The Fragmentation of Entrepreneurial Functionand the Role of External Control on Management Behavior
ABSTRACT
Starting from the interpretation of corporate governance as the outcome of the fragmentation of entrepreneurial power and the related agency problem, the paper stresses the strict relationship between management control and risk management. This issue implies the need of effective internal and external controls, i.e. board implementation and supervision of a consistent control function and auditing, but the market and public regulatory authorities give the most important external control system. The paper focuses next on the role of the Codes of Conduct, the critical aspects of their effectiveness and other key issues in the governance of corporations highlighted by the last financial and economic crisis.
Starting from the interpretation of corporate governance as the outcome of the fragmentation of entrepreneurial power and the related agency problem, the paper stresses the strict relationship between management control and risk management. This issue implies the need of effective internal and external controls, i.e. board implementation and supervision of a consistent control function and auditing, but the market and public regulatory authorities give the most important external control system. The paper focuses next on the role of the Codes of Conduct, the critical aspects of their effectiveness and other key issues in the governance of corporations highlighted by the last financial and economic crisis.
KEYWORDS
Entrepreneur, Corporate Governance, Managerial Behavior, Ownership Structure, Risk Management
Entrepreneur, Corporate Governance, Managerial Behavior, Ownership Structure, Risk Management
Cite this paper
nullP. Gottardo and A. Moisello, "The Fragmentation of Entrepreneurial Functionand the Role of External Control on Management Behavior," iBusiness, Vol. 3 No. 4, 2011, pp. 339-344. doi: 10.4236/ib.2011.34045.
nullP. Gottardo and A. Moisello, "The Fragmentation of Entrepreneurial Functionand the Role of External Control on Management Behavior," iBusiness, Vol. 3 No. 4, 2011, pp. 339-344. doi: 10.4236/ib.2011.34045.
References
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[1] J. S. L. Plummer, J. M. Hany and J. Godesiabois, “An Essay on the Origins of Entrepreneurial Opportunity,” Small Business Economics, Vol. 28, No. 4, 2007, pp. 363- 379. doi:10.1007/s11187-006-9036-8 [2] T. Eckhardt and S. A. Shane, “Opportunities and Entrepreneurship,” Journal of Management, Vol. 29, No. 3, 2003, pp. 333-349. doi:10.1016/S0149-2063(02)00225-8 [3] S. D. Sarasvathy, “Entrepreneurship as a Science of the Artificial,” Journal of Economic Psychology, Vol. 24, No. 2, 2003, pp. 203-220. doi:10.1016/S0167-4870(02)00203-9 [4] S. A. Shane and S. Venkataraman, “Entrepreneurship as a Field of Research: A Response to Zahra and Dess, Singh, and Erikson,” The Academy of Management Review, Vol. 26, No. 1, 2001, pp. 13-16. doi:10.5465/AMR.2001.27879269 [5] S. A. Shane and S. Venkataraman, “The Promise of Entrepreneurship as a Field of Research,” Academy of Management Review, Vol. 25, 2000, pp. 217-226. [6] A. A. Berle and G. C. Means, “The Modern Corporation & Private Property,” Transaction Publishers, New Brun- swick, 1991. [7] D. Czarnitzk and K. Kraft, “Management Control and Innovative Activity,” Review of Industrial Organization, Vol. 24, No. 1, 2004, pp. 1-24. doi:10.1023/B:REIO.0000031361.27597.7c [8] G. Chen, M. Firth, D. N. Gau and O. M. Rui, “Ownership Structure, Corporate Governance and Fraud: Evidence from China,” Journal of Corporate Finance, Vol. 12, No. 3, 2006, pp. 424-448. doi:10.1016/j.jcorpfin.2005.09.002 [9] S. A. Ross, “The Economic Theory of Agency: The Principal’s Problems,” American Economic Review, Vol. 63, 1973, pp. 134-139. [10] M. C. Jensen and W. H. Meckling, “Theory of the Firm: Mangerial Behavior, Agency Cost and Capital Structure,” Journal of Financial Economics, Vol. 3, No. 4, 1976, pp. 305-360. doi:10.1016/0304-405X(76)90026-X [11] D. B. Audretsch, E. E. Lehman and L. A. Plummer, “Agency and Governance in Strategic Entrepreneurship,” Entrepreneurship Theory and Practice, Vol. 33, No. 1, 2009, pp. 149-166. doi:10.1111/j.1540-6520.2008.00284.x [12] M. Singh and W. N. Davidson, “Agency Costs, Ownership Structure and Corporate Governance Mechanisms,” Journal of Banking & Finance, Vol. 27, No. 5, 2003, pp. 793-816. doi:10.1016/S0378-4266(01)00260-6 [13] S. Reichelstein, “Providing Managerial Incentives: Cash Flows versus Accrual Accounting,” Journal of Accounting Research, Vol. 38, No. 2, 2000, pp. 243-269. doi:10.2307/2672933 [14] R. Coase, “The Problem of Social Cost,” Journal of Law and Economics, Vol. 3, No. 1, 1960, pp. 1-44. doi:10.1086/466560 [15] A. Alchian and H. Demsetz, “Production, Information Cost, and Economic Organization,” American Economic Review, Vol. 62, No. 5, 1972, pp. 777-795. [16] M. M. Jennings, “Ethics and Investment Management: True Reform,” Financial Analysts Journal, Vol. 61, No. 3, 2005, pp. 45-58. doi:10.2469/faj.v61.n3.2727