Broken Ties: Interlocking Directorates and Intercorporate Coordination

Author(s): Donald Palmer

Source: Administrative Science Quarterly, Vol. 28, No. 1 (Mar., 1983), pp. 40-55
Published by: Sage Publications, Inc. on behalf of the Johnson Graduate School of Management,
Cornell University
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Broken Ties: Interlocking
Directorates and Inter-
corporate Coordination
Donald Palmer
? 1983 by Cornell University
000 1-8392/83/2801 -0040/$00. 75
For detailed comments on the most recent
versions ot this paper, I wish to thank
Ronald Burt, Maggie McLoughlin, Jeffrey
Pfeffer, Jerry Ross, and an anonymous
ASQ reviewer. For comments on earlier
drafts, I wish to thank Charles Perrow,
Michael Schwartz, Joanne Martin,Jon
Bendor, Dick Scott, the participants of the
NIMH Research TrainingProgram at Stan-
ford University, and the members of the
MACNETResearch Group at SUNY-Stony
Brook For patience, I thank the union wait-
ers and waitresses at Zim's.
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Little is known about the specific types of relationships that
interlocking corporate directorates facilitate. This study
examines the connective and directional continuity of all
ties disrupted accidentally among 1,131 large U.S. corpora-
tions between 1962 and 1964to determinethe relative
likelihood that different types of interlock ties facilitate
relationships of formal coordination. In accordance with
previous theory, the number and type of interlocks of which
a tie consists was found to be related to the likelihood that it
is a vehicle of formal coordination. However, previous
assumptions aboutthe percentage of ties in thefull network
that facilitate such relationships and the significance of
interlock direction were not supported. The implications of
these results for interpreting past results and directing
future research are also discussed.@
Those who study corporate interlocking directorates are, in
general, vague and pluralisticwhen it comes to specifying the
types of relationships that interlocks facilitate, that is, give rise
to and maintain. However, both organizational and political
sociologists agree that one of the kinds of relationships that
interlocks sometimes facilitate is ongoing joint corporate plan-
ning, called here "formal coordination." What is more, studies
by a number of political sociologists implicitlyassume that the
vast majorityof interlock ties facilitate formal coordination. In
this paper, I attempt to determine the relative likelihood that
different types of interlock ties facilitate formal coordination. I
also examine the validityof assumptions about the significance
of interlock direction and speculate on the proportion of all ties
that are vehicles of formal coordination in the network from
which the data are drawn.
TYPES OF RELATIONSHIPS
Interlocks have been studied from two different but compatible
perspectives, which are called here the "interorganizational"
and the "intraclass" approaches.
According to the interorganizationalapproach, organizations are
entities that possess interests. In pursuit of these interests,
they establish relationships with other organizations. Inthis
way, interlocking directorates are considered relationships be-
tween corporations or enterprises, and directors are considered
the agents of these relationships, which may take several
forms. Interlockingdirectorates may provide their partners with
the opportunity to exchange specific information about their
operations or general information aboutthe industrialsectors in
which they are located. This information may allow them to
formulate policies that are more sensitive to their environments
(Dooley, 1969; Allen, 1974; Pfefferand Salancik, 1978: 161;
Burt, 1979) and may even provide the basis for tacit forms of
interorganizationalcoordination, such as anticompetitive price
setting (Blair,1976: 142-147). Interlockties may also allow
partners to influence one another's board-level policies, thus
providing the basis for stronger forms of interorganizational
coordination. If influence is based solely on the commitments
of the interlocking director to the members of the two boards
on which he or she sits, coordination will crystallize or dissolve
as situations change (Pfeffer and Salancik, 1978: 161 -164). If,
structureslinkthe organiza-
however, other boundary-spanning
40/AdministrativeScience Quarterly,28(1983): 40-55
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 Broken Ties

