The impact of interlocking directorates on innovation: the effects of business and social ties

Boards of directors of large companies all over the world frequently have a certain number of shared directors, which can be motivated by social structures that foster different types of links, including investments and vertical relationships. The purpose of this paper is to identify the effects that board interlocking exerts on innovation, considering the different nature of shared directors that finally determines the type of links dominating the boards.

Panel regression analyses were conducted using data collected from 69 Spanish listed innovative sector companies during the period 2010–2014, which provided an unbalanced panel of 325 data observations.

The results suggested that the typology of interlocks determined their effects on innovation, which had a positive influence when independent and extra-industry directors held multiple directorships, whereas it was negative in the case of intra-industry and women interlocking directors.

This study provided evidence for the diverse effects of interlocking directorates and contributed to the open debate on the best board composition for improving business innovation, considering the common feature of shared directorships.

The value of this research was twofold. On the one hand, the study considered a wide typology of interlocking directorates, such as women, affiliated and independent directors, intra- and extra-industry directorships, as well as shared directors from the same country. On the other hand, the effects of these different interlocking directorate typologies were analysed on innovation by considering different innovation indicators.