Exploration in Board Networks: A Study of US Commercial Bank Interlocks

Seminar arranged by Center for Strategic Management and Globalization

by Serden Özcan (Copenhagen Business School - IVS)

ABSTRACT: This paper proposes an organizational adaptation account of interlock formation where each incoming outside director is conceived of as either an exploration tie or an exploitation tie. By distinguishing between search across space and across industry, I formulate predictions explaining exploration decisions. A study of US commercial bank interlocks shows that banks whose performance exceeds both the sample-based aspirations and the geographic marketbased aspirations are more likely to induce exploration ties than those who do not meet performance aspirations on either dimension or both. Results also show that market concentration has a negative effect whereas market deterioration has a positive effect on the propensity to appoint a non-local director. In addition, banks facing unique uncertainty or decreasing proportion of industrial and commercial loans to total outstanding loans refrain from non-local search along industry networks.