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

Abstract

This is the accepted version of the paper.This version of the publication may differ from the final published version.  We would like to thank the UK Department for Trade and Industry with support for the research on which this study was based. The authors would like to thank the participants of seminars and workshops at Cass Business School, University of Groningen, University of Auckland, UK AIB Chapter (King's College London), Copenhagen Business School, the editor and two anonymous reviewers for their helpful comments on earlier drafts. The authors are listed alphabetically and contributed equally to this paper. Permanent repository link AN ORGANIZATIONAL APPROACH TO COMPARATIVE CORPORATE GOVERNANCE: COSTS, CONTINGENCIES, AND COMPLEMENTARITIES ABSTRACTThis 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 interdependences 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 how costs, contingencies, and complementarities impact 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'.

The impact of corporate governance practices on R&D efforts: a look at shareholders' rights, cross-listing, and control pyramid

“…According to a 2002 Standard and Poor's survey, France actually ranked third right after the US and UK for transparency (see Khanna et al, 2004). This importance of information disclosure can be interpreted as a consequence of the importance of foreign institutional shareholders (Aguilera et al, 2008). Despite possible criticisms, we contend that:…”

“…They can be difficult to evaluate and encompass (Aguilera et al, 2008). Various costs include the following: the costs of compliance with the legislation (on accountancy rules, communication rules, human resource rules, taxes .…”

Corporate governance and national institutions: A review and emerging research agenda

“…In fact, the effectiveness of different corporate governance practices depends strongly on their fit with the broader organizational environment (Aguilera et al, 2008). The strategic salience of resources differs across organizations and creates different demands on governance.…”

“…Given the 'under-contextualized' nature of corporate governance research, a challenge remains to more explicitly understand and compare how the effectiveness of different corporate governance mechanisms varies across different organizational environments and institutional contexts (Aguilera, Filatotchev, Gospel, & Jackson, 2008). Effectiveness may involve not only the protection of investors' wealth, as in agency theory, but also fostering creation of new wealth and the fair distribution of wealth among stakeholders.…”

“…The contribution of this perspective is to go beyond more universalistic approaches, which apply models such as agency theory in the same universal manner in different institutional settings. As such, we contribute to emerging attempts to integrate institutional theory within corporate governance research (e.g., Aguilera et al, 2008;Aguilera & Jackson, 2003).…”