Date of this Version
Strategic Management Journal
Agency theory predicts that incentives will align agents' interests with those of principals. However, the resource-based view suggests that to be effective, the incentive to deliver must be paired with the ability to deliver. Using Fortune 500 boards as an empirical context, this study shows that the presence of directors who lack top-level experience but own large shareholdings is negatively associated with firm value, an effect that increases in the number of such directors. Firm value rises after such directors depart from boards, with the greatest increases occurring when many of these directors leave. While agency theory highlights the importance of the right incentives being in place, this research suggests that this can be ineffective if the right resources are not also in place.
This is the peer reviewed version of the following article:Feldman, E. R. and Montgomery, C. A. (2015), Are incentives without expertise sufficient? Evidence from fortune 500 firms. Strat. Mgmt. J., 36: 113–122., which has been published in final form at doi: 10.1002/smj.2211. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
agency theory, resource-based view, capabilities, incentives, expertise
Feldman, E. R., & Montgomery, C. A. (2015). Are Incentives Without Expertise Sufficient? Evidence From Fortune 500 Firms. Strategic Management Journal, 36 (1), 113-122. http://dx.doi.org/10.1002/smj.2211
Date Posted: 27 November 2017
This document has been peer reviewed.