Board Interlocks, Knowledge Spillovers, and Corporate Innovation

We examine whether interlocking boards of directors help to foster knowledge spillovers between firms. To capture exogenous variation in board interlocks, we use a novel identification strategy based on schedule conflicts between firms’ annual shareholder meeting dates. For a variety of patent-based measures, we find that innovation by a “source” firm has a greater effect on the quantity, quality, and relatedness of a “downstream” firm’s innovation when the firms share an interlock. We also document that spillovers are larger when an interlocking director is younger or non-busy. However, consistent with theories of board functioning, spillovers are reduced when either the source or downstream board has a higher proportion of outsiders or is less co-opted by the CEO. Our findings suggest that board interlocks provide an important channel by which scientific knowledge and innovation can flow between firms