An understanding of the relationship between the board diversity and internationalization through the moderating effect of ownership structure in Asia

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Final Thesis

Thesis Title: An Understanding of the Relationship between the

Board Diversity and Internationalization through the Moderating

Effect of Ownership Structure in Asia

My name: Lin Ding

Student No.: 11085177

Supervisor: dr. Ilir Haxhi

dr. Michelle Westermann-Behaylo

Major and Track: Business Administration-International Management

Name of institution: University van Amsterdam

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Statement of originality

This document is written by Student [ Lin Ding] who declares to take full

responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that

no sources other than those mentioned in the text and its references have been

used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision

of completion of the work, not for the contents.

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Abstract

Recently, board diversity has caught much attention in research of an important topic in corporate governance. Most previous related studies focus on the relationship between board diversity influences and firm performance. Using the primary and second-hand data of 386 firms which registered in the Asian stock exchanges, this thesis argues that there is a connection of board diversity and corporate internationalization as well as the moderating effect of ownership concentration, especially the state ownership. Although the model of the percentage of foreign sales is not significant. The regression for the number of foreign subsidiaries prove the positive relationship of directors’ age and the internationalization while the educational background of directors negatively influences the international diversification. Compare to the state- and individual-owned firms, the corporate- and foreigner-owned corporations strengthen the positive connection of the age of board directors and the number of foreign subsidiaries, especially when the board members’ age level is high. Additionally, the ownership concentration as well as the high state ownership percentage strength the negative relationship of board educational level and the international expansion degree especially when the board member has a low educational background. This thesis extends the nascent literature on board diversity and internationalization by showing the positive relationship of board directors’ age and international level and negative direct effect of board on the firm internationalization with hierarchical regressions. Moreover, it suggests that shareholders and investors should consider the board members with different age and educational characteristics as well as distinguished ownership concentrations especially when corporations in emerging markets began foreign investment.

Key words: board diversity, average age, educational level, internationalization, ownership structure

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1. Introduction

Scholars have paid increasing attention on emerging economies in Asia, not only because of the investment opportunities but also the increasing internationalized domestic companies. Although there are some institutional voids in emerging market, which have a negative influence on their domestic firms (Khanna, 2005). Khanna (2005) defines institutional voids as the lack of specialized and professional intermediaries, regulatory and legal systems as well as strong contracts’ enforcement in emerging markets. In rapid development of globalization and international commerce, it is urgent for corporations to pursue opportunities to expand their market (Gao et al. 2010, P. 377), including corporations in emerging economy. Despite there are different opinions on the relationship between internationalization and performance. Lu and Beamish (2004, cited in Gaur and Delios, 2015) emphases both costs and income imposed by international diversification. For example, lots of Chinese firms have already started seeking internationalization after the economic liberalization (Gao et al. 2010, P. 378). Simultaneously, the Chinese government also has applied some effective and flexible methods to manage the companies’ international motivation (Gao et al. 2010, P. 378), which make Chinese corporate governance has its special characteristics. Even though the companies in emerging market are later comers for the international market place, Gaur and Delios (2015) emphasize that they have internationalized into distant countries rapidly and effectively since the 2000s. Furthermore, the local firms in Indonesia and Vietnam is confront more or less similar situations. Emerging economic firms play the role of ‘late comers’ to internationalization, in lacking firm-specific advantages which could be developed in foreign subsidiaries (Cui et al. 2014). Hence, the internationalization, especially strategic assets seeking foreign direct investment could be used as a channel to overtake the international market leaders (Cui et al. 2013; Li et al. 2013; Luo and Tung, 2007; Yamakawa et al., 2008,

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cited in Cui et al., 2014). According to Gubbi et al. (2010), local enterprises from emerging economies have already strategically updated their capabilities by organic modes of taking part in the international market. Such overtake strategy especially demand foreign market knowledge and international operating skills.

Diversified board membership always has advantages, originating from their background differentiations, when to deal with internationalization issues. For the complicated and large information processing demand in internationalization, the strategic decision-making task requires relevant diversified knowledge and capabilities. However, instituting differentiated teamwork demand firms’ larger pool of resources. Dutton and Duncan (1987, cited in Rivas, 2012, P.1) demonstrate that top management teams with diversified expertise and orientations are more innovative and flexible in related issue resolution, less impressionable to group mindsets, and perhaps more likely to overpower their domestic short-sightedness. Moreover, diversified groups are also more likely to establish faithful and fair procedure among managers from subsidiaries, especially when coordinating internal resources. Board of directors with the high level of diversification can have the better understanding about the complicated and different global markets. It is more likely for diversified directors to realize signals of consumers, employees, suppliers as well as institutional environments, as well as catch opportunities. Furthermore, such board composition can convince stockholders and other stakeholders that the firm is selecting members from larger resource pool (Rivas, 2012). According to Hutzschenreuter, Horstkotte (2013), top management teams’ knowledge, information processing abilities and their unit performance units are significantly influenced by their experiences. Consequently, board diversity including such experience will strength the board’s capability of attaining benefits and reducing costs of international expansion resulting, like cultural, administrative, geographic and economic distance (CAGE model) (Ghemawat, 2001). It is believed that diversity at the board level might contribute a characteristic and

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intangible resource for enterprises which could potentially enhance the level of internationalization (Rivas, P. 3).

The firm ownership concentration significantly influences the board composition and corporation management decision-making process. According to Ben‐Amar et al. (2013), different types of shareholders may pursue distinguished goals even with similar assets, which will cause important effects on corporate governance and final firm profit. Different ownership types will help explain the relationship between board diversity and firm operation reasonably and precisely. Because the main responsibilities of board directors are to help shareholders to control and supervise the operation of a corporate business to make profits (Palmberg, 2009). According to OECD (2015), one critical right of the shareholder is to nominate, select and dismiss board directors. Moreover, shareholders should be entitled to question the board about the issues like annual external audit, to decide the agenda of the general meeting and to provide a solution (OECD, 2015). Simultaneously, shareholders are subject to reasonable limitations, to balance the internal distribution of authority and guarantee the proper managing and decision-making process in considering all stakeholders’ profits. Furthermore, shareholders should be facilitated to effectively participate in making key decisions of corporate governance, such as the nomination and election of board members (OECD, 2015). In addiction, the compensation strategy about how to motivate the board and employees should also be approved by shareholders (OECD, 2015). There are plenty of studies research the relationship between ownership structure and performance (Palmberg, 2009), but rarely consider the effect of ownership on the internationalization.