tions, either as consequences or preconditions of these social

relationships, interorganizationalcoordination takes on a formal
character. Some boundary-spanning structures, such as the
shared organizationalcommitments of joint plans, programs, or
routines, are relatively intangible (Allen, 1974: 394; Pfeffer and
Salancik, 1978: 161), whereas others, such as resource ex-
change agreements (for example, debt), joint ventures, and
intercorporate stockholding, are more concrete (Mintz and
Schwartz, 1981 a).
Organizational sociologists adopting the interorganizationalap-
proach focus on the relationship between interlocking, patterns
of resource dependence, and corporate effectiveness (Pfeffer,
1972; Allen, 1974; Bunting, 1976; PfefferandSalancik, 1978;
Burt, Christman, and Kilburn,1980; Burt, 1980a, 1980b, 1983;
Pennings, 1980). They argue that the different forms of inter-
firm relationships that interlocks facilitate help corporations
cope with resource dependence and improve their effective-
ness. They seldom specify, however, the extent to which
interlocks facilitate each form of interfirm relationship.
Most political sociologists adopting the interorganizationalap-
proach focus on the structure of the network of interlocking
directorates among a population of firms. They argue that the
different forms of interfirm relationships that interlocks facili-
tate may be considered "control" or "power" relationships and
that the structure of the network is indicative of the structure of
power among corporations linked in the network (Mills, 1956;
Stanworth and Giddens, 1975; Norich, 1980; Gogel and Koenig,
1981). A precise power structure interpretation of the interlock
network depends, however, on the extent to which interlocks
facilitate the various forms of interfirm relationships. If inter-
locks primarilyfacilitate information exchange and information
is a source of power, then it may be correct to consider
interlocks to be traces of intercorporate power relationships.
But such power relationships are qualitatively different from
power relationships effected by interlocks that facilitate formal
coordination (Palmer, 1983).
Some researchers attempt to interpret the interlock network in
light of the different relationships interlocks may facilitate. For
example, Mintz and Schwartz (1981 a, 1983) use the term
"hegemonic" to describe the most central firms in the network,
commercial banks. This label signifies that these institutions
possess more power than other firms in the economy but not
that individualbanks control specific corporations.
Other researchers implicitlyassume that the bulk of interlock
ties facilitate formal coordination. This is particularlytrue of
those who consider clusters of firms that interlock primarily
among themselves to be economic interest groups (Levine,
1972; Knowles, 1973; Koenig and Sonquist, 1975; Beardenet
al., 1975; Allen, 1978; Mintz and Schwartz, 1981 b; Mizruchi,
1981). Interest groups are, by most definitions, groups of firms
that coordinate their behavior (that is, their production and
distribution)to maximize the profits of the group as a whole or
of its dominant member, frequently at the expense of some of
its constituents. Such coordination presumably entails the
interpenetration of corporate administrative structures at levels
other than the board level, the substance of formal coordina-
tion,as defined here.Thus,while the precisionof organizational
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 and some political sociological research can be improved by
estimates of the extent to which ties facilitate formal coordina-
tion, the validity of political sociological research aimed at
identifying interest groups depends on the validity of the
assumption that the majorityof all ties facilitate this kind of
relationship.
According to the intraclass approach, individualswithin the
capitalist class or business elite are actors who possess inter-
ests. Organizations are the agents of these actors. Inpursuit of
their interests, capitalists establish relationships with other
capitalists (Domhoff, 1967, 1971; Roy, 1981). Inthisway,
interlocking directorates among firms can be considered the
result of relationships between the interlocking directors and
the other directors of the boards on which they sit. The
complete assemblage of such relationships may be called a
social network (Koenig and Gogel, 1981). The significance of
these relationships for organizations may be divided into two
categories. First,to the extent that the interests of directors are
identified with the interests of the organizations to which they
are principallyaffiliated, that is, the organization in which their
main business interests rest (Bearden et al., 1975; Mintz and
Schwartz, 1981 a), interlocks may facilitate the several types of
relationships already discussed above. Second, to the extent
that the interests of directors are identified with other social
groups that they belong to, specifically a social class or segment
of a social class, interlocks may facilitate other types of
relationships. One recent version of the intraclass approach,
the class hegemony model (Koenig and Gogel, 1981), suggests
that interlocks facilitate direct interaction and the communica-
tion of techniques, values, and beliefs between directors. In
this way, directors generate a common business elite or
capitalist class culture that guides managerial behavior,
socializes new directors into this culture, and socially controls
deviant managerial behavior. A director's prominence and
power within the business elite or capitalist class depends on
his or her position in the social network. Some authors focus on
the number of corporate board seats a director holds, called
innergroup centrality (Zeitlin,Ratcliff, and Ewen, 1974; Useem,
1978, 1979; Ratcliff, 1980). Others focus on whether or not a
director possesses a seat on the board of a financial institution,
called finance capitalist status (Soref, 1980). These indicators of
prominence and power are highly correlated (Useem, 1979).
Further, a director's position in the corporate board social
network is highly correlated with his or her position in other
social networks created by overlapping memberships in elite
social clubs, business policy groups, and government policy
groups (Ratcliff, Gallagher, and Ratcliff, 1979; Useem, 1979).
The interorganizationaland intraclass approaches to the study
of interlocking directorates are, in the abstract, not mutually
exclusive. The two do, however, present qualitatively different
images of the relationships interlocks facilitate. The analyses
presented in the remainder of this paper are derived from these
two approaches.

