panel-corrected standard errors to explore the dynamic relationship between public perception of capital markets and equity market size in Austria and Poland. We further theoretically and empirically explore how formal and informal institutions mutually reinforce each other in the context of capital market development. Our results suggest that informal institutions matter differently in developed and emerging economies.

The popularity of the business model phenomenon has out paced its theoretical development. We argue that establishing construct clarity for the business model phenomenon is necessary before scholars and practitioners can answer foundational questions such as whether strategy and business models are different constructs and if so, the implications for practitioners, theory development and pedagogy. We advocate for a Theory-In-Use (TIU) approach to establish construct clarity. TIU is one approach to phenomenon-driven research used to co-create new knowledge by involving academics and practitioners, leveraging extant theoretical and empirical knowledge to position, describe and explain a phenomenon, and embraces constructionist and positivist epistemologies to map constructs on to a phenomenon. We overview the TIU approach and develop a hypothetical interview schedule for developing construct clarity for the business model phenomenon. Assuming that construct clarity is established, we identify promising research directions for two streams of business model research that are underdeveloped; international business and corporate governance. Our overarching goal is to stimulate research to advance the theoretical relevance of the business model phenomenon.

This essay seeks to introduce the renewed role of governance in management by adopting an open-systems approach. We discuss how governance plays a key role in current firm innovation efforts as wel...

The exchange of academic knowledge increasingly flows in both directions, from West to East and East to West. The result is a rich and ever increasing development of theory and understanding of practice, which is expected only to gain further momentum in the future. This paper seeks to help establish a foundation for further development of this fertile exchange of ideas between East and West. We reflect on the research focus of the main theories in management studies in East and West. We discuss the topics of East and West in selected areas of management studies, including competitive strategy, strategic leadership, and the human resource management to offer avenues for future research. Translating practices between the two contexts creates institutional, leadership, strategy and organizational challenges while providing new promising research avenues and opportunities to integrate East and West perspectives. We also offer a more critical view on the relationship between West and East, focusing specifically on the role of power and power relations in making sense of how management and organization studies treat issues of cultural, institutional and philosophical divergence.

This introductory, along with the eight articles contained within this Special Issue, highlights and brings greater clarity to entrant-incumbent interactions and to firm movement - when entrants traverse market territories for the creation and/or delivery of offerings, where 'markets' include service or product categories, technology or resource spaces, industries, sectors and/or geographies. Collectively, this Special Issues explains that firm movement across market boundaries is highly consequential, influencing resource-capability mixes inside firms, interfirm relations, market logic and industry value chains, and of course, people, communities and even nations. Specifically, we develop a field-wide perspective of market entry by expanding on the framework of market entry that Zachary and his colleagues developed (Zachary et al., 2015) - i.e., the who (players such as incumbents, entrants, suppliers, etc.), when (the timing and sequence of entry), how (the strategy, resources, capabilities, etc.), where (the space of entry) and what (product, service, business model, etc.) - to include two additional categories: complements (networks, platforms, ecosystems) and non-market elements (government, political, social and cultural arrangements). We also summarize the eight highly diverse and insightful articles that make this Special Issue, and conclude with a discussion to highlight foundational questions that point to new directions in future research in this field. In sum, we hope to inspire scholars to go beyond counting outcomes (e.g., entry/exit rates, or profiling successful versus unsuccessful entrants), to consider contexts, processes and contingencies (e.g., cost, time, collaboration, competition, interfirm relations, etc.) and to discover boundary conditions that inform a theory of market entry.

