Introduction of Outside Directors in Korea : Management Inertia and Institutional Pressure

When an American system is introduced into an emerging market, both inertia and outside pressure for this system exist, especially in the beginning stage. In the later stage, the firm's resources and capability to accept this system is critical in implementing the system effectively. We assume the same situation in the introduction of the outside directors in Korea. Because the outside director is imported from America, and inasmuch as Korea and America have different business environments and company systems, we hypothesized the existence of inertia in Korean companies against governance reform or outside director introduction and, at the same time, the existence of institutional pressure to promote it.