NETWORKSTABILITYAND TYPES OF INTERLOCKS:FOUR

HYPOTHESES
This study examines a unique type of stability in a well-defined
corporate-interlock network by analyzing the connective and
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1
Mariolis and Jones (1980) examined the
stability of the interlock network at the
corporation level (i e, the stability of firm
centrality measures over time), finding it
extremely stable Ornstein (1982)
examined the stability of over 7,000 inter-
lock ties among the 100 largest Canadian
firms between 1946 and 1977, finding
somewhat less but still considerable stabil-
ity (approximately 30 percent of all ties
interrupted for any reason were connec-
tively continued).
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Broken Ties
directional continuity of those ties that have been accidentally
disrupted or broken. An interlock tie is considered accidentally
disrupted or broken if one of the interlocks that compose it is
broken accidentally, that is, as a result of events that are
unrelated to the interorganizationalstrategies of the firms it
was linking.The purpose of this analysis is to (1) assess the
relative likelihood that different types of ties are vehicles of
formal coordination, (2) determine if interlock direction is indica-
tive of the balance of power among firms linked in relationships
of formal coordination, and (3) speculate about the percentage
of ties between large firms that facilitate such relationships.1
Continuity of Connection
The connective continuity of ties is used to evaluate three
hypotheses about the extent to which different types of
interlock ties may facilitate formal coordination. Koenig, Gogel,
and Sonquist (1979) asserted that interlock ties that facilitate
formal coordination (intheir terminology, "reciprocity"or "con-
trol") will be continued by the creation of new or the mainte-
nance of already existing interlocks between the same firms
when ties are accidentally disrupted. They collected a sample of
ties between firms listed as among the 797 largest by Fortune
Magazine in 1970 that were composed of only one interlock and
that were broken between 1969 and 1975 as the result of the
deaths of the directors who created them. Only about 6 percent
of the 78 ties they examined were continued in the year after
the break. This led the authors to conclude that interlocks
seldom facilitate formal coordination.
This study is based on Koenig, Gogel, and Sonquist's (1979)
assumption that ties that facilitate formal coordination will be
continued if accidentally disrupted or broken. There are at least
two reasons why tied firms engaged in formal coordination
should attempt to preserve this relationship of coordination
afterthe tie that links them is disrupted. First, interlockties and
the relationships they facilitate are generally thought to be
predicated on specific characteristics of a firm's environment.
Since the accidental disruption of a tie does not, by definition,
coincide with changes in the firm's perception of the environ-
ment, the same factors that initiallylead the firms to interlock
and coordinate formally should lead them to preserve the
relationship of coordination. Second, formal coordination en-
tails the creation of other boundary-spanning structures, the
costs of which are nonrecoverable. Although partners in a
disrupted tie might, in the abstract, be able to enact with other
firms new relationships that meet the demands that their
environments place on them, the costs incurred would be
greater than the costs of preserving the established relation-
ship. If interlock ties facilitate relationships of formal coordina-
tion and the firms in this study linked by such ties choose to
preserve these relationships of coordination, they should
choose to reestablish the disrupted or broken interlock ties that
linked them.
Ties other than those that facilitate formal coordination may
also be continued if they are accidentally disrupted or broken.
First,some ties that are not vehicles of formal coordination may
be continued because they are vehicles of other intercorporate
relationships.Forexample,ties that facilitateinformationex-
change between two firms may be continuedbecause one or
43/ASQ, March1983
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2
Considering these three factors, one might
justifiably wonder if any of the continued
ties observed in the course of this study are
really vehicles of formal coordination This
possibility is explored in detail elsewhere
(Palmer, 1982: Ch. 5). Unfortunately, there
is no way to assess the extent to which
these factors contribute to tie continuity.
First, it is impossible to construct a realistic
probabilistic model of the creation of inter-
locks. Second, even a case-by-case
analysis of the ties in the data set used in
this study cannot unambiguously reveal the
cause of the creation of an interlock.
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both partners in the tie are perceived by their partneras the best
source of information in their industry. Second, some ties that
are not vehicles of formal coordination may be continued
merely as a consequence of social network processes. For
example, retiringinterlocking directors may recommend candi-
dates to fillthe vacancies on the boards that they are leaving. In
such instances, the interlocking director may recommend a
director of one of the firms on whose board he or she has sat,
because he or she knows these directors better than others. If
such recommendations are accepted, the tie will be reestab-
lished. Third,it seems plausible that some ties will be continued
as the result of random processes.2
This suggests that connective continuity is a necessary but not
sufficient condition for labeling a tie a vehicle of formal coordi-
nation. Thus, the percentage of connectively continued ties in
the data used here cannot be considered a direct estimate of
the percentage of ties that facilitate formal coordination in the
larger network from which the collection of ties is drawn.
However, assuming that the factors that cause ties that do not
facilitate formal coordination to be continued are equally preva-
lent among different types of ties, the relative frequency with
which different types of ties are continued may be considered
indicative of the relative likelihood that each type of tie may
facilitate formal coordination in the larger network.
The validity of this argument does not depend on the choice of
either the corporation or the enterprise as the unit of analysis. A
focal enterprise, when considered the principalorganizational
actor, presumably uses the corporate board that has proprietary
jurisdiction over it to co-opt a member of another corporate
board (i.e., establish an interlock tie with a corporation) which
has proprietaryjurisdiction over another enterprise with which
the first wishes to link.When the tie facilitates formal coordina-
tion, other boundary-spanning structures are expected to link
the enterprises as well. Enterprises engaged in formal coordina-
tion should attempt to preserve this coordination relationship
when the tie that links their respective corporate boards is
disrupted, for the same reasons corporate actors should. Tie
disruption is not believed to coincide with changes in the
circumstances that presumably motivate enterprises to engage
in formal coordination, and other boundary-spanning structures
should represent sunk costs to them as well. If directorate ties
between the enterprises' corporate boards facilitate formal
coordination, and the enterprises choose to preserve their
coordination relationship, they should also choose to continue
the tie between their respective corporate boards.
For theoretical reasons, however, the corporation was used as
the point of focus in this study. Thus, "interlock tie partners"
means tied corporations. The decision to interlock with a
specific firm is most likely made by the interlocking director's
fellow board members, that is, at the level of the corporation,
even if the decision is primarilyinfluenced by the location of the
corporation's enterprises in the interindustry resource-
exchange network (Burt, 1980b; Burt, Christman, and Kilburn,
1980). Since this study focuses on the creation of interlocks
between specific firms, an event infused with intentionality,
rather than on the distribution of interlocks among classes of
firms at any one time, a characteristic of social structure that
44/ASQ, March1983
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 BrokenTies

