Global institutions and local filtering: Introducing independent directors to Taiwanese corporate boards

Abstract

Drawing on the idea of selective interaction between organizations and environments, the authors examine how organizations change their traditional practices when they are exposed to new institutional environments. In the context of corporate governance change in response to financial market globalization, they argue that global institutional influence is moderated by local corporate control contexts that function as filtering mechanisms. The authors empirically analyse the adoption of a new corporate governance practice, i.e., the initial introduction of independent directors, in Taiwanese public firms, where family governance has been a dominant governance model. The findings suggest that while firms exposed to US capital markets are more likely to adopt independent directors, this facilitating effect weakens when the firms are under strong family control and is amplified when they are unbound from local frameworks through the key leader’s education or their geographic context.