A structural theory of interlocking corporate directorates

A theory is proposed that explains where interlocking corporate directorates should appear between sectors of an economy, where they should not appear, and the profitability of efficient corporate interlocking. Taking the sector of an economy as the unit of analysis, interlocking directorates are cast as strategically created constraints on those sectors of the economy most “problematic” for obtaining profits in a given industry of firms. The extent to which each sector of the American economy is problematic for obtaining profits in two-digit and four-digit manufacturing industries is estimated from research linking industry profits with the form of the pattern of relations defining the industry as a position in the network of dollar flow transactions given in the 1967 Input-Output Study for the United States. A two-stage process is described for sampling firms representative of large corporations involved in American manufacturing. Measures of alternative strategies for interlocking across sectors are described. Two classes of hypotheses are derived: (1) Firms in an industry should interlock with firms in some other sector in proportion to the extent to which the sector constrains the industry's profits. (2) Controlling for production and market differences, the ability of firms in an industry to obtain unusually high profits reflects their success in creating interlocks with those sectors most problematic for their industry's profits.