This paper examines how outside directors facilitate corporate R&D investment in the face of family control and the discrepancy between share ownership and decision control. Our panel regression analysis of large Korean firms (1998 to 2005) shows that mere addition of a shareholder-oriented mechanism, namely outside directors, is not effective for promoting R&D intensity. However, the disciplining role of outside directors can become valid for R&D intensity by moderating the negative influence of the discrepancy when a firms' growth opportunity is high. In addition, family control is positively related to a firm's R&D investment when the firm's growth opportunity is low. Thus, we argue that the strategic management of organizational change in corporate governance should take into account the disciplining role of shareholder-oriented mechanisms in the context of ownership structure and a firm's strategic position.
Bibliographical noteFunding Information:
A previous version of the manuscript was presented at the 2010 Academy of Management Annual Meeting in Montreal, Canada. This work was supported by Hankuk University of Foreign Studies Research Fund of 2014 and by the National Research Foundation of Korea Grant funded by the Korean Government ( NRF-2013S1A3A2053799 ). Taeyoung Yoo and Taeyoon Sung contributed equally, and both of them are co-first authors.
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