Política de cookies

Utilizamos cookies propias y de terceros para mejorar nuestros servicios y mostrarle publicidad relacionada con sus preferencias mediante el análisis de sus hábitos de navegación. Si continua navegando, consideramos que acepta su uso.

Más información
Solicitud de permisos - Ayuda - - Regístrese - Teléfono 902 888 740
Buscar en
Revista Europea de Dirección y Economía de la Empresa 2015;24:130-7 - DOI: 10.1016/j.redee.2015.04.001
It is useful to consider the interlocks according to the type of board member (executive or non-executive) who posseses them? Their effect on firm performance
¿Es útil diferenciar a los interlocks de acuerdo con el tipo de consejero (ejecutivo o no ejecutivo) que los posee? Su influencia sobre el rendimiento de la empresa
Leticia Pérez-Calero Sáncheza,, , Carmen Barroso-Castrob
a Universidad Pablo de Olavide, Organización de Empresas y Marketing, Spain
b Universidad de Sevilla, Administración de Empresas y Marketing, Spain
Recibido 16 enero 2015, Aceptado 20 abril 2015

Taking the assumptions of the resource dependency theory as our starting point, the main objective of this investigation is to gain an understanding of how and in what way board members who serve on multiple boards (interlocks) can affect a firm's profitability, and whether it is useful to consider the derivation of these interlocks according to the type of board member (executive or non-executive) who possesses them. Using dynamic panel data analysis (GMM) and a sample of 88 firms quoted on the Spanish Continuous Market for the period 2005–2008, our results confirm the existence of a curvilinear (inverted-U) relation between interlocks and firm performance. The results demonstrate that this relation is only significant if we include the total number of external ties rather than just the number of links generated by non-executive directors. We can also confirm that the degree of familiarity and shared knowledge between board members (measured by average board tenure) affects this relationship.


Partiendo de los supuestos de la teoría de dependencia de recursos, el principal objetivo de esta investigación pasa por conocer cómo y de qué forma la pertenencia de los consejeros a múltiples consejos (interlocks) podría afectar a la rentabilidad de la empresa y si es importante considerar en esta relación la procedencia de los interlocks según la tipología del consejero que lo ostente (consejeros ejecutivos y no ejecutivos). Mediante un análisis de datos de panel dinámico (GMM), y a través de una muestra de 88 empresas cotizadas en el Mercado Continuo español para el periodo 2005–2008, los resultados obtenidos confirman que existe una relación curvilínea (en forma de U invertida) entre los interlocks y el rendimiento de la empresa, y que esta relación es sólo significativa si tenemos en cuenta el número total de vínculos externos, y no sólo cuando tomamos en número de vínculos generados por los consejeros no-ejecutivos. Asimismo, podemos afirman que el grado de familiaridad y conocimiento mutuo entre los miembros del consejo (medido por la permanencia media del consejo) influye sobre esta relación.

JEL classification
Palabras clave
Consejos de administración, Interlocks, Permanencia del consejo, Rendimiento de la empresa

The board of directors can be viewed as a source of competitive advantage for an organisation, since it provides access to valuable external resources and allows the firm to respond to outside events (Pfeffer & Salancik, 1978; Wincent, Anokhin, & Boter, 2009). Studies based on the resource provision role of the board have generally focused on the external connections brought by the directors; the ties to other firms created by their joint board membership, known as interlocking directorates, are the most commonly used in the literature (Beckman & Haunschild, 2002; Gulati, Nohria, & Zaheer, 2000; Hillman & Dalziel, 2003; Kor & Sundaramurthy, 2009; Nahapiet & Ghoshal, 1998; Ortiz, Aragón, Delgado, & Ferrón, 2012).

Prior studies have sought to understand how the resources brought by board members via their interlocks affect a firm's performance and have proposed both positive (Kim & Cannella, 2008) and negative (Goerzen & Beamish, 2005) relations, and reached a variety of conclusions. These inconsistent results are due to, in the majority of cases, the existence of different types of interlocks, and the different effects these have on the firms’ performance and strategies. For example, Davis (1991) examine how a firm's interlocks formed with other companies that have adopted poison pill strategies in the past, increasing the likelihood of the firm adopting similar tactics; Shipilov, Greve, and Rowley, (2010) analyse how the adoption of a practice by one organisation is positively influenced by the accumulated adoption of the same practice by its interlocking firm; and finally, Diestre, Rajagopalan, and Dutta (2014) examine how board members’ experience in a specific market increases the likelihood of an interlocking firm entering that new market.

However, despite attempts in the literature to classify the various types of interlocks, the majority of studies ignore any distinction according to origin (from executive or non-executive directors); they are examined implicitly, with little awareness of the importance of the ties brought by non-executive directors (Certo, 2003; Filatotchev, 2006; Johansen & Pettersson, 2013; Kor & Sundaramurthy, 2009; Tian, Haleblian, & Rajagopalan, 2011), and ignoring the rich potential of the links formed by executive directors. Firms need to appoint non-executive board members who will bring new resources and knowledge to the top management team (TMT) (Kor & Misanyi, 2008). This is not to say, however, that the resources brought by executive directors should be ignored, especially when they also contribute new resources and knowledge derived from their external ties, and in particular through their interlocks.

