What does board capital really bring to the table? Exploring the effect of directors' human and social capital on effective governance during international expansion

What constitutes effective corporate governance? Which director characteristics render boards effective at positively influencing firm-level performance outcomes? This dissertation examines these questions by taking a multilevel, multidisciplinary approach to corporate governance. I explore the individual-, team-, and firm- level factors that enable directors to serve effectively as strategic resources during international expansion. I argue that directors' international experience improves their ability to serve as effective strategic consultants and resource providers to firms during the complex internationalization process. However, unlike prior research, which tends to assume that directors with the potential to provide important resources uniformly do so, I acknowledge contextual factors (i.e. board cohesiveness, strategic relevance of directors' experience) that affect their propensity to actually influence outcomes. I explore these issues in three essays: one review essay and two empirical essays.^ In the first empirical essay, I integrate resource dependence theory with insights from social-psychological research to explore the influence of board capital on firms' cross-border M&A performance. Using a sample of cross-border M&As completed by S&P 500 firms from 2004-2009, I find evidence that directors' depth of international experience is associated with superior pre-deal outcomes. This suggests that boards' deep, market-specific knowledge is valuable during the target selection phase. I further find that directors' breadth of international experience is associated with superior post-deal performance, suggesting that these directors' global mindset helps firms in the post-M&A integration phase. I also find that these relationships are positively moderated by board cohesiveness, measured by boards' internal social ties.^ In the second empirical essay, I explore the boundary conditions of international board capital by examining how the characteristics of firms' internationalization strategy moderate the relationship between board capital and firm performance. Using a panel of 377 S&P 500 firms observed from 2004-2011, I find that boards' depth of international experience and social capital are more important during early stages of internationalization, when firms tend to lack market knowledge and legitimacy in the host markets. On the other hand, I find that breadth of international experience has a stronger relationship with performance when firms' have higher scope of internationalization, when information-processing demands are higher.^

What Does Board Capital Really Bring to the Table? Exploring the Effect of Directors’ Human and Social Capital on Effective Governance During International Expansion

What constitutes effective corporate governance? Which director characteristics render boards effective at positively influencing firm-level performance outcomes? This dissertation examines these questions by taking a multilevel, multidisciplinary approach to corporate governance. I explore the individual-, team-, and firm- level factors that enable directors to serve effectively as strategic resources during international expansion. I argue that directors’ international experience improves their ability to serve as effective strategic consultants and resource providers to firms during the complex internationalization process. However, unlike prior research, which tends to assume that directors with the potential to provide important resources uniformly do so, I acknowledge contextual factors (i.e. board cohesiveness, strategic relevance of directors’ experience) that affect their propensity to actually influence outcomes. I explore these issues in three essays: one review essay and two empirical essays. In the first empirical essay, I integrate resource dependence theory with insights from social-psychological research to explore the influence of board capital on firms’ cross-border M&A performance. Using a sample of cross-border M&As completed by S&P 500 firms from 2004-2009, I find evidence that directors’ depth of international experience is associated with superior pre-deal outcomes. This suggests that boards’ deep, market-specific knowledge is valuable during the target selection phase. I further find that directors’ breadth of international experience is associated with superior post-deal performance, suggesting that these directors’ global mindset helps firms in the post-M&A integration phase. I also find that these relationships are positively moderated by board cohesiveness, measured by boards’ internal social ties. In the second empirical essay, I explore the boundary conditions of international board capital by examining how the characteristics of firms’ internationalization strategy moderate the relationship between board capital and firm performance. Using a panel of 377 S&P 500 firms observed from 2004-2011, I find that boards’ depth of international experience and social capital are more important during early stages of internationalization, when firms tend to lack market knowledge and legitimacy in the host markets. On the other hand, I find that breadth of international experience has a stronger relationship with performance when firms’ have higher scope of internationalization, when information-processing demands are higher.

