In a review from the period of 1935 through1965, Dooley (1969) identified five reasons for the existence of IDs in a sample analysis of 200 non-financial and 50 financial largest firms in the United States: (1) Size of the organization, the larger the firm, the higher the number of current interlocks, opposite to what Takes and Heemskerk (2016) found later; (2) Management control, referring to the intention of controlling another companies activities by creating IDs with them; (3) Financial interlocks, with two reasons for having them, - fulfilling the necessity of control over an indebted firm or having access to capital to ensure business activity continuity, as Davis and Mizruchi (1999) found in their study of how the role of banks evolved in the United States corporate network from 1982 to 1994, by changing their centrality degree in the structure; (4) Competition, even with the execution of Clayton Act of 1914 in the United States, there was evidence that many companies still had IDs with competitors’ firms in the same market, and (5) Local interest groups, where the most important issue is to keep the unity and integration of a strategic group of firms, relating one to another through shared directors (Dooley, 1969). Therefore, interlocks were created as mechanisms to deal with the uncertainty of the environment, making it possible for the organization to respond accordingly to the demands in context (Pfeffer, 1972).

Directorate interlocks are created to introduce into the firm new valuable resources from the environment; or to support an elite group or some wide class statements in order to maintain the corporate network integration or to follow individual or group’s interests (Richardson, 1987; Phan, Hoon Lee & Chi Lau, 2003). In addition to this, Zajac (1988) found that director’s decisions are driven by personal professional interests, following an individual advancement strategy. After Dooley (1969), a later review by Mizruchi (1996) posed the question: What do interlocks do?, exhibited five main determinants for the creation of interlocking directorates, some of them are focused on the firm’s outputs purposes and others just serve the directors’ interests. The first group considers the following determinants: (1) Collusion, also described by Dooley (1969) as a competition factor, where two or more organizations create these corporate ties in order to obtain an illegal advantage and execute some bad practices in the market; (2) Co-optation and monitoring, again referred to by Dooley (1969) as Management Control, where firms join together through an interlock to share resources and decrease the level of uncertainty that they have to deal with or to gain control and supervision over another organization; and (3) Legitimacy, when the composition of the board, obtained by the formation of interlocking directorates, enhances the reliability of the firm in the business community. On the other hand, the second group of determinants is focused on the construction of corporate ties oriented to: (4) Director’s self-interests as career advancement, stated also by Zajac (1988), when a director is interested in the creation of an interlock just for the purpose to boost his professional career; and (5) Social cohesion, exhibited also by Dooley (1969) as local groups of similar interests and by Useem (1984) as the existence of an Inner Circle, a small group characterized by its power, influence and connectivity over most important political, economic and social actors in a country, where directors aim to maintain the aftliation with a corporate elite (Useem, 1980; Mizruchi, 1996). Regarding risk of collusion through the presence of IDs, Simmons (2011) found no evidence for the establishment of IDs between two competing firms, challenging the previous statements of Dooley (1969) and Mizruchi (1996). However, Simmons’s findings suggested the legality of IDs as time contingent, due to the convergence of the firms’ activities in a specific sector. A later study of David and Westerhuis (2014) stated that the main functions of corporate networks as being four: (1) access to financial capital, usually needed by organizations’ business transactions, (2) channels for information, serving as pipe-lines through which several resources flow (explained later in OO-CM category), (3) control over competition, in accordance with the local antitrust regulations and characteristics and, (4) enhance the reputation of firms, considering the professional background of shared directors and their prestige.

