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 REDETE 2014 - Researching Economic Development and Entrepreneurship in Transition Economies - confOrganiser.com

REDETE 2014 - Researching Economic Development and Entrepreneurship in Transition Economies

April 10 - 13, 2016.

Board of directors and corporate entrepreneurship: A multitheoretic view from a transition economy

Author(s):
1. Huong Thi My Nguyen,

Abstract:
Research issue: Privatisation happening throughout Eastern Europe and East Asia in recent decades has led to radical changes in firms’ corporate governance (Zahra et al., 2000a, Uhlenbruck and Castro, 1998). These changes have, in turn, influenced innovation and the creation of new ventures, both of which have helped promote economic growth. A growing number of studies have examined the relationships between corporate governance and corporate entrepreneurship, with most finding that corporate governance has a significant influence (Zahra, 1996, Zahra et al., 2000b). However, the question of which governance mechanism most significantly drives corporate entrepreneurship is still underexplored (Phan et al., 2009) and the literature still lacks an in-depth account of how boards of directors develop and guide entrepreneurial activities for their firms. Consequently, this paper aims to answer the question, to what extent board independence affects corporate entrepreneurship in transition economies? Theoretical background: Agency theory is the most dominant perspective in research on the board independence. According to agency theorists, the boards of directors should be independent (e.g., Jensen and Meckling, 1976). However, Dharwadkar et al. (2000) suggested that traditional agency theory is not sufficient in explaining the principle-agent relationships in context where institutional infrastructure is underdeveloped. I suggest that multiple theories should be employed to increase the explanatory power for the relationships between board independence and corporate entrepreneurship in transitioning economies. Research context/ methods: Given the scant attention to corporate entrepreneurship in transitioning economies, a study adopting survey design is conducted in the context of Vietnam. Vietnam is chosen because Vietnam is a transitioning economy that has just experienced a decade of policy-driven privatisation with a large number of SOEs privatized, creating several forms and structures inside privatized firms which are associated with corporate governance (Hoskisson et al., 2000). Also, the unique regulatory framework, as well as the evolution of cultural beliefs during the institutional transition that has accompanied privatisation, makes Vietnam a dynamic setting for understanding more about structural board independence - corporate entrepreneurship relationships. As such, the sample of privatised firms in Vietnam will help to uncover the structures and mechanisms that work to facilitate corporate entrepreneurship. A survey of 128 chief executive officers (CEOs) of privatised firms was conducted using convenience and snowball sampling. Key results and contributions: This study makes important contributions to both theory and practice. It expands the current theoretical understanding of the complicated relationships between issues related to board of directors and corporate entrepreneurship through the integration of multiple perspectives. The results are contradicting to the findings provided in the studies of Zahra in Zahra (1996) and Zahra et al. (2000b), two among the very limited empirical studies examining the relationships between board characteristics and corporate entrepreneurship. The empirical evidence therefore supports the argument that in the case of an upheaval in institutions, the agent-principal relationship is more complicated and agency theory only works in certain conditions. Agency theory is accordingly strengthened by integrating the other theories - stewardship, and resource dependency theories.

Key words:
Corporate entrepreneurship, board of directors, agency theory, stewardship theory, resource dependence theory, institutional transitions

Date of abstract submission:
19.11.2013.

Conference:
REDETE 2014 - Researching Economic Development and Entrepreneurship in Transition Economies

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