may be interpreted without recourse to intentionality, the

corporation is the appropriate unit of analysis.
The four main hypotheses presented below are derived from
the interorganizationalapproach's view of the process by
which interlocks facilitate coordination. Organizational
sociologists generally view interlocks as co-optive devices. The
appointment of a representative of another firm to the board of
a focal firm provides the latterwith the opportunity to persuade
that representative, through the mechanism of commitment
processes, to influence the firm he or she represents in the
interests of the focal firm (Pfeffer and Salancik, 1978: 161 -
164). Political sociologists who take the interorganizational
approach view interlocks as infiltrativedevices. The placement
of a representative of the focal firm on the board of another firm
provides the opportunity for the focal firm to influence the
latter, through the direct participationof the representative in
policy-making decisions on the other firm's board, in the
interests of the focal firm (Bearden et al., 1975).
Many organizational and political sociologists differentiate be-
tween two types of interlocks: directional interlocks, created by
persons principallyaffiliated with one of the firms linked, and
nondirectional interlocks, created by persons not principally
affiliated with either of the firms linked. Because directors who
are principallyaffiliated with a firm are thought to be more
willing and able than nonprincipallyaffiliated directors to play
the role of firm's representative, integral to the functioning of
interlocks as co-optive or infiltrativedevices, directional inter-
locks are thought to facilitate coordination of all kinds more
frequently than nondirectional interlocks (Sweezy, 1953; Bear-
den et al., 1975; Pennings, 1980; Mintz and Schwartz, 1981 a).
Mizruchi and Bunting (1981) have shown that, for the early
twentieth century, the pattern of directional interlocks among
large U.S. firms, which they call the strong tie network, more
closely resembles accepted qualitative portraitsof the structure
of power in the economy of that time than the pattern of
directional and nondirectional interlocks, which they call the full
network. This suggests two related hypotheses:
Hypothesis 1 (H1):Ties that consist of directionalinterlockswillbe
continuedmore frequentlythan ties that do not consist of directional
interlocks.
Hypothesis 2 (H2):Ties disruptedby the eliminationof a directional
interlockwillbe continuedmore frequentlythan ties disruptedby the
eliminationof a nondirectionalinterlock.
Ties may also be differentiated on the basis of the number of
interlocks of which they consist. Several researchers argue that
ties composed of more than one interlock (multiple-interlock
ties) are more likely than ties composed of only one interlock
(single-interlock ties) to facilitate coordination of all kinds (Bear-
den et al., 1975; Koenig and Sonquist, 1975; Mintz and
Schwartz, 1981 a, 1981 b). This suggests a third hypothesis:
Hypothesis 3 (H3):Multipleinterlockties willbe continuedmore
frequentlythan single interlockties

Continuity of Direction
Directional continuity is examined to determine whether the
direction of a tie's interlock is indicative of the balance of
power between the firms it links. As the interlock typology
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 suggests, only directional interlocks possess a directional com-
ponent. Among firms linked by such interlocks, the corporation
that elects a principallyaffiliated director of another firm to its
board is the receiving partner to the link.The other firm is the
sending partner. The relationship between interlock direction
and the balance of power among tied firms depends on
whether the interlock is a mechanism of infiltrationor a
mechanism of co-optation.
If the interlock is a co-optive device, the receiving firm is usually
thought to be dominant. Inthis case, the receiving firm appoints
a principallyaffiliated director of another firm to its board in an
attempt to persuade the director to influence his or her firm of
principalaffiliation in the interests of the receiving firm. Re-
searchers who adopt this view frequently note, however, that
the co-opting firm may, in the process, become vulnerable to
the influence of the co-opted firm (Pfeffer and Salancik, 1978:
164-165). If the interlock is an infiltrativedevice, the sending
firm is usually thought to be dominant. Inthis case, the sending
firm places one of its principallyaffiliated directors on the board
of another firm in an attempt to influence the receiving firm in
the sending firm's interests. Several researchers have used
interlock direction as data for the construction of simplified
maps of the interlock network (Warnerand Unwalla, 1967;
Bearden et al., 1975; Mintz, 1978; Mintz and Schwartz, 1981 a,
1981 b; Mizruchi, 1981). Mizruchiand Bunting (1981) have
demonstrated that such directed maps of the U.S. corporate
network in the early twentieth-century are more consistent with
widely accepted qualitative portraitsof the structure of power in
the economy of that time than are nondirected maps.
If direction is indicative of the balance of power among interlock
partners, the directors who create interlocks that continue a
disrupted tie should be principallyaffiliated with the same firm
as the departed director. That is, the interlocks that continue
the tie should be arranged in the same direction as the original
broken interlock. For example, if a tie is a co-optive device, the
dominant firm can maintain its position of power only by
electing to its board another director principallyaffiliated to its
tie partner. On the one hand, the dominant firm could not
maintain its position of power by electing to its board a
nonprincipallyaffiliated director of its partner, because it is not
likelythat this director would be willing orable to exert influence
overthe latter in the interests of the former. On the other hand,
the dominant firm could not maintain its position of power by
placing one of its principallyaffiliated directors on the board of
its partner because, assuming that the tie remains a co-optive
device, the latter, previously subordinate firm would then be
considered dominant in the continued tie. The same logic
applies if the originaltie is an infiltrativedevice. This suggests a
final hypothesis:
Hypothesis 4(H4):Ties that consist of directionalinterlocks,when
continued,will be continuedinthe same directionas the originaltie.
DATA
The data were drawn from a larger data set, compiled by the
MACNETResearch Group at the State University of New York,
Stony Brook, that includes all the interlocks that linked 1,131
large U.S. corporations in 1962, 1964, and 1966 and the principal
affiliations of the directors who established the interlocks. The
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 Broken Ties

