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Board Characteristics, Managerial Incentives, and the Choice Between Foreign Acquisitions and International Joint Ventures

Department of Management, College of Business Administration, University of Texas at Arlington, Arlington, TX 76019, ddatta{at}uta.edu

Martina Musteen

College of Business Administration, San Diego State University, 5500 Campanile Dr., SSE 3302, San Diego, CA 92182

Pol Herrmann

Management Department, College of Business, Iowa State University, Ames, IA 50011

Drawing on the agency theory, corporate governance, and international business literatures, the authors link board characteristics and managerial incentives to the choice between acquisitions and joint ventures by firms entering foreign markets. Hypothesized relationships are examined in the context of 383 acquisition and 171 joint venture entries undertaken by relatively nondiversified firms in the U.S. manufacturing sector during the period 1991 to 1999. Findings indicate that firms with boards characterized by a higher proportion of outside directors and independent leadership structures (i.e., the absence of duality) are more inclined to favor acquisitions over joint ventures in foreign market entry. Likewise, the data reveal that firms where insiders have greater equity ownership and compensation structures that are more closely linked to long-term firm performance prefer acquisitions over joint ventures. Implications of the findings along with directions for future research are discussed.

Key Words: acquisitions • JVs • board characteristics • managerial incentives

This version was published on August 1, 2009

Journal of Management, Vol. 35, No. 4, 928-953 (2009)
DOI: 10.1177/0149206308329967


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