The composition of the board is affected by the age and stability of the firms in its sector and thus the majority of the top management team of newly created firms (new ventures) tend to be board members. As a result, in order to verify that the firm's decisions are being taken in an appropriate manner, the literature on corporate governance is beginning to question whether board members possess and are contributing sufficient resources, and to ask whether non-executive directors should be appointed to make up for the possible failings of its executive directors (Dalziel, Gentry, & Bowerman, 2011; Knockaert & Ucbasaran, 2013; Knockaert, Bjornali, & Erikson, 2014). However, in established firms of a certain size, the literature takes for granted that it is appropriate to appoint non-executive directors. It considers that non-executive directors exert an important control over the management, provide support and advice thanks to their human capital or professional experience (many board members enjoy a high professional prestige) and are able to bring in resources from outside the firm through their network of contacts (Finegold, Benson, & Hecht, 2007; Kroll, Walters, & Son, 2007). On the other hand, influenced by agency theory, the literature presupposes that executive directors, members of the top management team (Dalziel et al., 2011), will pursue their own interests and rewards at the expense of the firm's shareholders. This means that little attention has been paid to the external resources brought by executive directors or the need to study the board as a group of individuals who contribute valuable and complementary resources.

We therefore consider it appropriate to examine the value that all board members contribute through their interlocks. In this investigation, we propose that the resources brought by the directors, regardless of type, enable the firm to take better decisions, thanks to their pooled knowledge and experience (Filatotchev, 2006), and that this ultimately affects firm performance.

Finally, by considering the complete set of resources brought by all of the board members, regardless of type, we are supporting an idea that has already been proposed in a number of studies (Forbes & Milliken, 1999; Gabrielsson & Huse, 2004; Stevenson & Radin, 2009; Van Ees, Gabrielsson, & Huse, 2009) that the board should be viewed in its entirety as a “group of individuals”, whose effectiveness depends not only on the individual resources contributed by each member, but also on its ability to act as a team and to share and assimilate these resources. The aim of our investigation is to pursue this line of research in greater depth, introducing the moderator effect of board tenure on the relation between interlocks and firm performance. A board with high average board tenure encourages better relations and greater trust between its members (Le, Kroll, and Walters, 2013), encouraging a mutual and efficient exchange of the vision and strategic resources acquired from other firms. By looking at board tenure therefore, we can analyse the effect of the degree of familiarity and mutual understanding between board members and their essential role in the assimilation and application of the resources that can be gained through interlocks.

This work is structured as follows: in the first section we explain our choice of subject and set out our objectives. In the subsequent sections we carry out a literature review that allows us to propose a set of hypotheses. In the final section we explain our empirical study, followed by an analysis and interpretation of the results obtained.

Literature review and proposed hypotheses

The more traditional literature, based on agency theory (Fama & Jensen, 1983; Letza, Sun, & Kirkbride, 2004) identifies the control function as the board's principal activity, and assumes that non-executive board members are more effective than executive board members in controlling the senior management and protecting shareholder interests. This perspective reinforces the particular importance of the role of non-executive directors in board composition. To this can be added the recent financial scandals of high-profile firms (Enron, Tyco, WorldCom, Adelphia), which have reminded us of the importance of board independence, while bringing about a reduction in the number of executive board members and giving primacy to the board's control function. Recent studies (Hillman & Dalziel, 2003; Lynall, Golden, & Hillman, 2003; Stiles & Taylor, 2001) consider that new functions should be included, such as service, or resource provision, this latter being at the heart of our investigation. These new functions are founded on the use of knowledge, information, experience, capabilities, etc., namely, the set of resources that each board member brings to the board. This new viewpoint affects studies of board composition by altering the initial perspective: board composition should not only be viewed in quantitative terms (percentage of non-executive directors), but also in qualitative terms, since every board member, regardless of type, contributes complementary resources to the firm, which are required by the group as a whole for effective decision-making (Certo, 2003; Hillman & Dalziel, 2003; Westphal & Fredrickson, 2001).

The resource dependency theory considers that the board of directors is an effective mechanism for the firm, in that its members have outside contacts or external links with the environment (Kim, 2005). Of all the external connections, the relations that have been studied most frequently by researchers are the ties to other firms through shared board members (interlocking directorates) (Beckman & Haunschild, 2002; Gulati et al., 2000; Hillman & Dalziel, 2003; Kor & Sundaramurthy, 2009; Nahapiet & Ghoshal, 1998; Ortiz et al., 2012).

Interlocks and their effect on firm performance

The experience that directors acquire by serving on other boards (interlocks) is a valuable resource that enables them to fulfil their roles more effectively because of their ability to apply their external experiences (Hillman & Dalziel, 2003; Kor & Sundaramurthy, 2009; Tian et al., 2011). Boards with a high number of external connections will benefit from rapid access to important external information and critical resources (Kor & Sundaramurthy, 2009). Prior studies have shown that these external connections play an important role in the transfer of knowledge and successful practices between firms (Burt & Carlton, 1989; Shipilov et al., 2010). Firms might also benefit from their directors’ ties, gaining support from external stakeholders and other influential agents, which could be critical for the organisation's performance (Hillman, Cannella, & Paetzold, 2000; Kiel & Nicholson, 2006). Finally, the legitimacy of the decisions taken by these firms will also increase when their directors also serve on the boards of other companies (Mizruchi & Stearns, 1988, 1994; Westphal, Seidel, & Stewart, 2001).

However, despite these benefits, some authors believe that there are also risks or dangers associated with interlocks (Fligstein, 1995; Palmer, Barber, & Xueguang, 1995). Prior studies have argued that serving on a number of boards limits the time and attention that directors can dedicate to each one and reduces the degree of internal cohesion within the board. As a result, they suggest that when board members have a high number of interlocks it could be damaging to the firm's performance (Kor & Sundaramurthy, 2009). Therefore, while a moderate number of external links can help to improve firm performance, it is reasonable to suggest that above a certain level, this positive influence could become negative, creating a curvilinear relation (inverted-U) between the number of board interlocks and the firm's results.