Organizational theory recognizes reputation as a central element to understanding the firm. Examining investor valuations of 1,676 initial public offerings (IPOs) in the United States from 1990 to 2011, we find that reputation transfer through an association of an IPO firm with a venture capital (VC) firm represents a resource whose value can increase/decrease over time depending on investors’ valuations of prior IPOs funded by a VC firm. We conclude that the impact of reputation transfer through association is not unidirectional but, instead, is to be viewed in the context of prior reputational development of organizations the focal firm is associated with. Furthermore, we find that three “transfer enhancers” can improve the impact of VC firm reputation transfer on IPO valuations, including the VC firm’s past experience intensity, the diversity of IPO experiences, and the number of prior syndicated IPOs involving the VC firm as a lead investor.

We integrate the institutional perspective with research on the governance role of private equity firms in an investigation of Founder-CEO successions in Initial Public Offerings (IPOs) in emerging markets. Using a unique, hand-collected and comprehensive sample of 191 firms having undertaken IPOs in 21 markets across the African continent between January 2000 and August 2016, we apply instrumental variable (IV) Probit methodology and find that higher levels of private equity ownership are positively associated with the probability of the founder's retention as CEO, especially in the context of low-quality formal institutions. Further, in societies with high tribalism, higher private equity ownership is associated with an increased likelihood of founder retention. Voids in the institutional architecture underscore the importance of the founder as a key organizational resource for the firm and a source of institutionalized legitimacy, which in turn confers on the firm an ability to access required resources.

Compared to scholarship focused on venture capital, we know less about angel investing and, in particular, less about how angels operate across institutional environments. Given the importance of angels within early-stage entrepreneurial investment growing globally, the field of angel governance is poised for further investigation. Thus, in this paper, we begin the conversation on angels and institutions and provide a framework for studying the post-investment governance role taken by angels amid institutional variation. First, we provide a review of the research conducted on angel-centered corporate governance. We then explore how the regulative, normative, and cultural-cognitive institutional domains may influence angel governance arrangements. Within these domains, we isolate how the extent, frequency, and mode of angel engagement with the target venture can be shaped by the institutional environment. ispartof: Academy of Management Perspectives vol:35 issue:1 pages:1-37 status: Published online

In this article, we contribute to, and extend, multiple agency theory through investigations beyond dichotomous agency relationships. As such, we examine temporal interests among principals, and propose faultlines as a novel approach to capture full agency dynamics, conflicts and costs. We test our model in the empirical setting of foreign and domestic firms undergoing an initial public offering (IPO) in the US, and explain incentives of public market investors to price investor faultlines in public equity markets. Within this framework, we distinguish dormant from active faultlines, and describe their activation course through the triggering event of IPO lockup expiration. We find evidence that faultlines negatively affect post-IPO stock market performance, with foreign firms driving this negative effect. We further investigate the contingency of firm foreignness, and uncover geographic dispersion among principals to heighten perceptions of faultlines. Moreover, we find firms operating in high technology markets to weaken, and increased ownership retention by directors and executives to strengthen, investor faultlines perceived by public market investors.

We extend the domain of liability of foreignness (LOF) research to capital markets and evaluate whether firms incur LOF when attempting to raise debt capital abroad. We rely upon multiple conceptualizations of institutional distance to capture the extent to which distance may contribute to LOF in capital markets. Based on a sample of 361 firms from 45 countries over a 24 year time period, we find that institutional distances lead to increased cost of debt. More importantly, we find that frequency of foreign bond issuance helps to mitigate the LOF. We conclude with a discussion of our results and their implications for future research on understanding how firms address LOF when sourcing debt abroad.

Although researchers have devoted considerable attention to assessing how organizations benefit from ascriptions of high status, relatively little research has analyzed the financial costs that organizations may incur in actively managing such ascriptions. In this study, we analyze how and why organizations may pay a relatively steep economic price for the attainment and/or maintenance of social status. Specifically, we advance an original theoretical perspective, which suggests that firms engaged in economic competition are simultaneously engaged in social ceremony and that these dual processes can generate a combination of social gains (in terms of status) and economic losses (in terms of profitability). We theorize and test our perspective in the context of competitive bidding ceremonies using a unique, decade-long data set on repeated competitive market interactions among firms in the U.S. construction industry. We find support for our prediction that firms’ participation in bidding ceremonies can generate divergent outcomes, that is, higher social status and diminished economic performance. We discuss the implications of our theoretical and empirical analysis for the existing literature on social status, competitive bidding, and—more generally—on the role social forces play in competitive market behaviors and outcomes.

