Governance Stickiness: Understanding Governance Designs in Emerging Economies

Abstract

Many firms in emerging economies adopt governance designs that include several barriers of board monitoring. Scholars argue that these barriers are attributed to powerful shareholders who want to control corporate decisions and/or relatively weak minority shareholder protection from regulatory frameworks. Alternatively, we propose that governance designs can also be explained by governance stickiness, which we define as the difficulty of firms to transfer or adopt specific corporate governance practices due to high governance costs. We theorize that governance stickiness involves the interplay of a firm’s capacity and willingness to bear the high costs of adopting specific governance designs. Building on the neo-configurational perspective, we test our proposition by inductively exploring the governance designs reflected in the bundles of board monitoring barriers of publicly listed Brazilian firms. Our findings uncover a typology of governance designs that correspond to particular levels of governance stickiness. Our research advances knowledge of strategic corporate governance by bridging the literatures of governance designs and costs.