Finally, as we indicate in the introduction, the majority of investigations into the relation between interlocks and firm performance have only studied the links brought by non-executive directors. However, it is important to consider the resources that executive directors contribute through their own external connections. These directors also provide access to resources and key information on how other board's function, which can be directly applied to the firm's decision-making processes. Furthermore, external ties have been linked to the good reputation of board members which, in the case of executive directors, improves investors’ perceptions of the firm's decision-makers (Bjornali & Gulbrandsen, 2010; Ferris, Jagannathan, & Pritchard, 2003; Johnson, Schnatterly, Bolton, & Tuggle 2011; Kim & Cannella, 2008; Shropshire, 2010; Wincent et al., 2009). Experience obtained from other firms via a tie created by an executive director could be applied directly to the focal firm's decision-making, with no need for any kind of intermediary, and is likely to increase the transfer of knowledge and successful practices between firms. The risks associated with an excessive number of external connections, such as the lack of time and attention paid to the focal firm, would also be reduced/minimised since executive directors are fully aware of the firm's operations because of their own involvement with the management of the firm.

Therefore, in view of these arguments, we propose the following:

H1. There is a curvilinear (inverted-U) relation between (non-executive and executive) directors’ membership of multiple boards (interlocks) and firm performance, such that performance will improve as the total number of interlocks rises, but then falls as the total number of interlocks increases.

Following another line of study, Adler and Kwon (2002) suggest that the behaviour of a group, such as a board of directors, is influenced by its external ties, and also by its ability to work towards common objectives. These authors make the point that these two board member relations – external and internal ties – are not mutually exclusive. Taking these arguments, we propose that boards with a high number of external ties also require a high level of shared knowledge and familiarity between the directors, in order to facilitate their internal relations and to mitigate the possible negative effects of boards with a high number of interlocks. With Kor and Sundaramurthy (2009), we argue that experience on a particular board gives directors the opportunity to become more familiar with the capabilities, habits and personalities of their fellow board members, breaking down barriers between them and allowing them to share and apply the resources gained from these external ties. We therefore propose that board tenure, which refers to the degree of familiarity and knowledge sharing between board members during the period that they serve together on the board, moderates the relation between a high number of interlocks and firm performance.

We therefore propose the following working hypothesis:

H2. Average board tenure moderates the relation (inverted-U) between directors’ membership of multiple boards and firm performance. Specifically, when average board tenure is high, the percentage decrease in firm performance (associated with an increase in the number of external ties) is reduced.

MethodologySample and data collection

The sample of firms used in this study comprises Spanish firms quoted on the Madrid Stock Exchange and the Continuous Market during the period 2005–2008. These firms were chosen because of their obligation to publish data relating to their corporate governance and performance. We subsequently eliminated the following firms: (1) those classified as financial services (if they included estate agencies), given the difficulty involved in interpreting all of the data relating to that sector; (2) firms that ceased to be quoted during the period of analysis (we only included firms that were quoted on the stock exchange for the entire study period); and (3) firms for which we did not have access to their annual reports. Within these limitations, we obtained a total of 94 firms, but from this total we had to eliminate another six firms that did not provide data on their directors’ interlocks, leaving a final sample of 88 firms.

The data on the firms’ results were obtained from the DataStream database and information on board composition was obtained from the Comisión Nacional del Mercado de Valores (CNMV, the Spanish Stock Market Commission); from their reports we were able to access the names of all the board members for each firm in our sample – a total of 3482 directors for the period 2005–2008.

To obtain information relating to each director's interlocks, we turned to Axesor, a consultancy firm specialising in the provision of information on firms and directors, obtained from official registers. The information from Axesor, available in the Official Mercantile Registry Bulletin (BORME), provided a list of the ties that each director has with one or more boards, in both quoted and unquoted firms, for each year of the study. To achieve this, we used the start and end dates corresponding to the interlock of each board member. Within these guidelines, the total number of external ties was 14,972.

The information on our control variables was obtained from a number of sources, depending on whether the variable was linked to the firm or the board. At the firm level, the information on firm size and age was obtained from the Osiris database and the stock exchange sectoral classification published by CNMV. Information at board level regarding the number of directors on each board, CEO/Chair duality and the type of directors on each board was obtained from the corporate governance reports published by the CNMV.

Dependent variable

We used return on assets (ROA) as our measurement of financial performance for each firm. We calculated the ROA (with a one-year lag, ROA+1) as the profit derived from the company's operations divided by the firm's total assets for each year. In general, we consider that countable measures such as ROA reflect the influence of the internal management more accurately than market-based measures, which are more susceptible to the influence of exogenous economic factors (Elitzur & Yaari, 1995; He & Huang, 2011).

Independent and moderator variables

Board tenure is calculated as the average number of years that board members have served on a particular board (Golden & Zajac, 2001; Johnson, Hoskisson, & Hitt, 1993; Kaymak & Bektas, 2008; Kor & Sundaramurthy, 2009; McIntyre, Murphy, & Mitchell, 2007).

We define interlocks as the ties that are formed when a board member serves on the board of another firm. This measure of interlocks has previously been used in the literature on boards (Filatotchev, 2006; Haynes & Hillman, 2010; Kor & Sundaramurthy, 2009; Wincent et al., 2009; Ortiz et al., 2012; Pombo & Gutiérrez, 2011; Tian et al., 2011). Non-executive directors’ interlocks are calculated as the total number of external ties with other firms that are formed by a board's non-executive directors. The total number of interlocks is calculated as the total number of external ties formed by both executive and non-executive directors with other firms.

