Future research
We hope that this Special Issue will help to build the foundation for greater understanding not only of performance outcomes of different governance mechanisms in the context of MNEs, but also of a complex interaction of firm-level governance charactersitics with meso- and macro-factors such as the firm’s industry and institutional environments. Our review of the state-of-the-art research in finance and international business, as well as papers in this Special Issue suggests that the structure and processes of corporate governance are embedded in formal and informal institutions, and MNEs by the very nature of their global operations are exposed to a diverse range of institutional pressures in their home and host countries that ultimately shape their governance settings and, subsequently, business startegy and performance.
The recognition of sometimes conflicting demands imposed by regulatory, normative and cognitive institutions points to a number of promising avenues for future research. For example, Krause et al. (2016) provide evidence that whereas governance activists view CEO power as illegitimate, customers in product markets characterized by high cultural power distance view CEO power as a legitimizing force. In support of this “demand-side” argument, the authors found that firms selling primarily to high-power-distance countries conferred more power on their CEOs. It remains unknown, however, whether informal, cultural institutions abroad affect the MNE’s governance configurations when the firm must simultaneously build legitimacy with stock market investors. It also remains unknown whether investors value the MNE’s compliance with demands associated with normative and cognitive legitimacy in foreign markets or if their valuations of firms follow agency norms exclusively.
