Neo-institutional theory and institutional change: Towards empirical tests on the “Americanization” of German executive pay

Abstract

Institutional theory has usually been associated with path dependence and inertia. In international corporate governance, it has been used as an explanation for the supposed continued divergence of national systems. Recent developments in institutional theory, however, identify the circumstances in which change is likely to occur. Neo-institutional theory is therefore employed to derive seven propositions concerning governance change in general. Subsequent empirical tests will take years to complete, but the propositions are developed here in the context of German corporate governance, and of executive stock options as a specific governance element. Some German illustrations of how such hypotheses may be tested are provided.