THE ROLE OF GOVERANCE IN SUCCESSFUL INTERNATIONAL BUSINESS

The Role of Governance in Successful International Business

Corporate governance plays an essential role in successful international business by
enhancing the making of critical decisions, which determine an organization’s productivity.
International business is the backbone of successful multinational conglomerates due to its
influence in increasing enterprises’ market share to improve revenue and profitability. Global
trade increases companies’ revenue by allowing organizations to exploit external marketplaces
(Hajli 2013). This era of globalization has improved accessibility of operations and services
across the globe, where consumers get commodities from various parts of the world, and
businesses export and establish new entities in different countries. 
Operations in the international arena require strategic governance of companies to
understand international relations and evaluate business performances from global perspectives.
Numerous enterprises have taken this role to ensure that their companies maximize their profits,
and consumers get high-quality commodities at a fair price. According to Fry (2015) corporate
administrations “protect and enhance the interests of their constituents in a complex era of
globalization, interdependence, and ‘creative destruction.’” Evidently, managers promote
international business success. Researchers evaluate the roles of corporate governance in the
success of global companies from various perspectives. Particularly, analysing theories of
corporate governance, international business frameworks, and factors affecting organizational
success in the worldwide market promotes the understanding of company governance’s role in
global business success.  

Research Questions

 What roles does company governance play in the success of international business?
 Does governance improve or lower multinational conglomerates’ success?

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 How does governance influence international business culture?

Research Hypotheses

 Company governance plays an active role in defining the host and guest countries’
corporate culture.
 Governance’s involvement enhances the success of global entities. 

Literature Review

Various researchers have studied the role of corporate governance in international business
success, since it influences organizational operations. Evaluating its role from different
perspectives helps businesses select the best ways to make decisions, since the process allows
stakeholders to consider the type of trade an organization undertakes (Hajli 2013). Agreeably,
the interconnection and the interdependence of the international community have progressed
rapidly, which has necessitated the involvement of companies’ administrations. Faster and
cheaper communication networks have allowed global corporate leaders to communicate with
ease, which has boosted the success of international business. Therefore, researchers have
focused on elaborating on the governance’s associations to guarantee corporate success.
The evaluation of governance’s role in the success of international business is an elaborate
process involving comprehension of the international business culture, theoretical frameworks
and background information of international trade, and theories governing the process. A review
of these concepts makes economists and organizations understand the roles of corporate
governance in successful international business. Above all, it aids them to devise the best ways
of enhancing the practice. 
Corporate Governance

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Definition. Corporate governance is a system that controls and directs a company’s
operations. The nature of corporate governance, its roles, composition, and decision-making
process depends on the size of a particular enterprise. Corporate governance is an emerging
concept in the increasing competitiveness of markets. Consequently, managers use available
tools to exploit external segments to improve companies’ market share. Additionally, the
network various departments to enhance collaboration among staffs (Mohrman S., Tenkasi, &
Mohrman A. 2003). Governance uses available technological inventions to improve enterprises’
innovations as a way of creating a competitive edge in both domestic and international markets
to enhance productivity and organizational growth. One of the most important technological
tools that has influenced governance techniques is the World Wide Web, since it has
interconnected international business in a scale that was unimaginable prior to its inception.
Hence, administrators must seek up-to-date technological innovations to boost their governance
operations, which has a significant impact on the success of international trade.
Various researchers have introduced theories to explain corporate management, especially
its interests and the integration of a productive workforce. Some of these concepts include
agency, transactions, and stockholder theories. They define various aspects of corporate
governance to promote an understating of its roles. The models explain why company
governance make particular decisions, and the impacts of such choices on international business
success. 
Agency theory. Agency theory explains that corporate governance plays an active role in
international business success by making a company’s vital and long-term decisions.
Specifically, the approach analyses governance’s roles in the property delegation process but not
owning the company since they “cannot easily dominate owners” (Bendickson, Muldoon,

