Board Interlocks and Firm Performance: Toward a Combined Agency–Resource Dependence Perspective

Journal of Management

Volumn 44, Issue 2, 2018, Pages 589-618

  Zona, Fabio ^a   Gomez Mejia, Luis R ^b   Withers, Michael C ^c  

^a BOCCONI UNIVERSITY   (Italy)

^b UNIVERSITY OF NOTRE DAME   (United States)

^c TEXAS A AND M UNIVERSITY   (United States)

Author keywords

agency theory; boards of directors; resource dependence

Indexed keywords

EID: 85040465219     PISSN: 01492063     EISSN: 15571211     Source Type: Journal    
DOI: 10.1177/0149206315579512     Document Type: Article

References (110)

1. Achen C. H., 2001. Why lagged dependent variables can suppress the explanatory power of other independent variables. Unpublished manuscript, University of Michigan, Ann Arbor.
2. Aguilera R. V., Jackson G., 2010. Comparative and international corporate governance. The Academy of Management Annals, 4: 485-556.
3. Aiken L. S., West S. G., 1991. Multiple regression: Testing and interpreting interactions. Thousand Oaks, CA: Sage.
4. Alchian A. A., Demsetz H., 1972. Production, information costs, and economic organization. American Economic Review, 62: 777-795.
5. Arellano M., Bover O., 1995. Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68: 29-51.
6. Balkin D., Swift M., 2006. Top management team compensation in high-growth technology ventures. Human Resource Management Review, 16: 1-11.
7. Becerra M., 2009. Theory of the firm and strategic management. Cambridge, England: Cambridge University Press.
8. Beckman C. M., Haunschild P. R., 2002. Network learning: The effects of partners’ heterogeneity of experience on corporate acquisitions. Administrative Science Quarterly, 47: 92-124.
9. Beckman C. M., Haunschild P. R., Phillips D. J., 2004. Friends or strangers? Firm-specific uncertainty, market uncertainty, and network partner selection. Organization Science, 15: 259-275.
10. Boivie S., Bednar M. K., Barker S. B., 2015. Social comparison and reciprocity in director compensation. Journal of Management. 41: 1578–1603.
11. Boyd B., 1990. Corporate linkages and organizational environment: A test of the resource dependence model. Strategic Management Journal, 11: 419-430.
12. Boyd B. K., Haynes T. K., Zona F., 2011. Dimensions of CEO-board relations. Journal of Management Studies, 48(8): 1892-1923.
13. Burt R. S., 1983. Corporate profits and cooptation: Networks of market constraints and directorate ties in the American economy. New York: Academic Press.
14. Casciaro T., Piskorski M. J., 2005. Power imbalance, mutual dependence, and constraint absorption: A closer look at resource dependence theory. Administrative Science Quarterly, 50: 167-199.
15. Certo S. T., 2003. Influencing initial public offering investors with prestige: Signaling with board structures. Academy of Management Review, 28: 432-446.
16. Certo S. T., Holcomb T. R., Holmes R. M., 2009. IPO research in management and entrepreneurship: Moving the agenda forward. Journal of Management, 35: 1340-1378.
17. Certo S. T., Semadeni M., 2006. Strategy research and panel data: Evidence and implications. Journal of Management, 32: 449-471.
18. Chen G., Hambrick D. C., Pollock T. G., 2008. Puttin’ on the ritz: Pre-IPO enlistment of prestigious affiliates as deadline-induced remediation. Academy of Management Journal, 51: 954-975.
19. Conyon M. J., Peck S. I., Sadler G. V., 2009. Compensation consultants and executive pay: Evidence from the United States and the United Kingdom. Academy of Management Perspectives, 23(1): 43-55.
20. Conyon M. J., Read L. E., 2006. A model of the supply of executives for outside directorships. Journal of Corporate Finance, 12: 645-659.
21. Core J. E., Holthausen R. W., Larcker D. F., 1999. Corporate governance, chief executive officer compensation, and firm performance. Journal of Financial Economics, 51: 371-406.
22. Daily C. M., Dalton D. R., Rajagopalan N., 2003. Governance through ownership: Centuries of practice, decades of research. Academy of Management Journal, 46: 151-158.
23. Dalton D. R., Daily C. M., Certo S. T., Roengpitya R., 2003. Meta-analyses of financial performance and equity: Fusion or confusion? Academy of Management Journal, 46: 13-26.
24. Dalton D. R., Hitt M. A., Certo S. T., Dalton C. M., 2007. Agency theory and its mitigation. The Academy of Management Annals, 1: 1-64.
25. Dalziel T., Gentry R. J., Bowerman M., 2011. An integrated agency–resource dependence view of the influence of directors’ human and relational capital on firms’ R&D spending. Journal of Management Studies, 48: 1217-1242.
