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Revisiting the Effect of Internationalization on Firm Governance: A Replication and Extension Study

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Abstract

The idea that a firm’s degree of internationalization shapes its governance structure is a consequential phenomenon examined in strategic management and international business research. Sanders and Carpenter (Acad Manag J 41(2):158–178, 1998) was one of the first studies to comprehensively consider this phenomenon by finding that firms cope with the uncertainty of internationalization by granting CEOs higher and longer-term pay, constructing larger top management teams, constructing larger and more independent board of directors, and separating the CEO and chairman of the board positions. Given that firm governance structures have substantially changed over the past few decades, our study revisits these relationships by conducting a replication of Sanders and Carpenter (1998). Our results find general support for Sanders and Carpenter’s (1998) central premise that internationalization shapes firm governance structures but also highlight important non-findings that reflect how the internationalization-governance relationship has changed since their study. Based on the findings of our replication, we also extend Sanders and Carpenter’s (1998) framework and find that firms have more recently coped with the uncertainty of internationalization by hiring CEOs with international experience and hiring a more internationally diverse board of directors. We also provide insights on important boundary conditions of the non-replicated results in our study.

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Notes

  1. We included all controls utilized in Sanders and Carpenter’s (1998). For the blockholder control variable, we replaced missing data with zero due to a large number of missing data. Our sample of firms is the same as in the improved tests described below (n = 10,493).

  2. Since CEO compensation variables were highly skewed, we followed winsorized CEO long-term pay a 1% and took the natural logarithm of CEO total compensation. Our results were not altered with these transformations.

  3. Our results are robust to a variety of measures of industry effects, including the inclusion of fixed-effect controls using different SIC codes.

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Authors and Affiliations

  1. Department of Management, G. Brint Ryan College of Business, University of North Texas, 1307 W. Highland St, Denton, TX, 76201, USA

    Jeffrey A. Chandler

  2. Department of Strategy, Entrepreneurship, and Venture Innovation, Sam M. Walton College of Business, University of Arkansas, 515 Willard J. Walker Hall, Fayetteville, AR, 72701, USA

    Tsutomu Doiguchi & Oleg V. Petrenko

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  1. Jeffrey A. Chandler
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  2. Tsutomu Doiguchi
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Correspondence to Jeffrey A. Chandler.

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Chandler, J.A., Doiguchi, T. & Petrenko, O.V. Revisiting the Effect of Internationalization on Firm Governance: A Replication and Extension Study. Manag Int Rev 62, 351–391 (2022). https://doi.org/10.1007/s11575-022-00472-3

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