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Liguori, & Davis 2016). Organizational success depends on the availability of resources and
choices made by a firm’s administration regarding the best ways of using its assets to promote
growth. Stockholders do not make critical decisions, but their contribution to an enterprise’s
equity makes them a vital part of a company’s administration. On the other hand, corporate
governance makes decisions but lacks funds (Bendickson et al. 2016). As a result, the two parties
must collaborate to promote a company’s success. The agency theory illustrates that corporate
governance should prioritize stockholders’ interests ahead of its own, since an organization
cannot execute its decisions without shareholders’ consent (Namazi 2013). Researchers
discovered that ignoring stockholders’ opinion facilitates short-term success, but limits a
company’s expansion since owners’ equity plays an essential role in the process. As a result, the
agency theory explains corporate governance’s role in view of the administration’s responsibility
to stockholders. The decisions of those in corporate governance should coincide with those of
shareholders to promote long-term success and expansion to global marketplaces. 
Transactions theory. Transactions theory indicates that corporate governance contributes
to international business success by monitoring resource acquisition while considering a
company’s profit margins at the same time. Moreover, this theory adds that the process promotes
a firm’s success by boosting flexibility of operations and improving sales (Dagdeviren &
Roberston 2016). The transactions theory defines corporate governance as an opportunistic
section of a company whose primary focus is improving its overall revenue by minimizing the
cost of production. Corporate governance balances the cost of raw materials with their quality.
The administration understands that cheap raw materials produce low-quality commodities,
which fetch low revenues.

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Conversely, high-quality raw materials are expensive, yet they produce top-quality
products. Therefore, this theory illustrates the roles of corporate governance from the perspective
of resource acquisition (Dagdeviren & Robertson 2016). Managers contribute to international
business success by promoting the production of excellent commodities that can compete in
global marketplaces through the evaluation of quality resources. 
Stakeholder’s theory. The stakeholder’s theory illustrates that corporate governance plays
a leading role in creating a conducive working environment for workers by upholding ethics and
introducing organizational codes to enhance collaboration among them. International businesses
have cross-cultural workforces, and such staff can experience conflicts due to differences in
ideologies to increase the business’ economic value to shareholders (Harrison & Wicks 2013).
Company governance plays an active role in resolving disputes to create collaborative teams that
share knowledge to improve productivity. A cross-cultural workforce enhances the
understanding of consumers’ needs from different localities (Friedman & Miles 2002).
Acknowledging the desires of such customers allows multinational enterprises to succeed in
global trade, since a firm customizes commodities according to consumer requirements.
Therefore, corporate governance promotes international business success by uniting multicultural
workforces. Overall, interpreting the roles of corporate governance using the theories of agency,
transactions, and stakeholders indicates that companies’ administrations encourage international
business success by making long-term decisions, monitoring the resources acquisition process,
and uniting workers to form collaborative teams. 
The Roles of Corporate Governance
Corporate governance is the sole business decision-maker, and its choices influence
enterprises in the short and long-term. Therefore, it evaluates the internal and external business

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environments to comprehend the factors influencing organizational growth and incorporate
various strategies to achieve company goals. Governance influences the international business
culture and elements of global trade. 
How governance influences international business cultures. Business culture entails the
values and behaviors of employees, depending on the psychological environment an organization
operates. An international business culture examines these values and behaviors in a broad
sphere, particularly regarding the lifestyle of consumers. Corporate governance plays a crucial
role in influencing international business culture by evaluating how cultural factors in a given
marketplace can affect the organization’s profitability and growth. Notably, governance
integrates a cross-cultural workforce, unites various cultures, and provides research on influences
of culture in a given market to promote international business success. 
Governance creates a cross-cultural workforce. One of the most effective means of
addressing cultural issues affecting business is by employing workers who understand the
culture. In essence, culture is a trait of individuals who share history and perceptions about
happenings (Cornelissen & Durand 2014). It is challenging to reason in a way similar to people
practicing a given norm. Therefore, corporate governance addresses cultural issues affecting
business by having workers who understand how a given ethnic group reasons, makes decisions,
and interacts. A cross-cultural workforce promotes diversity by ensuring that all significant
cultures are represented and their ideas respected (Chang & Lin 2015). International business is
culturally diverse, and a commodity sold in one location may not succeed in another
marketplace. A culturally diverse staff suggests the best good to supply to a given region, and the
administration evaluates the viability of such an investment and launches the operation if
profitable (Dabic, Tipuric, & Podrug 2015). Consequently, by integrating a culturally diverse

