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Lost in Space: The Geography of Corporate Interlocking DirectoratesAuthor(s): Clifford Kono, Donald Palmer, Roger Friedland, Matthew ZafonteSource: The American Journal of Sociology, Vol. 103, No. 4 (Jan., 1998), pp. 863-911Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/2782932

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Lost in Space: The Geography of CorporateInterlocliingDirectorates'

Clifford onoUniversityfCalifornia, anta Barbara

Donald PalmerUniversity fCalifornia, avis

RogerFriedlandUniversity fCalifornia, anta Barbara

MatthewZafonteUniversity fCalifornia, avis

The article tudies he causesof ocal and nonlocal nterlockingi-rectorates mongthelargestU.S. industrial orporationsn 1964.The authorshypothesizehat nterlocks re spatialphenomena-

with patial ttributesndspatialdeterminants.onsistent ith hishypothesis,hey ind hat ocal and nonlocal nterlocks ave differ-ent correlates.Further, hreespatial structures nfluence nter-locking: he ocation f a corporation's eadquarters is-'a-vis thercorporate eadquarters nd upper-class lubs,theterritorialistri-bution f a firm's roduction acilities,nd thespatialconfigurationof a corporation's wnership elations. his suggests hatpreviousinterlock esearch,which gnores patial considerations,as beenseriouslymisspecified.

INTRODUCTIONInterlockingirectorates, hich arise whentwo corporations hare oneor more irectors,ave ongbeensuspected f rodingmarket ompetitionand politicaldemocracyn the UnitedStates.Many contend nterlocks

1Wethank . DevereauxJenningsorhelp ncomputinghespatial nterlock ari-ables used nthis tudyndKathyThoren ndChristina ozano forpreparationfthetext, ables, ndfigures.We are ndebted o WilliamBielby, redBlock,JamesLincoln, ethMintz,HarveyMolotch, eter hillips,Michael chwartz, arry taw,

Robert utton,ndJohnWalton or ommentsnearlier ersionsfthis rticle.Wealso appreciate he criticismsnd suggestionsftheAJSreviewers, hohelpedusrefine urargumentsndanalyses. pecialthanks oourchildren-Hannah, arah,Erica, ndTony-withoutwhomwe wouldbe trulyost nspace.Direct orrespon-

? 1998byTheUniversityfChicago.Allrights eserved.0002-9602/98/10304-0002$02.50

AJS Volume103Number4 (January 998):863-911 863



AmericanJournal f Sociology

facilitate he flowof informationetweenfirmsMills 1956; Stanworthand Giddens1975) and the ransmissionndenforcementfnorms mong

businesselites Koenigand Gogel 1981; Useem 1983). Some argue thatthey llow corporations o co-optor infiltratene another nd therebycoordinate heir ehavior Pfeffernd Salancik 1978;Mintz nd Schwartz1985; Glasberg1989).A few assert hat nterlocks, hen associatedwithinterfirmtockholding r lending elationships,ven serveas vehiclesofinterfirmontrol Fitchand Oppenheimer 970).Recentresearch emon-strates hat nterlockingirectoratesnfluence widerangeofcorporatebehaviors-politicalactioncommitteeontributions,ublic policygroupmemberships,rganizational orm hanges, nd involvementn mergers

and acquisitions seeMizruchi 1996]for review).A host of theories fferompetingxplanations fthecauses of nter-

locking.Most believe that nterlocksre createdto serve the organiza-tional nterests fcorporationsr theclass nterestsftheeliteswho com-mand them.On the one hand,traditional esource ependence heoristsbelieve hat nterlocksretheresult fcorporate ttempts oreduceuncer-tainty nd constraintnherentn the market tructure f the economy(Pfeffer 972;Allen 1974; Pfeffernd Salancik 1978; Burt 1980, 1983;Burt,Christman,nd Kilburn 1980).Extending hisview, bank controland bankhegemonyheorists elieve hat nterlockseflectheparamountimportance f capital allocationwithin he economy Fitch and Oppen-heimer 970;Kotz 1978;Mintz and Schwartz1981a, 1981b,1985).On theother and, ocial class theoristselieve hat nterlocks eflecthe nternalstructuref hecapitalist lass,differentiatedykinship ies mongmajorstockholdersSweezy 1953;Zeitlin1974;Zeitlin,Ratcliff,ndEwen 1974)orsocial tiesamongbusiness lites Bonacichand Domhoff 981;Useem1979,1984;Soref 976;Soref nd Zeitlin1987).However, few tillmain-

tain that nterlocks re largelyunintended onsequencesofmanagerialattempts o acquire the advice of experiencedbusiness friendsMace1986).