Using a large sample of domestic and foreign IPOs in the US, we investigate how threats of enforcement by the Securities and Exchange Commission (SEC) and private litigation influence earnings management in IPO prospectuses. We propose that perceptions of foreign institutions may influence SEC enforcement action and private litigation. We provide evidence that enforcement and litigation threats are negatively related to the strength of legal institutions in the foreign IPO’s country of origin. We find earnings management is more pronounced in foreign IPOs from countries with strong legal institutions. We further explore whether earnings management is priced in the IPO market and find no relation between IPO proceeds and earnings management. Our results are consistent with upward earnings management as in Stein (1989), the magnitude of which is reduced when the anticipated cost of enforcement and litigation is higher. Collectively, our results cast doubt on the validity of the bonding hypothesis.

This study provides a reconciliation ofprevious findings regarding the effects of prior co-investments among venture capitalists (VCs) and the perfor-mance of VC syndicates. We propose a relational agencyframework outlining cost–benefit trade-offs associated withprior co-investments between VCs. A longitudinal study of4,550 U.S. ventures receiving syndicated investments from1980 to 2017 shows that there exists an inverted U-shapedrelationship between the number of prior co-investmentsand a venture's likelihood of a successful exit through initialpublic offering or merger and acquisition. We further findthat the relationship between prior co-investments and syn-dicate performance is moderated by venture- and partner-specific risks.

This paper investigates the impact of venture capital (VC) syndicate size and composition on the IPO and post IPO performances of investee companies in an attempt to shed some light on the extent to which larger and more diverse syndicates are more likely to suffer from internal agency problems which might hinder the decision making process and lead to less value added for their portfolio companies. The question is of great relevance because, while the vast majority of the empirical literature compares VC backed IPOs with non VC backed ones, most VC funding is provided by syndicates of two or more financiers.\ud \ud We construct alternative measures of size as well as diversity based on several VC characteristics such as age, geographic location, type and affiliation of VC firms and find that larger and more diverse syndicates are associated with higher underpricing and lower valuation at the IPO date. Furthermore we provide evidence that that diversity and size are negatively correlated to the long term performance of the IPO firms and this finding is robust to several alternative measures of long term performance.

This addendum offers more details about regression results and discussions on the findings. Tables 1A and 2A exhibit regression results with estimates, standard errors, and P values.

Manuscript type Review Research Question/Issue What can be learnt with regard to methods in corporate governance research from editorial experience in handling corporate governance manuscripts? We draw on our experience as editors and guest editors of various journals in highlighting some of the methodological challenges in corporate governance research. We consider methodological issues relating to both quantitative and qualitative studies. Within these broad approaches, we discuss implications of theorizing, ownership and types of firms, governance and institutional contexts, omission of governance variables, human and social capital of board members, endogeneity/causality issues, executive remuneration, configurations and interactions of governance constructs, other governance mechanisms, and data sources. Discussion of these issues also highlights the need for more theoretical and empirical consideration of contingent factors influencing governance relationships. We identify possible ways forward and future research avenues. Research Findings/Insights There is a need for corporate governance studies to devote greater recognition to the heterogeneity of various governance factors such as ownership types and director expertise. Studies have generally paid insufficient attention to the configurations of corporate governance. Theoretical/Academic Implications Future research needs to address the connections between the methodological recognition of heterogeneity and configurations and the implications for theorizing. Practitioner/Policy Implications Failure to address these methodological issues implies that conclusions drawn from corporate governance research for practice and policy could well be misleading.

