Who appropriates centrality rents? The role of institutions in regulating social networks in the global Islamic finance industry

Published on Jul 1, 2020in Journal of International Business Studies11.382
· DOI :10.1057/S41267-018-0202-4
Remzi Gözübüyük3
Estimated H-index: 3
(Sabancı University),
Carl Joachim Kock7
Estimated H-index: 7
(IE University),
Murat Ünal1
Estimated H-index: 1
This study explains and tests the effects of country-level institutions on the distribution of centrality rents between two sets of actors in an interorganizational network. Building on the literature on corporate elites, we propose that a cohesive elite following organizational logics other than profit-maximization diverts centrality rents and induces costs on firms, and that macro institutions act as external governance mechanisms to shape this relationship. We develop our theory in the emerging Islamic finance industry, where “Shariah scholars” connect firms and constitute a religious corporate elite. While central scholars in this network create legitimacy for firms, they also shirk and cause information leakage, suggesting a negative centrality-performance relationship for the firms. Country-level institutions such as government regulation and democracy, we argue, ameliorate these effects by influencing this religious elite’s institutional logic and restraining their actions, while institutions developed from within the industry strengthen the power of the elite. Testing our theory in a network of 367 scholars and 396 institutions over 31 countries using multi-level methods, we indeed find a negative centrality-performance relationship that is ameliorated by stronger government regulation but exacerbated by better-developed industry-specific institutions, as well as a negative relationship between democratic and regulatory institutions and centrality.
📖 Papers frequently viewed together
#1Elitsa R. Banalieva (NU: Northeastern University)H-Index: 14
#2Alvaro Cuervo-Cazurra (NU: Northeastern University)H-Index: 43
Last. Ravi Sarathy (NU: Northeastern University)H-Index: 16
view all 3 authors...
Abstract We analyze how pro-market institutions affect firm performance in emerging markets. Integrating transaction costs and signaling theory, we advance three arguments. First, we separate four dynamic components of pro-market institutions: intensifying and fading pro-market reforms and intensifying and fading pro-market reversals. Second, we propose an asymmetric dynamic view whereby not only intensifying reforms but also fading reversals improve firm performance, while not only fading refor...
#1Vittoria Giada Scalera (UvA: University of Amsterdam)H-Index: 11
#2Alessandra Perri (Ca' Foscari University of Venice)H-Index: 8
Last. Thomas J. HanniganH-Index: 7
view all 3 authors...
We explore how knowledge-based connections to domestic and foreign locations affect the technological scope of firm innovations. Inspired by a blend of Economic Geography and International Business perspectives, we propose a theoretical framework that distinguishes between domestic subnational differences and cross-national spatial heterogeneity. Further, we combine the Penrosean view of managerial capabilities with the attention-based theory of the firm. Analyzing a sample of US-based firms bet...
In today’s knowledge economy, clusters are a key driver of a country’s competitiveness. Yet a cluster’s technological base is now more than ever influenced by constituent firms’ actions to tap into distant knowledge sources. Drawing on a social network perspective, and distinguishing between horizontal versus vertical organization-based linkages, we explore the effects of a cluster’s connectedness to foreign locations on its innovation performance. We show that improvements in horizontal and ver...
#1Jonathan P. Doh (Villanova University)H-Index: 56
#2Suzana Braga Rodrigues (EUR: Erasmus University Rotterdam)H-Index: 23
Last. Mona V Makhija (OSU: Ohio State University)H-Index: 12
view all 4 authors...
For nearly two decades, scholars in international business and management have explored the implications of institutional voids for firm strategy and structure. Although institutional voids offer both opportunities and challenges, they have largely been associated with firms’ efforts to avoid or mitigate institutional deficiencies and reduce the transaction costs associated with operating in settings subject to those institutional shortcomings. The goal of this special issue is to advance schola...
#1Hyejun Kim (MIT: Massachusetts Institute of Technology)H-Index: 1
#2Jaeyong Song (SNU: Seoul National University)H-Index: 22
Business groups may fill institutional voids in emerging economies, but empirical research is lacking as to when and how institutional voids affect economic behavior of individual firms. We examine the effect of institutional voids in capital markets on individual transactions in emerging economies, focusing on M&A deals that were abandoned after being publicly announced. M&A deals may fall through when unexpected information is brought to light or financing difficulties arise. At the country le...
