Academic journal article The Geographical Review

Are American Interlocking Directorates Associated with Brain Circulation and Do They Translate into Higher Corporate Performance?

Academic journal article The Geographical Review

Are American Interlocking Directorates Associated with Brain Circulation and Do They Translate into Higher Corporate Performance?

Article excerpt

Historically, prosperous companies flourished by developing new products and processes through the generation of internal knowledge. In today's fast paced business climate though, competitive firms utilize external links more than ever as a cost-effective strategy to secure state-of-the-art knowledge. Through these external relationships, firms can better adapt to ever-changing environments and improve their competitive position.

Firms constantly tap into external relationships through a variety of business practices. One generally accepted method is through interlocking directorates. These occur when the board member of one firm also sits on the board of a second firm. Business academics argue that these connections yield knowledge transfer between the firms (Palmer and others 1993; Haunschild and Beckman 1998; Westphal and others 2001; Chen and others 2009; Shropshire 2010). Less studied is the geography of interlocking directorates, where researchers argue that these connections transfer knowledge across space (O'Hagan and Green 2002, 2004). The spatial relationship is particularly relevant within the current dialogue on brain circulation: the international migration of highly skilled individuals, the cycle of moving abroad to study and work, and later returning home to take advantage of valuable career opportunities.

The purpose of this study is to explore interlocking directorates, with specific focus on those connections when a director sits as an inside director for an American corporation and an outside director for a firm located outside of North America. Unfortunately, with few exceptions (Heemskerk 2011), research traditionally examining interlocking directorates has centered on domestic connections, particularly studies focusing on American firms (Pfeffer and Salancik 1978; Pennings 1980; Burt 1983; Green 1983; Useem 1984). Those that examined international linkages generally focused on intracontinental connections (van Veen and Kratzer 2011; Heemskerk 2013). This study addresses limitations in the literature by answering three main questions. First, does geography influence interlocking directorates at the intercontinental level? In other words, do firms in eastern United States link to those in Europe, and firms in western United States link to Asia? Second, does the personal history of directors have implications for where they sit as outside directors; such as, if a director has a personal history in Asia, is that director likely to be an outside director for an Asian firm? Finally, and perhaps most importantly, if personal history does influence where individuals sit as outside directors, does an interlocking directorate translate into higher performance for American companies?

BRAIN CIRCULATION, INTERLOCKING DIRECTORATES, AND INSTITUTIONALISM

Skilled and professional workers have traditionally moved from developing countries to developed countries. This phenomenon has been framed as brain drain, with the exodus hindering the progress of developing countries and benefitting developed ones. Some researchers suggest that brain drain is only one part of the story. As far back as 1971, though, Wilbur Zelinsky proposed "the hypothesis of the mobility transition," in which he predicted the return home of some of these skilled and professional persons. By the 1990s, academic discourse followed his lead, debating whether the migration pattern was purely a drain on the source countries, or if it eventually led to an impending brain gain for them through a global brain circulation in the long run.

Brain circulation, as defined by Jean Johnson and Mark Regets, is the international migration of highly skilled individuals, the cycle of moving abroad to study and work, and later returning home to take advantage of valuable career opportunities (1998). AnnaLee Saxenian is perhaps the researcher closest to examining this stream through the concept of place. Saxenain uses the term technical communities to explain the link between Silicon Valley and new development areas and states. …

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