This article reviews the existing literature on SWFs and the firm, focusing particular attention on the implications of the rise of SWFs strategic agility and HRM. This paper outlines three main channels through which sovereign wealth fund (SWF) investment has implications for employees. First, SWFs influence macroeconomic environments, and hence affect labor conditions. Second, institutional conditions in different countries shape the behavior of SWFs around the world, which in turn has implications for HR strategy and practice. Fourth, SWFs can have a direct effect on the corporate governance and hence HR strategies and employees of organizations in which they invest. We review and discuss these three channels and outline avenues for future research.

We introduce the topic of this Special Issue on the “Role of Financial and Legal Institutions in International Governance”, with a particular emphasis on a notion of “international mobility of corporate governance”. Our discussion places the Special Issue at the intersection of law, finance, and international business, with a focus on the contexts of foreign investors and directors. Country-level legal and regulatory institutions facilitate foreign ownership, foreign directors, raising external financial capital, and international M&A activity. The interplay between the impact of foreign ownership and foreign directors on firm governance and performance depends on international differences in formal/regulatory institutions. In addition to legal conditions, informal institutions such as political connections also shape the economic value of foreign ownership and foreign directors. We highlight key papers in the literature, provide an overview of the new papers in this Special Issue, and offer suggestions for future research.

The proliferation of new sources of entrepreneurial finance potentially makes it easier for ventures to raise capital and grow. To date, entrepreneurial finance literature has developed a rich tradition of research on venture capital and angel finance. However, the emergence of “new” sources of finance, such as crowdfunding and the limited attention paid to “traditional” debt financing and financial bootstrapping, offers opportunities to explore, from different points of view and theoretical perspectives, the challenges that ventures face. The objective of this Special Issue is to explore these new and traditional sources of finance and suggest how these phenomena can extend entrepreneurial finance literature and guide new theory building. This paper outlines the new sources of entrepreneurial finance, and in comparing them with more traditional sources, we propose theoretical and empirical challenges that these new and traditional sources present to entrepreneurship scholars. We also provide a brief summary of papers in the Special Issue and outline promising avenues for future research.

Building on institutional theory, this study examines the effects of dysfunctional competition and government ties on new venture performance in transition economies. And, it goes deeper to investigate how these effects are contingent on a new venture's entrepreneurial orientation (EO). It finds that EO weakens the negative relationship between dysfunctional competition and new venture performance but exacerbates the negative linkage of government ties to new venture performance. The findings not only illustrate how government impacts new venture performance in transition economies, but also indicate that new ventures can leverage entrepreneurship to cope with the effects of government-related factors.

Venture capital (VC) syndicates involve repeated transactions among partners and therefore possess network-like characteristics. Although networks provide access to important externalities, extant literature has not studied the effects of the focal firm’s resource needs on performance benefits arising from different network structures. We investigate the impact of two proxies for firm-level resources, namely maturity and status, on the relationship between network cohesion and VC performance. We find that mature and high-status VCs benefit less from network cohesion. We also show that maturity and status simultaneously determine the performance effects of network cohesion.

This paper investigates theoretical tension associated with investor valuations of firms from emerging markets that tap into global capital markets. One line of argument expands liability of foreig...

This study provides a reconciliation of previous findings regarding the effects of prior co-investments among venture capitalists (VCs) and the performance of VC syndicates. We propose a relational agency framework outlining cost-benefit trade-offs associated with prior co-investments between VCs. A longitudinal study of 4,550 U.S. ventures receiving syndicated investments from 1980 to 2017 shows that there exists an inverted U-shaped relationship between the number of prior co-investments and a venture’s likelihood of a successful exit through initial public offering or merger and acquisition. We further find that the relationship between prior co-investments and syndicate performance is moderated by venture-specific and partner-specific risks.

