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Investment in research and development (R&D) is an important sustainable strategy for firms in developing unique products to own their differentiation and competitive advantages. Financial leverage is influential in R&D investment. However, previous studies identified different relationship between financial leverage and R&D investment. This study revisits this puzzle from a unique perspective that targets firms undertaking international cross-listings. This specification allows us to test whether firms are willing to prioritize R&D funding when debt capacity is enhanced. This is a new perspective that has never been explored in the relationship between debt financing and R&D investment. We find that the launch of cross-listing significantly increases the level of firm financial leverage, which is followed by a significant increase in corporate investment in R&D. The aggressive strategy of cross-listing firms that enhance financial leverage to support more investment in R&D further significantly influences their industrial rivals to increase investment in R&D as a responding strategy. Overall, these results show that firms exploit the timing of international cross-listing to increase their leverage to further fund R&D, which also stimulates an intra-industry contagion effect. Our findings suggest a new viable path for funding R&D that carries important implications for corporate sustainability.

This study investigates the impact of corporate diversification on the value creation of patent grants. We find that focussed firms experience significantly greater market reactions to patent announcements than diversified firms. Diversification into related industries has little effect on the wealth gains of granted patents, while diversification into unrelated industries significantly reduces the wealth gains. We further find that post-announcement operating performance is significantly associated with the degree of diversification. Overall, our findings suggest that the selection of diversification as a firm's organisational structure has a negative influence on the value creation of innovation, and this influence is exacerbated when this diversification involves unrelated industries.

Prior research on foreign-market entry determinants offers various firm-, industry-, and market-level explanations. Yet, few studies consider the subjective psychological attributes of the executives making actual decisions. Based on behavioral decision theory and the psychology literature, this study provides the first empirical evidence of the influence of managerial overconfidence on ownership decisions into foreign markets. The results show that CEOs’ tendency toward overconfidence increases the propensity for full over shared ownership, where their positive relationship is more pronounced when firms are exposed to greater information asymmetry or environmental uncertainty, in terms of greater home-host cultural and institutional distances, higher host-country risks, and inexperience in the local market. A powerful board weakens this positive relationship, but does not diminish the effect completely. The results hold with overconfidence measures based on both CEOs’ actual actions and public opinions. Our findings complement extant entry-mode decision literature by highlighting the imperative to incorporate firm leaders’ psychological biases.

Grounded in agency theory, this study explores whether the separation of ownership (by shareholders) and control (by managers) in firms is an essential determinant of the valuation effect of joint ventures (JVs). This is achieved by examining the efficacy of incentive alignment mechanisms and their contingency effects. Based on a sample of 963 U.S. firms' JV investments, the results show that poor JV performance is linked to lower levels of executive ownership and reduced equity compensation. The possibility of managers acting for their own self-interest in corporate JV investments is further supported by the stronger positive performance effect of incentive alignment mechanisms documented when firms have a higher level of free cash flow or undertake JVs in unrelated business domains. Both performance measures of short-run announcement effects and long-run stock returns yield similar results. Our results underscore the importance of governing executives' self-interested actions in their JV engagements.

This study investigates the long-term stock market performance of firms following announcements of new product introductions (NPIs). We find that firms announcing NPIs experience significantly positive abnormal stock returns in the three- and five-year post-announcement periods. Further, firms’ marketing capabilities and industry background, firm size, and the timing new products are introduced significantly affect shareholder gains from NPIs. The Carhart four-factor model, the zero-investment portfolio method, and the buy-and-hold return procedure yield consistent results. Our findings show that investors on average do not fully capture the valuation impact of new products nor incorporate the information contained in the initial announcements.

Despite boards of directors’ prominent involvement in strategic alliance (SA) decisions in practice and reports from news media, there is relatively little academic research exploring the board's value for a firm's technical SA investments involving a technical transfer or R&D, which are characterized by a high level of uncertainty, information asymmetry, and extreme complexity. Anchored in the resource dependence theory, this study aims to address this important issue by examining how board of directors contribute their human capital, in the form of relevant strategic experience, may mitigate the core challenges managers face when pursuing technical SAs and thereby influencing their outcomes. Our empirical results show that when outside directors hold more extensive alliance experience, they can better execute their consulting function and improve the firm's technical alliance performance. In addition, directors with experience specifically related to technical alliances also have a positive effect on performance. Last, we find that the impact of alliance experience on technical alliance performance is positively moderated by the size of directors’ prior affiliated companies and their share ownership in the focal firm.

This study examines complementarity of firm leaders’ psychological attributes in terms of their inclination towards overconfidence in cooperative activities. Examining the high-tech industry settin...