Taking the lead from other studies on corporate governance, we have included the following control variables that might affect the proposed relations: CEO/Chair duality (Ellstrand, Tihanyi, & Johnson, 2002; Holm & Schuler, 2010; Singla, George, & Eliyaht, 2010), measured as a dummy variable with the value 1 when the chief executive of a firm is also Chair of the board and 0 otherwise; board size (Kim, 2005, 2007; Kroll, Walter, & Wright, 2008; Ocasio, 1994; Sanders & Carpenter, 1998; Zahra, Priem, & Rasheed, 2007), measured as the number of directors on the board; firm age (Barroso, Villegas, & Pérez-Calero, 2011; Calof, 1993; Zahra et al., 2007), measured as the number of years since the firm was founded; percentage of non-executive directors (Datta, Musteen, & Herrmann, 2009; Filatotchev, Dynomina, Wright, & Buck, 2001; Singla et al., 2010), calculated as the sum of non-executive directors on each board divided by the total number of board members; firm size, measured by the number of employees in each firm for each year; and the firm's previous performance, measured by previous return on assets (ROA) (Kim, 2005; Tian et al., 2011). Finally, to control for temporal and sectoral effects, we included dummy variables for each year (2005–2008) and industry, according to the stock market industry classification published by the CNMV.1

Statistical estimations

To test our hypotheses we used an estimation process that is appropriate for our theoretical arguments and robust enough to withstand the typical problems associated with panel data analysis. We therefore used the Arellano–Bond model and used the generalised methods of moments (GMM) method (Arellano & Bond, 1991; Arellano & Bover, 1995; Greene, 2003). These authors propose the use of GMM, using the lagged values of the original independent variables as instruments, thereby resolving the problem of endogeneity. Hermalin and Weisbach (2000) and Aguilera and Cuervo-Cazurra (2009) argue that endogeneity makes it hard to analyse relations between board composition and firm value, and so if this is not controlled, the results could generate errors and inconsistent estimations. In this work, potential endogeneity could be due to the problem of simultaneity or inverse causality (Hermalin & Weisbach, 2003) and therefore, in accordance with prior studies, we have included the percentage of non-executive directors within the total number of board members as sources of endogeneity (Andrés de, Valentín, & Félix, 2005; Jackling & Johl, 2009; Kim, 2007; Kor & Sundaramurthy, 2009; Pombo & Gutiérrez, 2011). We used the Stata/SE software programme to calculate all of our estimations.

We also considered the possible problems of heteroscedasticity and autocorrelation. In order to establish if there was a problem of heteroscedasticity we carried out a modified Wald test, which rejected the H0 absence of heteroscedasticity, and we therefore selected the robust option in Stata for all of our models. To control for autocorrelation, we ran the Wooldridge test, using the xtserial command in Stata. The H0 absence of correlations was rejected, and the test therefore indicated that there was a problem of autocorrelation to be corrected.

We consider our model to be “autoregressive” and have therefore included the lagged dependent variable (ROAt−1) as the instrument, but the lagged dependent variable was intrinsically correlated to the non-observed effects at panel level, giving inconsistent standard estimators for the linear regression models for the random and fixed effects. This supports our use of the GMM method (Arellano & Bond, 1991; Arellano & Bover, 1995; Greene, 2003).

To test the validity of the model specification when using GMM, the Hansen Statistic of overidentifying restrictions was applied to evaluate the lack of correlation between the instruments and the terminal error in all of our models. The acceptance of the H0 Hansen statistic implies the absence of any correlation between the instruments used and the terminal error in all of our models. We also included the m2 statistic, which enabled us to confirm the absence of any secondary-order serial correlation in the regression residuals. Further to these comparative specification tests, we included the following Wald tests in the estimations: first (z1) joint significance of the reported coefficients of the explanatory variables and second (z2) joint significance of the dummy time variables. Both were statistically significant.

Table 1 sets out the descriptive statistics and the correlation matrix for the variables. The variables used in the model were not strongly correlated either between themselves or with the control variables, and there were therefore no problems of multicollinearity. In order to avoid the possible problems of multicollinearity between the primary effects and interaction terms, the independent variables were centred before the interaction variables were created (Aiken & West, 1991).

Table 1.

Correlation matrix.

  Mean  S.D  10  11  12  13  14  15  16 
1.ROA  0.038  0.098                               
2. Non-executive directors’ interlocks  43.61  34.74  −0.04                             
3. Total interlocks  54.42  39.93  0.01  0.57***                           
4. Tenure  6.89  4.64  0.1*  0.32***  −0.04                         
5.ROA−1  0.043  0.079  0.71***  0.00  0.00  0.11**                       
6.CEO/chair duality  0.64  0.48  0.03  0.05  −0.03  0.18***  0.00                     
7. Board size  10.81  3.62  0.07  0.47***  0.59***  −0.06  0.11*  0.12**                   
8. Industry 1  0.11  0.32  0.05  0.08  0.14***  −0.18***  0.05  0.10*  0.30***                 
9. Industry 2  0.32  0.47  0.04  0.03  −0.09*  0.07  −0.02  0.04  −0.07  −0.25***               
10. Industry 3  0.31  0.46  −0.06  −0.02  −0.17***  0.27***  −0.03  −0.01  −0.19***  −0.24***  −0.45***             
11 Industry 4  0.13  0.33  0.2***  −0.04  0.14***  −0.02  0.16***  0.02  0.08  −0.14**  −0.26***  −0.25***           
12. Industry 5  0.07  0.25  −0.16***  −0.03  0.09  −0.21***  −0.00  −0.15***  −0.07  −0.09*  −0.18***  −0.18***  −0.10*         
13. Industry 6  0.07  0.25  −0.13**  −0.03  0.03  −0.15***  −0.17***  −0.05  0.05  −0.09*  −0.18***  −0.18***  −0.10*  −0.07       
14. Firm age  47.43  33.58  0.08  0.09*  −0.08  0.26***  0.10*  −0.03  0.04  −0.12**  0.13**  0.07  −0.13**  −0.08  0.04     
15. % of non-executive directors  0.80  0.12  −0.07  0.16***  0.17***  −0.11**  −0.06  −0.17***  0.25***  0.13**  0.01  −0.03  −0.13**  0.05  −0.02  0.15***   
16. Log firm size  11,555.33  31,930.73  0.14**  0.28***  0.26***  0.11**  0.11*  0.24***  0.52***  0.00  0.12**  −0.14***  0.20***  −0.38***  0.15***  0.07  0.028 

Fuente: elaboración propia.