Furthermore, the ownership structure will importantly influence firm internationalization. The ownership-stake-related intention and bargaining authorities of different owners, along with the variable autonomy of managers employed in different ownership concentration provide the explanation (Oesterle, Richta & Fisch, 2013). Calabro et

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al. (2013) also point out that there is a positive and important relationship between foreign ownership and the level of international income in both family and non-family corporations in Norway. However, internationalization by entry mode of acquisition will decrease the corporate market value (Jensen & Ruback 1983, Jensen et al. 2002, cited in Oesterle, Richta & Fisch, 2010). Finally, the relationship between the board diversity with corporate ownership structure and international still remains open for further research. Furthermore, shareholders should be facilitated to effectively participate in making key decisions of corporate governance, such as the nomination and election of board members (OECD, 2015). In addition, the compensation strategy about how to motivate the board and employees should also be approved by shareholders (OECD, 2015). There are plenty of studies research the relationship between ownership structure and performance (Palmberg, 2009), but rarely consider the effect of ownership on the internationalization.

There are two research gaps in the research field. The first gap is the moderating effects of ownership structure on the direct relationship between the board and international diversities. Gaur and Delios (2015) point out that different shareholders have varied interests and preferences for internationalization, and the relationship of different owners and corporate internationalization can be researched. There are studies concentrating on the relationship between board diversity and internationalization, as well as the connection of ownership structure and international expansion. However, the relevance of these three main factors is in a void. In particular, the moderating effect of ownership structure needs further research. Rivas (2012) has contributed to the business and management literature by measuring and testing three distinction characteristics (generation, incumbent and functional experience) of both board and top management team based on a sample of European and American firms (Rivas, 2012, P. 2). Secondly, the gap is the research void of related academic empirical research on Asian domestic companies. Although, local enterprises from emerging economies have already

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strategically updated their capabilities by organic modes of taking part in the international market (Gaur & Delios, 2015; Gubbi et al., 2010). This thesis applies data from China (Shanghai, Shen Zheng and Hong Kong stock exchanges) and Vietnam. This Asian perspective will provide valuable and reliable analysis, especially for research on emerging markets.

The research question of my thesis is what is the direct relationship between board diversity and corporate internationalization as well as how the ownership structure moderates this relationship in Asian domestic firms. Although there is lots of research on board diversity and corporate performance, the results are inconsistent (Rivas, 2012). Moreover, the discussion of the relationship between board diversity and firm internationalization is still open. The question of whether diversified board directors are the advantage for international expansion is still in void and worth researching, especially for Asian emerging countries. The American and European multinational corporations’ board systems tend to include more outsiders and female members of the racial minority (Hillman, Cannella & Harris, 2002). However, the characteristics of Chinese domestic firms are unclear. Furthermore, it is obvious that Chinese large domestic corporations are most government-controlled (Kusnadi, Yang and Zhou, 2015). Due to the ownership characteristic of Chinese domestic corporations, the analysis of the moderating effect of ownership structure is also meaningful. Therefore, the thesis analyzes the director effect of board diversity on the firm international degree and the moderating effect of ownership concentration

This thesis applies the empirical quantitative analyzing method. Hypothesis about the relationship between board diversity and firm international degree is established. For the moderator of ownership, a related hypothesis is also established. To test these hypothesizes, the data sample of domestic firms in China and Vietnam is collected, which could be representative of corporations in emerging market. To analyze whether the board diversity positively promotes the corporate international degree, the hierarchical regression will be

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applied to test the significant and adjusted R-square. Moreover, the PROCESS developed by Hayes could test the moderation of ownership concentration.

The study contributes to the corporate governance literature on understanding how board characteristics could influence the firm internationalization managements in different ownership structures. The regression for the number of foreign subsidiaries proves the positive association of board directors’ age and the international expansion degree while the educational background of directors negatively influences the international diversification. Compare to the state- and individual-owned firms, the corporate- and foreigner-owned corporations strengthen the positive connection of the age of board directors and the number of foreign subsidiaries, especially when the board members’ age level is high. Additionally, the ownership concentration as well as the high state ownership percentage strength the negative relationship of board educational level and the international expansion degree especially when the board member has a low educational background. This thesis extends the nascent literature on board diversity and internationalization by showing the positive relationship of board directors’ age and international level and negative direct effect of the board on the firm internationalization with hierarchical regressions. In terms of practical perspective, this study could make some contributions to corporate management and investors’ decision-making process. It suggests that shareholders and investors should consider the board members with different age and educational characteristics as well as distinguished ownership concentrations especially when corporations in emerging markets began foreign investment.

This thesis is going to analyze the direct relation of board compositional characteristics and international expansion moderation factor of ownership structure in this relation. The following content is arranged as the below introduction. Firstly, the existing literature on comparative governance (board system and its characteristics), international theories, as well as ownership structures’ characteristic will be elaborated on in the following Second part. In

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literature reviewing part, the influence of board diversification on the corporate foreign direct investment will be also stated. The possible moderating factors of ownership structures will also be discussed. Based on the literature review, the hypothesizes are developed in the Third part. The following section Four includes the outline of research methodologies. Then the regression results are reported in the Fifth part. Afterward, there is a discussion session for the analyzing results. The limitations of this thesis and future research directions will be mentioned in part Seven and Eight. Finally, there is the conclusion.

2. Literature Review

The different associations existing between factors in the research question of this study will be discussed in the section. Theories of agency and principle, information processing, resource-based view, managerial network are applied in this discussion.

2.1. Influence board diversity-internationalization

There are three basic theories in this section, information-processing, resource-based view and managerial network theories. Firstly, there are two reasons for management failures based on the information processing theories. One is that the board directors cannot get the access to the necessary information, the other is that the board members are unable to process the available and useful risk related information (Pirson & Turnbull, 2011). The first reason refers to the directors’ limitations of human resources and information as well as the ability to exploiting new access of information. The second reason emphasizes the capability of the board members. Moreover, the directors are basically the important human resource of the companies from the RBV (resource-based view) which is the essential and core factor of corporation successful operation (Cheng, Chan & Leung, 2010). So the characteristics of the core resource of the firms influence the internationalization which is an important part of the corporate managerial success. Furthermore, the managerial network theories argue that top executives’

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social connection and human capital could help the enterprise decrease the transaction cost to achieve corporate profitability (Cheng, Chan & Leung, 2010). High education level, abundant experiences, and ages all could increase board directors’ social ties and human capitals.

