Walking on thin ice: CEOs′ internationalization decisions in underperforming firms

Abstract

We build on previous research on the behavioral theory of the firm to examine the relationship between performance shortfalls and internationalization. We start from existing literature in claiming that the interplay between the aspirations of restoring performance and survival concerns leads to an inverted U-shaped relationship between a firm's performance shortfalls and its new internationalization. Our main contribution is to show that CEO duality moderates this relationship. Dual CEOs have a high control of the board that reduces oversight and increases their job security. This allows them to impose their risk preferences, thus embracing survival over aspirations. Our empirical analysis using a sample of Spanish listed firms from 1986 to 2010 provides support for our hypotheses.