¹Harvard Business School, Boston, USA

Correspondence: J Siegel, Harvard Business School, Morgan Hall 231, Soldiers Field, Boston, MA 02163, USA. Tel: +1 617 495 6303; Fax: +1 617 496 5859; E-mail: jsiegel@hbs.edu

Received 25 April 2006; Revised 30 July 2008; Accepted 6 August 2008; Published online 12 March 2009.

Abstract

The last decade of work in corporate governance has shown that weak legal institutions at the country level hinder firms in emerging economies from accessing finance and technology affordably. To attract outside resources, these firms must often use external commitments for repayment. Research suggests that a common commitment mechanism is to borrow US securities laws, which involves listing the emerging economy firm's shares on a US exchange. This paper uses a quasi-natural experiment from Mexico to examine the conditions under which forming a strategic alliance with a foreign multinational firm is actually a superior mechanism for ensuring good corporate governance.