The Effect of Director Interlocks on Firms' Adoption of Proactive Environmental Strategies

Abstract

ABSTRACTManuscript Type: EmpiricalResearch Question/Issue: We examine whether director interlocks enable or inhibit a firm's adoption of a proactive environmental strategy. Specifically, using resource dependence theory, we argue that director interlocks with suppliers are linked to varying likelihoods that a firm adopts a proactive environmental strategy, depending on the relation between the provided resources and the environmental approach.Research Findings/Insight: Based on a sample of US electric firms, our results show that director interlocks with firms providing knowledge‐intensive business services are positively linked to the adoption of proactive environmental strategies. However, director interlocks with firms providing financial resources and fossil fuel are negatively related to the adoption of these strategies for our sample.Theoretical/Academic Implications: Board linkages may enable and inhibit proactive environmental strategies. We contribute to resource dependence theory by offering empirical evidence that the reduction of uncertainty about critical resources by director interlocks may either make business change easier or constrict a firm's autonomy, making change more difficult.Practitioner/Policy Implications: The influence of interlocking directors varies depending on the type of resources that director interlocks transfer to their organizations. As a result, the selection of specific director interlocks can become very important to the strategic goals of the firm. Regulators should continue to pay attention to potential risks for other stakeholders from director interlocks.