The final footnotes values should be:








The results obtained are set out below (Tables 2 and 3). Model 1 is the base model that includes all of the control variables. Curiously, none of the variables, with the exception of firm size, are significant.

Table 2.

Results of the analysis of non-executive directors’ interlocks versus total interlocks and firm performance.

  Model 1 “baseline model with control variables”  Model 2 “non-executive directors’ interlocks”  Model 3 “total interlocks” 
Non-executive directors’ interlocks    1.18   
Non-executive directors’ interlocks2    −1.20   
Total interlocks      2.78*** 
Total interlocks2      −2.39** 
ROAt−1  1.62  1.54  1.70* 
CEO/Chair duality  0.38  0.36  0.76 
Board size  1.31  1.19  −0.10 
Firm age  −2.96***  −2.64***  −2.87*** 
% of non-executive directors  0.51  0.46  0.83 
Log firm size  −1.08  −1.16  −1.48* 
Industry effect  YES  YES  YES 
Annual effect  YES  YES  YES 
Z1  11.32*  9.52  14.46* 
Z2  28.47***  28.14***  30.68*** 
m2  0.72  0.70  0.90 
Hansen  6.12  5.23  4.27 
X2  32.87***  33.85***  36.35*** 






Table 3.

Results of the moderating effect of average board tenure on the relationship between total interlocks and firm performance.

  Model 4 
Board tenure  2.94*** 
Total interlocks  3.41*** 
Total interlocks2  −3.12*** 
Total interlocks*board tenure  −2.95*** 
Total interlocks2*board tenure  2.95*** 
ROAt−1  1.70* 
CEO/chair duality  0.70 
Board size  0.43 
Firm age  −4.14*** 
% of non-executive directors  0.71 
Log firm size  −1.61 
Industry effect  YES 
Annual effect  YES 
Z1  24.29*** 
Z2  24.48*** 
m2  0.94 
Hansen  6.12 
X2  41.76*** 





As can be observed, our results confirm our two proposed working hypotheses. With regard to hypothesis 1, models 2 and 3 confirm that the inverted-U relation between interlocks and firm performance is only significant when we include the total number of interlocks rather than the number of ties belonging only to the non-executive directors. In model 3, the estimated coefficient for the total number of interlocks was statistically significant (p<.01) with a positive value, while the total number of interlocks was statistically significant (p<.05) with a negative value.

Model 4 includes the moderating variable, board tenure. The table shows that the board tenure coefficient is statistically significant (p<.01), with a positive value. The squared term of the interlocks was negative and significant (p<.01). The linear interaction term for tenure and the interlocks was negative and significant (p<.01), and the squared interaction term (p<.01) was positive and significant.

Therefore, in relation to hypothesis 2, we can confirm the moderating effect of board tenure on the negative relation between a high total number of interlocks and firm performance. However, and although it was not predicted in our hypothesis, this moderator effect also exists in the positive relation between a small total number of interlocks and firm performance. In comparison to model 3, adjusted model 4 is fairly significant, producing an increase in the value of X2, which suggests that board tenure moderates the curvilinear effects of the total number of interlocks on performance.


Unlike agency theory, which argues that a high percentage of non-executive directors is required to fulfil the board's control function, more recent theories have focused on the search for qualified and competent directors, regardless of type. However, with regard to interlocks, the majority of authors have concentrated exclusively on the study of the non-executive directors’ ties (Kim, 2007; Kor & Sundaramurthy, 2009; Tian et al., 2011) to compensate for the executive directors’ lack of business experience or external contacts (Filatotchev, 2006). On the other hand, from the resource dependency perspective, with its focus on the capture of resources for the firm (Hillman & Dalziel, 2003), the essential aspects have been board size – if the number of board members rises, the opportunity to capture external resources also increases – and diversity within the board, since more diverse boards have access to a broader range of resources. Logically, these two variables also affect board composition. Our study demonstrates that another variable – less explored and of greater interest for explaining the influence of the board on a firm's results – is the consideration of the board as a single entity, which does not take account of board member type when analyzing their potential for establishing external links. In fact, the results obtained in our investigation (a comparison of models 2 and 3) demonstrate the need to view the board as a single entity.

Our models 3 and 4 also support our predictions. If a board wishes to be more efficient, it should increase the number of interlocks. However, increasing the number of these ties could also have a negative effect on the board's internal functioning, as the group's cohesion might be reduced when board members are forced to divide their energies and attention between too many responsibilities. The board will therefore achieve its greatest productive efficiency when it has not only access to the greatest possible number of resources but is also able to function as a compact social group when taking decisions. We argue that internal relations, through board tenure, moderate the negative effects caused by a high number of board interlocks, and highlight the need to view the board as a decision-making body. Furthermore, although it was not predicted in our hypotheses, the results also show that board tenure moderates the positive relation between a low number of external links and firm performance. Directors with an appropriate/non-excessive number of ties and who therefore have more time to dedicate to their own board will be negatively influenced by a long tenure with the firm. A possible explanation that has not previously been considered is that if the two elements are combined (a lot of time to dedicate to the board and long tenure), directors could be affected by their own beliefs and the schemes that have been developed within their firm, and therefore the resources acquired in other firms could become a less valuable resource. That is to say, the board members could start to be more affected by a set of behaviour patterns learned in their own firm than by the knowledge that they acquire from the firms on whose boards they serve. Executive directors will only be able to take decisions that are defined by these patterns and the abilities of non-executive directors to provide resources and offer advice to the management team will be reduced.

