TIME:10:00-11:30, April 22, 2011

ROOM: 216,New Building

SPEAKER: Heli Wang, Associate Professor, HKUST

TITLE: Exogenous Increase in Takeover Protection and Firm Knowledge Accumulation Strategy

Abstract

In this paper, we examine how an exogenous change in corporate governance(increase in takeover protection) may lead to a firm’s strategic shift toward the accumulation of a greater level of firm-specific knowledge assets. Compared to general knowledge assets, the development and deployment of firm-specific knowledge are likely to require the firm’s top managers to invest in a greater level of specialized managerial skills. Managers may be concerned about engaging in such specialized efforts if a firm is prone to takeover threat, in which case they are likely to be replaced and the value associated with their specialized skills are at greater risk. An exogenous increase in takeover protection may thus mitigate managers’ concerns and lead to a firm’s strategic shift toward the development of more firm-specific knowledge assets. Further support for this argument is found through some additional analysis, which shows that with an increase in takeover protection, firm-specific knowledge has a greater impact on firm financial performance. This paper contributes to the resource-based view of the firm and corporate governance literatures to show how they may be integrated to provide a better understanding of firm strategy andperformance.