Interlocking Directorates: A Strategy for Reducing Environmental Uncertainty

Abstract

Interlocking directorates among corporations are common, despite statutory attempts to limit interlocking. Through interlocking, companies may gain any of four benefits that reduce environmental uncertainty: horizontal coordination linking competitors; vertical coordination linking an organization with suppliers of inputs or receivers of outputs; expertise; enhanced reputation. Antitrust legislation implies that the maintenance of uncertainty in the marketplace through competition is a social good, but reducing uncertainty through interlocking may be a profit-maximizing strategy of benefit to business firms and their shareholders.