Interlocking Alliances : A quantitative exploration of board interlocks and strategic alliances

Abstract

This study explores the relationship between board interlocks and strategic alliances. Our introduction identifies the abovementioned link as an overlooked relationship and justifies the reasoning behind this study. Our theoretical framework introduces the notion that a board interlock has potential benefits for strategic alliances. Specifically, we study the influence of board members’ ties to external firms on the alliance participation propensity of the focal firm. Moreover, we identify alliances where the partners share a board member and define alliances with this characteristic as interlocking alliances. Finally, we study the effect of this characteristic on the alliance performance in terms of abnormal returns accruing to the partners. We find that an expansion of the board by one member increase the propensity of alliance participation by 3 %. We also find that an increase by one additional board interlock increase the propensity of alliance participation by 3 %. The search of interlocking alliances resulted in five observations, suggesting this as a rare occurrence. Due to the small sample size, the performance measurements did not hold any statistical significance. However, the observed abnormal returns were fluctuating between negative and positive. Implications of these findings for the literatures on board interlocks and strategic alliances are discussed. Our study contributes to the strategic management literature by the identification of interlocking alliances, the effect of the board on alliance participation propensity, and by drawing the overlooked link between board interlocks and strategic alliance performance.