26. D’Aveni R. A., Kesner I. F., 1993. Top managerial prestige, power and tender offer response: A study of elite social networks and target firm cooperation during takeovers. Organization Science, 4: 123-151.
27. Davis G. F., 1991. Agents without principles? The spread of the poison pill through the intercorporate network. Administrative Science Quarterly, 36: 583-613.
28. Davis G. F., Cobb J. A., 2010. Resource dependence theory: Past and future. In Schoonhoven C. B., Dobbin F., (Eds.), Research in the sociology of organizations: 21-42. Bingley, England: Emerald Group.
29. Dawson J. F., Richter A. W., 2006. Probing three-way interactions in moderated multiple regression: Development and application of a slope difference test. Journal of Applied Psychology, 91: 917-926.
30. Devers C. E., Wiseman R. M., Holmes R. M., 2007. The effects of endowment and loss aversion in managerial stock option valuation. Academy of Management Journal, 50: 191-208.
31. Devos E., Prevost A., Puthenpurackal J., 2009. Are interlocked directors effective monitors? Financial Management, 38: 861-887.
32. Donaldson L., 1995. American anti-management theories of organization: A critique of paradigm proliferation. Cambridge, England: Cambridge University Press.
33. Drees J. M., Heugens P. P. M. A. R. 2013. Synthesizing and extending resource dependence theory: A meta-analysis. Journal of Management, 39: 1666-1698.
34. Dyl E. A., 1989. Agency, corporate control and accounting methods—The LIFO-FIFO choice. Managerial and Decision Economics, 10: 141-145.
35. Eisenhardt K. M., 1989. Agency theory: An assessment and review. Academy of Management Review, 14: 57-74.
36. Emerson R. M., 1962. Power-dependence relations. American Sociological Review, 27: 31-41.
37. Emerson R. M., 1976. Social exchange theory. Annual Review of Sociology, 2: 335-362.
38. Fama E. F., 1980. Agency problems and the theory of the firm. Journal of Political Economy, 88: 288-307.
39. Fich E. M., 2005. Are some outside directors better than others? Evidence from director appointments by Fortune 1000 firms. Journal of Business, 78: 1943-1972.
40. Fich E. M., Shivdasani A., 2006. Are busy boards effective monitors? Journal of Finance, 61: 689-724.
41. Fich E. M., White L. J., 2003. CEO compensation and turnover: The effects of mutually interlocked boards. Wake Forest Law Review, 38: 935-959.
42. Fich E. M., White L. J., 2005. Why do CEOs reciprocally sit on each other’s boards? Journal of Corporate Finance, 11: 175-195.
43. Finkelstein S., 1992. Power in top management teams—Dimensions, measurement, and validation. Academy of Management Journal, 35: 505-538.
44. Fligstein N., Brantley P., 1992. Bank control, owner control, or organizational dynamics: Who controls the large modern corporation? American Journal of Sociology, 98: 280-307.
45. Friedkin N. E., 1986. A formal theory of social power. Journal of Mathematical Sociology, 12: 103-126.
46. Geletkanycz M. A., Boyd B. K., Finkelstein S., 2001. The strategic value of CEO external directorate networks: Implications for CEO compensation. Strategic Management Journal, 22: 889-898.
47. Gomez-Mejia L. R., Berrone P., Franco-Santos M., 2010. Compensation and organizational performance: Theory, research and practice. New York: M.E. Sharpe.
48. Gomez-Mejia L. R., Tosi H., Hinkin T., 1987. Managerial control, performance, and executive compensation. Academy of Management Journal, 30: 51-70.
49. Greene W. H., 2000. Econometric analysis (4th ed.). Upper Saddle River, NJ: Prentice-Hall.
50. Gulati R., 1995. Social structure and alliance formation patterns: A longitudinal analysis. Administrative Science Quarterly, 40: 619-652.
51. Hambrick D. C., Finkelstein S., 1995. The effects of ownership structure on conditions at the top: The case of CEO pay raises. Strategic Management Journal, 16: 175-193.
52. Haynes K. T., Hillman A., 2010. The effect of board capital and CEO power on strategic change. Strategic Management Journal, 31: 1145-1163.
53. Hill C. W. L., Snell S. A., 1989. Effects of ownership structure and control on corporate productivity. Academy of Management Journal, 32: 25-46.
54. Hillman A. J., Dalziel T., 2003. Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28: 383-396.
55. Hillman A. J., Withers M. C., Collins B. J., 2009. Resource dependence theory: A review. Journal of Management, 35: 1404-1427.
