Corporate Broad Interlocks and New Product Introductons
Srinivasan, Wuyts & Mallapragada
Theory
Board interlocks: when the directors of a firm’s board are also members of boards of other firms,
which creates connectons between the firm’s board and other firms’ boards.
Because senior executies who also serie on other firms’ boards are familiar with market
intelligence, board interlocks are crucial channels for transfer of market intelligence across firms.
Board interlocks are influental because they are inexpensiie, trustworthy and credible informaton
sources that proiide iiiid, first hand market intelligence based on directors’ personal experiences.
Board interlock centrality: the more central the actor’s positon in a social network, the greater the
actor’s access to informaton from other actors in the network.
We propose that because board interlocks are important sources of market intelligence, they
influence firms’ adaptaton, as reflected in firms’ new product introductons. We assert that a firm’s
board interlocks proiide it with broad market intelligence on changing consumer preferences and
emerging market trends, which stmulates the introducton of new products. Furthermore, we note
that the market intelligence drawn from the firm’s board interlocks is unlikely to result in the
introducton of break through products.
Hypothesis 1: the higher the firm’s board interlock centrality, the higher its new product
introductons.
Internal leadership: the extent to which senior executies at the firm are also members of its board.
Internal leadership has influence on the motiaton and ability to translate opportunites into new
products. Internal board members may be able to leierage market intelligence for the firm’s benefit
and be more motiated to do so because of self-interest in improiing the firm’s performance.
Hypothesis 2: the positie efect of the firm’s board interlock centrality on its new product
introductons increases as the internal leadership on its board increases.
The benefits from market intelligence may be limited if the external board members are from other
firms within the same industry (intra-industry) (is. from firms outside the industry):
Because they also haie a duty to other firms in the industry, they may be less motiated to
share market intelligence;
Because their industry experiences oierlap with those of its senior management.
Hypothesis 3: the positie efect of the firm’s board interlock centrality on its new product
introductons decreases as the firm’s intra-industry external leadership on its board increases.
In a firm with high internal marketng leadership on the board, market intelligence obtained from its
board interlocks is likely to be ialued and acted on through new product introductons. A high
presence of internal marketng leadership on the board signifies substantal releiant marketng
expertse in the firm, which improies the firm’s responsiieness to the market intelligence obtained
from its board interlocks.
Hypothesis 4: the positie efect of the firm’s board interlock centrality on its new product
introductons increases as the firm’s internal marketng leadership on the board increases.
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