“That is OK, he is a good fellow”: introducing the outcomes dichotomy for corporate networks of interlocking directorates

Abstract

Firms create a formal mechanism of governance to avoid agency problems: the board of directors. At the same time, unintended informal networks emerge from those efforts that build corporate ties among firms through shared directors called interlocking directorates (IDs). These corporate networks act as moderator of behavior, and of many director’s decisions within this business structure; thus, leading companies to several and distinct actions. This study presents the natural dichotomy of IDs activity from the perspective of business outcomes. A comprehensive and systematic review of 80 manuscripts related to IDs research was carried out, proposing three complementary elements that distinguish the positive and the negative side of these informal networks: i) financial benefits against financial disadvantages, ii) free competition against information asymmetries, and iii) resources acquisition against individual interests. The results of this study suggest that IDs main outcome for firms is a positive one, concentrated on acquiring resources to boost firms’ decision-making processes. Finally, we propose paths for further research.