Ideological Homophily in Board Composition and Interlock Networks: Do Liberal Directors Inhibit Viewpoint Diversity?

Kerry Hudson*, Robert E. Morgan

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Research issue
A consistent feature of social networks is homophily: the tendency for people to interact with similar others. Psychological and sociological research suggests that homophily is most pronounced along ideological lines, with conflicting evidence as to whether this tendency is higher among individuals who hold liberal or conservative beliefs. Based on this literature, we conduct the first study of ideological homophily in two key organizational networks: the intrafirm connections among directors on the board and the interfirm connections created by board interlocks.

Research insights
In a panel of 408 U.S. firms between 2000 and 2020, we find that liberalism increases homophily both within and between boards. Furthermore, we find that homophily has decreased over time but that this has been driven by conservative boards while the effect of liberalism has strengthened in recent years. These findings provide the first evidence for an ideological component in the composition of intra- and interorganizational networks.

Academic implications
Most research on director selection and interlock formation has focused on situational or demographic antecedents. Our findings contribute to the development of a broader theoretical framework that accounts for individual dispositional factors in these processes.

Practitioner implications
Our findings bring attention to the issue of ideological homogeneity in firms. Given the growth of homophilic tendencies among liberal directors in recent years, we suggest that it may be increasingly important for directors to become aware, and mitigate the effects, of their ideological biases in order to maintain cognitive diversity in information networks and decision making.
Original languageEnglish
JournalCorporate Governance: An International Review
Number of pages18
ISSN0964-8410
DOIs
Publication statusPublished - 21 Sep 2021

Bibliographical note

Epub ahead of print. Published online: 21 September 2021.

Keywords

  • Corporate governance
  • Board interlocks
  • Boards of directors
  • Homophily
  • Social networks

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