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Ideological homophily in board composition and interlock networks: Do liberal directors inhibit viewpoint diversity?

Hudson, Kerry and Morgan, Robert E. 2022. Ideological homophily in board composition and interlock networks: Do liberal directors inhibit viewpoint diversity? Corporate Governance 30 (3) , pp. 272-289. 10.1111/corg.12406
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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 intra-firm connections among directors on the board, and the inter-firm 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 inter-organizational 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.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Wiley
ISSN: 1467-8683
Date of First Compliant Deposit: 21 September 2021
Date of Acceptance: 17 September 2021
Last Modified: 14 May 2022 14:36
URI: https://orca.cardiff.ac.uk/id/eprint/144310

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