The question of whether an outside director with multiple board seats creates value for a firm is a subject of continued debate in the corporate governance literature. Dozens of studies have investigated this linkage over the past decades. Unfortunately, the findings generated to date are inconclusive and contradictory. This study reconciles conflicting perspectives by synthesizing the existing insights and knowledge, and develops a new three-stage S-shaped curve proposition. We target firms’ merger and acquisition (M&A) activities to test this argument. The results show a consistent horizontal S-shaped relation between the number of directorships held per director and the wealth creation from corporate M&A investments before the enactment of the Sarbanes–Oxley Act of 2002. However, the negative relation at the highest directorship level turns insignificant in the post-SOX period, suggesting that the mandatory changes by SOX may mitigate the negative impact of overboarded directors. This study contributes to the on-going debate on the performance effect of multiple directorships by providing a more complete assessment of the full range of the advantages and disadvantages across different levels of directorships. The different association patterns found in the pre-/post-SOX periods further highlight the importance of factoring in regulative environmental change when making an inference about the effect of multiple directorships.

This study aims to investigate the critical debate in corporate governance research concerning the boundary of the efficacy of the corporate governance mechanism. With particular focus on a specific set of firms' primary stakeholders, strategic alliance partners, our research design facilitates the examination of this issue. The results show a significantly positive association between a firm's corporate governance quality and the gains of its alliance partners. The proposition that firms with good governance more greatly value the interests of stakeholders whose devotion is critical is further supported by our findings of significantly positive moderating effects of the following three factors: a firm's growth potential, its business relatedness with its counterparts, and the activity types that the alliance encompasses (technical versus non-technical). Our research results suggest that firms, and thus shareholders, would economically benefit from managing their stakeholder relationships in a manner that positively affects firm prospects and shareholder wealth.

This study investigates the effect of outside director experience on the performance of a firm's joint venture (JV) engagements, a type of strategic move where the influence of board remains under-investigated despite directors’ active participation in the decision-making process. By examining the direct linkage between director experience and strategic performance, our research presents the first direct evidence of the value outside director experience has for a firm's strategic engagements; this has previously been exclusively assessed by indirect indicators. We address this important issue in the following three ways. First, we explore what type of director experience contributes most to JV outcomes. Second, we investigate what circumstantial factors significantly influence the value of director experience. Lastly, we analyze whether incentive mechanisms moderate the relationship between director experience and firm performance. The results confirm the value of director experience gained from JV engagements but not from relevant industries. In addition, executive experience and the industry affiliation of the JV significantly moderate the value of director experience. Finally, experienced directors with large shareholdings outperform those with experience but limited stakes in the firms’ equity, justifying the necessity to motivate directors’ governance efforts despite their existing fiduciary obligation to shareholders. Our study contributes to agency theory by indicating that director experience holds a significant influence on a firm's strategic performance, an issue which has long been neglected in agency-based governance research. It also contributes to resource-dependence theory by providing a direct measurement of directors’ experiential assets, which have so far been exclusively assessed by indirect indicators. Finally, findings from this study can elucidate the long-standing question of how a firm can realize the purported benefits JVs provide by introducing a vital yet rarely explored factor: board experience.

Prior studies on entry mode choice are mostly grounded in rational analysis models made from the economic perspective without considering the orientations or concerns of managers. Based on agency theory and resource dependency theory, our work explores how the board of directors, the highest authority in a firm's control system, influences the managerial selection of foreign market entry modes. By simultaneously addressing the monitoring and advisory roles of the board, and the influence of director incentives and competencies, we find that the board mechanism has a significant impact on a firm's foreign market entry mode choice. Directors with experience in foreign direct investment decisions, either regarding a specific target host country or a variety of environmental settings, tend to encourage the choice of acquisitions over joint ventures in foreign market entry decisions. Equity holdings of directors are also positively associated with the choice of acquisitions. The proportion of outside directors, conversely, is not found to have a significant influence. Furthermore, we find that directors' stockholdings positively affect the relationship between director experience and entry mode choice.

This study investigates whether firms benefit from prior alliance experiences as they undertake international strategic alliances. Different from previous studies that mostly focus on equity joint ventures, this study investigates non-equity alliances. This specific investigation is essential, because the complexity and uncertainty associated with such alliances potentially magnify the benefits of experiential learning. With a sample of 629 international, non-equity alliances formed by US firms, our results confirm the contribution of ISA experience in general, as well as that of experience specific to partner's country of origin and alliance activity type. The results also reveal a contingent benefit of ISA experiences, where experience of technological cooperation and experience with alliance partners from emerging countries both add more to firm value. We derive consistent evidence, as performance is assessed either by the market's perception of ISA value creation, or by the post announcement operating earnings in practice.

