Corporate Governance Deviance

Abstract

We develop the concept of corporate governance deviance and seek to understand why, when, and how a firm adopts governance practices that do not conform to the dominant governance logic. Drawing on institutional theory, coupled with the entrepreneurship and corporate governance literatures, we advance a middle range theory of the antecedents of corporate governance deviance that considers both the institutional context and firm-level agency. Specifically, we highlight the centrality of a firm’s entrepreneurial identity as it interacts with the national governance logic to jointly create corporate governance discretion (i.e., the latitude of accessible governance practices) within the firm. We argue that as a firm’s governance discretion increases, it will be more likely to adopt over- or under-conforming governance practices that deviate from established norms and practices. Moreover, we propose that adopting a deviant corporate governance practice is contingent on the governance regulatory environment and a firm’s corporate governance capacity. We conclude by advancing a new typology of corporate governance deviance based on a firm’s over- or under-conformity with the dominant national logic, as well as its entrepreneurial identity motives. This globally-relevant study refines and extends comparative corporate governance research and enriches our current understanding of the institutional logics perspective.

Keywords: Comparative Corporate Governance, Governance Discretion, Governance Capacity, Corporate Governance Deviance, Institutional Logics, Entrepreneurial Identity

JEL Classification: G30, G34, L20, L26, L31, O17