#1Dale Griffin (UBC: University of British Columbia)H-Index: 58
#2Omrane Guedhami (USC: University of South Carolina)H-Index: 52
Last. Liang Shao (Hong Kong Baptist University)H-Index: 7
view all 5 authors...
It is well known that firm-level corporate governance practices vary mainly between rather than within countries, but country-level factors such as legal and financial institutions explain less than 50% of this cross-country variation. In this article we show that two dimensions of national culture – individualism and uncertainty avoidance – capture about 90% of the country fixed effects and outperform the country-level explanatory variables used in prior literature. We argue that culture works ...
#1Mihail K. Miletkov (UNH: University of New Hampshire)H-Index: 7
#2Annette B. Poulsen (UGA: University of Georgia)H-Index: 28
Last. M. Babajide Wintoki (KU: University of Kansas)H-Index: 16
view all 3 authors...
Foreign directors can affect firm value through their advising and monitoring functions. However, the demand for these directors, as well as their effect on firm performance is likely to be influenced by firm- and country-level characteristics. In a large sample of non-US firms, we find that foreign directors are more likely to be associated with firms that have more foreign operations and an international shareholder base, and firms that are located in countries with a limited supply of potenti...
#1Jean-Luc Arregle (EMLYON Business School)H-Index: 21
#2Toyah L. Miller (UTD: University of Texas at Dallas)H-Index: 16
Last. Paul W. Beamish (UWO: University of Western Ontario)H-Index: 77
view all 4 authors...
Abstract International business research is only beginning to develop theory and evidence highlighting the importance of supranational regional institutions to explain firm internationalization. In this context, we offer new theory and evidence regarding the effect of a region’s “institutional complexity” on foreign direct investment decisions by multinational enterprises (MNEs). We define a region’s institutional complexity using two components, regional institutional diversity and number of co...
#1James D. Westphal (UM: University of Michigan)H-Index: 46
#2Guy Shani (UM: University of Michigan)H-Index: 2
This study reveals how self-regulated cognition in advance of social interaction can resolve the so-called "ingratiator's dilemma," which is that the most attractive targets of social influence--those who have relatively high social status--tend to be the most difficult to ingratiate successfully. Our theoretical argument suggests that in anticipation of social interaction with a relatively high-status colleague, corporate directors tend to reflect on characteristics shared with that colleague, ...
#1André van Hoorn (UG: University of Groningen)H-Index: 12
#2Robbert Maseland (UG: University of Groningen)H-Index: 14
Extant institutional research has failed to make a distinction between the effects of institutional profile and institutional distance on MNEs. The problem stems from the fact that, due to the use of a single reference country, variation in institutional distance between the reference country and partner countries is essentially equal to variation in the institutional profiles of these partner countries, making institutional distance and institutional profile effects indistinguishable. This rese...
Cited By5
#1Seng Kiong Kok (RMIT International University)H-Index: 1
#2Gianluigi Giorgioni (University of Liverpool)H-Index: 12
Last. Stuart Farquhar (University of Northampton)H-Index: 4
view all 3 authors...
Abstract null null Adopting a resource dependence lens, this study examines the impact of the trade-off between knowledge accumulation and independence on the Shariah governance-firm performance nexus through a detailed examination of Shariah supervisory board tenure. Utilizing a unique, hand-collected dataset of 140 of the largest Islamic financial institutions over the period 2011–2015 and across 16 nations, we discover that Shariah supervisory board tenure is a positive, linear predictor of f...
#1Seng Kiong Kok (LJMU: Liverpool John Moores University)H-Index: 1
Abstract The extant academic literature has shown the distinct differences between Islamic and conventional financial institutions along either a performance or efficiency front with an attribution to these differences to the adoption of a religio-financial framework merging the principles of economics and finance with those of Shariah. However, these empirical estimations do not entirely capture the religio-financial framework since they use performance and efficiency measures that include both...
#1Nabil Baydoun (Hamdan bin Mohammed e-University)H-Index: 9
#2Syed Aziz Anwar (Hamdan bin Mohammed e-University)H-Index: 6
Last. M. Sadiq Sohail (UPM: King Fahd University of Petroleum and Minerals)H-Index: 21
view all 3 authors...
There is a growing tide of global interest in China’s Belt and Road Initiative (BRI) launched by President Xi Jinping in 2013. The initiative has brought in its wake enormous opportunities for crea...
This website uses cookies.
We use cookies to improve your online experience. By continuing to use our website we assume you agree to the placement of these cookies.
To learn more, you can find in our Privacy Policy.