The role of institutional logics in shaping firm practices: the case of corporate governance and corporate social responsibility

This thesis investigates the role of institutional logics, as hidden drivers of firm behaviour, in shaping firm practices and decisions on corporate governance configurations and engagement in corporate social responsibility. It adopts a quantitative approach to identify and assess the embeddedness of family and market (non-family) logics in firm decision making, incorporating several behavioural dimensions in terms of real firm practices that are empirically proven to differ between family and non-family firms. The thesis builds on the socioemotional wealth preservation perspective regarding displaying family or non-family firm-like behaviour, and develops a new, institutional-based classification of firms, comprising family logic-driven and market logic-driven firms that draw from the notion of firm logic orientation – a latent explanatory, institutional factor. This institutional-based approach suggests a distinct view of the familiness and non-familiness, or marketness, of firms irrespective of ownership status (family or not). Particularly, this thesis emphasises that it is not family ownership status (or not), but the firm practices and behaviour that characterise and define firms in terms of their distinctive culture and nature. Using US-based data of firms listed on the S&P 1500 index in the period of 2006–2016, it tests the main and moderation effects of firm logic orientation through the empirical windows of corporate governance and corporate social responsibility. The analysis finds that family logic-driven firms differ from market logic-driven firms regarding the firm choice of internal corporate governance configurations and the magnitude of the established corporate governance determinant-configuration relationships. Specifically, relative to market logic-driven firms, family logic-driven firms appoint smaller and less independent boards and pay top managers lower total and equity-based compensation. Moreover, compared with the marketness logic orientation, the familiness of firms mitigates the effect of corporate governance determinants, including firm-specific, managerial and governance characteristics, on corporate governance configurations concerning the structure of the board of directors and the design of executive compensation. The findings also show that family logic-driven and market logic-driven firms vary in terms of the firm social performance of corporate social responsibility and the magnitude of the relationship between strategic conformity ¬– a legitimacy-seeking activity – and corporate social responsibility performance. Particularly, relative to market logic-driven firms, family logic-driven firms perform worse regarding firm engagement in corporate social responsibility. However, relative to the marketness logic orientation, the familiness of firms amplifies the social gains derived from firm legitimacy in relation to improving the perception of firms’ corporate social responsibility. This mitigates the otherwise negative impact of familiness logic orientation on corporate social responsibility performance. The findings indicate that, driving firm behaviour, the familiness logic orientation of firms presents a distinct, family-oriented business form that, apart from family ownership status (or not), differentiates firms from the standard, shareholder-oriented view of firms – so-called marketness logic orientation – in terms of firm practices and decisions. This implies that the latent institutional factor of firm logic orientation matters at least as much as the facet of ownership status for firm practices and behaviour. This thesis is one of the first to quantitatively measure the embeddedness of institutional logics – an intangible construct – in firm decision making based on the level of observed firm practices as a tangible manifestation of namely family and market logics, and to empirically examine the influence of family and market logics on firm practices and behaviour in the contexts of corporate governance and corporate social responsibility.