The effect of CEO incentives on deviations from institutional norms in foreign market expansion decisions: Behavioral agency and cross-border acquisitions |
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| Authors: | Mirko H. Benischke Geoffrey P. Martin Luis R. Gomez-Mejia Grigorij Ljubownikow |
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| Affiliation: | 1. Department of Strategic Management and Entrepreneurship, Erasmus University, Rotterdam School of Management, Rotterdam, The Netherlands;2. Department of Business Administration, University of Melbourne, Melbourne Business School, Melbourne, Victoria, Australia;3. W.P. Carey School of Business, Arizona State University, Tempe, Arizona;4. Department of Management and International Business, University of Auckland Business School, Auckland, New Zealand |
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| Abstract: | CEO incentives have been the subject of great interest for human resource scholars. We explore the institutional context within which the CEO makes sense of their incentives. Our theory suggests that CEO equity incentives interact with institutional norms to influence foreign market entry choices. Specifically, we argue that CEOs will weigh the risk bearing created by equity incentives, along with the consequences of legitimacy loss, when deciding whether to deviate from institutional norms when internationalizing. In doing so, we advance human resource literature by demonstrating that CEO responses to incentives are influenced by institutional norms and that CEOs' decisions to deviate from institutional norms are shaped by their incentives. We find support for our framework in the analysis of the stake taken by acquirers in 4,184 cross-border acquisitions. |
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| Keywords: | agency theory CEO compensation compensation and benefits institutional theory |
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