Determinants of selection of ex-bureaucrats as board members: A study of firms in India

Abstract

Emerging economies, which are often characterized by relatively, weaker institutional arrangements provide opportunities for firms to capitalize on institutional voids. Firms in these economies may benefit from their board members’ ‘influence capital’ that enables them to extract ‘influence rents’ (Ahuja and Yayavaram, 2011). While firm connections to politicians as board members have been examined in prior literature, connections to ex- bureaucrats have not received the same level of attention despite a sharp rise in the appointment of ex-bureaucrats in company boards across several economies in the last few years. Taking stock of this phenomenon, we analyze and provide evidence that industry regulation, foreign corporate ownership, and board size are major determinants of selection of ex- bureaucrats as board members. We also find that ‘generalist’ bureaucrats are more sought after by firms than ‘specialist’ bureaucrats, usually as independent directors, mainly for their higher ‘influence capital’ and ‘network bridging capabilities’ across government offices. Overall, this study provides an initial thrust for studying bureaucrat board members as providers of influence capital.