corporations in the data set are all the firms listed by Fortune
Magazine as among the 500 largest industrialor 50 largest
merchandizing, transportation, public utility, and life insurance
companies and commercial banks in any of the years between
1962 and 1972 inclusive, as well as 50 large investment banks
(Bearden et al., 1975). Supplemental data on corporations and
directors were gleaned from a data set compiled by Mariolis
(1975), which consists of all the interlocks that linked 797 large
U.S. financial and nonfinancial corporations in 1969, and from
other standard business sources (Moody's annual; Standard
and Poor's, annual).
Accidentally broken interlocks were identified as those that
existed in 1962 but not in 1964 and that were created in 1962 by
directors who, between 1962 and 1964, lost their seat on the
board of their firm of principalaffiliation. An interlock present in
the 1962 MACNETdata set is not present in the 1964 MACNET
data set if a director who created an interlock between two
firms in the 1962 data set did not create a linkbetween these
same firms in the 1964 data set. Directors lose theirseat on the
board of their firm of principalaffiliation as the result of death,
retirement, change in place of employment, or other similar
events. A case-by-case analysis using business press sources
(WallStreet Journal, New YorkTimes) suggested that the
events associated with a director's loss of principalaffiliation
were not related to the interorganizationalstrategies of the
firms he or she linked. Thus, interlocks that were severed at the
same time as the directors who created them lost their principal
affiliation were coded accidentally broken. The data used in the
study consisted of all the ties in the 1962 MACNETdata set that
were accidentally disrupted or broken between 1962 and 1964,
with two exceptions. First, ties involving firms acquired by
another firm between 1962 and 1966 were excluded from the
data set. Because an acquired firm seldom retains its corporate
board after the acquisition, such ties cannot be continued.
Second, ties that included investment banks were excluded,
because many of these firms were undergoing reorganization
from the partnership form of governance to the corporate board
form. This transition confounded the procedure for identifying
accidentally broken interlocks. The final data set consisted of
238 ties.
The connective continuity of ties in the data set were deter-
mined as follows: single-interlock ties were coded "broken" if
the one interlock they consisted of was accidentally broken
Multiple-interlockties were coded "disrupted" if only one of
the interlocks they consisted of was accidentally broken, and
were coded "broken" if the rest of the interlocks that consti-
tuted them were broken, accidentally or otherwise. If a new
interlock linked two firms in 1964 or 1966 that were tied in 1962
by either a single- or multiple-interlock tie, the tie was coded
reconstituted." To be considered "new," an interlock must
have been created by a directorwho did not linkthe same firms
in 1962. If no new interlocks were created to join firms
previously tied by a multiple-interlock tie, but at least one
interlock remained between these firms in 1966, the tie was
coded "maintained." If no new interlocks linked firms in 1964 or
1966 and no interlocks remained in 1966 to join firms previously
linked by either a single- or multiple-interlock tie, the tie was
coded "discontinued. "
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 Because maintained ties are continued, it is possible that they
facilitate formal coordination. However, because the firms
linked by these ties took no action to continue them, one might
infer that these ties were not vehicles of formal coordination.
Without other data, one cannot determine which interpretation
of tie maintenance is correct. Therefore, the less ambiguous
measure of continuity, "rates of reconstitution," was used to
evaluate the hypotheses about the relative likelihood that
different types of ties facilitate formal coordination. The more
ambiguous, and liberal, measure of continuity, "rates of main-
tenance or reconstitution," was used only to speculate about
the percentage of ties in the 1962 MACNETnetwork that were
vehicles of formal coordination.
The directional orientation of multiple-interlock ties is fre-
quently ambiguous, because such ties may be composed of
several directional interlocks arranged in opposite directions.
For this reason, the examination of directional continuity was
restricted to single-interlock ties only. To increase the number
of ties examined, the population of single-interlock ties was
expanded to include ties accidentally disrupted between 1964
and 1966 that may or may not have been continued in 1966 and
1969. The direction of a single-interlock tie was the direction of
the interlock it consisted of. If a broken tie was reconstituted
with a directional interlock in the same direction as the original
tie, directional continuity was coded "preserved."