This chapter integrates agency research with an institutional perspective and investigates multiple agency conflicts in venture capital (VC) syndicates and their effect on stock-market performance of initial public offerings (IPOs) in the United States and the United Kingdom. Using a matched sample of 402 IPOs, the authors show that the size and diversity of a VC syndicate have a negative impact on performance, but this impact is higher in the United States. Ownership concentration within a syndicate improves performance, but this effect is stronger in the United Kingdom. Results indicate that the extent of multiple agency conflicts and their potential remedies are not universal and depend on formal and informal institutions.

In this chapter, the authors review emerging literature on multidimensional, information age-related phenomena across different disciplines to derive common themes and topics. The authors then proceed to analyse recent developments in these fields to provide an interdisciplinary overview of the most disruptive challenges for multinational companies (MNCs) competing in the modern information age. These challenges include more efficient peer-to-peer communication between stakeholders, crowd-organisation, globalisation of value chains and the need to organise knowledge resources. The aim of the chapter is not to review all age research, but to identify fundamental uncertainties for MNCs and discuss strategies of tackling such information age phenomena from an international business perspective.

We introduce the topic of this Special Issue of the Journal of Corporate Finance on corporate governance of a multinational enterprise with a particular emphasis on the theoretical and empirical gaps in prior finance and international business studies associated with corporate governance problems and the effectiveness of governance solutions in the context of diverse institutional settings. We integrate analysis of the accepted articles with existing research on international corporate governance and global strategy. Overall, the work in this area continues to emphasize the importance of institutions, legal environment and culture in all aspects of global enterprises. We conclude the article with suggestions for future research in this rapidly expanding and important area of global business.

Building on the institutional perspective on capital markets, we examine the process of legitimation that underpins investor valuation of initial public offerings in the context of institutional polycentricism. We focus on the impact of board interlocks of the CEO and internal and external board members on investor perceptions of initial public offering firms in the United States and United Kingdom. We find that the extent of board members’ interlocks relates positively to the extent of the CEO’s interlocks, but this relationship is stronger in the United Kingdom than in the United States. More extensive interlocks lead to higher valuations in the United Kingdom than in the United States. This is the result of differences in institutional confluences that underpin corporate governance in the two culturally related countries.

Agency theory-grounded research on boards of directors and firm legitimacy has historically viewed CEO power as de-legitimating, often taking this fact for granted in theorizing about external assessors’ evaluations of a firm. With few exceptions, this literature has focused exclusively on capital market participants (e.g., investors, securities analysts) as the arbiters of a firm’s legitimacy and has accordingly assumed that legitimate governance arrangements are those derived from the shareholder-oriented prescriptions of agency theory. We extend this line of research in new ways by arguing that customers also externally assess firm legitimacy, and that firms potentially adjust their governance characteristics to meet customers’ norms and expectations. We argue that the cultural-cognitive institutions prevalent in customers’ home countries influence their judgments regarding a firm’s legitimacy, such that firms competing heavily in high-power distance cultures are more likely to have powerful CEOs, with CEO power a source of legitimacy—rather than illegitimacy—among customers. We also argue that the more dependent a firm is on its customers and the more salient cultural power distance is as a demand-side institutional norm, the greater this relationship will be. Data from 151 U.S. semiconductor and pharmaceutical firms over a 10-year period generally support our predictions.

How do social organizations evolve? How do they adapt to environmental pressures? What resources and capabilities determine their survival within dynamic competition? Charles Darwin’s seminal work The Origin of Species (1859) has provided a significant impact on the development of the management and organization theory literatures on organizational evolution. This article introduces the JMG Special Issue focused on Darwinism, organizational evolution and survival. We discuss key themes in the organizational evolution research that have emerged in recent years. These include the increasing adoption of the co-evolutionary approach, with a particular focus on the definition of appropriate units of analysis, such as routines, and related challenges associated with exploring the relationship between co-evolution, re-use of knowledge, adaptation, and exaptation processes. We then introduce the three articles that we have finally accepted in this Special Issue after an extensive, multi-round, triple blind-review process. We briefly outline how each of these articles contributes to understanding among scholars, practitioners and policy makers of the continuous evolutionary processes within and among social organizations and systems.

