The Study Of The Relationship Of Board Informal Hierarchy,Organizational Ambidexterity And Corporate Performance

Under the external environment continuously being more and more changeable,how to unpack the black box of board working is increasingly more important for corporation than ever.Board is the core of corporate governance,its effective decision does deeply influence the corporation long-term health growth.Current mainstream view of this topic has researched the influencing process of formal board institution on corporate governance performance,but this research path can't perfectly explain the difference of board decision results between corporations.In the opinion of this paper,besides formal board institution,there exists implicit interaction relationships which have important influence on the effectiveness and efficiency of board decision,and existing research seldom considers the effect of different status resulting from individual capabilities and prestige between members of the board of directors on board decisions.The research result of group dynamics born from sociology realm shows that informal hierarchy is ubiquitous among nearly all kinds of groups,and clear informal hierarchy will made group members give spontaneous obedience and coordination to their informal hierarchy leader.As a kind of group,corporate board must be influenced by its internal informal hierarchy when it makes its decisions.Now there are already a few researchers have begun to study the effect process of board informal hierarchy on corporate performance,but the logic black box is still needed to unpack,it is the intention of this paper.For that reason,this paper sets the position information of members of the board of directors,relevant corporate financial data and patent data of China's small and medium enterprise board listed company from 2012 to 2019 as the research sample,and takes the traditional Chinese concepts"pecking-order" and"guanxi-centered" into consideration,bring director political connection and director financial connection into measurement,uses the Gini coefficient's computing method and its enlightenment as the core,to construct the measurement index of board informal hierarchy.On this basis,this paper studies how board informal hierarchy influences corporate financial performance and innovation performance through organizational ambidexterity.Moreover,this paper also explores the CEO power plays on the relationship between board informal hierarchy and organizational ambidexterity,and the effect of environment uncertainty and resource constraint on organizational ambidexterity's intervening effect.After a series of robustness test and endogeneity test,this paper concludes:First,clear board informal hierarchy is positive to the fostering of organizational ambidexterity.Board is not only the equal group decision making term made of formal institution,the board informal hierarchy made from capabilities difference between members of the board of directors can also make big influence on board decision.For the reason that board needs to make important decisions under the conditions of lacking clear discussion procedure,in limited time and using the democratic way,so the member of the board of directors who has outstanding decision-making capabilities and big influence always receive other members' respect and obedience,they voluntarily give him/her decision-making power and cooperatively give their constructive suggestion to him/her,then the effect and efficiency of board decision-making process is enhanced accordingly.In clear board informal hierarchy,spire director has sufficient motivation to exploit existing business to satisfy short-term corporate benefit and make explorative decisions to foster corporate long-term growth,all to maintain the fulfilled needs of the respect of others and make the self-actualization needs fulfilled.And,the fundamental reason that the opinion of spire director is respected is that he/she not only has the motivation,but also have the capabilities to let different share holders'investment intention come true,that is making capital increasing and continuously giving stable profit.The spire director can offer tangible and intangible resources that fostering organizational ambidexterity needs from investment decision,corporate culture,organizational structure,team construction to budget supporting.Second,organizational ambidexterity can enhance corporate financial performance and innovation performance.As a kind of structural dynamic capability,the fundamental value of organizational ambidexterity is to make sure the corporation does not operate at one end in exploration or exploitation.Although exploitation can help to make the company achieve stable profit in the foreseeable future,but putting excessive emphasis on it will weaken the company's ability to adapt major environmental change happening in unforeseeable future,for the same reason,putting excessive emphasis on exploration will inevitably occupy too much resource which is necessary for normal exploitation,then the company's current survival will be harmed.Given this,the core value of organizational ambidexterity is by flexibly allocating explorative and exploitative resources to make exploitative business ever growing,improving the quality of products,extending volume growth,meantime,actively investing explorative domain to look for new value-adding point for realizing the company's long-term health growth on the premise of anchoring the company's mission and purpose.By top-down systematic construction,organizational ambidexterity can make the company realizing continuous and stable cash flow,and the company's innovation input and innovation output is also promised under the company system,sequentially the hidden danger of interruption is largely lowered.Third,organizational