Empirical upport or hesetheories s mixed t best. While studies tthe ndustryevel ofanalysis ndicate hatnonfinancial esource epen-dence relations re associated with interlockingmongmanufacturingfirmsPfeffernd Salancik 1978;Burt1980, 1983),firm-levelnalysesdonot Galaskiewiczet al. 1985;Palmer,Friedland, nd Singh 1986;Miz-ruchi1989, 1992).Firm-levelnalysesoftherelationship etweenfinan-

cial dependence nd financialnterlockingave produced onflictinge-sults Dooley 1969;Pfeffer972;Allen 1974;Pfeffernd Salancik 1978;Burt 1980; Pennings1980;Mintzand Schwartz 1985; Stearns nd Miz-

dence oDonald almer,raduatechool fManagement,niversityfCalifornia,Davis, California 5616.

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Lost in Space

ruchi1987;Mizruchi nd Stearns1988).Tests of the social class perspec-tive have onlybeen conducted t the person evel of analysis Soref1976,

1980; Bearden and Mintz 1987;Johnson nd Mintz 1989). Mace's (1986)expertise nd friendshiprgument as neverbeentested t thefirmevelforU.S. firms. inally, o thebestofour knowledge, o onehas evaluatedeach of thesetheories f nterlockingn a single,multitheoretictudy.

Ourgoal n this rticle stoassesscompetingheories fcorporatenter-locking y analyzing nterlockings a spatial phenomenon. ocial theorytends o gnore he patial character f ocial action nd structure,mplic-itlyviewing pace as a stageupon which hey nfold Friedland nd Bo-den 1994; Soja 1989). Contemporary rganization nd class theory re

written s ifcorporations,heir dministrativend productive ctivities,and their eaders re not ituatedna physicalworld.2 he failure o theo-rize spatial structurend process n interlock esearch s exemplified ythe relative ilence urroundingts most stablished inding,hat he net-work f nterlockingirectoratesslocalized nspace-consistingof clus-ters" f corporationsnterlocked ithother irms eadquarteredn theirheadquartersocale,which re nturn ied ogether y bridges" ormed ycorporationsnterlocked ationallyDooley 1969;Levine1972;Allen1974,1978; Koenig and Sonquist 1977; Mizruchi 1982;Mintz and Schwartz1985; Bearden and Mintz 1985, 1987;Johnson ndMintz1989). t is im-portant hatthis patialstructure as been observed n studies hat pantheperiodfrom 935through 976-a timewell after heriseof et traveland instantaneousong-distance oice and image transmission,onven-tionally ssumed tohave progressivelyeduced he mportance f space.

Researchers ave debatedthe extent o whichregion ather han otherfactorss theprincipaldimension longwhichthe interlock etwork ssegregatednd have speculated boutthe factors-common esource x-

changeor financial ontrol elations-bindingfirmsogethern regionalcliques (Allen 1978;Mizruchi1982;Mintz and Schwartz1981a, 1981b,1985). But,withone partial xception Allen 1978),no one has analyzedthe patial tructuref orporatenterlockingtthefirmevel. pecifically,no one has explored hepossibilityhat ocal and nonlocal nterlockinghavedifferenteterminants.f ocaland nonlocal nterlockingave differ-entdeterminants,astresearchmayhave underestimated,fnot miscon-strued, he mpactof somehypothesized eterminants. or has anyoneexplored hepossibilityhat thegeography f organizational nd class

2There are exceptions to this tendency.A growingnumber of contemporary heoristsview space as a constitutive imensionof social phenomena (Foucault 1977;Harvey1982, 1985, 1989; Bourdieu 1990; Giddens 1990). Withinorganizational studies,popu-lation ecologists have begun to explorethe significance f space (Barnett and Carroll1987; Haveman and Nonnemaker 1997; Haveman and Romanelli 1997).

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relationshipsn whichfirms re embedded hapes nterlocking.f it does,past theory bout thecauses of nterlockings incomplete.

In this rticle,we analyzethe patial tructuref nterlocksmaintainedby argeU.S. industrial orporationsn 1964.We determine he extent owhichcorporationsnterlocked ithother ndustrial irmsnd financialinstitutionsnd thendecompose hese otals ntotheir ocal and nonlocalcomponents.We then model total, ocal, and nonlocal industrial ndfinancial nterlockings a function f determinantsuggestedby pre-vioustheories,s well as an urbangrowthmachine heory artly f ourown design.