Board system with high level of diversity has the stronger capability of problem solving and decision making in international development. Board of diversity refers to variations of incumbency, age, gender, educational background, functional background, political relationship to the state government as well the independence (insider/outsider). Williams and O’Reilly (1998, cited in Rivas, 2012, P.1) define it as ‘any attribute that another person may use to detect individual differences’’. Consequently, diverse classification mechanism like nationality or gender or even the percentages such as the proportion of a minority has been applied to deeply explain the group diversity. Board diversity analysis has mainly concentrated on the distinction in gender, generation, race, the term of office, educational and functional background (Rivas, 2012, P.1) The variations significantly influence the mindset, abilities and human capital of the board team.

2.1.1. Board system and board diversity

The nature of the board’s function is to divide the responsibilities and allocate the resource to ensure the efficient enforcement. According to OECD (2015), it is one important principle that the different authorities should clearly allocate the responsibilities to serve the public interest of the organization. Furthermore, the clear definition and division of accountabilities for administration, execution and enforcement among different authorities facilitate the effective enforcement. In this way, the capabilities and competencies of complementary departments and units are separated and function most effectively.

2.1.1.1. Board system and directors

There are two systems of the board of directors, the one-tier board system and the two-tier board system. The unitary board structure, also called exclusive board structure, comprises

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executives who are formally selected from a general shareholder meeting (Haxhi, 2015, P. 227). Moreover, Haxhi (2015) illustrates that the chairman or CEO, supported by the full board, are often the main origin of effect on the nomination of directors. In the one-tier board of directors, shareholders always have the powerful influence on important management decisions while the independent directors are considered as helpful representatives of other stakeholders to balance the authorities. Meanwhile, the Dual firm board system consists of an executive (Vorstand) and a supervisory board (Aufsichtsrat) (Haxhi, 2015, P. 218). The supervisory board always comprise “codetermination”, the employee membership. Haxhi (2015) also states that there are both optional and compulsory two-tier board system. To distinguish the two kind system, it is not necessary for optional dual board system to connected to the co-determination. Different countries applying the same board system have their own characteristics. Based on Chinese corporate laws, registered firms are required to maintain the two-tier board system, supervising board (SB) and the board of directors (BOD) (Sanders & Carpenter, 1998). Xiao et al. (2004, cited in Sanders & Carpenter, 1998) and Firth (2007, cited in Sanders & Carpenter, 1998) illustrate that the-the BOD is specifically defined as a decision-making and the SB as a monitoring agency mechanism by the corporate law in China. Both the BOD and the SB are appointed by and must report to the shareholders of the firm (Xiao et al. 2004; Firth et al. 2007).

2.1.1.2. Roles of the board of directors

The function of the board of directors is explained by the official connection of corporate shareholders and the managers who are assigned for the daily organizational and administrative issues’ processing. Fama and Jensen (1983, cited in Rivas, 2012) have utilized the ‘‘apex of the firm’s decision control system’’ to describe the board role. Similarly, as top management teams (TMTs), boards will also confront complicated, multidimensional issues, often concerning about strategic decision processing (Jackson, 1992, cited in Rivas, 2012). However, the de important distinction between boards and TMTs is more signification for

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scholars to pay attention. According to Fama and Jensen (1983, cited in Rivas, 2012), members of the board only take responsibility of supervising and influencing strategic decision-making process while managers are in charge of executing strategic decisions or management. There are three functions of the board of directors, controlling (monitoring), resource dependence and service (providing suggestions and guidance) (Krause et al., 2013, P. 1), among which controlling and monitoring are the most relevant duties. Controlling function means the authorized responsibilities of monitoring administration of the representative of the corporate shareholders and, to implement duty with effective allegiance and careful mind (Monks & Minow, 1995, cited in Rivas, 2012). For the service task, directors potentially supply recommendation and suggestion to the chief executive officer and other top managers actively involved in strategy formulation. (Rivas, 2012).

Based on the agency theories, the function of board system and shareholders’ interests mutually influences. Jensen and Meckling (1976) has also proposed a theoretical explanation for the results of the fragmenting of ownership and administration. Corporate stockholders play as the principles whose goal is the maximization of the companies’ market value. Simultaneously, the executives in the role of agents, seek for higher individual profits and compensation. Thus, ‘there is good reason to believe that the agent will not always act in the best interests of the principal’ (Jensen & Meckling, 1976, cited in Oesterle, Richta & Fisch, 2010). Furthermore, there is empirical evidence supporting this agency theoretical view. The actions of executive-controlled corporations are distinguished from the operation of proprietor monitored firms. Specifically, executive-controlled enterprises focus on increasing sales and smoothing income (Boudreaux, 1973, cited in Oesterle, Richta & Fisch, 2010), rather than profits (Amihud & Kamin, 1979, cited in Oesterle, Richta & Fisch, 2010), are more internationalized (Amihud & Lev, 1981, cited in Oesterle, Richta & Fisch, 2010). Those behavioral features of executive-controlled enterprises are clarified as the consequence of

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managers’ opportunistic behavior because this enterprise decision making sometimes is obviously conflictive with the aim of the enterprise’s market value maximization (Lloyd et al., 1987, cited in Oesterle, Richta & Fisch, 2010).

2.1.2. Internationalization

There are two main distinguished main theories on the process of international diversification, the internationalization method, and the economic theory. Based on the Uppsala Model (Rugman, Verbeke & Nguyeb, 2011), also called Internalization process, there is stage of international diversification where the potential benefits from the arbitrage of firm specific advantages (FSAs) in host countries require to overweight the cost of operation and learning to overcome the liabilities of foreign. According to the economic theory, managers make their decisions of foreign direct investment only according to the benefits and expense of those location countries (Benito & Gripsrud, 1992). Furthermore, the exploitation of the enterprise’s monopolistic advantages, the internalization of imperfect component markets, the market-seeking motivation, leveraging industrial economic effects, the increasing operational flexibility as well as the chance of organizational learning are the most common reasons mentioned to explain the firm’s international diversification (Oesterle, Richta & Fisch, 2010). A firm’s internationalization or called its international diversification is the extension of its operations in foreign countries in response to unutilized resources (Oesterle, Richta & Fisch, 2010). During the internationalization process, managers and directors have the deal with global markets where diversity is always a real fact (Rivas, 2012, P. 3). Dunning’s OLI-Paradigm especially proposed reasonable explanations for the choice of market entry and establishment modes, which are most accepted by scholars. The firm’s reliability on foreign markets for customers and productions and this reliabilities’ geographical dispersion are reflected by its degree of internationalization (Sanders & Carpenter, 1998).

