Corporate linkages and organizational environment: A test of the resource dependence model

TLDR

Two competing models of corporate boards are presented: management control, where the board is a rubber stamp, and resource dependence, where the board manages environmental uncertainty. The study aimed to determine whether corporate boards respond to different types of environmental uncertainty. A structural model was applied to data from 147 companies across nine industry groups. Boards were smaller and had more interlocks in more uncertain environments, with this relationship stronger in high‑performing firms.

Abstract

Abstract Two competing models of corporate boards are presented. Management control proposes that the board is a rubber stamp for management, and plays a minor role in strategic management, while resource dependence asserts that the board is a tool used to manage environmental uncertainty. A structural model was developed to determine whether corporate boards respond to different types of environmental uncertainty, using data on 147 companies from nine industry groups. It was found that boards tended to be smaller in a more uncertain environment, while having an increased number of interlocks. This relationship was stronger in high‐performing firms.