Strategic interlocking directorates

Battaggion, Maria Rosa; Cerasi, Vittoria

doi:10.1016/j.jebo.2020.07.015

Cited by 6 publications

(8 citation statements)

References 44 publications

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“…It may also suggest better or preferential access to knowledge and finance (Boyd 1990;de Jong, Fliers, and Westerhuis 2021). In addition, interlocking directorships may foster collusion with firms in the same industry, with subsequent monopoly effects (Battaggion and Cerasi 2020). There can also be a potential downside to chairmen having multiple directorships-they might be too "busy" to give their chairmen role enough time and focus (Fich and Shivdasani 2006).…”

Section: Who Were the Managers?mentioning

confidence: 99%

Was Marshall Right? Managerial Failure and Corporate Ownership in Edwardian Britain

Aldous

Fliers²,

Turner³

2023

J. Econ. Hist.

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Alfred Marshall argued that the malaise of public companies in Edwardian Britain was due to the separation of ownership from control and a lack of professional management. In this paper, we examine the ownership and control of the c.1,700 largest British companies in 1911. We find that most public companies had a separation of ownership and control, but that this had little effect on their performance. We also find that manager characteristics that proxy for amateurism are uncorrelated with performance. Ultimately, our evidence suggests that, if Marshall was correct in identifying a corporate malaise in Britain, its source lay elsewhere.

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Section: Who Were the Managers?mentioning

confidence: 99%

Was Marshall Right? Managerial Failure and Corporate Ownership in Edwardian Britain

Aldous

Fliers²,

Turner³

2023

J. Econ. Hist.

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“…Despite the practical relevance of ID, little theoretical research has been devoted so far to companies' strategic incentives to interlock. Recently, Battaggion and Cerasi (2020) analyzed companies' strategic decisions to form ID as a way to share information, as this paper does. However, they consider two integrated companies with independent marginal costs, and show that consumer surplus is maximized under no interlocking.…”

Section: Related Literaturementioning

confidence: 99%

“…17 For instance, according to European Commission's annual report, 2021 on European SMEs there is a cost correlation between SMEs undertaking in-house R&D and those outsourcing R&D activities. 18 Notice that, as in Battaggion and Cerasi (2020), for brevity, we use the notation d i ¼ I, which captures only the case in which the inviting company sends the invitation to interlock to the receiving company to be accepted. In contrast, we use d i ¼ N to capture the cases where marginal cost remains private information, which happens when either (i) M i invites rival to interlock while the rival does not accept the invitation, or (ii) M i does not send an invitation to interlock.…”

Section: Contract and Communicationmentioning

confidence: 99%

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On the optimality of information sharing between integrated and vertically separated competitors

Battaggion

Cerasi

Karakoç

2023

Southern Economic Journal

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A manufacturer relies on an exclusive subcontractor for production and competes horizontally against an integrated rival that produces in‐house. The exclusive agent is privately informed about the marginal cost of production. When marginal costs are correlated across companies, information sharing benefits both companies due to reduced uncertainty, but it affects the contracting terms within the vertical hierarchy and creates horizontal externalities between companies. We show that the manufacturer who suffers from agency cost benefits more from sharing information than his rival performing in‐house production only when costs are highly correlated, and in this case, information sharing may actually benefit consumers.

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“…Research in this area has also been greatly supported by the rapid growth in the number of corporate datasets, with detailed data on director profiles and network connections, in key emerging markets such as China, Korea and India (Lamb and Roundy, 2016;Smith and Sarabi, 2021). Also important to note are the advances in the empirical approaches researchers utilize to establish more robust and causal linkages between interlocked boards and firm outcomes, thereby addressing traditional concerns of endogeneity and simultaneity frequently mentioned among early researchers in this area (Kaczmarek et al, 2014;Battaggion and Cerasi, 2020). This paper aims to understand recent research on director interlocks and firm outcomes by undertaking a systematic literature and bibliometric review of peer-reviewed articles extracted from the Web of Science (WoS) database published between 2000 and 2023 and generated based on a pre-determined search query developed for these two themes using the R-package litsearchr.…”

Section: Introductionmentioning

confidence: 99%

Interlocking boards and firm outcomes: a review

Ramsawak,

Buertey,

Maheshwari

et al. 2023

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PurposeThis paper explores the relationship between board interlocks and firm outcomes by reviewing the most recent peer-reviewed articles examining this research theme.Design/methodology/approachA systematic and bibliometric methodology of assessing 369 peer-reviewed articles from the Web of Science (WoS) database was applied. The study also leverages key R-packages litsearchr and Bibliometrix software to enhance the descriptive and thematic literature analysis to identify gaps and opportunities for new research.FindingsThis study confirms a rapid increase in articles on this thematic area, over the last decade, with increasing collaboration occurring among researchers in the United States, Europe, China, South Korea and India. Four core research clusters are identified. The first and largest cluster links interlocked directors to issues related to corporate governance and firm outcomes. The second cluster links social network theory, interlocking directorates and firm outcomes. Smaller emerging research clusters include topics related to ownership structure, board size, political connectedness and impacts on firm outcomes. The final cluster examines the influence of board interlocks on market value and firm innovation.Practical implicationsInterlocked directors can have both positive and negative impacts on a wide variety of firm outcomes. This study places great interest in the selection of new directors, ensuring that the selection has aligned with the needs and interests of the company and disclosures of potential competing interests are declared and considered. Equally important are the governance practices used to monitor directors' behavior and to protect the interest of shareholders and the firm. This is particularly relevant in the internal appointment of interlocked directors to critical positions, such as audit committees or instances where interlocked directors may simultaneously hold CEO or executive leadership positions in other companies.Originality/valueThis paper examines the board interlocks literature related to firm outcomes. Additionally, this review identifies several topics and disciplines which, if pursued, could enrich the literature and promise new avenues for future research.

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Strategic interlocking directorates

Cited by 6 publications

References 44 publications

Was Marshall Right? Managerial Failure and Corporate Ownership in Edwardian Britain

Was Marshall Right? Managerial Failure and Corporate Ownership in Edwardian Britain

On the optimality of information sharing between integrated and vertically separated competitors

Interlocking boards and firm outcomes: a review

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