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The performance effect of international expansion is arguable. Because The competencies, strategy and competitive advantages’ nature and boundaries have been changed by internationalization (Bartlett & Ghoshal, 1989; Melin, 1992; Porter, 1986; Prahalad & Hamel, 1994, cited in Sanders & Carpenter, 1998). Because of advanced development of technology and communications, different distant countries have brought closer and it becomes necessary to "leverage" global business innovations and products ideas across different nations (Bartlett & Ghoshal, 1989; Conference Board, 1995; Kim & Mauborgne, 1991, cited in Sanders & Carpenter, 1998). Furthermore, there are several short-term and long-term benefits, associated with the process of internationalization (Gaur & Delios, 2015). The long-term profits are particularly significant for emerging multinational corporations that make the foreign investment to seek resource and technologies which will be helpful for competition in global and domestic markets. There are mixed perspectives, including shaped, inverted U-shaped, S-U-shaped, and both positive and negative linear relationships (Hutzschenreuter, Horstkotte, 2013). It is believed that a central contingency factor in the empirical analysis of performance effects of internationalization has been largely neglected: the firm’s management. It is highly related as complication added in the process of internationalization comes with additional information processing requirements for directors and top managers (Penrose, 1959, cited in Hutzschenreuter, Horstkotte, 2013).

2.1.2. Diversification-internationalization influence

The characteristics of board members significantly affect the decision making, strategy establishing and problem solving in international process. Gaur and Delios (2015) highlight “firm governance influences internationalization behavior.” Significantly, the firm’s governance structure determines the corporate capability of successfully solving the complexity which will increase with the degree of internationalization (Bartlett & Ghoshal, 1989; Child, 1972; Daily & Schwenk, 1996; Hoskisson, Hitt, & Hill, 1993; Melin, 1992;

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Thompson, 1967; cited in Sanders & Carpenter, 1998). Specifically, the composition (Baysinger & Hoskisson, 1990) and structure (Baysinger & Hoskisson, 1990) of the board system have played the critical role in corporate governance. Base on the theories of information economic, governance structures is expected to effectively supervise and inspire the top management team in the process of international diversification (Sanders & Carpenter, 1998). Moreover, international diversification not only enhances the information-processing demand, but it also requires both the specific knowledge of the company’s local market and managements as well the uncertainty and risk of the surrounding board members’ behaviors (Nohria & Ghoshal, 1994, cited in Sanders & Carpenter, 1998).

Based on the RBV and managerial network theories, the human capital resources of the diversified board could facilitate solving the increasing complexity of management as well as the increasing demand for specific knowledge and skills. It is argued that the experiences of the top management team could accelerate solving the complicated issues caused by added cultural distance between different nations (Hutzschenreuter & Horstkotte, 2013), so as the board team members. From the decision/information making perspective, Walsh (1995, cited in Rivas, 2012) states that the resolutions made by directors will be crucially affected by the board members’ mindset. It will be easier to attain diffused range of task-related knowledge, skills and abilities if the board team has diversified characteristics.

2.2. Empirical evidences diversity-internationalization

There is some empirical evidence of the board characteristics’ influence on internationalization. However, these findings are inconsistent and the-the research is still open to discussing. Sanders and Carpenter (1998) has analyzed the positive relationship a firm's degree of internationalization and board size as well as the influence of duality of board system on international diversification. It is reflected that the separation of chairperson and CEO positions facilitate the international development (Sanders & Carpenter,1998). Moreover,

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Rivas (2012) proves that larger board size with more independent directors is positively related to internationalization. It is also concluded that efficient corporate governance arrangements which are more appropriate for resolving complexity could promote firms to internationalize. (Rivas, 2012). Rutherford and Buchholtz (2007) exam the associations between boards’ demographic features and boards’ behaviors of information gathering. With the sample 149 firms, it is found that the increasing proportion of outside directors is related to increase the information quality and promote proactively seeking information (Rutherford & Buchholtz,2007). Moreover, Khanna, Jones and Boivie (2013) forward the conception of human capital, which is considered as s source of capability and competitive advantages. In addition, the diversification may also boost the entrepreneurship and innovation. Cheng, Chan and Leung (2010) research the positive relationship of board directors’ age and corporate performance while Rivas investigate the negative association between board members’ age and international expansion degree.

2.3. Influence of ownership structure on internationalization

Agency theory is the main theory in the related discussion of ownership structure. According to Sanders and Carpenter (1998), both assume that corporate governance could enhance the productivity and efficiency of the organization. The problems and solutions, related to the principles’ delegating their task to agents in the complicated environment with conflicting interests among different stakeholders (Linder & Foss, 2013). In this situation of the delegation, Lupia (2013) notes that the principle relies on the agent to take actions on their behalf. Shareholders from different ownership types select and delegate the board members, relied on them to strive for interest and profits. Agency theory also indicates that linking the interest of top management team to the benefits-maximizing intentions of corporate shareholders (Sanders & Carpenter, 1998).

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Ownership structure is only defined as the distribution of ownership stakes, associated with shares and the related voting rights (Oesterle, Richta & Fisch, 2013). Owner–corporation relationships in the ‘big companies’ within the Rhineland model are mainly described by one or more large shareholders. There are six types of Owners, individuals, banks, government, institutional investors, other companies and foreign firms. The types of investors with strategic intentions, like corporations, the public organizations are always the large shareholders (Haxhi, 2015, P. 216). There are also smaller shareholdings, including individuals (families), investment funds as well as the insurance firms.

The internationalization-related complexity and information processing demands have significant implications for the agency relationship between the shareholders and corporate executives, and, more particularly, for the delegation and monitoring of executives (Sanders & Carpenter, 1998). From the perspective of an agency relationship, it is isomorphic of the information-processing requirements and agency interests throughout the whole company and the corporate governance structure is required to accommodate the enhanced complications related to the international development (Sanders & Carpenter, 1998). Specifically, Bethel and Liebeskind (1993, cited in Sanders & Carpenter, 1998), as well as Finkelstein and Hambrick (1996, Sanders & Carpenter, 1998) all, emphasize that the firm’s strategy and governance structure might both be affected crucially by the shareholders who owned large quantity of the corporate outstanding stock. In EE firms, the ownership structure exerts vitally critical influence on both knowledge absorption and core strategic decisions like internationalization (Keasey et al. 2005; Shleifer & Vishny 1997, cited in Cui, 2014).

