Building Blocks for Corporate Governance

This chapter provides an overview of the theoretical perspective on corporate governance and the options for establishing ‘modern corporate governance’ in an international organization. The creation of a sound institutional environment primarily requires an understanding of how a country’s economic, socio-cultural and political institutions influence an organization. This is particularly true where ownership of an organization is split, such as in the case of an international strategic alliance. National corporate governance systems dominate the competitiveness of a host country’s economy as they dictate how firms run their business more effectively within a given society. The construction of a national institution that facilitates the effective use of a country’s overall investments and international production is an essential government mechanism if society is to function properly. This chapter offers several theoretical explanations of corporate governance mainly relating to new institutional economics in emerging business environments with China as the main example. Analyses of corporate governance are expounded that encompass both the macro institution at the national level and the micro-institutional context at the organizational level.