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staff, the governance will understand the cultural practices of a given community and produce
market commodities desired by that society. Such strategies increase organizational growth
leading to international business success. 
Governance unites various cultures. Notably, having a culturally diverse workforce is not
a sufficient step for improving international business culture due to the challenges it brings to a
company. Conflict is a common occurrence in a business environment consisting of people from
different backgrounds due to unique modes of communication and different perspectives of
business activities (Chan & Cheung 2012). The company governance plays a crucial role in
resolving conflicts and preventing future struggles to unite workers. The process creates a
collaborative team that shares knowledge to improve productivity. The administration promotes
unity by improving interaction to ensure that employees have a clear channel and techniques for
addressing matters. add that clearly stating the goals of the organization can guide workers and
unite them since they serve the same purpose. A cross-cultural workforce has unique tactics of
addressing issues since it promotes collaboration by ensuring that everyone contributes his or her
idea (Chan & Cheung 2012). By uniting a culturally diverse workforce, the organization benefits
from an elaborate and effective decision-making process, which considers the culture of
consumers in a particular region. Therefore, the strategy allows governance to promote
international business success. 
Governance promotes research. Another effective way of understanding cultural factors
affecting the business is through researching to gather first-hand data. Communication plays a
leading role in collecting information in a foreign market since the language barrier can prevent
interaction (Tuzun 2013). The company governance selects participants who understand a given
language, including non-verbal cues, to evaluate consumers’ perspectives regarding a

The Role of Governance in Successful International Business 9

commodity. Mooij (2015) adds that researchers who understand the language and cultural
practices of a given community have a higher chance of collecting unbiased data than foreigners
due to the trust between individuals who share history. The company’s governance chooses
individuals who understand particular cultural practices allows businesses to obtain sufficient
information about culturally diverse markets leading to the success of an enterprise in
international trade (George 2016). Overall, corporate governance evaluates international business
cultures by creating a culturally diverse workforce, which interprets the needs of consumers
practicing a unique way of life, leading to increased sales and product popularity. The improved
product popularity promotes customer loyalty and creates a competitive advantage, which
promotes international business success. 
The roles of governance on influencing the elements of international business.
Governance influences various aspects of global trade, which, in turn, determines organizations’
success in international marketplaces. Internationalization contributes to various faces,
perspectives, horizons, and levels of interactions. Despite its old nature, globalization has
modified international business to enhance product accessibility to consumers regardless of their
location (Verbeke, Coeurderoy, & Matt 2018). The process has led to the development of macro
economies and meso industries, which are the basis of international trade. Good corporate
governance understands the influence of macro economies on meso industries, and how the
relationship influences business success in the global market. A firm’s management executes its
responsibilities by researching and introducing public policies and objectives to govern
operations (Pieterse, Caniels, & Homan 2012). Public policies subdivide various aspects of
international business to allow workers to specialize in particular sectors for effective handling
of organizational activities. Some of the elements handled by corporate governance to promote

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international business success include comprehending theoretical approaches to global trade and
evaluating factors influencing the business. 
Theoretical approaches to international business. Corporate governance introduces
theoretical approaches to global trade and upholds the concepts to promote international business
success. Considerably, studies on globalization commenced in the 1960s when
internationalization started influencing various aspects of life, especially economic and social
issues (Verbeke, Coeurderoy, & Matt 2018). A theoretical approach to global trade involves
networking, nature of resources and their availability, innovation, and entrepreneurship theory.
Company governance supports these aspects in various manners to ensure that international
relations benefit all involved parties. 
Networking. Companies’ administrative units promote international business success by
connecting various entities to enhance organizational productivity. Undoubtedly, linking up
various business entities is the fundamental aspect of globalization, which makes it an essential
asset to international businesses. The network theory evaluates markets as a system of
relationships involving suppliers, customers, competitors, and controlling entities (Mohrman S.,
Tenkasi, & Mohrman A. 2003). Suppliers guarantee product availability to consumers, who,
subsequently contribute to business success by providing revenue to companies. On the other
hand, competitors push producers towards enhancing commodity quality as a means of ensuring
customers have a choice. Corporate governance monitors parties involved in global trade, and
controls business activities taking place in international marketplaces to facilitate the production
of high-quality commodities. Agreeably, networking is an essential aspect of international trade,
and the involvement of a firm’s governance ensures that relevant parties undertake their
responsibilities diligently to improve customer satisfaction and create a competitive advantage

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(Mohrman S., Tenkasi, & Mohrman A. 2003). Therefore, management promotes international
business success by networking experts who create high-quality commodities, which enables an
organization to overcome competition. 
Resource-based review. As mentioned earlier, corporate governance monitors the process
of resource acquisition to guarantee the production of top-quality products while considering a
company’s profit margins at the same time. The resource-based review concept broadens this
role of administrators through the evaluation of resources’ accessibility. International businesses
involving foreign investments must ensure that newly established firms can access high-quality
resources, which allows the company to manufacture top-quality products (Tuzun 2013).
Corporate governance plays a crucial role in the process by ensuring that enterprises reach their
potential. Managers can undertake research and evaluate the accessibility and adequacy of
required raw materials, which can lead to international business success.  

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