Institutional Complementarities and Gender Diversity on Boards: A Configurational Approach

• Date: 01 July 2016
• Author: Michela Iannotta,Morten Huse,Mauro Gatti
• DOI: http://doi.org/10.1111/corg.12140
• Published date: 01 July 2016

Institutional Complementarities and Gender

Diversity on Boards: A Conf‌igurational Approach

Michela Iannotta*, Mauro Gatti, and Morten Huse

ABSTRACT

Manuscript Type: Empirical

Research Question/Issue: To address the lack of a complementarities-based approach in studies of board diversity, this paper

seeks to understandwhether and how certain country-level factors arecausally and jointly relatedto women on boards and the

nature of their complementarities (are they synergic or substitutes?). Moreover, we intend to learn more about the

adoption/diffusion of board gender quotas, by taking into account their role in the existing national conf‌igurations (whether

they are necessary and/or suff‌icient conditions).

Research Findings/Insights: Using fs/QCA, our f‌indings reveal a particular conf‌iguration of country-level conditions that

supports the existence of a joint causal relation between given institutional arrangements. Furthermore, we f‌ind that board

gender quota legislation is not a suff‌icient condition on its own to achievea higher number of women on boards.Such evidence

suggests that its diffusion across countries could be the result of institutional isomorphism or social legitimacy more than to

rational reasons.

Theoretical/Academic Implications: For scholars, our paper ref‌ines and expands insights from the extant comparative

corporate governance literature. By f‌inding support for the “bundled”or jointly causal nature of given institutional factors,

we open a window for further research that investigates board-level phenomena in a complementarities-based perspective.

Practitioner/Policy Implications: For policy makers, thisstudy provides some insightsthat could better drivetheir choice about

which mix of policies is necessary to improve female representation on boards, and especially in which institutionalareas they

should be implemented. It is particularly relevant, because once gender quotas are endorsed at board level, they could have

ambiguous effects on f‌irm performance and corporate governance.

Keywords: Corporate Governance, Conf‌igurational Approach, Qualitative Comparative Analysis, Women on Boards

INTRODUCTION

There is a vigorous tradition in economic research

underlining the inf‌luence of institutional environments

on a wide range of corporate governance phenomena. Nota-

ble examples concern studies of business behaviors and

performances (e.g., Ntim & Soobaroyen, 2013; Zattoni,

Pedersen, & Kumar, 2009), corporate governance legitimacy

(e.g., Aguilera & Jackson, 2003; Judge, Douglas, & Kutan,

2008), and corporate governance practices (e.g., Aguilera &

Cuervo-Cazurra, 2004; Denis & McConnell, 2003), such as

the adoption/diffusion of international accounting standards

or codes of goodgovernance (Alon, 2013; Judge,Li, & Pinsker,

2010; Zattoni & Cuomo, 2008). Furthermore, a comparative

and country-levelliterature has explored the effects of institu-

tional antecedents on the composition of corporate boards of

directors, with particular regard to gender diversity issues

(Adams & Kirchmaier, 2013; De Anca, 2008; Grosvold, 2011;

Grosvold & Brammer, 2011; Terjesen & Singh, 2008).In detail,

legal, cultural, and occupational environments have been

found to play the most relevant role for the prevalence of

women on boards (Adams & Kirchmaier, 2013; Grosvold &

Brammer, 2011) and, interestingly, a close interdependence

between them has appeared in a parallel stream of research

(e.g., Esping-Andersen, 1990; Mandel & Semyonov, 2006;

Misra & Moller, 2005; Orloff, 1993, 1996). Alongside,

institutional arguments have spread in the literature about

the adoption of gender quota legislation for boards of

directors. For instance, Terjesen, Aguilera, and Lorenz (2014)

propose that it is highly coherent with the presence of certain

institutional factors, while Grosvold and Brammer (2011)

support its compensatory role which likely makes up for the

def‌iciencies of others institutions.

This state of theart suggests that gender diversity on corpo-

rate boards may be the outcome of multiple complementary

institutional domains, as regulatory policies, welfare states,

labor, and cultural institutions are not just independent from

each other but they appear to be closely interrelated. How-

ever, this literature presents two main limitations. First, prior

empirical evidence suggests that a relationship between these

*Address for correspondence: Michela Iannotta, Sapienza University of Rome, Via del

Castro Laurenziano 9, 00161 Rome,Italy. Tel:(+39) 06 49766263; Fax:(+39) 06 49766262;

E-mail: michela.iannotta@uniroma1.it

© 2015 JohnWiley & Sons Ltd

doi:10.1111/corg.12140

Corporate Governance: An International Review, 2016, 24(4): 406–427

institutional domains exists, but a lack of holistic perspective

has limited our knowledge of whether, how, and which

country-level factors in each institutional domain are in

conjunctural causality with the representation of women on

boards. The second limitation is that the arguments about

gender quotas have been relatively separate from studies of

institutional antecedents for women on boards, with little

attention to theimportance of existing nationalconf‌igurations

for the introduction of new regulatory policies. As a result,

what remains rather unclear is whether gender quotas for

corporate boards are suff‌icient by themsel ves to achieve a

higher number of women on boards (Adams & Kirchmaier,

2013; Bergstø,2013), or if they are substitutes orcomplements

in current national conf‌igurations.

