The Origin of Chief Executive Officers and Performance in Hybrid Businesses: The Case of Microfinance

Abstract

This study examines the relationship between the origin of chief executive officers (CEOs) and performance in hybrid businesses using a sample of 353 microfinance institutions (MFIs) from 76 countries during 1996–2011. The statistical results suggest that MFIs whose CEOs have been recruited internally perform better compared to institutions with externally hired CEOs. The findings are consistent with the view that insider CEOs have firm‐specific skills, experience, and network resources that result in enhanced performance in hybrid businesses. Therefore, boards of MFIs searching for a new CEO should look for suitable internal candidates.

Characteristics of owners and managers in different countries: a meta-analytical investigation of SMEs' growth

“…This indicator has been taken as a proxy for country development by many scholars of entrepreneurship (see Bitti et al. , 2019; Mersland et al. , 2019), including those studying female-led enterprises (see Goltz et al.…”

“…In this case, we used the human development index (HDI), which is a summary measure of countries' average achievement in key dimensions of human development: life expectancy, education and standard of living (UNDP, 2018). This indicator has been taken as a proxy for country development by many scholars of entrepreneurship (see Bitti et al, 2019;Mersland et al, 2019), including those studying female-led enterprises (see Goltz et al, 2015;Maniyalath and Narendran, 2016). The next 12 variables were linked to entrepreneurial variables extracted from the Global Entrepreneurship Index Database (GEDI) (2017).…”

Is microfinance breaking new grounds? A cross country empirical investigation of the performance of microfinance institutions

“…Based on the domain expertise lens, Armendariz de Aghion & Morduch (2010) state that MFI's business model is complicated for a newly hired CEO if he/she does not possess any prior microfinance experience. Mersland et al (2019) state that in MFIs, domain-specific experience matters a lot as the internally hired CEO spends more years in the same organization, he/she becomes much more aligned towards the mission of the MFI. We expect that whether the CEO is internally hired or has prior experience of working in the microfinance industry can take better and quick decisions, explores more opportunities, expand current services and products that lead to an increase in the financial performance of MFI.…”

“…Similarly, no study discusses how the growth of MFIs filled up the market niche and provided competition to existing market players. Moreover, very few studies (Cull et al, 2014;Donou-Adonsou & Sylwester, 2017) compare these institutions with existing market players, and analyse the top management's role on these institutions' performance (Randoy et al, 2015;Mersland et al, 2019). The primary motivation of this thesis is to analyze microfinance institutions' performance as a response to this gap.…”

“…On the other hand, MFIs having CEOs with domain-specific experience show significant financial performance as relevant domain expertise allows these CEOs to spend a significant time of their career in one functional area that enables them to relate and visualize the business problems and offer relevant solutions. Therefore, improve the overall efficiency and performance of the organizations (Mersland et al 2019;Brown & Duguid, 1991).…”