METHODS AND RESULTS

Connective Continuity
The number of ties that were reconstituted, maintained and
discontinued was cross-tabulated by Intensity (the number of
interlocks composing a tie in 1962, coded as 1 or 2-or-more) and
Interlock Content Type (the types of interlocks composing a tie
in 1962, coded as "no directional interlocks" or "at least one
directional interlock"). The results are shown in Table 1.

Table 1

Relationship between Intensity, Interlock Content Type, and Continuity

Continuity

Intensity Interlock Content Type Discontinued Maintained Reconstituted

One Nondirectional 59 - 0
Directional 85 - 14
Two or more Nondirectional* 2 5 1
Directionalt 11 40 21

*These ties contain no directional interlocks.

tThese ties contain at least one directional interlock.

The first and third hypotheses were evaluated by fitting com-

peting log-linear models to the observed cell frequencies in the
three-dimensional table, Reconstitution (R) by Intensity (I)by
Interlock Content Type (T),where Reconstitution is a dichoto-
mous variable coded as "reconstituted" or "not reconstituted."'
48/ASQ, March1983

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 Broken Ties

The model has the general form:

InIF,,k, =0 I? X
+ A, f?
+ AT+
j XIk

+XRT + XRI + At'

+ XRTI

where Fijk is the expected value for the entry in cell ijk, 0 is the
grand mean of the logarithms of the expected values and the
various X's are called effects (Fienberg, 1978). The first-order
effects (that is, XR,XT,XI) represent the tendency for an interlock
to fall into a given row or column in the table. Forexample, XIis
the tendency for an interlock tie to be a single-interlock tie. The
second- and third-order effects refer to relationships between
the three variables. Forexample, X7RIT is the tendency fora tie to
have the/th level of Reconstitution and thel'th level of Interlock
Content Type. If none of the three variables are related to one
another, the model of complete independence,

/j ik k i~k t

also written as,

[R] [7f [/]
will best fit the data. H1predicted that ties that include
directional interlocks will be reconstituted more frequently than
those that do not. This implies that XJT # 0. H3predicted that
the number of interlocks that a tie consists of is directly related
to the likelihood that it will be reconstituted. This implies that
XRI 0.
Only those models that control for the relationship between
Intensity and Interlock Content Type were considered, that is,
those that included the XT/ interaction (Swafford, 1980). Of
these, Table 2 shows that the full second-order effect model
(XRTI 0 or [TI] [Rf [RI]) fits the data best (G2= 2.06, with one
degree of freedom). Since XJT # 0 and XRI # 0, H1or H3cannot
be rejected.

Table 2

Competing Log-linear Models of the Frequencies for the Cross-tabulation

of Intensity (/), Interlock Content Type (7) and Reconstitution (R)

Model G2 df

[RT1]* 0.0 0
[TI] [PT] [RI]* 2.06 1
[TI] [PT] 9 88 2
[TI] [RI] 11 70 2
[TI] 150.30 4

*Signifies models that did not give rise to statistically significant errors in
prediction ( 05 level). The saturated model, [RTI],was not considered most
parsimonious because removal of the third-orderinteraction term did not result
in a statistically significant decrease in the predictive power of the model.

The transformed log-linear parameter estimates presented in

Table 3 indicate that containing more than one interlock added
1.036 to the log odds of a tie's being reconstituted or multiplied
the odds of reconstitution by 2.821. Containing a directional
interlockadded 1.868 to the log odds of a tie's being reconsti-
tuted or multipliedthe odds of reconstitutionby 6.483.
49/ASQ, March 1983

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Table 3

Parameter Estimates for the Most Parsimonious Model in Table 2 *

Log-linear Logit
Interaction terms parameter estimates (A) parameter estimatest

Theta (mean) 2 513

Reconstitution (R)
Not reconstituted 1.133
Reconstituted -1 133
Intensity (/)
One 0.359
Two or more -0 359
Interlock Type (T)
Nondirectional -1.012
Directional 1.012
I/Interaction
One x Reconstituted -0.259 -0 518
Two or more x Reconstituted 0.259 0 518
RT Interaction
Nondirectional x Reconstituted -0.467 -0 934
Directional x Reconstituted 0 467 0 934
IT Interaction
One x Directional -0 351
Two or more x Directional 0.351

*This is the full second-order effect model, [T] [RflT[RI], which exhibited an insignificant likelihood-ratio chi-square of
2 06 with one degree of freedom.

tParameters for the logit model, which assume Reconstitution (R)to be the dependent variable, were obtained by
doubling the log-linear parameter estimates that involve Reconstitution (R) The logit parameter estimates may be
interpreted as follows. Containing more than one interlock adds 1.036 to the likelihood that a tie will be reconstituted. This
is the difference in the parameter estimates for the two levels of the independent variable intensity at the same level of
the dependent variable Reconstitution Itis the same as saying that containing more than one interlock multiplies the odds
of reconstitution by e1036 or 2.821 (Swaf ford, 1980)

