Corporate governance and top managers: potential sources of sustainable competitive advantage

Abstract

Theorists in various fields have viewed corporate success differently depending on their ideological persuasions. This paper attempts to critically review and synthetize the previously fragmented literature around two main approaches. The first is grounded in traditional economic theory and industrial organization tradition. The second is rooted in a resource and competency-based view of the firm. Both approaches are centered on techno-economic factors of sustainable competitive advantage. Little attention, if any, has been given to top managers’ loyalty, high commitment and proactiveness as drivers of competitive advantage. Those top managers’ attributes are taken for granted whereas it is mostly alleged that top managers are self-serving, risk-avoider, and not committed to long-term organizational goals. Such practices might have been tolerable until recently, but are untenable under the tremendous pressure of globalization. Using non parametric tests on a Canadian sample, we found evidence of top manager opportunism. However, firms surveyed exhibit various corporate governance safeguards that seem to constrain top managers’ misconduct. Along this line, we found that owner-controlled firms are likely to outperform manager-controlled firms.