THEORY AND HYPOTHESES

Expertise nd Friendship

The simplest xplanation f nterlockingoldsthatpersons re elected oa corporation's oard on thebasis oftheir usiness xpertisend friend-shipwith hefirm's nsidedirectorsMace 1986).Corporate xecutives ryto place knowledgeable utsiders n theirboards because boardsadvisemanagers n long-termtrategy. ecause thedirectors f arge corpora-

tions end o possess hegreatest usiness xpertise,his reates networkof nterlockingirectoratesmong he argest orporations. anagers lsotryto place friends n theirboards because boards can support hemagainst hreats otheir enure. ecause spatial proximitys an importantpreconditionffriendshipetween eople Festinger, chacter,nd Back1950; Festinger 953;Feld 1981),thisprobably eads to interlockswithlocallyheadquartered irms. hus, the number f other irms eadquar-tered n a corporation's eadquartersocation hould be directly elatedtothe ikelihood hat t interlocks ithother irms,specially ther ocal

firms.3To the best of ourknowledge, o one has examined herelationship

between the spatial propinquity f corporateheadquarters nd inter-locking mongU.S. firms t thefirmevel. Green 1983) found hat evelsof nterlockingetweenfirmsndifferent .S. and Canadian citieswereinversely roportional o thedistancebetweencities.Lincoln, Gerlach,and Takahashi (1992) report hatJapanesecorporationsre more ikelyto share directorswhentheywereheadquarteredn the sameprefecture(a Japaneseprovincial nitofgovernance imilar o a U.S. county).Ka-

3 While professional search firms oday are responsiblefora growing percentage ofdirector ppointments, he majority re stillarranged withoutthe aid offormal nter-mediaries. In 1983, about 9% of all outside corporate directorswere identifiedbyexecutive search firms Mruk and Giardina 1983). By 1989, this figurehad risen-but only to 16% (Korn/Ferry nternational 1989).

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Lost in Space

TABLE 1

EXCLUSIVE METROPOLITAN CLUBS IDENTIFIED BY DOMHOFF (1970)

AS UPPER-CLASS INSTITUTIONS

Club City Club City

Arlington Portland Maryland Baltimore*Boston New Orleans* Milwaukee MilwaukeeBrook New York Minneapolis MinneapolisBurlingame ountry San Francisco New HavenCalifornia Los Angeles Lawn New Haven*Casino Chicago PacificUnion San FranciscoCentury New York Philadelphia PhiladelphiaChargrinValleyHunt Cleveland PiedmontDriving Atlanta*Charleston Charleston* PipingRock New YorkChicago Chicago Racquet St. LouisCuyamuca San Diego Rainer SeattleDenver Denver RichmondDetroit Detroit German RichmondEagle Lake Houston Rittenhouse PhiladelphiaEverglades PalmBeach* River New YorkHartford Hartford RollingRock PittsburghHope Providence Saturn Buffalo

Idlewild Dallas St. Cecelia Charleston*Knickerbocker New York St. Louis Country St. LouisLinks New York Somerset Boston

Union ClevelandWoodhillCountry Minneapolis

* Clubssituatedncitiesnwhichnoneofthe 1964top500 ndustrialorporations ereheadquartered.

dushin 1995)found hatFrenchfinancial liteswereno more ikely ositon thesame boards ofdirectorsf hey esidedn thesame exclusive arisneighborhood-the16th rrondissement.owever, liteswho ived n the16th rrondissement ere more ikely o be friends nd eliteswho werefriendswere more ikely o serve on thesame corporate oards.

Upper-ClassSocial Interaction

Friendships hatgiveriseto director ppointments ay be predicated n

more than spatial propinquity.nside directors refer oard candidateswhom hey rustwill remainoyalto themntimes fcrisis. he 40 exclu-sivemetropolitan pper-class ocial clubs thatDomhoff1970)maintainsare sitesofcapitalist lassformationlisted ntable 1) may providevehi-cles for hedevelopment f such trust. omhoff1970, 1974)and others(Useem 1987;Phillips1994)believe hat hese lubsarefocifor lite nter-

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actionthatprovide nstitutionalizednformal ettingsnwhichelites resocialized nd socially ontrolledo adhere o normative usiness ttitudes

and behaviors n whichtrust s predicated.Hence the ocal presence fupper-class lubs may facilitate riendshipshat ead corporate irectorsto selectone another o serveon each others'boards. While ocal upper-class clubsprovide firm's irectors ith heopportunityodeveloprela-tionshipsf rustwithboth ocal and nonlocal lubmembers,ontactwithlocally mployed irectorshouldbemost ntimatendmost ikely o eadtoboardnominations.hus, beingheadquarteredn a citywith nupper-class club shouldbe directly elatedto the likelihood hatcorporationsinterlock,speciallywithother ocal firms.

