International returnees as outside directors: A catalyst for strategic adaptation under institutional pressure

• Published in: International business review Vol. 24; no. 4; pp. 594 - 604
• Main Authors: Lee, Ji-Hwan, Roberts, Michael J.D.
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.08.2015
• Subjects: Business management; Business organization; Business strategies; Chief executive officers; Corporate governance; International returnee; Leadership; Management research; Management techniques; Organizational analysis; Outside director; Senior management; South Korea; Strategic adaptation; International returnee; South Korea; Corporate governance; Strategic adaptation; Outside director
• ISSN: 0969-5931; 1873-6149
• DOI: 10.1016/j.ibusrev.2014.10.015

•We investigate the ability of returnees outside directors to influence strategic adaptation in the face of institutional pressure.•The restructuring efforts of large Korean firms in the early 2000s following the introduction of radical new board regulations are empirically examined.•Decreases in debt ratio and diversification level are greater for firms with more returnee outside directors.•Individual directors’ prestige and foreign investors’ support positively moderates such relationship. Building on perspectives from corporate governance, resource dependence, and organizational learning, this paper investigates the ability of international returnees while acting as outside directors in corporate boards to influence strategic adaptation in the face of institutional pressure to adopt what are arguably more legitimate management practices. We empirically examine the restructuring efforts of large Korean firms in the early 2000s following the introduction of radically new board regulations by the government. To accomplish this we use a hierarchical linear modeling with repeated measures. Our results show that decreases in debt ratio and diversification level are greater for firms with more returnee outside directors. Such an association is strengthened by the extent of foreign experience held by returnee directors. In addition, the prestige of individual directors as well as support from foreign investors positively moderates the impact of returnee outside directors on strategic adaptation.