Abstract
Background: Although previous studies provide important insights on how firms respond to institutional pressure, they fail to acknowledge the salience of globalisation that results in institutional pressures diffusing across countries. Objectives: Drawing on a selective adaptation model, this article examines whether firms comply with reforms to board structures beyond the minimum legal requirement. Method: It investigates the determinants of appointing outside directors beyond the minimum legal requirement by analysing the relationship between four main variables and minimum compliance. Results: Using a sample of Korean listed firms during 2002–2014, this study found that the salient organisational conditions (firm complexity and firm performance) and key organisational actors (controlling shareholders and foreign investors) determine the extent to which firms appoint outside directors on their boards. Conclusion: This study contributes to the strategy literature that examines organisational response to institutional pressure, furthering the understanding of why there is heterogeneity in firm decisions even from firms in the same institutional environment that face similar institutional pressures. Moreover, it makes a contribution to corporate governance literature, in particular to the adoption of governance mechanisms that originate from foreign models.
Highlights
Why, among firms in similar institutional environments, do some adopt and implement governance practices that go well beyond regulatory compliance requirements while others pursue merely symbolic compliance? At the heart of this question is the probability that the effects of institutional pressures may be moderated by organisational attributes such as financial characteristics and key actors (Okhmatovskiy & David 2012; Short & Toffel 2010)
In attempting to understand this theme, some researchers have begun to integrate theories of institutional and organisational dynamics. They explain how differences can persist even among organisations that face comparable institutional pressures (Greenwood et al 2011; Pache & Santos 2010). These studies provide important insights on how firms respond to institutional pressure, helping us to understand the relationship between the external environment and internal organisational dynamics, their approach and scope neglect other aspects that are necessary to understand organisational responses
Drawing on arguments grounded in the selective adaptation model, this article has examined an important issue involving the appointment of outside directors in a context not traditionally associated with this governance mechanism
Summary
Among firms in similar institutional environments, do some adopt and implement governance practices that go well beyond regulatory compliance requirements while others pursue merely symbolic compliance? At the heart of this question is the probability that the effects of institutional pressures may be moderated by organisational attributes such as financial characteristics and key actors (Okhmatovskiy & David 2012; Short & Toffel 2010). They explain how differences can persist even among organisations that face comparable institutional pressures (Greenwood et al 2011; Pache & Santos 2010) These studies provide important insights on how firms respond to institutional pressure, helping us to understand the relationship between the external environment and internal organisational dynamics, their approach and scope neglect other aspects that are necessary to understand organisational responses. They explore conditions under which organisations are more likely to resist institutional pressure, but do not consider cases where organisations welcome institutional pressure by being proactive and doing more than what is expected. Previous studies provide important insights on how firms respond to institutional pressure, they fail to acknowledge the salience of globalisation that results in institutional pressures diffusing across countries
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
