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Board Interlocks and Diversification Strategies  

Christine Shropshire

The board of directors serves multiple corporate governance functions, including monitoring management, providing oversight on strategic issues, and linking the organization to the broader external environment. Researchers have become increasingly interested in board interlocks and how content transmitted via these linkages shapes firm outcomes, such as corporate structure and strategies. As influential mechanisms to manage environmental uncertainty and facilitate information exchange, Board interlocks are created by directors who are affiliated with more than one firm via employment or board service and allow the board to capture a diversity of strategic experiences. One critical corporate decision that may be influenced by interlocks and strategic diffusion is diversification (i.e., in which products and markets to compete). Directors draw on their own experiences with diversification strategies at other firms to help guide and manage ongoing strategic decision-making. There is broad scholarship on interlocks and the individuals who create them, with extant research reporting that some firms are more likely to imitate or learn from their interlock partners than others. Prior findings suggest that the conditions under which information is transmitted via interlock, such as an individual director’s experience with diversification strategies at other firms, may make that information more influential to the focal firm’s own strategic decision-making related to diversification. A more holistic framework captures factors related to the individual interlocking director, the board and firm overall and the context surrounding these linkages and relationships, helping to promote future research. Understanding the social context surrounding board interlocks offers opportunities to more deeply examine how these interconnections serve in pursuit of the board’s fundamental purpose of protecting shareholder investment from managerial self-interest. Overall, integrating multi-level factors will offer new insights into the influence of board interlocks on firm strategies on both sides of the partnership. Expanding knowledge of how inter-firm linkages transmit knowledge influential to board decision-making can also improve our understanding of board effectiveness and corporate governance.

Article

Constructs and Measures in Stakeholder Management Research  

James Mattingly and Nicholas Bailey

Stakeholder strategies, or firms’ approaches to stakeholder management, may have a significant impact on firms’ long-term prosperity and, thereby, on their life chances, as established in the stakeholder view of the firm. A systematic literature review surveyed the contemporary body of quantitative empirical research that has examined firm-level activities relevant to stakeholder management, corporate social responsibility, and corporate social performance, because these three constructs are often conflated in literature. A search uncovered 99 articles published in 22 journals during the 10-year period from 2010 to 2019. Most studies employed databases reporting environmental, social, and governance (ESG) ratings, originally created for use in socially responsible investing and corporate risk assessment, but others employed content analysis of texts and primary surveys. Examination revealed a key difference in the scoring of data, in that some studies aggregated numerous indicators into a single composite index to indicate levels of stakeholder management, and other studies scored more articulated constructs. Articulated constructs provided richer observations, including governance and structural arrangements most likely to provide both stakeholder benefits and protections. Also observed were constraining influences of managerial and market myopia, sustaining influences from resilience and complexity frameworks, and recognition that contextual variables are contingencies having impact in recognizing the efficacy of stakeholder management strategies.