An Institutional Contingency Perspective of Interlocking Directorates

Interlocking directorates, in which companies are linked by the directors that serve on their boards, exist globally. It is an expression of hegemonic power exercised by the elites of a society, and has been studied with great interest by organizational sociologists, management scholars and financial economists. The interest emanates from the effect that interlocks have on wealth creation and distribution, and from the perspective that interlocks can tell us how elites in a society are networked. Although diverse theoretical perspectives have informed the research on interlocking directorates, this review shows that the Anglo-American perspective dominates. This dominance is notable not only in the volume of Anglo-American studies, but also in theories employed by international studies. For example, most international studies use agency theory to investigate the welfare implications of interlocks, but many countries do not use the Anglo-American legal regime, which is the basis for agency theory. This paper expands the theoretical basis of the review to include class hegemony and resource dependence, to articulate better the causes and consequences of interlocks in the international context. The paper also extends theory by showing that institutions have an important influence on interlocks, so that the latter can be welfare-depleting in one institutional setting, while welfare-enhancing in another. The review concludes by discussing the implication for future research.