The global environment in which multinational corporations (MNCs) operate dramatically increases the complexity of the governance challenges and ethical dilemmas confronting MNCs and their leaders, as well as the diversity of stakeholders whose interests must be considered. In this context, MNCs face a perennial dilemma: how to balance the need for global consistency in CSR approaches and ethical standards across the organization with the need to be sensitive to the demands and expectations of a diverse set of stakeholders spread across the globe? Building on the framework of “transnational CSR”, we provide a systematic mapping of CSR approaches in MNCs, high¬light the tensions and possible trade-offs between globally integrated and locally adapted CSR strategies, and discuss the constraints that they impose on MNC activities at both headquarters and subsidiary levels. We also highlight the impli¬cations for corporate governance, stakeholder management and corporate social performance. Based on in-depth case studies of 18 MNCs, we conclude that a transnational CSR approach that attempts to strike an appropriate balance between global consistency and local adaptation seems best able to guide managerial decision making and help executives address the CSR challenges in the global arena.

Purpose Market orientation (MO) has been shown to provide a valuable resource-based advantage in domestic markets. How internationalizing firms from emerging markets can benefit from this capability is more complex while facing institutional distance. The purpose of this paper is to develop and test a theory to suggest that although MO capabilities can enhance export performance, the structure where they are deployed, namely the export channel a firm uses and the market in terms of institutional distance from home, can affect the benefits derived from MO. Design/methodology/approach With a sample of Chinese exporters and data collected via questionnaire survey, this research uses a multiple regression model to test the hypotheses. Findings It finds that firms with stronger MO capabilities can improve export performance by using hierarchical channels and by exporting to more institutionally distant markets where MO provides greater value. Originality/value This research claims to make several important contributions to the literature by providing a better understanding of how firms can successfully deploy MO capabilities when exporting.

Using unique survey data, this study investigates the impact of the learning of returnee entrepreneurs on firm performance. The findings indicate that returnee entrepreneur experiential and vicarious learning boosts firm performance. However, firm age significantly weakens the impact of learning on firm performance. The results extend the existing literature by explicitly examining the impact of the interrelationship between two forms of learning and firm age.

We build on the resource-based view and extend entry mode research by focusing on firms’ intention to transfer different resources from the parent firm to its overseas subsidiary. In line with our hypotheses, we find that parent firms that plan to transfer high levels of intangible resources to their foreign subsidiaries tend to choose wholly owned subsidiaries, while firms that intend to transfer high levels of tangible resources tend to choose international joint ventures. Moreover, we find that these relationships are moderated by institutional distance. We test our hypotheses using unique primary data from a sample of 128 foreign subsidiaries in the People’s Republic of China. Our results have important theoretical implications for international business strategy research as they develop further existing entry-mode theories.

Building on corporate governance research and institutional theory, this paper explores interrelationships between the firm's corporate governance, responsible leadership, and corporate social responsibility approaches in different institutional contexts. We present a critique of corporate governance research grounded in agency theory with its focus on corporate social responsibility as mere compliance with rules and regulations. We link different leadership orientations and corporate social responsibility approaches to two key process dimensions of corporate governance related to monitoring and incentives. This analysis builds on previous research that differentiates between governance mechanisms based on strategic as opposed to financial controls and explains how these types of control may be related to responsible managerial behavior and the firm's corporate social responsibility strategies. Building on governance studies grounded in sociology and organizational theory, we further argue that links betw...

Prior research in entrepreneurship suggests that the type of educational background is conducive for different cognitive bases. However, very few studies have produced empirical support for this as...

Previous research on cross-border investments has remained focused on how firms choose a target country in which to invest–i.e., the focal market. Meanwhile, the determinants of investment activity...