Microfoundations of firm internationalization: The owner CEO effect

• Published in: Global strategy journal 2019-02, Vol.9 (1), p.42-65
• Main Authors: Chittoor, Raveendra, Aulakh, Preet S., Ray, Sougata
• Format: Article
• Language: English
• Subjects: behavioral theory of the firm; business groups; Globalization; microfoundations; owner CEOs
• ISSN: 2042-5791; 2042-5805
• DOI: 10.1002/gsj.1193

Research Summary In this article, we examine the influence of owner CEOs’ motivations and authority on strategic risk‐taking behavior of firms as reflected by their investments in foreign markets. We theorize that owner CEOs, aided by their strategic leadership, long‐term orientation, and less‐restricted decision‐making powers, will facilitate their firms’ strategic decisions that are exploratory in nature and, thus, are more risky. We further propose that the owner CEO effect is likely to differentially interact with performance aspirations and governance structures of firms in influencing internationalization. We test our predictions on a longitudinal panel dataset of 226 Indian manufacturing firms over the 10‐year period from 2002 to 2011 and find support for our hypotheses. We contribute to the emerging literature on microfoundations and behavioral strategy. Managerial Summary Given that a large number of firms around the world are characterized by concentrated ownership and owners who also assume CEO roles, we explore the influence of owner CEOs on firms’ strategic risk‐taking behavior. We propose that firms with owner CEOs, particularly founder owner CEOs, are likely to exhibit a higher degree of internationalization as compared to firms with professional CEOs. Further, we propose that the positive owner CEO effect is stronger when the firm performance is above its aspirations and also in stand‐alone firms when compared to firms affiliated to business groups. We test our predictions using a sample of 226 Indian manufacturing firms over the 10‐year period from 2002 to 2011 and find support for our predictions.