Different shareholders have different interests, risk tolerance, and strategy preferences as well as relative power. Not all types of shareholders have the same incentives and interests for supervising and controlling decision-making and strategy-establishing process (Ramaswamy et al. 2002; Tihanyi et al. 2003, cited in Gaur & Delios, 2015). Particularly, it is

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likely that home and foreign shareholders have distinguished the level of risk tolerance and incentives associated with foreign investment in Asia. Gaur and Delios (2015) demonstrate that although both domestic and foreign firms stimulate the internationalizing process, the domestic and foreign ownership do not have the positive moderating effect on the-the internationalization-performance relationship. Ownership structure also lead to distinguished owners’ relative authorities in monitoring corporate strategic vision and resource types which owners might share with the firm (Cui, 2014). Because the shareholders have various objectives and resources, they affect the atmosphere of knowledge transferring.

2.3.1. State ownership

State ownership of firms will positively promote the corporate international diversification if the government develops a global economy and encourage companies to invest in foreign countries. State ownership is representative in the firm sector, especially in emerging countries, which considerably affect the internationalization of emerging economic corporations, especially in China (Cui, 2014). Government as shareholder control the strategy of firms, even the who chosen section of the domestic economy, as well as the corporate capital. Simultaneously, the state could help raise the market value of the invested firm by sustaining the international activities (Cui et al., 2014). Since firms’ key competitive capabilities could be enhanced by the outward foreign development investment which could help increase the corporate market value. Compare to private-, corporate- and foreign-owned firms, the internationalization of state-owned enterprises focuses not on short-term payback, but the long-term benefits of advanced technologies and brand. Liu et al. (2010, cited Cui et al., 2014) explain that state-owned enterprises not only concentrate on their own firm development but also are institutionally motivated to bring knowledge and skill spillover to domestic industries.

2.3.2. Other ownership types

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internationalization process are unclear. In emerging economies, the private-owned corporations, including individual-owned and family-owned, has shown outstanding growth. Private-owned enterprises always encourage and reward taking entrepreneurial risks in some approach (Cui et al., 2014), to maximize individual or family profits. There are several reasons. At first, private firms always operate in unlimited and more competitive markets so the market environment needs management attention to support (Carney et al. 2009, cited in Cui et al., 2014). Simultaneously, private-owned enterprises regularly are less accessible to government resources and so they must be more powerless to market uncertainty and international rivalry. This requires and also motivates private firms to strength superior their management capabilities, which include performance-based rewards, faster decision-making process as well as more flexible regulations (Child & Pleister 2003, cited in Cui et al.). So the private-owned corporations are more flexible and have autonomy to pursue entrepreneurial opportunities. Their growth strategy is more aggressive and the strategy implementation is more effective and efficient (Liang et al. 2012, cited in Cui et al.) Thirdly, it is more sensitive and ambidextrous of private enterprises to weigh the home country based advantages and explore foreign strategic assets. Because they might face unfavorable domestic institutions and market imperfection which press private-owned firms to seek attain low-costs and business networks in the foreign institutional environment. Therefore, private-owned enterprises have diverse advantages, sustaining entrepreneurship and pursuit of foreign market opportunities, but have the limitation of government support and resources.

Foreign ownership, even as a minority stake, promotes corporate governance and facilitate getting internationalization-needed resources. Compare to domestic investors, foreign shareholders not only supply capital but also the foreign experiences and insights. Chen et al. (2002) and Gul et al (2010) all think that foreign investors not only could participate in supervising the firm management but also increase the internal information transparency.

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The percentage of foreign ownership over the total equity indicates that the firm originally has some connection the with the foreign market and related knowledge, which are attained both in attracting foreign investment and then the operational inputs from the foreign shareholders (Bhaumik et al. 2010, cited in Cui et al.).

2.4. Influence of ownership structure on board diversity

The board members are selected, delegated and monitored by majority shareholders. Based on OECD (2015), shareholders are entitled the following rights authorities: safe approaches of ownership registration; 2) convenience of transferring shares; 3) receiving regular reports and relevant information on the corporation; 4) participation and voting in general shareholder meetings; 5) nominating, selecting and dismissing board directors; and 6) sharing profits of the firm ‘s operation. Specifically, corporate owners should be sufficiently accessible to the transparent information of and are powerful to approve or get involved in, decisions about fundamental changes of the company like extraordinary transactions, including the transfer of assets, which effectively lead to the sale of the firm. Based on agency theory (Gaur & Delios, 2015), it will be easier for shareholders to supervise and control top directors and managers who might motivate by their personal interests rather than the organizational targets if the ownership is concentrated. Furthermore, such agency problems are aggravated by internationalization. Because foreign direct investments might give managers more freedom to seek personal goals in contrast with local business development (Morck et al. 1990, cited in Gaur & Delios, 2015). Hence, concentrated ownership support efficient internal corporate governance against the agent’s self-interest pursuing actions.

2.4.1. State ownership

State-owned enterprises face many government constraints and rigid regulations. Although state firms enjoy superior authority over private firms in term of government resource

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maximum of the shareholders’ interest may not their priority (Cui et al., 2014). The corporate governance with complexity is hard to control and the nomination of the board is intervention by the government.

2.4.2. Other ownership types

The private companies are independent and have more freedom and authority of their own organization. The corporate governance of private corporations has fewer government constraints, private firms have sustainably less rigid structure, deeply embedded rules and less cognitive complications, consequently enjoying more arranging autonomy and operational flexibility, in contrast with state-owned enterprises (Cui et al., 2014). At the same time, individual- and family-owned corporations are more proactive and creative in governance management, in order to make sure of their survival in the foreign market.

For the proactive and efficient governance role of foreign shareholders, it is indicated that foreign owners have the capability of influencing the composition of the board, as well the decision-making process including international business expansion (Cui et al. 2014).

3. Hypothesis

The research questions of my thesis are the what is the relationship between board diversity (age level & educational level) and corporate internationalization as well as how the ownership structure moderates this relationship in Asian (Hong Kong, China & Vietnam) domestic firms.