56. Hitt M. A., Gimeno J., Hoskisson R. E., 1998. Current and future research methods in strategic management. Organizational Research Methods, 1: 6-44.
57. Horton J., Millo Y., Serafeim G., 2012. Resources or power? Implications of social networks on compensation and firm performance. Journal of Business Finance & Accounting, 39: 399-426.
58. Hoskisson R. E., Hitt M. A., 1994. Downscoping: How to frame the diversified firm. New York: Oxford University Press.
59. Hoskisson R. E., Hitt M. A., Hill C. W. L., 1993. Managerial incentives and investment in R&D in large multiproduct firms. Organization Science, 4: 325-341.
60. Jensen M. C., 1986. Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76: 323-329.
61. Jensen M. C., Meckling W. H., 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3: 305-360.
62. Keister L. A., 2004. Capital structure in transition: The transformation of financial strategies in China’s emerging economy. Organization Science, 15: 145-158.
63. Kim H., Kim H., Lee P. M., 2008. Ownership structure and the relationship between financial slack and R&D investments: Evidence from Korean firms. Organization Science, 19: 404-418.
64. Kolev K., Wiseman R., Gomez-Mejia L. R., 2017. Do CEOs ever lose? Fairness perspective on the allocation of residuals between CEOs and shareholders. Journal of Management. 43: 610–637.
65. Kor Y. Y., Sundaramurthy C., 2009. Experience-based human capital and social capital of outside directors. Journal of Management, 35: 981-1006.
66. Kroll M., Simmons S. A., Wright P., 1990. Determinants of chief executive officer compensation following major acquisitions. Journal of Business Research, 20: 349-366.
67. Lawrence B. S., 1997. Perspective—The black box of organizational demography. Organization Science, 8: 1-22.
68. Meeusen W., Cuyvers L., 1985. The interaction between interlocking directorships and the economic behaviour of companies. In Stokman F. N., Ziegler R., Scott J., (Eds.), Networks of corporate power: 45-72. Cambridge, England: Polity.
69. Misangyi V. F., Acharya A. G., 2014. Substitutes or complements? A configurational examination of corporate governance mechanisms. Academy of Management Journal, 57: 1681-1705.
70. Mizruchi M. S., 1996. What do interlocks do? An analysis, critique, and assessment of research on interlocking directorates. Annual Review of Sociology, 22: 271-298.
71. Neff T., 1998. So many boards.. so little time. Chief Executive, March: 36-40.
72. Nyberg A. J., Fulmer I. S., Gerhart B., Carpenter M. A., 2010. Agency theory revisited: CEO return and shareholder interest alignment. Academy of Management Journal, 53: 1029-1049.
73. Ofori-Dankwa J., Julian S. D., 2012. Dynamism, capital structure, and performance in a sub-Saharan economy: Extending the institutional difference hypothesis. Organization Science, 24: 1422-1438.
74. O’Sullivan N., 2000. Managers as monitors: An analysis of the non-executive role of senior executives in UK companies. British Journal of Management, 11: 17-29.
75. Palmer D., Friedland R., Singh J. V., 1986. The ties that bind: Organizational and class bases of stability in a corporate interlock network. American Sociological Review, 51: 781-796.
76. Palmer D. A., Jennings P. D., Zhou X., 1993. Late adoption of the multidivisional form by large U.S. corporations: Institutional, political, and economic accounts. Administrative Science Quarterly, 38: 100-131.
77. Pennings J. M., 1980. Interlocking directorates. San Francisco: Jossey-Bass.
78. Perry T. O. D., Peyer U. R. S., 2005. Board seat accumulation by executives: A shareholder’s perspective. Journal of Finance, 60: 2083-2123.
79. Pfeffer J., 1972. Size and composition of corporate boards of directors. Administrative Science Quarterly, 17: 218-229.
80. Pfeffer J., 1987. A resource dependence perspective on interorganizational relations. In Mizruchi M. S., Schwartz M., (Eds.), Intercorporate relations: The structural analysis of business: 22-55. Cambridge, England: Cambridge University Press.
81. Pfeffer J., Salancik G. R., 1978. The external control of organizations: A resource dependence perspective. New York: Harper & Row.
82. Pfeffer J., Salancik G. R., 2003. The external control of organizations: A resource dependence perspective. Stanford, CA: Stanford University Press.
83. Phan P. H., Lee S. H., Lau S. C., 2003. The performance impact of interlocking directorates: The case of Singapore. Journal of Managerial Issues, 15: 338-352.