In the majority of cases, the difficult balance between board independence and the board's social capital (via interlocks) can vary, depending on the context and type of firm, which suggests that future investigations should focus on these aspects. For example, firms operating in dynamic markets, or which face an initial public offering (IPO), should pay particular attention to their human and social capital requirements in relation to the strict independence of their non-executive directors (Filatotchev, 2006; Kor & Sundaramurthy, 2009). Other possible future lines of investigation could look in greater detail at the nature of interlocks. In this study, we have only considered national interlocks, between Spanish firms. It would be of interest to see whether the effects on performance of interlocks with foreign firms differ from those identified in this study, or even how this would affect the other dependent variables, such as the firm's internationalisation. Entry into new markets, or setting up subsidiaries in international markets, brings significant benefits for the firm's growth. These also tend to be complex operations, given the high levels of uncertainty and risk of failure associated with them (Sanders & Carpenter, 1998). In this context, interlocks constitute a very important tool that gives board members the opportunity to access information that mitigates risks and allows them to seek information from other firms. Finally, we would point out that this work does not specify whether the interlocks are “intragroup” – ties between firms belonging to a particular group, with shared ownership or even overlapping activities – or are interlocks between firms that are completely independent of each other with regard to their ownership structure. This distinction might affect our results.

Adler and Kwon, 2002
P.S. Adler,S.W. Kwon
Social capital: Prospects for a new concept
Academy of Management Review, 27 (2002), pp. 17-40
Aguilera and Cuervo-Cazurra, 2009
R. Aguilera,A. Cuervo-Cazurra
Codes of good governance
Corporate Governance: An International Review, 17 (2009), pp. 376-387
Aiken and West, 1991
L.S. Aiken,S.G. West
Multiple regression: Testing and interpreting interactions
Sage Publications, (1991)
Andrés de et al., 2005
P. Andrés de,A. Valentín,L. Félix
Corporate boards in OECD countries: Size, composition, functioning and effectiveness
Corporate Board, 13 (2005), pp. 197-210
Arellano and Bond, 1991
M. Arellano,S. Bond
Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations
Review of Economic Studies, 58 (1991), pp. 277-297
Arellano and Bover, 1995
M. Arellano,O. Bover
Another look at the instrumental variable estimation of error-components models
Journal of Econometrics, 68 (1995), pp. 29-51
Barroso et al., 2011
C. Barroso,M.M. Villegas,L. Pérez-Calero
Board influence on a firm internationalization
Corporate Governance: An International Review, 19 (2011), pp. 351-367
Beckman and Haunschild, 2002
C.M. Beckman,P.R. Haunschild
Networks learning: The effects of partner's heterogeneity of experience on corporate acquisitions
Administrative Science Quarterly, 47 (2002), pp. 92-124
Bjornali and Gulbrandsen, 2010
E.S. Bjornali,M. Gulbrandsen
Exploring board formation and evolution of board composition in academic spin-offs
Journal of Technology Transfer, 35 (2010), pp. 92-112
Burt and Carlton, 1989
R.D. Burt,D.S. Carlton
Another look at the network boundaries of American markets
The American Journal of Sociology, 93 (1989), pp. 723-753
Calof, 1993
J.L. Calof
The mode choice and change decision process and its impact on international performance
International Business Review, 2 (1993), pp. 97-120
Certo, 2003
S.T. Certo
Influencing initial public offering investors with prestige: Signaling with board structures
Academy of Management Review, 28 (2003), pp. 432-446
Dalziel et al., 2011
T. Dalziel,R.J. Gentry,M. Bowerman
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 (2011), pp. 1217-1242
Datta et al., 2009
D.K. Datta,M. Musteen,P. Herrmann
Board characteristics, managerial incentives, and the choice between foreign acquisitions and international joint ventures
Journal of Management, 35 (2009), pp. 928-953
Davis, 1991
G.F. Davis
Agents without principles? The spread of the poison pill through the intercorporate network
Administrative Science Quarterly, 36 (1991), pp. 583-613
Diestre et al., 2014
L. Diestre,N. Rajagopalan,S. Dutta
Constraints in acquiring and utilizing directors’ experience: An empirical study of new-market entry in the pharmaceutical industry
Strategic Management Journal, (2014), http://dx.doi.org/10.1002/smj
Elitzur and Yaari, 1995
R. Elitzur,V. Yaari
Executive incentive compensation and earnings manipulation in a multi-period setting
Journal of Economic Behavior and Organization, 26 (1995), pp. 201-219
Ellstrand et al., 2002
A.E. Ellstrand,L. Tihanyi,J.L. Johnson
Board structure and international political risk
Academy of Management Journal, 45 (2002), pp. 769-777
Fama and Jensen, 1983
E.F. Fama,M.C. Jensen
Separation of ownership and control
Journal of Law & Economics, 26 (1983), pp. 301-326 http://dx.doi.org/10.3109/15360288.2015.1047553
Ferris et al., 2003
S. Ferris,M. Jagannathan,A.C. Pritchard
Too busy to mind the business? Monitoring by directors with multiple board appointments
The Journal of Finance, 58 (2003), pp. 1087-1112
Filatotchev, 2006
I. Filatotchev
The effects of executive characteristics and venture capital involvement on board composition and share ownership in IPO firms
