Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 311: Foreign Investors as Change Agents: The Swedish Firm Experience

Kathy S. Fogel (), Kevin K. Lee (), Wayne Y. Lee () and Johanna Palmberg ()
Additional contact information
Kathy S. Fogel: University of Arkansas
Kevin K. Lee: California State University
Wayne Y. Lee: University of Arkansas
Johanna Palmberg: Entrepreneurship Forum, CESIS, KTH

Abstract: Institutional theory suggests that informal institutions effectively constrain human behavior. Culturally embedded norms and values align corporate governance with socially acceptable outcomes. We argue that active foreign investors can act as agents of change in corporate governance. Investigating changes in ownership and control of Swedish firms, we find that active foreign investors’ participation in conjunction with a reduction of control by the largest domestic shareholder, improves firm performance through more efficient capital utilization and labor productivity. Firms move away from a Swedish stakeholder orientation toward an Anglo-American shareholder wealth maximization focus.

Keywords: Foreign Direct Investors; Informal Institution; Business Culture

JEL-codes: E02; G32; G34; G38; M14

44 pages, May 24, 2013

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