Power and paradigms: The Dutch response to pressures for shareholder value

Manuscript Type: Empirical Research Question/Issue: In recent years, research aimed at identifying and relating the antecedents and consequences of diffusing organizational practices/ideas has turned its attention to debating the international adoption and implementation of the Anglo-American model of corporate governance, i.e., a shareholder value orientation (SVO). While financial economists characterize the adoption of an SVO as necessary and performance-enhancing, behavioral scientists have disputed such claims, invoking institutional contingencies in the appropriateness of an SVO. Our study seeks to provide some resolution to the debate by developing an overarching sociopolitical perspective that links the antecedents and consequences of the adoption of the contested practice of SVO. Research Findings/Insights: We test our framework using extensive longitudinal data from 1992-2006 from the largest listed corporations in the Netherlands. We find a negative relationship between SVO adoption and subsequent firm performance, although this effect is attenuated when accompanied by greater SVO alignment among major owners and a firm's visible commitment to an SVO. Theoretical/Academic Implications: This study extends prior research on the diffusion of contested organizational practices that has taken a sociopolitical perspective by offering an original contingency perspective that addresses how and why the misaligned preferences of corporate owners will affect (i) a company's inclination to espouse an SVO, and (ii) the performance consequences of such misalignment. Practitioner/Policy Implications: This study suggests that, when board members are considering the adoption of new ideas/practices (e.g., SVO), they should consider the contextual fitness of the idea/practice with the firm's owners and their interests.