The Wisdom and Madness of Crowds: How Information Networks and Board Cognition Help or Hinder Firm Performance Across the Business Cycle

Kerry Hudson*, Robert E. Morgan

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


We know little of why a minority of firms pursue counter-cyclical strategies and consequently outperform competitors during recessions. Based on the theory of institutional isomorphism, we hypothesize that these firms avoid the mimetic and normative pressures that promote strategic convergence during uncertainty. We demonstrate these effects at the board-level in a sample of 1,615 U.S. firms. Mimetic processes are evident, with firms' connectedness in board interlock networks attenuating profitability and decreasing firm value during recessions—a reversal of the positive effects during expansions. Normative pressures arise from homogeneity in directors’ educational and professional experience, with greater consequences for long-term performance. Overall, recessionary performance is improved when firms occupy relatively isolated positions in informational networks and appoint directors from a range of backgrounds.
Original languageEnglish
Article number102180
JournalLong Range Planning
Issue number6
Number of pages20
Publication statusPublished - Dec 2022

Bibliographical note

Published online: 21 December 2021.


  • Strategic leadership
  • Corporate governance
  • Board interlocks
  • Board composition
  • Recession

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