In addition to these findings, Zajac and Westphal (1996) found, over a sample of 491 large firms in the United States during the period 1985-1992, that the reason for creating an interlock obeys mostly to the CEO’s influence and interests, looking to maintain his or her intra-organizational power through the manipulation of inter-organizational interlocks, when the CEO’s decisions of who will be part of the board depends on the level of control that he or she wants to have over the firm. These are similar results to those of Geletkanycz, Boyd and Finkelstein (2001), who demonstrated how CEO external directorate linkages were related to his or her compensation. Similarly, Fracassi and Tate (2012) indicated that powerful CEOs tend to search among directors well connected with them in order to appoint these executives to integrate the board. The result of this manipulation of the board’s composition, through the creation of several IDs, is a weaker monitoring over the CEOs’ business decisions. IDs formation also could be a matter of public policy accomplishment or just to facilitate a specific transaction. According to Cárdenas (2015), the corporate network elite in Latin America is a fragmented one, revealing that countries are mostly interested only in national business transactions rather than management control over the region. They prefer local rather than regional ties, thus stopping the emergence of a transnational corporate network. Silva, Majluf and Paredes (2006) found that Chilean interlocking directorates by 2000 seemed to be there just to ensure an expropriation process or to fulfill some legal requirement. Sometimes these common transactions or obligations can help the creation of IDs. According to Lluch et al (2014), there could be more than one mechanism for network cohesion when an interlocking directorate is created. In their study, at the beginning of the 1970s, Argentina presented a cohesive corporate network considering three major business mechanisms: (1) identity by ethnic condition, (2) family relationships and (3) relationships to a common government agent who was present in many boards, called syndic. Similarly, the presence and number of interlocks can define the boundaries of a business mechanism as well, such as business groups (Khanna & Rivkin, 2006), or family firms (Salvaj, Ferraro & Tapies, 2008).

Regarding the resilience of interlocks, a broken tie occurs when the common director between two firms disappears (Palmer, 1983). As was observed in a research study of over 1,131 firms in the United States during the period 1962-1964, the majority of IDs accidentally broken were not reconstituted again. Furthermore, Palmer, Friedland and Singh (1986) found that just directional ties are more likely to be reconstituted. So according to this analysis, not all broken ties will be renewed; it will depend on the firm’s intentions, requirements and strategic goals (Palmer, 1983). These findings do not support some of the statements made by Dooley (1969) and Mizruchi (1996) who proposed management control and monitoring as reasons for establishing IDs, leading to the expectation of the reconstitution of a broken corporate tie as something natural, something that was not evidenced by the empirical research. Furthermore, those who are or will be the directors’ companions on the board might influence the formation and reconstitution of interlocks. According to Conyon and Muldoon (2006), major interlocked directors tend to sit on boards where there are other highly interlocked ones. A study of the elite corporate network of 100 businesses, 109 nonprofit organizations and 98 government committees in the United States, demonstrated that nonprofit organizations, especially charities and foundations, seem to have a lower integration and central degrees than business and government sectors, where major firms are important actors and have high-profile directors on their boards (Moore, Sobieraj, Allen Whitt, Mayorova & Beaulieu, 2002). Actors who participate inside the corporate network have a responsibility and a correct function, but their final behavior depends on the context and the period where they have to perform. So, the dynamic and flexible roles of these participants mostly depends on the external influences of the environment. In a study of 166 firms in the United States, Mizruchi and Bunting (1981) found that by 1904 the total number of interlocks related to a firm could be improved in order to reveal the firm’s influence according to the strength and direction of the ties. Nevertheless, later, Palmer (1983) demonstrated in his research over the period 1962-1964, that it is not suftcient just to consider their direction in order to find the balance of influence between two interlocked firms. These two contradictory findings reinforce the idea of Mizruchi et al (2006), where the effects of social ties could vary across time. Later analysis had shown that this centrality measure is time contingent, because firms that were highly central in one period, can exhibit a different centrality with the passing of the years, according to the changes of the business environment or the organizations’ strategies (Davis & Mizruchi, 1999), such as what happened with the banks in the United States during the period of 1982-1994, which over time changed their role of high central actors in the corporate network, or the banks and financial institutions in Spain by 2003 (Salvaj & Ferraro, 2005) and in the United Kingdom (Schnyder & Wilson, 2014), demonstrating that corporate networks’ structures evolve alongside countries’ current form of capitalism.

