Structural Hole Theory

Structural Hole Theory: The Relationship between Corporate Ties and Corporate Innovation (2007)

Erik Noyes – Boston University

An interlocking board occurs when a board member of one firm also serves on additional company boards — thereby creating a “tie” between two or more companies. For example, IBM and Intel may “share” a board member who sits on both of their respective boards, such that information about each company’s respective industry or market environment may be accessed through that director. Structural Hole Theory predicts that a company’s connections — and more specifically its absence of certain connection — will shape its access to unique information, i.e., information which other companies may struggle to obtain based on their position in a firm network. Dr. Noyes analyzed a study sample of thousands of firms and tens of thousands of directors spanning a period of eight years, in order to observe the effect of interlocking boards on investments in new corporate ventures, a major source of growth and innovation for large companies