No onehas explored hepossibilityfan ecological mpactofexclusiveupper-class lubs on the nterlockingehavior fcorporations eadquar-tered n thecitieswhere hey re situated.However, everal tudies na-lyzetheconnection etween irectors' pper-class lub membershipsndcorporateboard affiliations. ost show that directorswho belongtoupper-class lubs hold more orporatend financial oard seats and thuscreatemore ndustrialnd financial nterlocks handirectors hodo notbelong othese lubs Bonacich nd Domhoff 981;Soref 976,1980;Sorefand Zeitlin 1987). Further, ohnson nd Mintz 1989) demonstrate hattheprobabilityhat wo directorserve n two or more fthe ame boardsis higherwhen both belong o an upper-class lub. They also found hatmembershipnthe same upper-class lubwas associatedwith he proba-bility hat two directors erved on two or more of the same corporateboards-but onlywhen directorswereprincipallyffiliated ithfirmsheadquarteredn differentegions. hey speculate hat ocial ties essfor-mal than ommon lub membershipsiverise o common orporate oardmemberships hendirectors eside n the ameregion-implying,ncon-

tradiction o our hypothesis bove, that the effect f local upper-classclubs on interlocking ill be most evident n connectionwith nonlocalinterlocking.

ResourceDependence Relations

The traditional esource ependence erspective.The dominant rga-nizationalexplanation f interlockingssumes thatcorporationsreateinterlocksnresponse o uncertaintynd constrainttemming rom heir

reliance nother irms or esources. orporations xperience ncertaintyvis-'a-visompetitors,epending n theconcentrationevels nthe ndus-tries n whichtheyproduce Pfeffernd Salancik 1978).Firms are con-strained y buyers nd suppliers, epending n the extent owhichtheytransactwithonly few other ndustries,s well as theextent owhichtheir ndustriesnd those withwhichtheytransact re highly oncen-

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Lost in Space

trated Burt 1983). Corporations re constrained yfinancial nstitutionsto thedegree hat hey orrow rom hem Dooley 1969;Allen1974;Burt

1980;Pfeffernd Salancik 1978).Corporations an reduce esource ncer-tainty nd constraint y establishinginkageswithfirms roducing nin-dustries hat generate ncertaintynd constraint orthem PfefferndSalancik1978;Burt1980). nterlocking irectoratesre onesuch inkage,potentially roviding orporations ith nformationbout and influenceover problematic irmsn their nvironment. hus, thenumber f nter-locks orporations aintain houldbe associatedwith he evelofresourceuncertaintynd constraint o whichthey re exposed.

Traditional esource ependence heorists lso assume a corporation's

size influencestspropensityo interlock. argecorporationsre thoughtto pose more uncertaintyorotherfirms nd thus are assumed to moreoften e thetargets f other irms' nterlocktrategiesPfeffernd Salan-cik 1978).4A corporation'sndustrial iversitymayalso influencetspro-pensityo nterlock. n theonehand,diversifications a strategyo reduceuncertaintynd constraint, educing heamountof nformationnd in-fluence irms eed to manage their nvironments,hereby ossiblyde-creasing he need to interlockPfeffernd Salancik 1978).On theotherhand, ndustrial iversityncreases he complexity fcorporate nviron-ments nd thus ncreases heamountof nformationnd influence irmsneed to manage them, hereby ikely ncreasing he need to interlock.Hence,we remain quivocal aboutthe direction f ndustrial iversity'seffectn interlocking.

The traditional esourcedependenceperspective as largely gnoredspatial considerations. owever, n an earlyprogrammatictatementfthisperspective, ill (1958)notedthat organizationsperatingn manyspatially ispersedocalesrequiremore nformationomanage heir nvi-

ronments. his implies hatgeographic omplexityhouldbe directly e-lated to the number f nterlocks orporationsmaintain. urther,n oneof hefirstttemptsoexplain hecliquestructuref henational nterlocknetwork, llen 1978) speculated hat ocalization fthecorporatenter-lock network s a product fthe ocalization f resource ependence ela-tions nthenational conomy. e reasoned hat orporationsend o com-pete and transactprimarilywithotherfirms eadquarterednear themand thatcorporations educeresourceuncertainty y interlocking ithlocal competitorsnd transaction artners s opposedto firms eadquar-

tered n distant ocales. This impliesthat the effects n interlockingf

4 Elite theorists rgue that arge corporations lso have more prominent nd powerfuldirectors nd that t is the prominence nd power oftheirdirectors-rather than theresource uncertainty nd constraint hey generate for other firms-that accounts forthe greaternumber of interlocks hey maintain (Useem 1979).

