15. Organising Innovative Knowledge Transfer through Corporate Board Interlocks

Drawing on knowledge management and social network literature we examine the relation between corporate board interlocks and a board’s commitment to innovation. Based on a sample of Dutch and German publicly listed ‘high-tech’ companies, empirical results indicate that intra-industry interlocks are supportive of arranging for innovative knowledge exchange. Intra-industry interlocks connect the board to nonlocal but related knowledge in the form of companies residing in alternative pockets of their respective industry, increasing a board’s internal knowledge diversity. Following absorptive capacity theory, this type of upper-echelon relational embeddedness improves the board’s ability to recognise and pursue innovation opportunities, in this case showcased by corporate research and development expenditure. In contrast, no effect was found for interlocks with companies residing outside the focal industry. These findings add to the knowledge-based theory of the firm which states that the innovativeness of a firm depends on both its current knowledge base and the means by which such knowledge is enriched by knowledge domains that come from outside the boundaries of the firm. The findings emphasise the relevance of upper-echelon relational embeddedness to the ability to reap the benefits of innovative knowledge exchange through investment in innovation.