Does Board Independence Influence the Top Management Team? Evidence from Strategic Decisions toward Internationalization

Manuscript Type: Empirical Research Question/Issue: Using insights from the upper echelon perspective and agency theory, this paper examines the effects of TMT characteristics on internationalization and the moderating effect of independent directors on the TMT characteristics - internationalization relationship. Research Findings/Insights: Based on a panel of listed firms in Taiwan, this study finds positive associations of TMT tenure and international experience and a negative association of TMT age with internationalization, supporting the upper echelon perspective. There is also some support for agency theory. The findings suggest that the positive relationships of TMT tenure and international experience with internationalization are stronger as more independent directors are included on the board, supporting the view that independent directors as monitors and resource providers may offer better advice and counsel to executives and enhance their strategic action capabilities in moving toward internationalization. However, the support for agency theory is limited, as this study finds no evidence of a moderating effect of independent directors on the relationship between TMT age and internationalization. Theoretical/Academic Implications: This study contributes to corporate governance knowledge by bridging the gap in the relationship between TMT characteristics and internationalization via an empirical inquiry into the influence of independent directors on the TMT. Specifically, it reinforces the important role of the TMT in the strategic decision to internationalize and highlights the significant influence of independent directors on the TMT characteristics - internationalization relationship, expanding our understanding of the important strategic role of boards involved in TMTs' strategic action in a contextually appropriate manner. Practitioner/Policy Implications: This study suggests that the board of a firm realizing that internationalization is a necessary strategy may consider choosing executives who are younger and have a longer tenure and more international experience in order to develop and execute international operations effectively. To improve board effectiveness and the quality of corporate governance, this study also demonstrates that a firm should include more independent directors on the board.