Government directors as a double‐edged sword for strategic change: Strong resource provision but weak monitoring

Abstract

This study examines the double-edged effect of government directors on strategic change by conceptualizing them as strong resource provision but weak monitoring that exert the opposite impact on strategic change. Since we cannot predict which of the two effects will be larger ex ante, we do not predict a main effect. Instead, we examine resource constraints, managerial incentives, and state ownership as contingency factors. Using a sample of Chinese listed firms from 2010 to 2016, we find evidence for the prediction. This study contributes to the current literature by providing a more complete understanding of government directors.