British Journal of Management, 17 (2006), pp. 75-92
Filatotchev et al., 2001
I. Filatotchev,N. Dynomina,M. Wright,T. Buck
Effects of postprivatization governance and strategies on export intensity in the former Soviet Union
Journal International Business Studies, 32 (2001), pp. 853-871
Finegold et al., 2007
D. Finegold,G. Benson,D. Hecht
Corporate boards and company performance: Review of research in light of recent reforms
Corporate Governance: An International Review, 15 (2007), pp. 865-878
Fligstein, 1995
N. Fligstein
Networks of power or the finance conception of control?
American Sociological Review, 60 (1995), pp. 500-503
Forbes and Milliken, 1999
D.P. Forbes,F.J. Milliken
Cognition and corporate governance: Understanding boards of directors as strategic decision making groups
Academy of Management Review, 24 (1999), pp. 489-505
Gabrielsson and Huse, 2004
J. Gabrielsson,M. Huse
Context, behavior and evolution: Challenges in research on boards and governance
International Studies of Management and Organization, 34 (2004), pp. 11-36
Goerzen and Beamish, 2005
A. Goerzen,P.W. Beamish
The effect of alliance network diversity on multinational enterprise performance
Strategic Management Journal, 26 (2005), pp. 333-354
Golden and Zajac, 2001
B.R. Golden,E.J. Zajac
When will boards influence strategy? Inclination X power=strategic change
Strategic Management Journal, 22 (2001), pp. 1087-1111
Greene, 2003
W. Greene
Econometric analysis
5th ed., Upper Saddle River, (2003)
Gulati et al., 2000
R. Gulati,N. Nohria,A. Zaheer
Strategic networks
Strategic Management Journal, 21 (2000), pp. 203-215
Haynes and Hillman, 2010
K.T. Haynes,A. Hillman
The effect of board capital and CEO power on strategic change
Strategic Management Journal, 31 (2010), pp. 1145-1163
He and Huang, 2011
J. He,Z. Huang
Board informal hierarchy and firm financial performance: Exploring a tacit structure guiding boardroom interactions
Academy of Management Journal, 54 (2011), pp. 1119-1139
Hermalin and Weisbach, 2000
B.E. Hermalin,M.S. Weisbach
Board of directors as an endogenously determined institution: A survey of the literature. Working paper
University of California at Berkeley and University of Illinois, (2000)
Hermalin and Weisbach, 2003
B.E. Hermalin,M.S. Weisbach
Boards of directors as an endogenously determined institution: A survey of the economic literature
Economic Policy Review, 9 (2003), pp. 7-26
Hillman et al., 2000
A.J. Hillman,A.A. Cannella,R. Paetzold
The resource dependence role of corporate directors strategic adaptation of board composition in response to environmental change
Journal of Management Studies, 37 (2000), pp. 235-255
Hillman and Dalziel, 2003
A.J. Hillman,T. Dalziel
Boards of directors and firm performance: Integrating agency and resource dependence perspectives
Academy of Management Review, 28 (2003), pp. 383-396
Holm and Schuler, 2010
C. Holm,F. Schuler
Reduction of asymmetric information through corporate governance mechanisms – The importance of ownership dispersion and exposure toward the international capital market
Corporate Governance: An International Review, 18 (2010), pp. 32-47
Jackling and Johl, 2009
B. Jackling,S. Johl
Board structure and firm performance: Evidence from India's top companies
Corporate Governance: An International Review, 17 (2009), pp. 492-509
Johnson et al., 1993
R.A. Johnson,R.E. Hoskisson,M.A. Hitt
Board of director involvement in restructuring: The effects of board versus managerial controls and characteristics
Strategic Management Journal, 14 (1993), pp. 33-50
Johnson et al., 2011
S. Johnson,K. Schnatterly,J.F. Bolton,C. Tuggle
Antecedents of new director social capital
Journal of Management Studies, 48 (2011), pp. 1782-1803
Johansen and Pettersson, 2013
R.T. Johansen,K. Pettersson
The impact of board interlocks on auditor choice and audit fees
Corporate Governance: An International Review, 21 (2013), pp. 287-310
Kaymak and Bektas, 2008
T. Kaymak,E. Bektas
East meets west? Board characteristics in an emerging market: Evidence from Turkish banks
Corporate Governance: An International Review, 16 (2008), pp. 550-561
Knockaert and Ucbasaran, 2013
M. Knockaert,D. Ucbasaran
The service role of outside boards in high tech start-ups: A resource dependency perspective
British Journal of Management, 24 (2013), pp. 69-84
Knockaert et al., 2014
M. Knockaert,E.S. Bjornali,T. Erikson
Joining forces: Top management team and board chair characteristics as antecedents of board service involvement
Journal of Business Venturing, 30 (2014), pp. 420-435
Kiel and Nicholson, 2006
G.C. Kiel,G.J. Nicholson
Multiple directorships and corporate performance in Australian listed companies
Corporate Governance, 14 (2006), pp. 530-546
Kim and Cannella, 2008
Y. Kim,A.A. Cannella Jr.
Toward a social capital theory of director selection
Corporate Governance: An International Review, 16 (2008), pp. 282-293
Kim, 2005
Y. Kim
Board network characteristics and firm performance in Korea
Corporate Governance: An International Review, 13 (2005), pp. 800-808
Kim, 2007
Y. Kim
The proportion and social capital of outside directors and their impacts on firm value: Evidence from Korea
Corporate governance: An International Review, 15 (2007), pp. 1168-1176
Kor and Misanyi, 2008
Y. Kor,V. Misanyi
Outside directors ‘industry-specific experience and firm's liability of newness
Strategic Management Journal, 29 (2008), pp. 1345-1355
Kor and Sundaramurthy, 2009
Y. Kor,C. Sundaramurthy
Experience-based human capital and social capital of outside directors