3.1. Board age diversity and corporate internationalization

The relationship between the age of board directors and the internationalization is debatable. Rivas (2012) argues that younger board age positively affects and promotes the internationalization. Because the energetic younger directors might be willing take risks and challenges. Moreover, age diversifications in the board systems could motivate different

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perspectives from different age groups, which is an integral factor in successful decision making and project planning (Rivas, 2012). Back soon and Chanwoo (2010, cited in Rivas, 2012) found that the board members’ age diversity might enhance the firm valuation.

From my perspective, the experiences and resource of aged board directors are comparatively more important. Aged board members have deep insight and mature understanding of the complexity added by the firm internationalization. Then the top and middle managers could take the responsibilities and provide energies to carry out the plans. Moreover, there is also evidence that older employees are regarded as more effective and efficient. Applying a sample of Chinese enterprises from 1999 to 2005, Cheng, Chan, and Leung (2010) find that the age of chairpersons is positively associated with firm performance. There is empirical evidence that the profitability is positively associated with top executives’ age (Cheng, Chan & Leung, 2010). Furthermore, Rivas (2012) also points out the if the age distance is large in the board, the aged directors might have communication difficulties with the younger members. Therefore, hypothesis 1 is established like below. Aged directors are perceived to have more experiences and wisdom to influence the organizational decision-making process and enhance the corporate internationalization level in the managerial network.

Hypothesis 1: The age level of board members positively influences the firm’s internationalization.

3.2. Board education diversity and corporate internationalization

Particularly, research of the internationalization process model (IPM) indicates that knowledge of oversea markets and management across boundaries make enterprises capable of enhancing their reputation and promising in oversea markets (Cui et al. 2014). Knowledge created through international study and experience for foreign insight, like evaluating business opportunities and risks, as well as the implementation of operation process. Rivas (2012) gave

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in Europe, like media, labor union, tax, and law. Such knowledge and capabilities, like how to solve these differences are often tacit, embedded in individuals and teams. Furthermore, it is assumed that high educational level will bring directors more human capital, which could be the origin of the corporate competitive advantages. Directors’ human capital resource could benefit the firm international development and performance (Khanna, Jones & Boivie, 2013). Because their prior educational experiences are highly possible to be effective and efficient at controlling operation and supply advice.

It is argued in the thesis that the board members with high university titles promote the international development. The board directors’ higher educational background means more knowledge of the international market and abundant human capital for the firm, so the educational level of board members should positively influence the firm internationalization. Based on the managerial network theories, subordinators always admire top executives with higher educational background and are motivated to implement their decisions. Cheng, Chan, and Leung (2010) prove that the board directors’ educational degree is positively associated with the firm performance. The positive relationship between the board’s educational level and the firm international level is proposed.

Hypothesis 2: The education level of board members positively influences the firm’s internationalization.

3.3. Moderations between board diversity and corporate internationalization through ownership structure

Based on the agency theory, the ownership structure might strength or weak the relationship between board diversity and internationalization. For example, the increased ownership of principles will be a greater motivation for monitoring agents’ activities. While the increased stakes of shareholders should lead to more efficient and careful decision making when the internationalization comes to the higher level (Gaur & Delios, 2015). Cui et al. (2014)

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research that the positive effects of board directors’ international leadership experience on corporate internationalization are strengthened by central state and private ownership but are weakened by local government and foreign ownership. The state ownership will strength the relationship between the board characteristics and internationalization because of the government support and resources. The shortcoming of institutional advantages makes private corporations face greater overtaking pressure than state-owned enterprises. Such pressure leads to stronger incentives of acquiring experiential knowledge through international business expansion. There is also evidence that the increased domestic and a foreign ownership promote firm internationalization (Gaur & Delios, 2015).

From my perspective, government ownership percentage positively strength the board diversity and international level. Especially in emerging markets, the government always encourage firms to do foreign investment not only for the firm performance but also advanced technological development and managerial skills which are significant for industry restructure. Gaur and Delios (2015) and Cui et al. (2014) both find empirical evidence supporting this relationship. Gaur and Delios (2015) illustrate the higher efficiency of decision-making process while Cui et al. (2014) concentrate on proving the government ownership’s positive moderating effect. The state ownership reflects the support of resources and information from the government. The state ownership may make the positive effect of average age on the international development larger. The state ownership reflects the support of resources and information from the government. The state ownership may make the positive effect of average age on the international development larger.

Hypothesis 3a: The state ownership percentage positively strength the relationship between the board’s age level and the firm’s internationalization.

Hypothesis 3b: The state ownership percentage positively strength the relationship between the board’s educational level and the firm’s internationalization.

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Besides the state ownership, I think that other ownership concentration also has the positive moderating effect. Individual-owned firms always have an aggressive strategy and are motivated by owners’ personal profit to take the risk. Moreover, the foreign ownership concentration originally has the economic connection and network resource of foreign market. So the ownership concentration also has advantages to developing internationalization.

Hypothesis 4b: The ownership concentration strength the relationship between the board’s age level and the firm’s internationalization.

Hypothesis 4b: The ownership concentration strength the relationship between the board’s educational level and the firm’s internationalization.

In the graph 1 of a schematic representation of hypothesis, there is detailed information on the model of the study. There are two dependent variables, the percentage of foreign sales and a number of foreign subsidiaries. So there will be two regression models, one for the percentage of foreign sales and the other for a number of foreign subsidiaries, to separately test the hypothesis. For each model, the two characteristics of board members, the age and education will be analyzed respectively, which means that there are two types of relationship. Then the two moderators will be proved whether influence these two relationships. Throughout this process, four variables, country, firm size, board size, and board structure are all controlled. The below picture explains the two kind of relationship (directors’ age-firm internationalization & directors’ education level-firm internationalization) as well as the moderating effects.

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Graph 1: Schematic representation of hypothesis

4. Method

In this chapter, the data source and sample will both be introduced, as well the variables of interest. How the dependent, independent, controlling variables and moderators are measured will be explained. In particular, it is stated that how the models are established to test the hypothesis.

4.1. Data source

My thesis applied a cross-sectional research design to research how the board directors’ characteristics of age and education affect firms’ international diversity in 2014. All the data collected realized before 31st, December 2014. This sample had 387 largest companies in China, Hong Kong, and Vietnam according to the top rank on the stock exchange websites.