According to Salvaj (2013), Chile maintained its corporate network structure from 1969 to 2005, but the participants within this changed their roles many times. This network kept its cohesion through changes in the regulations of the government, the entry of multinational companies and the capital market development, but its actors played different roles. For instance, at the beginning of the period under analysis, banks were central participants with a high degree of intermediation centrality, but after the economic crisis of 1982 and the open market global phenomenon, banks left this role to local business groups and some multinational firms. Therefore, the Chilean corporate network is a good example of how a group of firms can have a high degree of global centrality, but a weak role as intermediates connectors within this network (Salvaj, 2013). Furthermore, Wilson, Buchnea and Tilba (2017), explained how the role of banks and new financial institutions was enforced over time, from 1904 to 1976, increasing the density of business leaders networks. These cases prove the resilience of the structure for interlocking directorates, but finally, the value of the cohesiveness of a business network comes when firms’ decisions take different paths, some for responsible behavior and others for collusion or other bad practices in the market (Salvaj, 2013). Despite the time contingent volatility of this centrality measure, IDs network seems to have an intrinsic property to maintain the structural characteristics of its configuration. Because of that, any possible removal of the main central boards or highly connected directors from the network will not produce major modifications in its structure, proving its resilience to external changes of the corporate governance factors (Davis, Yoo & Baker, 2003; Naudet & Dubost, 2017). Chilean IDs network had to deal with major political and economic changes in the business environment from 1970 to 2010, but nonetheless, it remained resilient, demonstrating a high level of connectivity between state-owned firms and private business groups (Salvaj & Couyoumdjian, 2015), similar to the Dutch corporate network, which maintained its resilience from 1903 to 2008 and exhibited banks as central actors over that time (Westerhuis, 2014), the same as The United States corporate network between 1962 and 1966 (Mariolis and Jones, 1982), or the Swiss corporate network that demonstrated cohesiveness from 1910 to 2010, banks being in a central position until 1980, when globalization effects reduced the importance of banks within the network and increased the number of outside directors on the boards (Ginalski, David & Mach, 2014; Buchnea, Tilba & Wilson, 2018). Furthermore, Carroll (2002) found that the Canadian corporate network was completely changed from 1976 to 1996 due to external factors in the environment like the trans- nationalization of capital, deregulation of the financial sector and reforms in the corporate governance, all of these reasons associated with the globalization trend. In addition to this, the Argentinian corporate network from 1923 to 2000 drowned in a long-term social deconstruction process that progressively fragmented it, because of the effect of external and internal issues, where businesses were not connected, were unaware of the potential benefits from IDs and finally losing their capability for attracting resources (Salvaj & Lluch, 2014). Resilience of both types of corporate network structures, ownership or interlocking directors, had been tested and proven, as well as other particularities such as traditional ruling class elites. According to Buck (2018), the British ruling class elite endured despite globalization effects over the entire corporate network that represented a huge number of new outside directors on the local boards. Kogut and Walker (2001) emphasized the robustness of the German ownership network structure that allowed it to endure over time, despite the globalization effects on the country’s economic environment. In addition to this, German IDs network had also shown high connectivity and centrality degree in Europe (Cárdenas, 2015), as well as the Spanish IDs and ownership networks (Salvaj & Ferraro, 2005), both representing exceptions to Kogut’s (2012) statement about the unlikelihood that a country has both corporate networks with the “Small-World” properties.

In a study of 1,733 firms in the United States, 2,236 firms in the United Kingdom and 2,354 Germany firms, Conyon and Muldoon (2006) found strong similarities between the corporate network structures of these three countries, according to their “Small-World” properties that were evaluated. To the contrary, Musacchio and Read (2007) did a comparative analysis using 1909 data of Mexico and Brazil corporate networks and found that corporate interlocks are more common in Mexico, where formal institutions are weak or ineftcient and organizations have to support their growth on informal institutions like interlocking directorates, in order to have proper access to important resources for their new ventures or initiatives. On the other hand, the Brazilian corporate network appears to be more fragmented and this structure implies that firms do not have a strong necessity for these corporate ties, because the formal institutions in Brazil were facilitating access to capital and good market conditions for the business community. (Musacchio & Read, 2007).

According to Windolf (2009), antitrust regulation had a fragmentation effect on the United States corporate network, causing its density reduction and weakening of banks. However, Germany’s corporate network density is not only higher than the United States’ is, but also banks had better centrality degree, and bankers a higher position on the boards. IDs enforced the cooperative German business environment but not the competitive one of the United States, thus facilitating German directors to have more social capital than their American counterparts.

