6 research outputs found
Mimicry, Knowledge Spillover and Expatriate Assignment Strategy in Overseas Subsidiaries
No full textBased on neo-institutional theory and knowledge spillover, we argue that the probability of a firm assigning an expatriate manager to a foreign subsidiary is influenced by a combination of mimicry and knowledge spillover from any existing expatriate community in the foreign location. The expatriate community's influence is hypothesized to be weaker when the firm's ownership share in its foreign subsidiary is greater but stronger when the cultural distance between a firm's home country and the foreign host country is greater. Data on 95,156 foreign-invested manufacturing ventures in China is used to test these predictions. The findings show an inverted U-shaped relationship between the assignment of expatriates and the number of expatriates previously sent to the same location by prior foreign investors. This relationship is shown to be moderated by subsidiary ownership, but not by the cultural distance between the investor's home country and the host country. Implications for research and practice are discussed.</p
Interest Alignment or Rent Extraction? The Performance Implications of Stock Option Plans in China
No full textThere are two contradictory arguments about the impact of stock options on financial performance: interest alignment or rent extraction. We examine the impact of stock options on firm financial performance in the context of a transitional economy and suggest that both arguments may be valid under different circumstances. From the interest alignment perspective, we argue that when the principle-agent conflict is salient, a stock option plan will complement the absence of effective incentive- and monitoring-based governance mechanisms and align the managerial interests with those of shareholders, enhancing a firm’s financial performance. However, building on the rent extraction perspective, we argue that when the principle-principle conflict is salient, a stock option plan may not increase the firm’s financial performance as it may provide managers and large owners an opportunity to appropriate the rents from the firm for their own private benefits. The empirical data of a sample of Chinese publicly listed firms between 2004 and 2013 largely supports our hypotheses. Among firms that adopt a stock option plan, those with a lower level of managerial ownership and independent director ratio have better financial performance. In contrast, those with a high level of ownership concentration and with the state as their controlling shareholder have lower financial performance
Entrepreneurs' socioeconomic status and government expropriation in an emerging economy
No full textResearch Summary This study focuses on a salient challenge for entrepreneurs in emerging economies: government expropriation. Drawing on signaling arguments, we propose that an owner's high socioeconomic status (SES) attracts government attention to her start-up by conveying information about its resource endowments. The empirical tests based on start-ups in China support that an owner's high SES increases government expropriation. The effect is stronger for start-ups in regions with greater income inequality or in those where the legal system is less developed. High-SES entrepreneurs can mitigate the risk of government expropriation by building political connections. Managerial Summary Institutional voids in emerging economies pose a major threat to start-ups in the form of government expropriation. This research finds that the threat is more severe for start-ups with high-SES entrepreneurs because they have strong resource-mobilization capabilities and easily become expropriation targets. Further, this research suggests that two measures help protect high-SES entrepreneurs from government expropriation: locating their start-ups in regions with low income inequality or a well-developed legal system, and building connections with the government in order to exchange favors with government officials.</p
CEO International Experience in Advanced Market Economies and Firm Investment Horizon in a Transitioning Economy
No full textBuilding on the literature on managerial myopia, we investigate how chief executive officers’ (CEOs) international experience in advanced market economies affects their firms' investment horizons in a transitioning economy. To overcome myopia, CEOs should possess the knowledge needed to manage current tasks, thereby freeing up cognitive resources for future considerations. In the context of our theorizing, we argue that international experience in advanced market economies equips CEOs with knowledge about how to deal with their current tasks of market-oriented adaptation in a transitioning economy, freeing up cognitive resources for considering longer-term investment horizons. Additionally, the effect of CEO international experience in advanced market economies on firm investment horizon is stronger under conditions that increase the cognitive burden on CEOs to perform market-oriented adaptation tasks – specifically, when there is a high scope of pro-market reform, high intensity of foreign competition, analyst coverage, and a high level of institutional ownership. Our estimation based on a matched sample of 204 Chinese CEOs during the period 2002–2019 supports the majority of our predictions. Our study contributes to research on firm investment horizon, CEO international experience, and transition economies
