Testing a Structural Theory of Corporate Cooptation: Interorganizational Directorate Ties as a Strategy for Avoiding Market Constraints on Profits

Abstract

Moving away from description of directorate ties as a cooptive device, we test a theory explicitly predicting cooptive uses of corporate directorates from the structure of the market in which firms operate. The theory is based on a network model of structural autonomy. It takes as exogenous information the sales and purchase transactions between establishments in sectors of the economy, locates those sectors most constraining pricing discretion within each sector, then predicts where establishments should be connected by interorganizational relations if such relations are intended to coopt market constraints. Using data on interorganizational relations as directorate ties (establishments connected through corporate boards by ownership, direct interlocking, and/or indirect financial interlocking) in the 1967 American economy, we find the theory's predictions to be accurate. Each of the three types of directorate ties tends to occur where there is market constraint and tends not to occur in the absence of constraint. Further, the three types of ties are coordinated as multiplex directorate ties. Where establishments in one sector constrain those in another, there is a strong tendency for all three types of directorate ties to exist between the two sectors. Where there is no such constraint, all three tend to be absent. Support is weaker for intrasector in comparison to intersector cooptation via directorate ties. Whatever the cooptive intent of the directorate ties described, they are patterned as if they were intended to coopt market constraints on corporate pricing discretion.