Upper echelon compensation, performance, and the rhythm of firm internationalization

Abstract

Purpose – The purpose of this paper is to examine the effects of the compensation level and the gap between the chief executive officer (CEO) and the top management team (TMT) with respect to the rhythm of firm internationalization. Design/methodology/approach – The approach takes the form of an empirical analysis. The authors use longitudinal data (1997-2006) of a sample of 345 publicly-listed firms in Taiwan. Findings – The results show that higher CEO compensation will lead to regular foreign expansion. The CEO–TMT compensation gap has a curvilinear effect on the rhythm of firm internationalization. Research limitations/implications – These findings highlight that the compensation structure has a significant influence on a firm ' s internationalization strategy. This research contributes to the literature linking strategic human resource management and corporate strategy in terms of firm internationalization. Practical implications – When firms consider regular foreign expansion, the compensation committee should design a high total compensation level and appropriate the compensation gap between the CEO and TMT members. Originality/value – This study sheds light on how the compensation of the upper echelons determines whether the internationalization rhythm is regular or irregular. Moreover, the study examines how internal contingencies, such as performance, moderate the relationship between the upper echelons’ compensation and the internationalization rhythm.