Transnational board interlocks

Abstract

Purpose While previous studies have focused on the role of directors in the formation of transnational interlocks, this paper argues that firm strategy can also influence the development of these relationships. The purpose of this paper is to shed light on the practice of transnational interlocks by extending board interlocks theory from the national to the transnational context, and exploring aspects that are unique to the transnational level. Design/methodology/approach Based on the experiences of four British firms, this paper develops a conceptual framework that integrates under-examined dimensions of this networking practice at the organizational level of analysis, specifically degree of internationalization (DOI) and psychic distance (PD). Findings The paper argues that firms will increasingly engage in transnational interlocks as internationalization intensifies, and that expansion into psychically distant countries may result in further engagement in these connections. Further, firms will tend to form transnational received interlocks at their early stages of internationalization, and transnational sent and neutral interlocks at later stages of this process. It identifies four categories of firms: locals, extenders, explorers and cosmopolitans. Practical implications Directors can contribute to their firms’ success by interlocking with firms located in key foreign markets. Firms should also welcome directors with transnational board appointments to secure knowledge and resources overseas. Originality/value The manuscript contributes to our understanding of transnational interlocks by examining the independent and joint influence of the firm’s DOI and PD on the formation of such relationships.

Proximity at a distance: The relationship between foreign subsidiary co-location and MNC headquarters board interlock formation

“…When the size increases by ten, the odds increase by 93% (calculated from the figure by (1.93 − 1) * 100). The results also confirm that a firm's internationalization increases board interlock odds, consistent with González's (2019bGonzález's ( , 2019c findings. Degree centrality in the board interlock network also impacts interlock formation, as expected.…”

“…By extension, the existing knowledge about MNC board interlock formation highlights the need for further research on the role of distance at the HQ and subsidiary levels to solve the paradox of transnational board interlocks. González (2019aGonzález ( , 2019b recently proposed that, to understand transnational board interlock formation, we need to consider the internationalization of firms. While previous research on the antecedents of interlocking directorates have concentrated for the most part on strategic motives, such as resource seeking, monitoring, signaling, and accessing human capital, and on the individual motives that drive directors to join boards, such as career advancement and access to social ties (see Lamb & Roundy, 2016), González cites foreign investment as a key factor driving board interlock formation.…”

“…Scholars have already recognized that firms respond to the complexity associated with internationalization by installing larger boards (Sanders & Carpenter, 1998) and having foreign board members in their statutory bodies (Oxelheim, Gregorič, Randøy, & Thomsen, 2013). González (2019bGonzález ( , 2019c takes this a step further and argues that, as their internationalization intensifies, firms seek transnational board interlocks as a non-experiential source of knowledge, much in the way firms did in local contexts before.…”

“…To test our assumptions, we developed a unique large-scale dataset covering almost forty-two thousand board interlocks among MNCs and their 12.7 million foreign subsidiary co-location pairs across the globe. We explored the relationship between internationalization and board interlock noted by González (2019aGonzález ( , 2019b, by testing whether similarity in foreign direct investment locations relates to HQ interlocks and thus contribute to the IB literature by adding to the role of subsidiaries in triggering the formation of interlocks between MNCs and by revealing how the agglomeration of subsidiaries influences transnational board formation. Our analyses' outcomes provide strong support for our hypotheses and help to advance both the corporate governance (CG) and the international business (IB) literatures.…”

Interlocking boards and firm outcomes: a review

“…Qualitative papers have utilized case studies, content analysis of newspaper publications, corporate reports and in-depth interviews to ascertain issues such as network formation, the dynamic of business networks and firm impacts (see Eichenberger and Ginalski (2017), Galvão et al. (2019), González (2019) as recent examples).…”