84. Piskorski M. J., Casciaro T., 2004. When more power makes actors worse off: Turning a profit in the American economy. Working paper, Stanford University Graduate School of Business, Stanford, CA.
85. Richardson R. J., 1987. Directorship interlocks and corporate profitability. Administrative Science Quarterly, 32: 367-386.
86. Roodman D., 2009. How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9: 86-136.
87. Rosenstein S., Wyatt J. G., 1994. Shareholder wealth effects when an officer of one corporation joins the board of directors of another. Managerial and Decision Economics, 15: 317-327.
88. Selznick P., 1949. TVA and the grass roots. Berkeley: University of California Press.
89. Shen W., 2003. The dynamics of the CEO-board relationship: An evolutionary perspective. Academy of Management Review, 28: 466-476.
90. Shropshire C., 2010. The role of the interlocking director and board receptivity in the diffusion of practices. Academy of Management Review, 35: 246-264.
91. Tian J., Haleblian J., Rajagopalan N., 2011. The effects of board human and social capital on investor reactions to new CEO selection. Strategic Management Journal, 32: 731-747.
92. Tosi H. L., Jr. Gomez-Mejia L. R., 1989. The decoupling of CEO pay and performance: An agency theory perspective. Administrative Science Quarterly, 34: 169-189.
93. Tremblay M., Côté J., Balkin D. B., 2003. Explaining sales pay strategy using agency, transaction cost and resource dependence theories. Journal of Management Studies, 40: 1651-1682.
94. Tushman M. L., Romanelli E., 1985. Organizational evolution: A metamorphosis model of convergence and reorientation. In Cummings L. L., Staw B. M., (Eds.), Research in organizational behavior: 171-222. Greenwich, CT: JAI Press.
95. Useem M., 1984. The inner circle. New York: Oxford University Press.
96. van Essen M., Otten J., Carberry E. J. 2015. Assessing managerial power theory: A meta-analytic approach to understanding the determinants of CEO compensation. Journal of Management, 41: 164-202.
97. Wade J., O’Reilly C. A., III Chandratat I., 1990. Golden parachutes: CEOs and the exercise of social influence. Administrative Science Quarterly, 35: 587-603.
98. Ward R. D., 1997. The 21st century board. New York: Wiley.
99. Werner S., Tosi H. L., Gomez-Mejia L., 2005. Organizational governance and employee pay: How ownership structure affects the firm’s compensation strategy. Strategic Management Journal, 26: 377-384.
100. Westphal J. D., Boivie S., Chng D. H. M., 2006. The strategic impetus for social network ties: Reconstituting broken CEO friendship ties. Strategic Management Journal, 27: 425-445.
101. Westphal J. D., Khanna P., 2003. Keeping directors in line: Social distancing as a control mechanism in the corporate elite. Administrative Science Quarterly, 48: 361-398.
102. Westphal J. D., Stern I., 2006. The other pathway to the boardroom: Interpersonal influence behavior as a substitute for elite credentials and majority status in obtaining board appointments. Administrative Science Quarterly, 51: 169-204.
103. Westphal J. D., Zajac E. J., 1997. Defections from the inner circle: Social exchange, reciprocity, and the diffusion of board independence in U.S. corporations. Administrative Science Quarterly, 42: 161-183.
104. Westphal J. D., Zajac E. J., 2013. A behavioral theory of corporate governance: Explicating the mechanisms of socially situated and socially constituted agency. The Academy of Management Annals, 7: 607-661.
105. Withers M. C., Hillman A. J., Cannella A. A., 2012. A multidisciplinary review of the director selection literature. Journal of Management, 38: 243-277.
106. Wry T., Cobb J. A., Aldrich H. E., 2013. More than a metaphor: Assessing the historical legacy of resource dependence and its contemporary promise as a theory of environmental complexity. The Academy of Management Annals, 7: 441-488.
107. Xia J., Li S., 2013. The divestiture of acquired subunits: A resource dependence approach. Strategic Management Journal, 34: 131-148.
108. Zajac E. J., Westphal J. D., 1996. Director reputation, CEO-board power, and the dynamics of board interlocks. Administrative Science Quarterly, 41: 507-529.
109. Zona F., 2012. Corporate investing as a response to economic downturn: Prospect theory, the behavioural agency model and the role of financial slack. British Journal of Management, 23(S1): S42-S57.
110. Zona F., 2015. Board ownership and processes in family firms. Small Business Economics, 44(1): 105-122.