According to Salvaj (2013) and Salvaj and Lluch (2014), by the 1960s Argentina and Chile, two countries with a similar type of capitalism, had largely different corporate network structures mainly because of two factors: (1) the country’s political and economic situation and (2) the ownership structures of firms involved in this business network. They found that Argentina’s corporate network structure was fragmented, but on the other hand, the Chilean network had shown a lot of cohesiveness between organizations. It seems that Argentinean firms trust less these board relationships than Chilean ones (Salvaj, 2013; Salvaj & Lluch, 2014). Moreover, Salvaj (2013) and, Salvaj and Lluch (2014) emphasized that a country with weak institutions such as Argentina in that period, did not put its trust on IDs as a substitute action to deal with that weakness. Furthermore, the professional backgrounds of the most-connected directors inside the corporate network are different for both countries. Argentinean well-connected directors tend to be lawyers, government oftcers and accountants, while for Chile these directors are mostly businessmen (Salvaj, 2013; Salvaj & Lluch, 2014). Lluch, Rinaldi, Salvaj and Vasta (2017) also found differences between the evolution of IDs corporate networks of Argentina and Italy, the latter being more cohesive, where banks changed their roles across time and had a strong professional network of syndics. On the other hand, Argentinian banks had shown an irrelevant presence in the corporate network. By the early 1970s, there was a change in the corporate network in Argentina where business groups acted as connectors in this network, establishing business ties with other dispersed firms through the creation of interlocking directorates (Lluch et al, 2014). These business groups’ behavior generated more cohesiveness inside the corporate network in Argentina and set a new role for these firm groups, but one thing remains equal, the most relevant linkers in the Argentinean corporate network during 1970-1972 are still professionals, technicians or syndics, but not businessmen (Lluch et al, 2014). Finally, Windolf and Beyer (1996) also found differences between two European countries, Germany and Britain. IDs in the German corporate network serves mostly to ownership interests, while Britain’s corporate network do not exhibited a particular configuration favoring any group.

Cárdenas (2016) found that by 2012, corporate networks in Latin America exhibited a different structural configuration. Business elites had more cohesion in Mexico and Brazil than in Chile and Peru. Generally, management in Latin America is not related to ownership, and there is less redundancy between ownership and directors networks, considering that this pattern appeared repeatedly some decades ago. The explanation for this might be a globalization phenomenon, which introduced a high number of outside directors on boards, keeping banks in a central position such as in Peru. There is evidence of “Inner Circles” (Useem, 1984) found inside these four countries’ corporate networks.

The presence of an interlock in the relationship between two firms is enough to know that their behavior will be affected by this corporate tie (Mizruchi, 1996). Some of the consequences of creating IDs are corporate control and network embeddedness. Corporate control ensures having an influence on the decision-making process in other firms or the capacity of monitoring their business activities and obtain critical information from them, considering also that the board’s control role may be segmented through an interlocking manipulation of the CEO, according to his or her personal motivations to attain power (Zajac & Westphal, 1996), obtaining better compensation levels (Geletkanycz et al, 2001) or to have less resistance to his or her business decisions from the board (Fracassi & Tate, 2012). Network-embedded refers to the effect of the firm’s social relations in their strategic business decisions (Granovetter, 1985), using the corporate network as a big scan of the environmental situation and consequently adapting its initiatives to such (Mizruchi, 1996).

Interlocks act as reliable conduits for information and directors’ experiences, facilitating the diffusion and the adoption process of different institutional and managerial practices through the corporate network (Davis, 1991; Davis & Greve, 1997; Shipilov et al, 2010; Shropshire, 2010; Cai, Dhaliwal, Kim & Pan, 2014; Mazzola, Perrone & Kamuriwo, 2016), but the likelihood of this transmission process depends on some specific director’s characteristics and other firm’s conditions, such as their number of interlocks and their position in the network (Shropshire, 2010). Copying practices does not occur blindly, but through a discrimination process according to the firms’ preferences and behavior (Davis & Greve, 1997). Davis (1991) explained how interlock network centrality degree was positively related to the firm’s adoption of poison pill practices, looking for the stability of the business elite members and protecting companies from attempts of hostile takeovers. However, huge firms were unlikely to adopt this managerial practice because their own size represented a suftcient barrier for such transactions. Poison pill managerial practice spreads more rapidly through IDs networks rather than ones of geographical proximity (Davis & Greve, 1997). The presence of director interlocks is related also to the diffusion of quarterly earnings cessation guidance and disclosure policies (Cai et al, 2014) and to the improvement of corporate reporting (Ginesti, Sannino & Drago, 2017). On the other hand, IDs act not just as providers for diffusion of practices, but as constrainers as well, depending on the specific resource they are going to share. According to Ortiz-de-Mandojana, Aragón-Correa, Delgado-Ceballos and Ferrón-Vílchez (2012), financial firms and fossil fuel firms are not likely to adopt environmental strategies because of the effect of director interlocks.