To evaluate the second hypothesis, Reconstitution was cross-

tabulated by Interlock Break Type (coded dichotomously as
"directional" or "nondirectional") for only those ties that in-
cluded at least one directional and one nondirectional interlock.
The results are shown in Table 4. Since the two were not
positively correlated, H2was not confirmed.3
3
A more compact way to analyze these data
would be to fit competing log linear models Table 4
to the four-way contingency table, Recon-
stitution (R), Number Directional Interlocks Cross-tabulation of Reconstitution by Interlock Break Type
(D), Number Nondirectional Interlocks (N),
and Interlock Break Type (B) This would
allow us to evaluate all three hypotheses Reconstitution
simultaneously, consider more than two Interlock Break Type Not reconstituted Reconstituted
levels of Intensity, and control for the
number of interlocks of each type present Nondirectional 5 3
in a tie when testing H2 Unfortunately, Directional 28 10
even when the second and third variables
were coded trichotomously (i e, 0, 1, or 2
more), the 36-cell table contained 12 struc-
p> .10 (Fisher's Exact Test)
tural zeros, 4 sampling zeros, and 12 cells
with values less than 5. Analysis of such
sparse tables is not recommended (Fien- This result for Interlock Break Type directly contradicted the
berg, 1978) An analysis of the three-
dimensional 18-cell table Reconstitution result for Interlock Content Type above. On the one hand, the
(R), Number Directional Interlocks (D), and presence or absence of directional interlocks in a tie was related
Number Nondirectional Interlocks (N),
which contained two structural zeros, one
to reconstitution. On the other hand, loss of a directional
sampling zero, and five cells with values interlock was no more likelyto be associated with tie reconstitu-
less than 5, agreed in every respect with tion than was loss of a nondirectional interlock. One possible
the results reported in the text The most
parsimonious model included only the RD explanation of this discrepancy is that InterlockContent Type is
and ND second-order interactions related to the likelihood that a tie facilitates formal coordination
50/ASQ, March 1983

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 Broken Ties

primarilyamong firms linked only by single-interlock ties. If so,

one would expect Interlock Content Type to influence tie
continuity less among multiple-interlock ties than among
single-interlock ties. This is not the case, however, as shown by
the absence of a nonzero XTI interaction in the most parsimo-
nious model in Table 2. Another more mundane explanation is
that the small number of cases made the cross-tabulation of
Reconstitution and Interlock Break Type prone to errors in
statistical inference.
Directional Continuity
Hypothesis 4 concerned the relationship between interlock
direction and the balance of power between tie partners.
Contraryto this hypothesis, only 14 of the 27 continued
single-directional interlock ties were continued in the same
direction as the originaltie.
There are two reasons why directional continuity might not be
preserved even though interlock direction was indicative of the
balance of power among partners to the originaltie. First, it is
possible that interlocks that are co-optive devices can be
substituted for broken interlocks that were infiltrativedevices,
and vice versa. If this occurs, although interlock direction is not
preserved, the changed quality of the relationship that the
interlock effects preserves the position of power of the previ-
ously dominant partner.
Second, it is possible that the reconstituting interlock was
created by a director who was a representative of the same firm
as the departed director, even though the former was not
principallyaffiliated to this firm. According to the coding
schema used, directors were considered principallyaffiliated to
and, thus, representatives of a firm only if the director identified
his or her main business interest with that firm. There are many
relationships, however, that an interlocking director may main-
tain with a firm's directors, such as kinship ties and common
social club, government or nongovernment policy-making group
memberships, which qualify him or her to play the role of
representative of the firm. The directors who created recon-
stituting interlocks in the "wrong" direction may have been
representatives of the appropriate firm by virtue of one of these
relationships. If so, following the class hegemony model of the
intraclass approach, one would expect the directors who re-
constituted interlocks in the wrong direction to have been more
prominent and powerful in the business elite or capitalist class
than other directors. After all, a director's prominence and
power is derived from or correlated with membership in just
those organizations that may facilitate relationships between
that director and the directors of the appropriate firm, which
may allow him or her to act as a representative of that firm.
Although the first alternative explanation could not be tested
with this data, the second could. If it is correct, one would
expect ties continued in the "wrong" direction (that is, with
nondirectional interlocks or with directional interlocks oriented
in the opposite direction of the broken interlock) to be reconsti-
tuted with interlocks created by prominent and powerful direc-
tors more frequently than ties continued in the "right" (that is,
same) direction. When prominence and power was measured
by the number of board seats a director held in 1962, called
innergroupcentrality,this predictionwas not confirmed.How-
51/ASQ,March1983

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 ever, when power and prominence was indicated by member-
ship or nonmembership on the board of a commercial bank in
1962, called finance capitalist status, the prediction was con-
firmed, as shown in Table 5.
Table 5

Cross-tabulation of Reconstituting Director's Finance Capitalist Status by

Tie's Directional Continuity

Directional Continuity
Reconstituting Director's
Finance Capitalist Status Not preserved Preserved

Non-finance capitalist 2 10
Finance capitalist* 8 4

p < .05 (Fisher's Exact Text)

*Directors were coded finance capitalists if they sat on the board of a

commercial bank, regardless of whether this bank was involved in the interlock
in question.

It is important to emphasize, however, that, regardless of

which of these post hoc explanations may be true, the evi-
dence suggests that knowing interlock direction may be of little
utilityto researchers of the contemporary U.S. economy. If the
first explanation is correct, we must conclude that the full
network consists of some interlocks that are co-optive devices
and some interlocks that are infiltrativedevices. Without a case
by case analysis of each interlock, we cannot determine which
of the two devices an interlock corresponds to and thus cannot
determine the balance of power between tie partners. If the
second is true, it suggests that the true direction of a tie cannot
be determined withouta thorough investigation of the relation-
ships between each interlocking director and the directors of
the firms he or she links.

