Seminar with Love Bohman.

A director sitting on two or more boards create a link, or an “interlock”, between the boards s/he represents. Director interlocks are well studied within the field of sociology, and the interlocks create social networks that have real-world consequences for firms’ decisions and behavior of firms as well as directors. Now, new analytical techniques and tools, emerging alongside the increasing availability of computational power, gives new opportunities to study how social network evolves over time. We study the evolution of the network of Swedish publicly traded firms and their directors with an agent-based simulation model. In short, we study how both network structure as well as firms’ and directors’ individual characteristics associate with the recruitment of new directors to the boards.

The results show among other things that director recruitment is highly associated with the structure of a second network, the one mapping ownership structure. We can also see a strong tendency to create four-cycles in the network. This means that directors serving on a board together with another director who also sits on a recruiting board, have a heightened probability to be recruited. We interpret this as a result of the importance of peer-referral in the recruitment process. Further, we can also see some tendencies that women have a heightened probability to be recruited to the boards, reflecting the ambition to increase the number of women on the boards, which the firms had during the studied period.

In general, we can also conclude that the creation of links between firms and directors (i.e., firms recruiting directors) in most cases follows a different logic than the maintenance of links. This suggests that the boards, when recruiting, are maneuvering their surroundings in order to find the right candidate rather than actively seeking to create certain kind of links and network structures.