Interlocking Directorates Networks and Young Firms’ Performance: Social Capital in the Entrepreneurial Environment

Abstract

There is voluminous research on the relationship between interlocking directorates networks and firm performance. However, empirical studies on this topic remain inconclusive. One issue identified by scholars is related to the scope of studies, as interlocking directorates literature has focused exclusively on mature and large companies. This research contributes by considering firm age as a moderator of the mentioned relationship. We utilize a seven-year panel dataset of the entire Professional, Scientific & Technical Activities sector in Norway, examining interindustry network originating from a census dataset of all registered companies. The findings indicate that there is a negative moderating effect of firm age on the interlock-performance relationship. We find that young companies benefit more from participating in an interlocking directorates network than established firms. In addition, we consider two types of inter-board connections, ties to young companies and ties to established companies, in terms of their impact on firm performance. We find that young firms extract more benefits from both types of connections. As such, we argue that social capital, through interlocking directorates, can help young companies to overcome liabilities that are associated with an early organizational age.