Impression after Reading the Paper- CEO outside Directorships and Firm Performance: Reconciliation of Agency and Embeddedness ViewsCAI QIAOXUE(蔡巧学), 201120125912, School of Business AdministrationSource of the PaperThis paper was found in a top journal- Academy of Management Journal, 2011, Vol.54, No.2, 335-352, written by the authors MARTA A. GELETKANYCZ, from Boston College and BRIAN K. BOYD, from Arizona State University.Summary of the ContentThis paper mainly focuses on the relationship between CEO outside board service and its contribution to firm performance. Based on theoretical and empirical research, the author put forward a reconciliation of agency and embeddedness views.Ever since a long time ago, there is always a debate surrounding CEO outside board and its contribution to firm performance. Agency scholars argue that CEO outside directorships constitute a form of managerial opportunism that potentially detracts from internal responsibilities, while embeddedness scholars insisting on that directorship ties afford access to information and resources of important strategic utility.Thus, the authors proposed and tested a model of more than 400 large firms on the purpose of studying the long-term performance of CEOs outside directorships in different contexts. At last, they draw the conclusion that in low growth, more competitive and less diversified firms, the CEOs outside directorships will give better long-term performance to the firms.Hypothesis of the PaperThe authors put forward five hypothesizes in this paper, and they areFirst, CEOs outside directorships are positively related to long-term firm performance, which is based on the embeddedness view.Second, CEOs outside directorships are negatively related to long-term firm performance, which is based on the agency view.Third, Industry growth moderates the relationship between CEO outside directorships and long-term firm performance in such a way that effects are more positive in low growth contexts. Four, Industry concentration moderates the relationship between CEO outside directorships and long-term firm performance in such a way that effects are more positive in contexts of low concentration.Five, Diversification moderates the relationship between CEO outside directorships and long-term firm performance in such a way that effects are more positive in contexts of less diversification.Validation of the HypothesizesTo validate the hypothesis, the authors chose a four-indicator measure incorporating:(1) The total number of outside directorships held by each CEO,(2) A count of directorships with Fortune 1000 firms,(3) The average net sales of outside firms on whose boards a CEO served, and finally(4) The average profitability of the outside firms on whose board the CEO served in 1987.The authors set seven variables as below:1.Predictor variables:Industry growth, measured over a five-year period (1982-1986) using a measured developed and validated by Dess and Beard.Industry concentration, measured using the Herfindahl Hirschman index.Diversification, measured using Palepu’s (1985) entropy measure.2.Outcome variables:Firm performance, measured using five-year averages (1987-1991, inclusive) of return on assets (ROA) and return on sales (ROS).3.Control variables:CEO human capital, measured using an ordinal scale ranging from 0 to 7.Prior performance, measured using a two-year composite of return on assets.Firm size, measured as the value of total assets.To validate the hypothesizes, the authors used statistic methods including(1) The chi-square goodness-of-fit statistic,(2) Chi-square adjusted for degrees of freedom,(3) The goodness-of-fit index (GFI),(4) The root-mean-square residual (RMSR), and(5) The coefficient of determination (CED) (Bollen, 1989).Results of the researchThe authors experiment the data, and found that(1)little evidence support that the typical CEO accumulates vast quantities of outsidedirectorships,(2)CEO outside directorships did not appear to have a significant, direct effect on performance,neither a positive nor a negative one,(3)Firm performance was positive and significant for firms operating in low-growthenvironments but not in high-growth contexts,(4)CEO outside directorships have greater benefit in contexts of low concentration than of highconcentration,(5)Greater performance gains accrue from CEO outside board service when a firm is lessdiversified.Totally to say, the authors suggest that the performance of CEO outside directorships is different according to different contexts. When in low growth, low concentration industry, more competitive and less diversified firms, CEO outside directorships are more positively related to the long-term performance.My impressions of the paperFirst, honestly to say, this is the first time I have finished reading an English paper on management. I have to admit that papers in English top journals are well written not only in their logic but also in their words.Second, we should possess the spirit of skepticism which is quite needed in academic circle when doing research. We should not always readily believe the previous theories as they are restricted by their era.Third, there are neither absolute correct nor incorrect theories as results gained from onecontext often change in another context. Instead, there is always a reconciliation view of two opposite ones that we should always pursue to solve problems.Four, statistic methods, such as the chi-square goodness-of-fit statistic, Chi-square adjusted for degrees of freedom, the goodness-of-fit index, the root-mean-square residual, and the coefficient of determination, should be mastered by each post graduate so that he can do the academic research.Five, the spirit of rigorous is quite needed in research so that we must cultivate the custom of it. Hopefully I wish I can publish my paper in one of the top journals in the three year of my post graduate school.。