How do Board–CEO Relationships Influence the Performance of New Product Introduction? Moving from Single to Interdependent Explanations

Hsueh‐Liang Wu

Corporate Governance: An International Review, 2008, vol. 16, issue 2, 77-89

Abstract: Manuscript Type: Empirical Research Question/Issue The relationship between board members and top executives is held central to corporate governance, yet studies of it are relatively few and our knowledge of its consequences is limited. This study aims to address how board–CEO relationships, in terms of power balance and social ties, contribute to the performance of new product introduction. It proposes a contingency view to highlight the context‐dependent nature of such governance arrangements. Research Findings/Results Using survey and archival data in a sample of 198 industrial firms in Taiwan, this research finds that the two distinct types of board–CEO relationships relate curvilinearly to the performance of new product introduction. Furthermore, such universal relationships are moderated by market instability and board interlocks, respectively. Theoretical Implications: This study departs from the traditional agency view to an argument that fine‐tuned board–CEO relationships, in light of sociopolitical and sociopsychological forces, and will serve as an essential enabling context for managerial risk taking. It demonstrates that research in this field should accommodate different theories to elaborate on the underlying tensions in the corporate governance and emphasize the merits of complementarity. Practical Implications: Acknowledging that good governance design softens managerial risk aversion, this study helps identify the governance conditions in which risk differentials between the board and CEO may align, and thus when exploratory efforts, in the form of new product introduction, are more likely to succeed.

Date: 2008
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