This study adopts a conf‌igurational approach in exploring

the joint inf‌luence of particular institutional arrangements on

diversity on boards and the natureof their complementarities.

More exhaustively, we draw on institutional complementar-

ities theory to argue that female representation on boards is

the outcome of a conjunctural causal relationshipbetween cer-

tain institutional conditions. Furthermore, we investigate the

role of board genderquotas in the existing national conf‌igura-

tions in terms of their suff‌iciency and necessity for gender

balance on boards. In a comparative perspective, the analysis

examines the 27 European Union countries and takes each

country as a conf‌iguration of specif‌ic conditions in four insti-

tutional domains: regulatory policies, welfare states, labor,

and cultural institutions. In order to explore causal relations

and combinatory effects, we employ fuzzy set/Qualitative

Comparative Analysis (fs/QCA), a set-theoretic method

particularly suitable for studying countries in terms of their

multiple memberships in sets of institutional attributes. Our

f‌indings reveal a particula r conf‌iguration of country-level

conditions, where the effect of a singlecondition unfolds only

in combination with other conditions, supporting the

existence of complementarities and joint causal relationships.

In addition, they show that board gender quota legislation is

neither a suff‌icient nor a necessary condition to achieve a

higher number of women on boards. Such evidence suggests

that their diffusion across countries could be due to institu-

tional isomorphism more than to eff‌iciency or rational reasons.

Overall, this study makes two important contributions.

First, after identifying the key institutional domains to be in-

vestigated, we provide a systematic theoretical reasoning

about the inf‌luenceof their complementaritiesin shaping gen-

der balance oncorporate board of directors.Second, the use of

aconf‌igurational approach provides an important methodo-

logical contribution. Through fs/QCA, we empirically

explore our theory-derived propositions and capturethe com-

plex relationships between country-level causal conditions

and the representation of women on boards. As a result, our

paper ref‌ines and expands insights from the extant compara-

tive corporate governance literature, by opening a window

for further complementary-based research concerning board

composition and demography. For policy makers, it provides

some insights that can better drive their choice about which

mix of policies might be necessary to improve female

representation on boards, and especially in which institutional

domains they should be implemented.

The paper is structured as follows. After the literature re-

view, we discuss the theoretical framework and develop our

propositions. The following sections describe the research

methodology and the main f‌indings resulting from the com-

parative analysis. Discussion and conclusions are provided

in the last section.

LITERATURE REVIEW

Institutions and Institutional Complementarities

Institutional theory points out that institutions inf‌luence

economic activities, organizational structure, and human

behavior. Institutions represent the formal (e.g., laws, consti-

tutions) and informal constraints (e.g., taboos, traditions,

socio-cultural norms) which limit individuals and organiza-

tional choices (North, 1990). In other words, they shape the

interactions of human beings and form expectations of what

people will do (Nugent& Lin, 1995). (Scott,1987: 499) def‌ines

institutions as re latively resilient “systems of social beliefsand

socially organized practices associated with varying func-

tional arenas within social systems,”such as work, politics,

laws, or regulations. In this vein, any institution “f‌its into a

system of institutions”(Neale, 1988: 245) in a way that they

co-exist and co-evolve within a given structure by showing

mutually reinforcing characteristics (Ahlering & Deakin,

2007; Deeg,2007; Jackson & Deeg, 2008). Extantresearch refers

to this interdependence with the concept of institutional

complementarities. Such a perspective is widespread in the

comparative capitalism literature, because institutional com-

plementaritiesare acknowledged as an important mechanism

to explain the diversity of national institutional systems and

their resistance to change (e.g., Amable, 2003; Aoki, 2001;

North, 1991). For instance, Amable (2000) argues that the

overall coherence of a “national model”can be better

understood by considering a large set of interacting and

interrelated institutional arrangements, rather than isolated

institutions. Indeed, when complementarities occur, the exis-

tence of an institutional form reinforces the existence of the

others: this generates a “dynamic stability”(Amable, 2003).

Generally, complementarity between some elements stems

from the circumstance that employing one of them increases

the value of employing the others (Aoki, 2001; Milgrom &

Roberts, 1995). From the institutional perspective, comple-

mentarities imply that the conjunction of two or more insti-

tutions together enhances the performance of a given actor

(e.g., organizations or national economies). However, two

main logics are embodie d in institutional comple mentarity.

When two or more institutions are organized around similar

properties and common principles, the logic is similarity.

Conversely, the logic of contrast occurs when institutions

with different or contrasting properties coexist and one

makes up for the def‌iciencies of the other (Crouch, 2005).

While the latter logic implies a sort of compensation, the for-

mer refers to the presence of synergies between institutions.

Since similar structures make coexistent institutions

mutually reinforced (Campbell, 2011), the more aligned

and consistent the institutions, the better a given country-

level outcome (Amable, 2003).

Although the complementarities-based approach has

spread in f‌inancial (e.g., Amable, Ernst, & Palombarini, 2005;

Campbell, 2011) and corporate governance research (e.g.,

Aguilera, Filatotchev, Gospel, & Jackson, 2008; Garcìa-Castro,

407COMPLEMENTARY INSTITUTIONS AND WOMENON BOARDS

© 2015 JohnWiley & Sons Ltd Volume 24 Number 4 July 2016