IDs facilitate coordination between firms possibly conducting them to alliances and collusion practices as well (Mizruchi, 1996). An adequate discrimination of how to adopt and use those practices could overwhelm firms’ responsibility when confronting high uncertainty in their contexts or come from communist systems. Following Szalacha (2011), IDs conflict of interests would appear mostly in those environments, where firms tend to operate on the edge of formal/informal and legal/illegal practices, and emerging economies for instance. Regulatory environment, globalization, and general economic conditions can moderate the effects of IDs in such coalitions and make adoption processes. Buch-Hansen (2014), found little evidence of collusion practices in Europe, when these environmental factors are involved.

IDs represent an external source through which several resources flow, enabling monitoring, influencing, co-opting and collaborating activities among firms and their environment. In a study of 80 large firms in the United States in 1969, Pfeffer (1972) determined that a precise presence of interlocks according to the environmental needs was related to firms’ positive performance. The corporate network permits it to monitor and respond to uncertainty of market fluctuations, establishing relationships with banks via interlocking directorates (Burt, 1980). A later research study of board composition and number of interlocks over a sample of 147 companies from different industries in the United States, had shown that firms tend to increase the number of their interlocking directorates and reduce the size of their boards to deal with environmental uncertainty and resources scarcity. Then, these firms concentrated on maintaining directors with a high level of corporate linkages (Boyd, 1990). In addition to this, Bucheli, Salvaj and Kim (2018) maintain that Chilean business groups dealt with the transition period in the economic environment by establishing IDs between them, not abandoning their corporate ties once institutional voids were addressed. To the contrary, a study of 3,745 manufacturing firms in the United States during the period 2001-2009, had demonstrated that IDs do not reduce the uncertainty that a firm has to deal with, but they are capable of enhancing firm performance and bring positive effects to it under the presence of high levels of uncertainty in the business environment (Martin, Gözübüyük & Becerra, 2015). The level of uncertainty has a moderating role in the relationship between the position of these executive ties inside the corporate network and the organization’s performance. So, uncertainty creates the necessary conditions to obtain the benefits of having IDs in the organization, not as a reason for creating them. Similarly, Larcker, So and Wang (2013) previously found that well-connected boards will improve organizational performance especially in firms which are facing adverse situations. These findings are consistent with Beckman, Haunschild and Phillips (2004) research where firms that were facing individually specific uncertainty did not look to expand their corporate network structure, but to increase their interlocks with their current corporate network partners. The need of resources could lead organizations to the establishment of IDs in order to create synergies with other firms with complementary benefits. Bennett (2013), found banks and Chambers strongly connected by interlocked boards over the corporate network, sharing different resources they mutually expected.

Another way to deal with and exert monitoring action over business environment is to seek for influence in the political decision-making process of the organizations. According to Mizruchi and Koenig (1991), the presence of IDs between larger firms within a concentrated industry is related to similar political decisions, where both firms support and make economic contributions to the same candidates. Corporate elite political cohesion is strongly related to the action of IDs in the corporate network, more than members of the same industry or geographical proximity factors (Burris, 2005).

There are two types of inter-organizational directorship interlocks, one focused on fulfilling its inter-organizational objectives and another one committed to an integration function (Richardson, 1987). Considering this, in the specific relationship between a non-financial firm and a financial one, the non-financial corporation obtained positive effects on its profit performance as a result of the replacement of broken ties in its corporate network, and following its inter-organizational functions as well. The second type of interlocks, according to Richardson (1987), are unrelated to firm profit performance. Furthermore, an analysis of a sample of 191 joint-stock firms in Singapore at the end of 1997 also exhibited these two types of corporate networks, a group of directors who searched for valuable resources and another elite group who sought to maintain their wide class influence in the business community (Useem, 1984), and how these two interlock trends are related to firm performance (Phan et al, 2003). According to this research, those directors who want to attain power and influence through their corporate relationship tend to create interlocking directorates in the intra-industry range, having no effect at all on firm performance and also a negative collusion risk; while boards who are interested in capturing strategic resources for the firm mostly rely on inter-industry interlocks, generating a positive impact on organizational results. This is partially consistent with Larcker et al (2013) findings that well-connected boards have positive results on the firm’s financial performance. Pombo and Gutiérrez (2011) showed similar findings in a study of Latin America of 335 Colombian firms, where the presence of outside directors and the number of interlocks were strongly related to the firms’ financial performance.