Essays of strategic alliance portfolio configuration—Its performance properties, strategic antecedents and consequential effects on multinational firms' continuing foreign expansion

This dissertation focused on an increasingly prevalent phenomenon in today's global business environment—strategic alliance portfolio. Building on resource-based view, resource dependency theory and real options theory, this dissertation adopted a multi-dimensional perspective to examine the performance implications, strategic antecedents of alliance portfolio configuration, and its strategic effects on firms' decision-making on their continuing foreign expansion. The dissertation consisted of three interrelated essays, each of which dealt with a specific research question. In the first essay I applied a two-dimensional construct that embraces both alliance relations' and alliance partners' attributes to illustrate alliance portfolio configuration. Based on this framework, a longitudinal study was conducted attempting to explore the performance properties of alliance portfolio configuration. The results revealed that alliance diversity and partner diversity have different relative contributions to firms' economic performance. The relationship between alliance portfolio configuration and firm performance was shaped by degree of multinationality in a curvilinear pattern. The second essay attempted to identify the firm level driving forces of alliance portfolio configuration and how these forces interacting with firms' internationalization influence firms' strategic choices on alliance portfolio configuration. The empirical results indicated that past alliance experience, slack resource and firms' brand images are three critical determinants shaping alliance portfolios, but those shaping relationships are conditioned by firms' multinationality. The third essay primarily employed real options theory to build a conceptual framework, revealing how country-, alliance portfolio-, firm-, and industry level factors and their interactions influence firms' strategic decision-making on post-entry continuing expansion in foreign markets. The two empirical studies were resided in global hospitality and travel industries and use panel data to test the relevant theoretical models. Overall, the dissertation advanced and enriched the theoretical domain of alliance portfolio. It particularly shed valuable insights on three fundamental questions in the domain of alliance portfolio research, namely "if and how alliance portfolios contribute to firms' economic performance"; "what determines the appearance of alliance portfolios”; and "how alliance portfolios affect firms' strategic decision-making". This dissertation also extended the international business and strategic management research on service multinationals' foreign expansion and performance.

Risks to Hospitality Firms in the International Arena

Much potential for growth in hospitality firms exists in foreign countries, but expansion abroad typicality bears additional risks that could be detrimental to the operations. The authors explore those risks, currency exchange risk, and country risk, and offer practical techniques to access, manage, control, and reduce them. Deriving benefits from global opportunities requires effective management of these areas

Resources, strategies, location determinants, and host country location choice by emerging market firms

The extant literature had studied the determinants of the firms’ location decisions with help of host country characteristics and distances between home and host countries. Firm resources and its internationalization strategies had found limited attention in this literature. To address this gap, the research question in this dissertation was whether and how firms’ resources and internationalization strategies impacted the international location decisions of emerging market firms. ^ To explore the research question, data were hand-collected from Indian software firms on their location decisions taken between April 2000 and March 2009. To analyze the multi-level longitudinal dataset, hierarchical linear modeling was used. The results showed that the internationalization strategies, namely market-seeking or labor-seeking had direct impact on firms’ location decision. This direct relationship was moderated by firm resource which, in case of Indian software firms, was the appraisal at CMMI level-5. Indian software firms located in developed countries with a market-seeking strategy and in emerging markets with a labor-seeking strategy. However, software firms with resource such as CMMI level-5 appraisal, when in a labor-seeking mode, were more likely to locate in a developed country over emerging market than firms without the appraisal. Software firms with CMMI level-5 appraisal, when in market-seeking mode, were more likely to locate in a developed country over an emerging market than firms without the appraisal. ^ It was concluded that the internationalization strategies and resources of companies predicted their location choices, over and above the variables studied in the theoretical field of location determinants.^

A fresh look at decision making in international investment choices: Firm international coherence and home-host country relatedness