All the data is from Annual reports, Stock exchange websites as well as Corporate Board Member’s Directors Database and Orbis Database. Due to the limited data collection of Asian companies in databases, most of the sample data is predicted to collect from official websites and annual report. The first step of data collection is to identify the ranking names of

Average Age of Board Directors

Average Education Level of Board

Directors

1. Percentage of Foreign Sales 2. Number of Foreign Subsidiaries

Ownership Structure 1. State Ownership H1 H2 H3 H4 Control Variables 1. Country 2. Firm Size 3. Board Size

4. Board Structure (whether there is the nomination committee)

Ownership Structure 2. Ownership concentration

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firms in each stock exchange websites in different cities and countries. For example, we can find top one hundred biggest listed companies in Shanghai Stock Exchange website based on the market price of the total asset quantity. Then with the companies’ names, we could use the keyword (corporations’ names) and filters to search for the variable information in databases like Wharton Research Data Services (WRDS). Furthermore, if the databases only provide limited data, annual reports should be found and reviewed, to get necessary related variable data.

4.2. Sample

This thesis will apply a cross-sectional research design to analyze the individual characteristics of board directors and firms’ international diversity in 2014. The sample includes approximately four hundred largest companies in China and Vietnam, according to the top rank on the stock exchange websites. For the Chinese enterprises in this sample, about three hundred firms’ data will be equally divided to collect from Shanghai, Shenzhen, Hong Kong, and Taiwan. Specifically, we exclude the multinational enterprise and foreign companies in our sample. The analysis is focused on local, native and domestic firms. For example, there is two main kinds of stock in China, A stock and B stock. A Stock is issued by corporations in mainland China while B stock is issued for investors outside mainland China, who are in Taiwan, Hong Kong, and other foreign countries. Therefore, when we collect data from Chinese listed companies, we concentrate on A stocks.

For each firm, we collect data on following two board member attributes: age and educational background. When there appear two visions of board information claim, the complete list of board members will be recorded. Moreover, data of foreign sales, foreign assets and a number of foreign subsidiaries should be collected too. For ownership structure, we collect information on the ownership percentages of stated, corporate, individual (or family) and foreigner owned.

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4.3. Dependent variables

In this sample, (1) foreign sales as a percentage of total sales; (2) the number of foreign subsidiaries are chosen to describe the level of internationalization. Measures of the degree of internationalization dependent on (1) foreign sales as a percentage of total sales; (2) foreign assets as a percentage of total assets; (3) the number of foreign subsidiaries divided by the total number of subsidiaries (Lee & Park, 2006). Sanders and Carpenter (1998) also illustrate that the ratio of foreign sales to total sales represents the enterprise’s reliability on the international market. Moreover, Gaur and Delios (2015) measure international diversification with the percentage of foreign sales over total sales (FSTS) and the ratio of foreign assets to total assets (FATA). Furthermore, the number of countries where companies establish subsidiaries could measure the geographic dispersion. In this thesis, due to the shortage of data, the number of subsidiaries represent the geographic dispersion.

𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑜𝑓 𝑓𝑜𝑟𝑒𝑖𝑔𝑛 𝑠𝑎𝑙𝑒𝑠 =𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑠𝑎𝑙𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 4.4. Independent Variable

In this research, there are two independent variables, the average age and the average education level of board members. Although according to Pelled et al. (1999), the coefficient of variation – standard deviation divided by the mean can be used to measure both age and tenure diversity. Moreover, Blau’s index (Timmerman, 2000) can be applied to produce a predictor of the degree of team heterogeneity regarding functional and educational background as well as gender diversity. However, due to the limitation of the data source, the mean, and the standard deviation as well as the Blau’s index are in lacking. Therefore, instead, the average data is used.

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measured by the average age.

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑔𝑒 𝑜𝑓 𝐷𝑖𝑟𝑒𝑐𝑡𝑜𝑟𝑠 = 𝐴𝑔𝑒5

6 578

𝑛 (𝑛 = 𝐵𝑜𝑎𝑟𝑑 𝑠𝑖𝑧𝑒)

4.4.2. Average educational level of board members

Education diversity could be measured by the average educational level of all board member (5=Phd, 4=Master, 3=Bachelor,2=Applied University, 1=High school and Less). In the graph 2 (table of dummy independent variables), there is detail information of the frequency of each dummy independent variables. For nearly 60 percentage of the board systems in our sample, the average education level is a master. The Ph.D. educational background is only account for 2.1 percentage in the sample.

Graph 2: table of Dummy variables of educational background 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 𝐿𝑒𝑣𝑒𝑙 𝑜𝑓 𝐷𝑖𝑟𝑒𝑐𝑡𝑜𝑟𝑠 = 6578𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 𝐿𝑒𝑣𝑒𝑙5

𝑛 (𝑛 = 𝐵𝑜𝑎𝑟𝑑 𝑠𝑖𝑧𝑒)

4.5. Moderator

In this analysis, there are two moderators being researched, the ownership types (concentrated ownership) and the percentage of state ownership. Variables of ownership structure are all measured by the percentage of the firm’s equity held by them. Ownership types were identified by the highest percentage of ownership (1=stated owned, 2=individual owned, 3=corporate owned, 4=foreign owned). In the table of ownership concentration (Graph 3), it is shown that nearly half of the sample companies are state-owned. The influence of ownership concentration is always greater than minority ones (Gaur & Delios, 2015). According to

Education Level Dummy Variables Frequency Percentage

(%)

High school of Less 1 0 0

Applied University 2 45 11.6

Bachelor 3 106 27.4

Master 4 228 58.9

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Calabrò et al. (2013), foreign investors and CEOs in the business play an important role in the relationship with international sales. State ownership was measured by the percentage of stated-owned over the total shareholders.

𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑜𝑓 𝑆𝑡𝑎𝑡𝑒 𝑂𝑤𝑛𝑒𝑟𝑠ℎ𝑖𝑝 =𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑜𝑤𝑛𝑒𝑑 𝑏𝑦 𝑔𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡 𝑇𝑜𝑡𝑎𝑙 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦

Graph 3: Table of Dummy variables of ownership concentration 4.6. Control Variables

Differences on country level, company size, board size, and board structure are all controlled. Countries of origins were used as a control variable. Dummy variables are used to control country effects. In graph 4, the frequency of the firms’ original nationality is reflected. The majority is the Chinese (54%) and Vietnam (25.1%) firms. A financial industry like banks is excluded in our sample. Moreover, company size was controlled in the analysis, measured as the natural logarithm (ln) of the number of total employees. Firm size is always associated with the internal managerial complications as well as the information-processing requirements faced by board directors (Sanders & Carpenter, 1998). Moreover, the board size was also controlled and defined as the total number of the board members. Because size and composition of board system are related to the international degree. The last control variable was board structure which was described as whether the board has the nomination committee (1=yes, there is a nomination committee; 0=no, there is no nomination committee).

