Revisiting the Effect of Internationalization on Firm Governance: A Replication and Extension Study

The idea that a firm’s degree of internationalization shapes its governance structure is a consequential phenomenon examined in strategic management and international business research. Sanders and Carpenter (Acad Manag J 41(2):158–178, 1998) was one of the first studies to comprehensively consider this phenomenon by finding that firms cope with the uncertainty of internationalization by granting CEOs higher and longer-term pay, constructing larger top management teams, constructing larger and more independent board of directors, and separating the CEO and chairman of the board positions. Given that firm governance structures have substantially changed over the past few decades, our study revisits these relationships by conducting a replication of Sanders and Carpenter (1998). Our results find general support for Sanders and Carpenter’s (1998) central premise that internationalization shapes firm governance structures but also highlight important non-findings that reflect how the internationalization-governance relationship has changed since their study. Based on the findings of our replication, we also extend Sanders and Carpenter’s (1998) framework and find that firms have more recently coped with the uncertainty of internationalization by hiring CEOs with international experience and hiring a more internationally diverse board of directors. We also provide insights on important boundary conditions of the non-replicated results in our study.