A Longitudinal Study of the Formation of Interlocking Directorates

An earlier version of this paper was presented at the Annual Meeting of the American Sociological Association, New York, August 1986. Portions of this research were funded by a National Science Foundation Presidential Young Investigator Award (SES-8858669) to Mizruchi. We are grateful to John Freeman, Mark Granovetter, K. Jill Kiecolt, Donald Palmer, Linda Pike, and the anonymous ASQ reviewers for comments and suggestions on previous drafts. We also thank Holly Myers for her assistance in collecting and entering the data. The present study examines the creation of new interlock ties, using data on 22 large U.S. industrial corporations from 1956 to 1983 to determine factors affecting the appointment of representatives of financial institutions to the industrials' boards. The longitudinal design enabled us to focus on the effects of the general economic environment at a particular point in time as well as on characteristics peculiar to individual firms. Employing event-history analysis, we found that declining solvency, declining profit rate, the correspondence of increased demand for capital with declining interest rates, and the correspondence of increased demand for capital with contraction stages of the business cycle are associated with the subsequent appointment of financial directors. Our findings highlight the importance of examining the general economic environment within which organizational decision making occurs.'