This study investigates the wealth impact for Japanese and U.S. firms that announce non-equity strategic alliances. We find that, on average, both Japanese and U.S. shareholders benefit from the formation of international alliances. We also show that shareholder gains in these alliances are significantly larger for the partnering firms with a relatively small size, higher growth opportunities, or less profitability. Finally, we document that both Japanese and U.S. partnering firms display significant improvements in operating performance over the three-year period subsequent to the formation of international alliances.

This paper investigates the effects of intellectual capital (IC), alliance experience and their interaction on the value creation of international strategic alliances (ISAs). Based on a sample of ISAs formed by US firms, we find that firms with a higher level of IC receive greater announcement-period wealth gains. In addition, the empirical results suggest experience positively enhances the wealth effect of ISAs. Finally, we find a significant positive interaction effect between experience and IC on the wealth creation of ISAs. The results demonstrate the importance of considering the joint effects of IC and experience in assessing the value creation of ISAs.

Share repurchases were deregulated in Taiwan in 2000. The regulatory provisions and the government's stated aim of market stabilization provide a setting in which share repurchases are exclusively motivated by undervaluation. This study investigates if deregulation of share repurchases is an effective method of market stabilization by investigating the intra-industry effects of repurchase deregulation in Taiwan. We find that repurchasing firms and their corresponding rivals both experience strong value creation upon the repurchase announcements. The evidence suggests that the intra-industry effect of share repurchases is negatively associated with rivals' firm size, and positively associated with the announcing firm's abnormal return, the size of share repurchases and the similarity of business operation between rivals and repurchasing firms. These findings hold even after taking into account other effects that could influence the valuation of the rival firms.

The incidence rate of strategic alliances has accelerated in recent decades, and alliances have become one of the most important entry modes into foreign markets (Hergert and Morris, 1988; Glaister and Buckley, 1996; Nielsen, 2007). Earlier studies show that multinationals use alliances to enter the markets of countries that enforce restrictive conditions on foreign investments (Hood and Young, 1979). Later research shows an increase in firms voluntarily entering into alliances in response to changing, unpredictable, globalized competition. By participating in cooperative ventures, multinationals stabilize the flow of needed resources, smooth global operations and increase the speed at which they can enter new markets (Lavie and Miller, 2008). The fewer resource commitments required in alliances further allow firms to more flexibly hedge uncertainty in overseas investments, compared with alternative entry modes, such as mergers and acquisitions and wholly owned greenfields (Brouthers, Brouthers, and Werner, 2008). However, despite the purported advantages underlying alliances, empirical evidence shows that there are as many enterprises that succeed in their alliance engagements as those that fail to do so (e.g., Das, Sen and Sengupta, 1998; Ren, Gray and Kim, 2009). The presence of a mixture of outcomes suggests that realization of the purported advantages of alliances depends on how the associated costs are controlled.

Directors embedded in a network are likely to gain various resources from the external environment. However, directors with too many outside board seats could be too busy to properly exert their functions. Prior studies investigating the role of directors mostly focus on within-firm characteristics. Extending the literature, we examine characteristics outside a firm's boundary by investigating the impact of interlocking directorate on the market value of International Merger and Acquisition (IMA) announcements. We find an inverted U-shaped relationship between multiple directorships and the announcement returns of IMAs, revealing that the market value of IMAs initially improves and then declines with increasing directorships. This curvilinear relationship is further positively moderated by cultural distance. Our study not only highlights the importance of considering the benefits and costs of multiple directorships and how these affect investors' assessments of corporate cross-border acquisition strategies, but also shows how cultural distance can affect the curvilinear relationship.

Despite of board’s prevalent participation in firms’ internationalization strategies, extant research to date only assesses the relation between firms’ overall degree of internationalization, or de...

This study contributes to the growing literatures on the importance of board expertise to their provision of counsel for management. By demonstrating that when announcing overseas investments, how a firm alleviates its liabilities of foreignness by board members possessing relevant experiences, the present work addresses the long-standing issue of what renders board the most effective. Drawing on expertise literature, we exam the efficacy of both director specific and heterogeneous experience, assessed by foreign market entry mode and targeted host country. The empirical results yield support for favorable impacts of both types of director experience. This finding corroborates the transition of board’s role from “passively” ratifying executive proposals, as predicted by agency theory, to “actively” instructing executives, as argued by resource dependence theory. The resource provision function of a board is further supported by greater benefits of director experience in situations of limited firm resources, assessed by executives’ associated experience. Finally, we find that directors who have operated independently from the CEO but without relevant experience cannot have significant influence on investment outcome. Our research result contributes to corporate governance research predominated by agency theory for the past decades, which presumes director independence as the foremost prerequisite for board effectiveness.

Prior studies on determinants of the joint venture (JV) wealth effect are mostly grounded in economic considerations without considering costs arising from manager orientations and private concerns...

Previous studies have explored the relationship between directors' memberships on multiple boards and firm performance, but the findings are mixed. This study extends this line of research by integ...