Understanding how decisions for international investments are made and how this affects the overall pattern of investments and firm’s performance is of particular importance both in strategy and international business research. This dissertation introduced first home-host country relatedness (HHCR) as the degree to which countries are efficiently combined within the investment portfolios of firms. It theorized and demonstrated that HHCR will vary with the motivation for investments along at least two key dimensions: the nature of foreign investments and the connectedness of potential host countries to the rest of the world. Drawing on cognitive psychology and decision-making research, it developed a theory of strategic decision making proposing that strategic solutions are chosen close to a convenient anchor. Building on research on memory imprinting, it also proposed that managers tend to rely on older knowledge representation. In the context of international investment decisions, managers use their home countries as an anchor and are more likely to choose as a site for foreign investments host countries that are ‘close’ to the home country. These decisions are also likely to rely more strongly on closeness to time invariant country factors of historic and geographic nature rather than time-variant institutions. Empirical tests using comprehensive investments data by all public multinational companies (MNC) worldwide, or over 15,000 MNCs with over half a million subsidiaries, support the claims. Finally, the dissertation introduced the concept of International Coherence (IC) defined as the degree to which an MNE’s network comprises countries that are related. It was hypothesized that maintaining a high level of coherence is important for firm performance and will enhance it. Also, the presence of international coherence mitigates some of the negative effects of unrelated product diversification. Empirical tests using data on foreign investments of over 20,000 public firms, while also developing a home-host country relatedness index for up to 24,300 home-host pairs, provided support for the theory advanced.

Managing International Hospitality

To understand today's hospitality industry, executives need to recognize its international dimension. In this, the first part of a two-part article on the international dimension of hospitality, the author considers the forces driving hospitality's internationalization, the advantages drawing foreign investment into the North American market, and the patterns of expansion of American firms in overseas markets. The article is excerpted from Introduction to Management in the Hospitality Industry, New York: John Wiley & Sons, 1992.

The Development of an Ethical Strategy for Managers of International Hotels in Third World Countries

This article discusses some of the dilemmas of conscience that greet the international hotel manager in the Third World. It offers realistic and ethical guidelines for decision-making and problem-solving. Some of these guidelines require only common sense and good will to implement; others require a great deal of creativity, sensitivity, effort, and care; and a few will demand the courage to stand up for what is right in the face of competitive pressure.

Managing International Hospitality, Part II

The Spring 1992 issue of Hospitality Review featured Part I of this series on the impetus to internationalization of the hospitality industry, as well as the modes of overseas expansion by American firms. In Part 11, the author concludes with a look at the organization of overseas activities in their evolutionary stages and considers, as well, who some of the major international competitors to North American firms are in the international market and in North America. The article concludes with a brief consideration of opportunities for employment overseas.

Resource, Strategies, Location Determinants, And Host Country Location Choice By Emerging Market Firms

The extant literature had studied the determinants of the firms’ location decisions with help of host country characteristics and distances between home and host countries. Firm resources and its internationalization strategies had found limited attention in this literature. To address this gap, the research question in this dissertation was whether and how firms’ resources and internationalization strategies impacted the international location decisions of emerging market firms. To explore the research question, data were hand-collected from Indian software firms on their location decisions taken between April 2000 and March 2009. To analyze the multi-level longitudinal dataset, hierarchical linear modeling was used. The results showed that the internationalization strategies, namely market-seeking or labor-seeking had direct impact on firms’ location decision. This direct relationship was moderated by firm resource which, in case of Indian software firms, was the appraisal at CMMI level-5. Indian software firms located in developed countries with a market-seeking strategy and in emerging markets with a labor-seeking strategy. However, software firms with resource such as CMMI level-5 appraisal, when in a labor-seeking mode, were more likely to locate in a developed country over emerging market than firms without the appraisal. Software firms with CMMI level-5 appraisal, when in market-seeking mode, were more likely to locate in a developed country over an emerging market than firms without the appraisal. It was concluded that the internationalization strategies and resources of companies predicted their location choices, over and above the variables studied in the theoretical field of location determinants.