Content area
Abstract
In this dissertation, I identify firm-level competitive activity---one of the key elements of competitive dynamics research---as the most prominent mediation between corporate governance and firm-level financial performance. Accordingly, this dissertation focuses on the linkage between corporate governance and firm-level competitive behavior (characterized by the level and variety of firm-level competitive activity) to attempt to resolve the inconclusive and long-puzzling relation between corporate governance and firm-level financial performance.
I reclassify various practices of corporate governance by employing the "Motivation-Capability" logic. Based on this reclassification and a detailed discussion of the interrelationship between "motivation" and "capability" factors, I develop an integrative framework for studying the relation between corporate governance and firm-level competitive behavior. It is emphasized in the framework that effects of corporate governance on firm-level competitive behavior cannot be fully understood without considering the role of firm-level resources and capabilities.
To test the hypotheses developed in accordance with the overall theoretical framework, I statistically investigate thirty-seven companies in the U.S. pharmaceutical industry over a three-year time period (1999-2001). The empirical results indicate that the board of directors has practically important resource provision roles. Adding more directors (especially independent outsiders) to the board and separating CEO and chairperson generally enhance a firm's capability for engaging in more assertive and diverse actions. In addition, moderating or motivational effects of the board also exist. Having more directors (especially independent outsiders) and assigning different individuals respectively as the CEO and the chairperson of the board are more effective in preventing shirking and encouraging managers to engage actively in more aggressive competitive actions. The empirical results also suggest that firm capability defines the scale and scope of firm-level competitive activity.
