To Interlock or Not To Interlock? The Effect of Board Interlocks on New Venture Growth

Abstract

Research addresses different aspects of the role of boards in new ventures (Li, Terjesen, & Umans, 2018). However, instances when firms are linked by the directors that serve on their boards – board interlocks – are understudied in the entrepreneurial setting (Lamb & Roundy, 2016). Moreover, findings on one of the most researched relationships in the board interlock literature – the relationship between board interlocks and firm performance - are inconsistent (Lamb & Roundy, 2016). Therefore, the paper investigates the extent to which board interlocks affect new venture growth. The paper takes a closer look at the presence and number of board interlocks to identify whether board interlocks matter for venture growth. To investigate the relationships, I employ Norwegian registry data – a longitudinal dataset of all Norwegian residents and firms. With this dataset, the identification of board directors, new ventures and estimation of a wide array of different variables becomes possible. The richness in this register data also enables a number of empirical techniques and models used to make causal claims. Findings show interlocking ventures significantly outperform non-interlocking ones in terms of equity, asset and sales growth. After estimating 2SLS, the results demonstrate more interlocks have a positive and significant relationship with equity growth.