DISCUSSION
We may draw some specific conclusions as well as speculate
more generally from these results. Speaking specifically, only
one of the claims about the relative significance of different
types of interlocks was unequivocally supported. These find-
ings were consistent with the claim of previous researchers
that multiple-interlock ties are more likely than single-interlock
ties to facilitate formal coordination. However, the study pro-
vided only partialsupport for the claim that directional interlocks
may facilitate formal coordination more frequently than non-
directional interlocks do. These results were consistent with
the hypothesis that ties that include directional interlocks are
more likely to be vehicles of formal coordination than are ties
that do not. They were not consistent, however, with the
hypothesis that directional interlocks are more likely than
nondirectional interlocks to facilitate formal coordination be-
tween firms that are linked by ties composed of both types of
interlocks.
Finally,these findings did not support the claim, on which
recent studies are based, that interlock direction is indicative of
the balance of power between tied firms. An attempt to validate
an alternative explanation for this evidence on interlock direc-
tion provided tentative support for the claim that directors may
52/ASQ, March1983

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4
There are 1,498 directional and 2,761 non-
directional single-interlock ties and 470 di-
rectional and 148 nondirectional multiple-
interlockties in the 1962 MACNETdata set
Nondirectional interlock ties were consid-
erably underrepresented in the disrupted-
tie data set This is primarilybecause many
of the ties in the MACNETdata set consist
entirely of neutral, nondirectional interlock
ties, that is, interlocks created by directors
who were not principallyaffiliated to any
firm in the MACNETdata set. Because I
could not detect when such directors lost
their principalaffiliation, I could not detect
when these interlocks were accidentally
broken and include them in the data set
This unavoidable omission does not,
however, bias the results. Since about 90
percent of the directors who created neu-
tral, nondirectional interlocks were princi-
pally affiliated to business firms not in the
MACNETdata set, they were virtuallyiden-
tical with directors who created other non-
directional interlocks (Mintz, 1978), making
the two types of nondirectional interlocks
virtually identical
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Broken Ties
sometimes be selected as representatives of a firm to effect
formal coordination on the basis of their social-class ties to the
directors of that firm rather than on the basis of their bureau-
cratic or proprietaryties to the firm. Although these data do not
allow us to conclude with complete confidence that there is no
relationship between interlock direction and the balance of
power between tied firms, one may conclude that simply
knowing the direction of a tie does not allow researchers to
characterize this balance. This conclusion directly contradicts
the findings of Mizruchiand Bunting (1981). The fact that their
data cover the U.S. economy in the early twentieth century,
whereas these data cover the contemporary U.S. economy,
may account for this discrepancy. Altogether, the evidence
presented here seems to suggest that future interlock research
aimed at elucidating the structure of formal coordination among
large corporations in the contemporary U.S. economy should
focus primarilyon multiple-interlock ties that contain at least
one directional interlock. However, the direction of these ties
should be disregarded.
We may also speculate more generally about the proportion of
ties that were vehicles of formal coordination in the interlock
network from which the disrupted-tie data set used here was
drawn. This bears on the validity of the implicit assumption of
interest-group research that the majorityof interlock ties facili-
tate formal coordination. To get a crude upper-bound estimate
of the proportion of ties that facilitate relationships of formal
coordination in the 1962 MACNETcdataset, I firstassumed that
all continued ties (reconstituted or maintained) in the disrupted
tie data set may have been vehicles of formal coordination in
1962. Ithen summed the products of (1) the rates of continuity
(reconstitution or maintenance) in the disrupted tie data set and
(2) the number of ties in the 1962 MACNETdata set, for each
type of tie, and then divided this sum by the total number of ties
in the 1962 MACNETdata set. From this calculation I inferred
that only about 15 percent of all ties in the 1962 MACNETdata
set could have been vehicles of formal coordination.4 This
implies that approximately 85 percent of all ties in the 1962
MACNETdata set were not vehicles of such relationships.
These results are consistent with those of Koenig, Gogel, and
Sonquist (1979). They examined only single-interlock ties and
did not distinguish between different types of interlocks. The
reconstitution rate that they found for single-interlock ties (6
percent), however, corresponds closely with the reconstitution
rate that I found in this study (8.9 percent) for this type of tie.
Because this estimate is crude, we do not express it in the
language of statistical inference; for example, it is not sur-
rounded by confidence intervals. To do so would add little
precision to the conclusion and obscure potential sources of
error. On the one hand, it is not an estimate of the percentage of
ties that actually were vehicles of formal coordination in the
1962 MACNETdata set, but rather an estimate of the percent-
age of ties that could have been vehicles of formal coordination
in that data set. As discussed earlier, there are at least three
reasons why ties in the disrupted tie data set that did not
facilitate formal coordination might be continued.
On the other hand, there are at least three reasons why ties in
the disrupted tie data set that actually did facilitate formal
coordinationmight not be continued.First,some ties that are
53/ASQ,March1983
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