We address the issue of family firm heterogeneity and its implications for corporate governance and firm outcomes. We apply social identity theory to differentiate between clan and financial family firm identities and to explain how the domination of each identity leads to distinct governance needs and choices. We propose that family firms dominated by a clan identity will employ a unified bundle of internal corporate governance mechanisms, enhancing non-financial performance outcomes. A financial family firm identity will, on the other hand, result in implementation of a dispersed corporate governance bundle, enhancing the firm’s financial outcomes.

Shareholders are not identical, but differ in their objectives and actions. One difference is the level of delegation of the principal functions to the board, which we suggest can be observed through the level of directors’ compensation. We analyze the difference in board compensation through the concept of governance strategy and suggest two distinct categories of shareholder strategies: the company governance strategy and the financial governance strategy. These strategies create different distributions of governance costs, which we separate into principal costs and agency costs. We claim that the financial governance strategy adopts a higher level of delegation, which implies that the principal costs are assumed by the corporation and that agency costs are higher. This in turn can explain the higher compensation for the directors of the board compared to compensation under the company governance strategy. We test our hypothesis using a three-year panel of Swedish listed corporations and find that shareholders pursuing a financial governance strategy are associated with higher levels of board compensation. These findings suggest the existence of differences in governance strategies, reflected in governance costs through board compensation, among different types of shareholders in a corporation.

The concept of good governance, as the manifestation of a larger ideology of shareholder value maximization, is designed for and promoted by large, manager-controlled listed corporations. The increasing adoption and growing legitimacy of good governance have led to the formation of a dominant institutional logic, which family firms experience pressure to adopt. Particularly strong is the pressure to increase the independence of the board of directors. While the process of change towards more independent boards may not necessarily contribute to increased economic efficiency or be fully able to fulfill the governance needs of family firms, these firms continue to adopt such practices. Drawing on institutional theory, we propose that institutional pressure is the dominant reason for family firms to adopt board independence. We then deduce potential consequences of this change, including positive consequences in terms of creation of both social and economic value, as well as negative consequences in terms of dilution of board meetings, demotivation of managers and decreased collaboration in the boardroom. Our study suggests that the benefits associated with the adoption of good governance can become offset by a decrease in the strategic adaptability of a firm.

This dissertation addresses the question of effective delegation, exploring it through the concept of managerial discretion (i.e., a latitude of managerial actions, which lie in the zone of shareholders’ acceptance). While the corporate governance perspective on managerial discretion focuses mainly on the costs associated with delegation, the strategic management perspective emphasizes its benefits in creating value for the firm. Building on research in corporate governance and strategic management, this dissertation develops and empirically tests a theoretical framework that explains how the two distinct dimensions of managerial discretion jointly influence organizational outcomes. The proposed framework illuminates the importance of balance between the restraining and enabling decisions undertaken by professional managers. This dissertation makes a two-fold contribution to the field of corporate governance. First, it identifies and explains organizational and environmental forces that jointly shape strategic and governance dimensions of managerial discretion, redefining the concept. Second, it conceptually and empirically explores an integrative model of managerial discretion within the broader corporate governance framework, providing evidence of the joint effects of governance and strategic dimensions of discretion on organizational outcomes. The results suggest that the effect of governance dimension of managerial discretion on a firm’s performance is contingent on the strategic dimension of discretion. This draws attention to potential strategic implications of board monitoring over managerial decision making. While the majority of studies emphasize the benefits of increased control over managerial decision making, particularly stressing board monitoring, this dissertation also considers the benefits of delegation for firms’ strategic development. By reversing the polarity of the current emphasis on disciplining managers, this dissertation provides a more balanced view of the notion of corporate governance. The value of this approach derives from the integrated model, which highlights the benefits and the costs of delegation. 

What are the forces that influence strategic managerial decisions in the context of economic transition? In this paper, we analyse how strategic and governance forces influence the degree of discretion perceived by managers operating in the context of the transition economy of Russia. An exploratory case study provides insights about the managerial decision-making process in a transition economy through the exploration of context-specific factors that shape the perceived degree of managerial discretion. The findings of the paper redefine the concept, indicating the existence of a relationship between strategic and governance forces and their joint influence on managerial discretion. Our results provide a number of practical and theoretical implications for the managerial decisionmaking process in Eastern Europe.

Welche Kräfte beeinflussen strategische Managemententscheidungen im Kontext wirtschaftlicher Übergangsprozesse? In diesem Artikel analysieren wir den Einfluss strategischer und steuernder Kräfte auf den Ermessenspielraum, der von den Managern, die im Rahmen der russischen Transformationswirtschaft operieren, wahrgenommen wird. Eine explorative Fallstudie liefert Erkenntnisse über den Führungsentscheidungsprozess in einer Transformationswirtschaft, indem kontextspezifischen Faktoren, die den wahrgenommenen Grad des Führungseinflusses gestalten, untersucht werden. Durch die Ergebnisse des Artikels wird das Konzept neu definiert, indem die Existenz eines Zusammenhangs zwischen strategischen und steuernden Kräften und deren gemeinsamen Effekt auf den Führungseinfluss aufgezeigt werden. Unsere Ergebnisse liefern eine Reihe praktischer und theoretischer Implikationen für den Führungsentscheidungsprozess in Osteuropa.