ambidexterity has a partial mediating effect between the relationship of board informal hierarchy and corporate financial performance and innovative performance,but the two partial mediating effects have difference,the partial mediating effect organizational ambidexterity has between board informal hierarchy and corporate financial performance is stronger than it has between board informal hierarchy and corporate innovative performance.The reason that organizational ambidexterity has a partial but full mediating effect is that organizational ambidexterity is only one of the mediums between board and corporate performance,other mediums of board transactional decisions like budget audit,financial audit and incentive measures will still have an important influence on corporate performance.The reason that the difference between the two partial mediating effect is that the essence of fostering organizational ambidexterity is both fostering explorative capability and exploitative capability simultaneously,and explorative innovation and exploitative innovation are also the important practice process of organizational ambidexterity,their innovative output is the most direct reaction testing the strength of organizational ambidexterity.Furthermore,innovative output is not straightly linked to its economic profits,because there is market demand,marketing capacity and so on between the two,relative to explorative innovation,exploitative innovation has more uncertainty.Fourth,CEO power can intensify the positive action board informal hierarchy has on organizational ambidexterity.From the ubiquitous view,CEO with too much power will result to his/her opportunistic behavior,then lower the efficiency and effect of board decision.But the particularity of this paper is the investigation sample is small and medium enterprise board listed companies and many of them are family-run management companies and the chairman of the board is also the controlling shareholder,so the CEO is always being the family member of the chairman of the board and has the common interest with the chairman,so in such a case too much CEO power will create positive impact on the relationship between board informal hierarchy and organizational ambidexterity,and this impact will be strengthened when the CEO is also the chairman of the board.Besides,this paper also finds when the CEO has more share over the chairman of the board,the moderating effect CEO power makes will be restrained,this finding is the same with the common view that too much CEO power will result in principal-agent problem.Fifth,environmental uncertainty does not have a moderating effect on the relationship between board informal hierarchy and organizational ambidexterity,but it has a moderating effect on the relationship between organizational ambidexterity and corporate financial performance and innovative performance.On one hand,no matter the external environment is stable or turbulent,when there exists a clear board informal hierarchy,the spire director'personal capability and ambition will push him/her to make explorative and exploitive decisions.When the external environment is stable,the spire director will be prepared for danger in times of safety.When the external environment is turbulent,the spire director will look for chance in danger and anchor the company's long-term growth all the time.On the other hand,as a kind of structural dynamic capability,organizational ambidexterity is born from the situation that the company wish to conquer external environmental constraint and industry life cycle restraint,when the external environment's uncertainty is high,companies with excellent organizational ambidexterity then have the opportunity to fully use this dynamic capability,by tapping this dynamic capability's potential,they can find opportunities from the external environment,give all kinds of resources proper tangible and intangible configuration,to make organizational ambidexterity into full use,ultimately enhance the corporate performance.Sixth,resource constraint can not only have a positive moderating effect on the relationship between board informal hierarchy and organizational ambidexterity,but also have a positive moderating effect on the relationship between organizational ambidexterity and corporate financial performance and innovative performance.The board needs to make decisions according to the company's available resources,when the company faces stronger resource constraint,although there exists clear board informal hierarchy and the spire director has excellent individual ambidexterity and a strong will to make ambidextrous decisions,he/she still has to give priority to dealing with the imperious questions the company facing,thus he/she has a heart but no strength to dealing with strong exploration or deep exploitative action,so the potential of the company's organizational ambidexterity is undoubtedly restrained.On the other hand,when tangible and in tangible conditions the company needs to carry on ambidextrous strategy are established,the company management level also needs necessary resources to operate under the ambidextrous situation,under this circumstance,the quantity of available resources is the key factor to determine if the company can achieve the ideal financial and innovative output.There are three innovative points this paper has achieved:First,this paper has expounded and test empirically the cause of organizational ambidexterity from the motivation source,thus promotes the development of the study of organizational ambidexterity into deep.Current research about the cause of organizational ambidexterity has focused on two parts,external environment and corporate leadership,but being limited by research methodology and research depth,either of the two parts has systematically and detailly expound the