𝐹𝑖𝑟𝑚 𝑆𝑖𝑧𝑒 = ln(𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡ℎ𝑒 𝑡𝑜𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑒𝑠)

Ownership Types

Dummy Variables

Frequency

Percentage

(%)

State-Owned 1 172 44.4

Individual-Owned 2 81 20.9

Corporate-Owned 3 107 27.6

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. Graph 4: Table of country level as the control variable

4.7. Model

To measure the direct positive effect of the age and education characteristics on corporate internationalization, the hierarchical regression in SPSS is used. According to Erhardt et al. (2003), hierarchical a regression could be applied to illustrate the effect of the independent variable ‘board diversity characteristic’ on corporate internationalization with control variables as specific above. Two similar models were established, one with the percentage of foreign sales as the dependent variable and one with a number of foreign subsidiaries as a dependent variable, to determine whether the results diverge when different internationalization indicators are used. Control variables were chosen in the first block of independents, which are all the same in two regression models. The independent variables of interest, the average age and educational level of board members were typed in the second clock. The relationship can be described by the equation. Y is the dependent variable (corporate internationalization). X is the independent variable (board diversity).

𝑌 = 𝑎 + 𝑏𝑋

Country Dummy Variables Frequency Percentage (%) IT (Italia) 1 1 0.3 LU (Luxembourg) 2 1 0.3 CN (China) 3 209 54 BM (Bermuda) 4 19 4.9 KY (Kentucky) 5 27 7 Transportation, communications, electric, gas and sanitary services 3 HK (HongKong) 6 33 8.5 VT (Vitnam) 7 97 25.1

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To test for moderation, a modeling tool called PROSS developed by Hayes was applied. This tool combines many functions of statistical methods for test moderation in one model. The model of PROCESS which a suitable for testing hypothesizes 3a and 3b are the simple moderation model where the relationship between X and Y is influenced by a moderating variable. This moderating effect can be described by the equation. Z is the moderator (ownership structure).

𝑌 = 𝑎 + 𝑏𝑋 + 𝑐𝑍 + 𝑑𝑋𝑍

Six similar models were created as the below graph 5. Variables of interest will be typed each step, arranged by the table below. It is shown in the model arrangement (graph 5) that model 1 and 2 are regressions of foreign sale percentage while model 3 and 4 are regression of the number of foreign subsidiaries. In each regression, the first step is to analyze the direct effect of control variables on the dependent variable. Then each independent variable is typed in. The moderators are the final step.

Graph 5: Variables entered in different steps of hierarchical regression and process

1.1 1.2 1.3 1.4 2.1 2.2 2.3 2.4 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4

1 Foreign Sales _Percentage 2 Nb of foreign subsidiaries 3 Average Age

4 Level of

education 5 State ownership _percentage 6 _OwnershipType of 7 Country ID 8 Company size 9 Board Size 10 Nomination _committee Dependent Variables Independent Variables Moderator Control Variables Models

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5. Results

In this chapter, the results of the analysis in SPSS which is described in the session 4 will be reported. The results will be respectively reported for the two dependent variables, the percentage of foreign sales and the number of foreign subsidiaries. The moderating effects of state ownership percentage and ownership type will also be separately given. Based on these results, the supported and rejected hypothesizes could be stated.

5.1. Descriptive statistics

There are 387 firms in my data sample with no missing data. When collecting data, the filter in Excel was used to make sure all the data was available. Moreover, there is no need of recording in my data analysis. All the data were collected from the database ORBIS and corporate annual report as the correct and demanding way. Reliability Test was used examine the consistency of measurements. Some of my variables were in different scales in my data and other variables are nominal. Therefore, the Reliability test is inappropriate in my analysis.

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SPSS computes all the basic information (Mean, median, mode, standard deviation, variance, range, minimum, maximum, and sum) of each variable in graph 6 (table of statistics of variables of interest). For the dependent variable, the average foreign sale percentage is 11.16% with the minimum 0 and the maximum 100%. The mean of the number of foreign subsidiaries is 3, range from 0 to 52. For independent variables, the mean of the board average age is 53 with the minimum 35 and maximum 68. The average educational level of board members is nearly 4 with the highest level of Doctor and the lowest level of Applied education. For the moderator, the average state-owned percentage of one-fourth, which is comparatively very high. The highest percentage of state ownership is 97. Finally, the average of the board size is about 10 people with a range from 3 to 33.

Graph 6: Statistics of variables of interest

Moreover, the frequencies of nominal variables were also summarized in the below table. Specifically, the independent variable, over half companies’ the educational level of the board is Master. In addition, over half data comes from Chinese companies, which also match the ownership type data (44.4% state-owned firms). Although most of the data were from China,

Statistics of Variables of interest Variables of Interest 1 2 3 4 5 6 7 8 9 10 Statistics Percentage of Foreign Sales Number of foreign subsidiaries Average Age Level of education State-owned Type of Ownership Country ID company size No. of board members Nomination committee N 387 387 387 387 387 387 387 387 387 387 Mean 11.16% 3.1 52.6623 351.00% 25.35% 1.97 4.44 8.95 9.52 0.72 Median 0.00% 0 52.4667 400.00% 5.69% 2 3 9.033 9 1 Mode 0.00% 0 56 400.00% 0.00% 1 3 6.24 9 1 Std. Deviation 22.58% 6.367 5.4366 72.50% 28.52% 1.001 1.748 1.813 3.48 0.448 Variance 509.943 40.544 29.557 0.525 813.526 1.002 3.055 3.286 12.11 0.201 Range 100.00% 52 32.5714 300.00% 97.00% 3 6 10.704 30 1 Minimum 0.00% 0 35.4286 200.00% 0.00% 1 1 2.485 3 0 Maximum 100.00% 52 68 500.00% 97.00% 4 7 13.189 33 1 Sum 4317.30% 1201 20380.33 136000.00_% 9812.01% 763 1718 3463.545 3684 280