Journal of Management, 35 (2009), pp. 981-1006
Kroll et al., 2007
M. Kroll,B. Walters,A.L.E. Son
The impact of boards composition and top management team ownership structure on post-IPO performance in young entrepreneurial firms
Academy of Management Journal, 50 (2007), pp. 1198-1216
Kroll et al., 2008
M. Kroll,B. Walters,P. Wright
Board vigilance, director experience, and corporate outcomes
Strategic Management Journal, 29 (2008), pp. 363-382
Le et al., 2013
S.A. Le,M.J. Kroll,B.A. Walters
Outside directors’ experience, TMT firm-specific human capital, and firm performance in entrepreneurial IPO firms
Journal of Business Research, 66 (2013), pp. 533-539
Letza et al., 2004
S. Letza,X.P. Sun,J. Kirkbride
Shareholding versus stakeholding: A critical review of corporate governance
Corporate Governance: An International Review, 12 (2004), pp. 242-262
Lynall et al., 2003
M.D. Lynall,B.R. Golden,A.J. Hillman
Board composition from adolescence to maturity: A multitheoretic view
Academy of Management Review, 28 (2003), pp. 416-431
McIntyre et al., 2007
M. McIntyre,S. Murphy,P. Mitchell
The top team: Examining board composition and firm performance
Corporate Governance: An International Review, 7 (2007), pp. 547-561
Mizruchi and Stearns, 1988
M.S. Mizruchi,L.B. Stearns
A longitudinal study of the formation of interlocking directorates
Administrative Science Quarterly, 33 (1988), pp. 194-210
Mizruchi and Stearns, 1994
M.S. Mizruchi,L.B. Stearns
A longitudinal study of borrowing by large American corporations
Administrative Science Quarterly, 39 (1994), pp. 118-140
Nahapiet and Ghoshal, 1998
J. Nahapiet,S. Ghoshal
Social capital, intellectual capital and the organization advance
Academy of Management Review, 23 (1998), pp. 242-266
Ocasio, 1994
W. Ocasio
Political dynamics and the circulation of power: CEO succession in U.S. industrial corporations. 1960–1990
Administrative Science Quarterly, 39 (1994), pp. 285-314
Ortiz et al., 2012
N. Ortiz,J. Aragón,J. Delgado,V. Ferrón
The effect of director interlocks on firms’ adoption of proactive environmental strategies
Corporate Governance: An International Review, (2012), pp. 164-178
Palmer et al., 1995
D. Palmer,B.M. Barber,X. Xueguang
The finance concept of control “the theory that ate New York?” Reply to Fligstein
American Sociological Review, 60 (1995), pp. 504-508
Pfeffer and Salancik, 1978
J. Pfeffer,G. Salancik
The external control of organizations: A resource dependence perspective
Harper y Row, (1978)
Pombo and Gutiérrez, 2011
C. Pombo,L.H. Gutiérrez
Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups
Journal of Economics and Business, 63 (2011), pp. 251-277
Sanders and Carpenter, 1998
G. Sanders,M.A. Carpenter
Internationalization and firm governance: The roles of CEO compensation, top team composition and board structure
Academy of Management Journal, 41 (1998), pp. 158-178
Shropshire, 2010
C. Shropshire
The role of the interlocking director and board receptivity in the diffusion of practices
Academy of Management Review, 35 (2010), pp. 246-264
Shipilov et al., 2010
A. Shipilov,H. Greve,T. Rowley
When do interlocks matter? Institutional logics and the diffusion of multiple corporate governance practices
Academy of Management Journal, 53 (2010), pp. 846-864
Singla et al., 2010
C. Singla,R. George,R. Eliyaht
Internationalization, family business and corporate governance: An emerging market perspective
Academy of management annual meeting proceedings,
Stevenson and Radin, 2009
W. Stevenson,R.F. Radin
Social capital and social influence on the board of directors
Journal of Management Studies, 46 (2009), pp. 16-44
Stiles and Taylor, 2001
P. Stiles,B. Taylor
Boards at work: How directors view their roles and responsibilities
Oxford University Press, (2001)
Tian et al., 2011
J. Tian,Haleblian,N. Rajagopalan
The effects of board human and social capital on investor reactions to new CEO selection
Strategic Management Journal, 32 (2011), pp. 731-747
Van Ees et al., 2009
H. Van Ees,J. Gabrielsson,M. Huse
Toward a behavioral theory of boards and corporate governance
Corporate Governance: An International Review, 17 (2009), pp. 307-319
Westphal and Fredrickson, 2001
J.D. Westphal,J.W. Fredrickson
Who directs strategic change? Director experience, the selection of new CEOs, and change in corporate strategy
Strategic Management Journal, 22 (2001), pp. 1113-1137
Westphal et al., 2001
J.D. Westphal,M-D.L. Seidel,K.J. Stewart
Second-order imitation: Uncovering latent effects of board network ties
Administrative Science Quarterly, 46 (2001), pp. 717-743
Wincent et al., 2009
J. Wincent,S. Anokhin,H. Boter
Network board continuity and effectiveness of open innovation in Swedish strategic small-firm networks
R&D Management, 39 (2009), pp. 55-67 http://dx.doi.org/10.1097/SGA.0000000000000136
Zahra et al., 2007
S.A. Zahra,R.L. Priem,A.A. Rasheed
Understanding the causes and effects of top management fraud
Organizational Dynamics, 36 (2007), pp. 122-139

We have used the information from the database relating to the stock market industry classifications proposed by CNMV, coded as follows: (1) petroleum and energy; (2) raw materials, industry and construction; (3) consumer goods; (4) consumer services; (5) financial and property services; and (6) technology and communications. Given the differences in the frequency of the observations for each sector, we have assigned “1” to industries 1, 4, 5 and 6; “2” to industry 2; and “3” to industry 3.

Corresponding author. (Leticia Pérez-Calero Sánchez lcalero@upo.es)
Copyright © 2015. AEDEM