cause of organizational ambidexterity.The external environment cause view emphasizes the variation of external environment is major motivating factor of the corporate ambidextrous actions,this view reverses the law of paradoxical movement of "external causes take on their role through internal causes"and put the external environment being condition for change into the first place,thus can not highlight the leading cause of internal factor;for the corporate leadership view.although it has discussed how factors like leadership characteristics,behavioral process foster organizational ambidexterity,but it neglects the guiding ideology which is at a deeper level than before and is more worth to examine,besides,this view also does not discuss the process that leadership member makes his/her own will become the company's strategic decisions then affects organizational ambidexterity.Given this,this paper has discussed at a deep level the formation logic and the importance of board informal hierarchy,the relationship between board informal hierarchy clarity and its spire director's individual power,the personal motivation of spire director of board informal hierarchy and his/her will to make ambidextrous decisions,the capability of spire director of board informal hierarchy to carry on ambidextrous strategy.After quantitative analysis,this paper has finally come to the conclusion that the clarity degree of board informal hierarchy is positive with organizational ambidexterity.With this work,this paper has studied the cause of organizational ambidexterity in a deep-going way.Second,this paper has systematically analysized the relationship between board goverance and corporate long-term growth and brought organizational ambidexterity into the theoretical system of board governance research.Although there are a few literatures of corporate governance has discussed the effect of board on corporate ambidextrous matters,but the content is limited on one concrete part of exploration or exploitation and is centered largely on ambidextrous innovation,so current research does not focus on the fundamental value of organizational ambidexterity of making the company realize long-term healthy growth at the macro level.Because the board is responsible for all shareholders and shareholders of different type have different investment intention,so in corporate governance practice,a competent board should not only pay close attention to concrete questions in corporate day-to-day operations,but also have to take the whole situation into account and plan accordingly,adhere to awareness of unexpected development moment by moment,do well as the company's helmsman,indicate the direction for the company's long-term growth at the height of corporate mission and strategy,seize the day and lay out the future through a series of strategic decisions,and recruit and select proper managers to push the decisions into practice.This factor is not only matched with the core connotation of organizational ambidexterity,and is also matched with the request that corporate leadership is the sufficient condition of organizational ambidexterity.Given that,this paper studies the effect on organizational ambidexterity from the starting point of board informal hierarchy,and this way is also the process which standing on organizational ambidexterity to reversely deduce the fundamental attributes which is ought to required by competent board.By doing so,this paper has properly matched corporate board research with board core functions which are strategic decisions and supervision,therefore enriched and deepened the theoretical system of corporate board governance research.Third,this paper has constructed"board informal hierarchy-organizational ambidexterity-corporate performance" research framework,enriched existing"informal board structure-action-performance" paradigm.The research paradigm of corporate board governance has started from "formal structure-corporate performance"framework in which researchers always use principal-agent theory,upper echelons theory and so on to explain the effect of formal board structure like the ratio of independent directors,CEO duality,the completeness degree of board professional committee on corporate performance,however because this paradigm neglects the important link of corporate management which indicates corporate practice,so its logic has apparent defect,therefore researchers put corporate managerial practice into this framework and upgrade it to"formal board structure-corporate action-corporate performance" paradigm to cover the shortage of the former one.But the study of formal board structure relies on directly observable variables of corporate board and its members,its back-logic fundament is still the traditional economic person assumption and it seldom consider people's social attribute in real life.Furthermore,directors of corporate board are high-level needs person,it is better to use Y assumption to estimate their actions.Given that,researchers put forward "informal board structure-corporate performance" paradigm and "informal board structure-corporate action-corporate performance" paradigm,from the visual angle of social group to examine the interactive process in corporate board,hence the contradictive relationship between economic person assumption and social person assumption is reconciled.On this basis,this paper has further constructed "board informal hierarchy-organizational ambidexterity-corporate performance" research framework discussing how board informal hierarchy affect corporate performance through organizational ambidexterity,and brought into environment uncertainty,CEO power and resource constraint as moderator variables to explore the functional boundary of this framework,hereby current research paradigm of informal board structure has been enriched.