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The effect of CEO incentives on deviations from institutional norms in foreign market expansion decisions: Behavioral agency and cross‐border acquisitions

Mirko H. Benischke¹; Geoffrey Martin^2,3,4; Luis R. Gomez-Mejia⁵; Grigorij Ljubownikow^6,7

¹ Erasmus University Rotterdam · ² The University of Melbourne · ³ Victorian Curriculum and Assessment Authority · ⁴ Melbourne School of Theology · ⁵ Arizona State University · ⁶ University of Auckland · ⁷ Auckland University of Technology

CEO incentives have been the subject of great interest for human resource scholars. We explore the institutional context within which the CEO makes sense of their incentives. Our theory suggests that CEO equity incentives interact with institutional norms to influence foreign market entry choices. Specifically, we argue that CEOs will weigh the risk bearing created by equity incentives, along with the consequences of legitimacy loss, when deciding whether to deviate from institutional norms when internationalizing. In doing so, we advance human resource literature by demonstrating that CEO responses to incentives are influenced by institutional norms and that CEOs' decisions to deviate from institutional norms are shaped by their incentives. We find support for our framework in the analysis of the stake taken by acquirers in 4,184 cross‐border acquisitions.

DOI

10.1002/hrm.22006

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