Board leadership structures in international joint ventures

• Author: Elko Klijn,Jeffrey J. Reuer
• Date: 01 November 2020
• Published date: 01 November 2020
• DOI: http://doi.org/10.1002/gsj.1353

RESEARCH ARTICLE

Board leadership structures in international joint

ventures

Jeffrey J. Reuer

1

| Elko Klijn

2

1

Leeds School of Business, University of Colorado, Boulder, Colorado

2

Strome School of Business, Old Dominion University, Norfolk, Virginia

Correspondence

Jeffrey J. Reuer, Leeds School of Business,

University of Colorado, Boulder, CO

80309-0419.

Email: jeffrey.reuer@colorado.edu

Abstract

Research summary:We examine board leadership struc-

tures in international joint ventures (IJVs) and investigate

the determinants of CEO duality (i.e., the CEO also serves

as chair). In contrast to corporate governance research

emphasizing principal-agent conflicts in corporations, we

argue that duality in IJVs can impair the board's execution

of its responsibilities when the chair reflects the interests

of one of the partners. We consider how unique character-

istics of IJVs as organizational forms can exacerbate such

governance challenges. In addition, we investigate how

formal and relational governance mechanisms supporting

IJVs might mitigate these concerns and lead parent firms

to adopt unified board leadership structures. By joining the

IJV and corporate governance literatures, we identify some

of the distinctive properties and determinants of this facet

of IJV governance.

Managerial Summary:A key facet of governance is

whether the CEO also serves as chair of an organization's

board. CEO duality can promote unity of command and

decisive decision-making, but can also have serious draw-

backs. Our paper is unique in investigating CEO duality

for international joint ventures (IJVs) rather than unitary

corporations. In this context, the chair might prioritize one

partner's interests over another partner's, particularly when

the chair was appointed by that partner. This problem

Received: 25 July 2017 Revised: 16 April 2019 Accepted: 2 May 2019

DOI: 10.1002/gsj.1353

700 © 2019 Strategic Management Society Global Strategy Journal. 2020;10:700–725.wileyonlinelibrary.com/journal/gsj

magnifies when IJVs are prone to conflicts or need to be

adapted, so partners might wish to separate the CEO and

chair roles when engaging in IJVs involving broad scope

or operating in uncertain environments. However, well-

specified contracts can limit CEO discretion and protect

partners from these downsides of duality.

KEYWORDS

alliances, boards, CEO duality, corporate governance, leadership

1|INTRODUCTION

Despite recent research on joint ventures' boards of directors (Cuypers, Ertug, Reuer, & Bensaou,

2016; Klijn, Reuer, Van den Bosch, & Volberda, 2013; Kumar & Seth, 1998; Reuer, Klijn, &

Lioukas, 2014), scholars have yet to understand what conditions lead firms to avoid, or adopt, unified

board leadership structures (i.e., CEO duality, or when the CEO also serves as board chair) in their

international collaborations. Over the last few decades it has been recognized that IJV boards serve

as important control mechanisms, as they enable partners to detect and resolve goal conflicts as well

as adapt to unanticipated contingencies in a coordinated manner. However, research to date has not

considered board structures and the particular leadership roles that CEOs can fulfill. This gap in the

alliance literature is remarkable, especially if one considers the extensiveness of such research in the

corporate governance domain. This field has devoted substantial research attention to the conse-

quences of board leadership structures in stock-listed corporations but has yet to investigate other

organizational forms such as joint ventures (see Krause, Semadini, & Cannella Jr., 2014 for a recent

review).

For IJVs as well as other organizations, an inherent trade-off is present: between the benefits of

the unity of command afforded by duality versus the additional oversight provided by a separate

board chair (Finkelstein & D'Aveni, 1994). For example, within corporate governance research, pro-

ponents of stewardship theory have seen duality favorably given its advantages in terms of CEO

authority and discretion (Davis, Schoorman, & Donaldson, 1997), whereas agency theorists call for

the separation of the CEO and chair roles to strengthen the oversight capacity of the board of direc-

tors to curb principal–agent conflicts (e.g., Boyd, 1994; Fama & Jensen, 1983). At the same time,

agency theory recognizes that the institution of alternative governance mechanisms can help princi-

pals reduce the likelihood that a CEO will engage in self-interested behavior, such as by aligning the

CEO's incentives to those of principals or by controlling CEOs in other ways (e.g., Eisenhardt, 1989;

Jensen & Meckling, 1976; Sanders & Carpenter, 1998; Shleifer & Vishny, 1997). Interestingly, these

arguments parallel alliance research that has extensively focused on the different types of formal and

informal governance mechanisms to reduce partner opportunism (e.g., Parkhe, 1993; Poppo &

Zenger, 2002; Ryall & Sampson, 2009). At the same time, however, joint ventures have several

unique characteristics as an organizational form, making it interesting to examine CEO duality in the

IJV context. To begin with, CEOs as well as other directors are often appointed by one of the IJV

parents. As a consequence, they might serve the primary interests of the IJV partner who appointed

them to the board. We therefore expect that unified board leadership might also have unique

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