Interlocking directorates are also presented as mechanisms related to some specific financial results such as periodical company financial reports. According to Chiu, Hong Teoh and Tian (2013) in their study of 118 firms in the United States during the period 1997-2001, they found that the social contagion effect which flows through a corporate network makes it possible that a non-manipulative firm changes into one because of the presence on its board of a shared director from a manipulative earnings-oriented organization. As opposed to this, a non-manipulative firm that does not have any interlock with a manipulative earnings-oriented one is less likely to acquire this bad practice (Chiu et al, 2013). Mizruchi et al (2006) demonstrated that the effect of corporate ties on the firms’ financial behavior is historically contingent. Firms have shown a less progressive use of IDs in financial decisions as a consequence of the professionalization of financial activity, the internalization of it and the changes in the business environment (Mizruchi et al, 2006). These findings are complementary with Mizruchi and Brewster Stearns (1988) findings that firms tend to seek to have a financial representative on their board when they face solving deficiencies or an increase of their long-term debt, and this decision will allow them to have access to sources of capital, increasing their likelihood of borrowing from financial institutions (Mizruchi & Brewster Stearns, 1994). In addition to this, some factors of the economic environment such as demand for capital or phases of expansion in the business cycle are also positively related to making financial arrangements. Additionally, in response to the conditions of the environment, such as times of economic crisis, financial institutions are likely to demand their presence on non-financial boards in order to be able to monitor their investments (Mizruchi & Brewster Stearns, 1988).

Corporate network of IDs facilitates the diffusion of financial practices or the directors’ experiences, which permit taking financial-related decisions. In the 1981- 1990 period in 327 medium and large firms and their interlocked business community in the United States, Haunschild and Beckman (1988) found that IDs are useful sources of information for a firm’s acquisitions decisions when the focal organization does not have any other substitute source for this financial means. Therefore, according to this, the importance of interlocks as financial information enablers depends on which other sources of information are available for access. Fracassi and Tate (2012) also found firms that had directors with external ties to the CEO that usually decided on more acquisitions, but these decisions finally destroyed the firm’s value. Moreover, Cai and Sevilir (2012) proved that M&A transactions between interlocked firms have different consequences for the acquirer and the target. They found that these M&A transactions between first-degree connected boards, when acquirer and target have a shared director sitting on both boards, tend to favor the acquirer announcing higher obtainable returns, because of the asymmetric information that it has in the face of other bidders and the possibility of bargaining for a lower price, considering also that costs derived from banks or advisors will be less. Quite the opposite occurs in M&A transactions among second-degree connected boards, when both firms have the same director who sits on a third board, and where this kind of connectivity seems to favor the value created by the whole transaction (Cai & Sevilir, 2012). Benefits from financial decisions that come from IDs presence, depend on the type of interlock and the firms’ connectivity level in the network, and finding directors corporate ties as reliable sources of critical information (Zona, Gomez-Mejia & Withers, 2018). Private equity-trade transactions are more likely to occur between firms interlocked by their boards, because directors use their knowledge and past experiences in those transactions to incentive or enhance similar ones (Stuart & Yim, 2010), in the same way that happens with decisions about auditors choice and fees in an interlocked firm (Johansen & Pettersson, 2013), synchronous stock price between Chilean corporate network firms (Khanna & Thomas, 2009) and similar financial policies such as capital investment, R&D, cash reserves and interest coverage ratio (Fracassi, 2016). Finally, corporate elites embedded in social networks allow an imitation process between the participants, reflecting the power of interlocking directorates in the economic and strategic decisions of the largest firms and business groups.