Beyond the Dichotomous Worlds Hypothesis: towards a plurality of corporate governance logics

• Author: J. A. (Jordan) Otten,Pursey P. M. A. R. Heugens
• DOI: http://doi.org/10.1111/j.1467-8683.2007.00647.x
• Published date: 01 November 2007
• Date: 01 November 2007

Beyond the Dichotomous Worlds

Hypothesis: towards a plurality of

corporate governance logics

Pursey P. M. A. R. Heugens* and J. A. (Jordan) Otten

The dichotomous worlds hypothesis holds that corporate governance systems worldwide are

either based on the Anglo-American shareholder model or the Eurasian stakeholder model.

We suggest a more f‌ine-grained classif‌ication, based on f‌ive corporate governance logics –

socially constructed, historical patterns of material practices, assumptions, values, beliefs, and

rules by which all parties involved in economic productive activities structure their material

interdependencies and provide meaning to the social reality of corporate life. These logics

are discovered through a content analysis of the corporate governance reform codes of 38

countries.

Keywords: Codes of corporate governance, shareholder model, stakeholder model, conver-

gence, persistence, multivariate data analysis

The dichotomous worlds hypothesis

Comparative corporate governance schol-

ars have long tried to capture corporate

governance systems in dichotomous distinc-

tions (Aguilera and Jackson, 2003; Gedajlovic

and Shapiro, 1998). Many contributors sug-

gest that policy makers can choose from only

two basic systems of corporate governance,

notably: the Anglo-American shareholder-

oriented model and the Eurasian stakeholder-

oriented model (Becht and Roël, 1999; La Porta

et al., 1998). The depth of the chasm separating

these two systems is emphasised by Ahmad-

jian and Robbins: “One of the sharpest distinc-

tions among business systems is between the

market, or shareholder, economies of the

Anglo-American countries and the coordi-

nated, or stakeholder, economies typif‌ied by

Germany and Japan” (2005: 451). Thus,accord-

ing to what we will call the dichotomous worlds

hypothesis, “Corporate governance operates

in two broadly distinct worlds” (Buck and

Shahrim, 2005: 42).

But there are problems with the dichoto-

mous worlds hypothesis. It is often noted that

corporate governancearrangements in regions

like South-East Asia (Dore, 2000; Gedajlovic

and Shapiro, 2002), Eastern Europe (Fila-

totchev et al., 2000; Judge and Naoumova,

2004), and Latin America (Guillén and

Tschoegl, 2000; Khanna and Palepu, 2000) do

not easily f‌it its bimodal classif‌ication. Yet,

defenders of the hypothesis commonly argue

that the corporate governance systems in these

regions are not truly unique, but instead

represent some form of hybrid (cf. Bratton and

McCahery, 1999; van den Berghe, 2002). We

believe, however, that this typif‌ication denies

true variability, and that our understand-

ing of comparative corporate governance is

hampered rather than advanced by squeez-

ing every nation into a “two-sizes-f‌it-all”

straightjacket.

In this paper we seek to move beyond these

bipolar distinctions by inductively developing

a f‌iner-grained taxonomy of what we shall call

corporate governance logics – socially con-

structed, historical patterns of material prac-

tices, assumptions, values, beliefs, and rules

by which all parties involved in economic

productive activities structure their material

interdependencies and provide meaning to the

social reality of corporate life (see Thornton

*Address for correspondence:

RSM Erasmus University, PO

Box 1738, 3000 DR Rotterdam,

The Netherlands. Tel: 0031-

10-408-2365; Fax: 0031-10-408-

9012; E-mail: pheugens@rsm.nl

1288 CORPORATE GOVERNANCE

Volume 15 Number 6 November 2007

© 2007 TheAuthors

Journal compilation © 2007 BlackwellPublishing Ltd, 9600 Garsington Road,

Oxford, OX4 2DQ, UK and 350 Main St,Malden, MA, 02148, USA