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AmericanJournal fSociology

competitive ncertainty,nterindustryonstraint,arge size,and indus-trial diversity hould be mostevident n connectionwith local inter-

locking.Researchers ave found hatthe level of interlocking ithin nd be-

tweenmanufacturingectors s directly elatedto the level of resourcedependence-based ncertaintynd constraintnand between hemPfef-fer nd Salancik 1978;Burt et al. 1980;Burt 1980, 1983). However, nfirm-levelnalyses, o one has observed n association etween henum-berof nterlocksinking orporationsnd the evel ofdependence etweenthem Galaskiewicz tal. 1985;Palmeret al. 1986;Mizruchi1989, 1992).Further, here s conflictingvidence regarding he impact of financial

dependence n financialnterlocking,speciallynconnection ith orpo-rate reliance n long-term ebt. Some researchers indno associationbe-tween ong-termndebtednessndfinancialnterlockingAllen 1974;Miz-ruchiand Stearns1988),one finds positive ssociation Pfeffer972),and one evenreports negative elationshipPennings 980).While t swell establishedhat argefirmsmaintainmore nterlockshan mallones,no one has examined herelationship etweendiversificationnd inter-locking.

Bank hegemony heory.According tobank hegemony heory, he n-terlock etwork eflectsnd facilitateshecontrol fcapitalflows n theeconomy Mintz nd Schwartz1985). n itscrudest orm,his heoryim-ply reaffirmshebasic resource ependence enet hat nterlocks re cre-ated to reduceuncertaintynd constraintssociatedwith ntercorporatetransactions,ddingthat financial ependence s themostproblematicform fdependence.ndustrial irms reparticularly ependent nfinan-cial institutionsecause these nstitutionsontrol he mostfungiblendhighly oncentrated esource ntheeconomy-loan capital. n thisview,

ifthere s a relationship etweenresource ependence nd interlocking,itshouldbe most pparent n connectionwithfinancial ependence ndinterlocking.

In itsmore ophisticated orm, ankhegemony heory iews nterlocksas the backbone ofa general conomic ntelligencend decision-makingnetworknwhichfinancialnstitutionsre thekey ctors. ndustrial irmsinterlockwith financial nstitutionso obtaininformationbout and avoice n decisions egarding apital llocation, ndependentf heir artic-ular need for xternal uppliesofcapital.Financial nstitutionsnterlock

with ndustrial irmsn order o obtain nformationboutand access topossible ending nd investmentpportunities-those resented y thefirm,s well as thosepresented yother orporationsowhichthese n-dustrialsmaybeconnected. hese mperativesause thenationalnetworktobecome nternallyifferentiatedntoregional lusters onsistingf o-cally headquartered orporationsnd financialnstitutions,nwhichthe

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latter re peaks. The regional lusters re in turn ied together y indus-trial corporations hat are central n nationalcapital flows-large, geo-

graphically xtensive, ebt-dependentorporations alled bridges.As in-dustrial orporations row n size, geographic cope, nd need for apital,they eek out interlocks ithnationalfinancial nstitutionsutside heirheadquarters egion. arge geographically ispersed irmseek involve-ment n economywide apital allocation ecisions ecause they perate tthenational evel. Heavily ndebted irms eek nformationbout and ac-cesstonational apitalmarkets ecausetheir apitalneedsoutstripocalreserves.At the same time, financial nstitutions-especially ationalfinancialnstitutions-becomencreasinglynterestedn nterlockingith

these arge, geographically ispersed, ebt-dependentirmsn ordertogainaccess to informationnd expertise elated o the ocal economiesnwhich hey re situated. hus bankhegemony heorymplies,ncontrastto the traditional esource ependenceview,thatthe effectf arge size,geographic ispersion,nd indebtedness n interlockinghould be mostevident n connectionwithnonlocalfinancial nterlocks.

Urbangrowthmachine theory.We believethaturban growthma-chine heory, eveloped o explain ommunityower tructures,s consis-tentwithboththe traditional esource ependence nd bankhegemonytheories ndhas implications or hestudy f nterlockingMolotch1976;Logan and Molotch 1987). Cities, n this perspective, re "growthma-chines"-institutional omplexesgearedto the generation f economicand populationgrowth. ocal business lites nd state officials and to-gether n "growth oalitions" hatpromotepublic policies ntended ostimulateocal growth. t therootofeach coalition's tructures a socialnetworkinkingocal economic litesand publicofficialsPerrucci ndPilisuk1970). nterlocking irectoratesmong ocal firmss one meansto

participaten thisnetwork.We think corporation'snterestnparticipat-ing n itsheadquarters ity'sgrowth oalition s a functionf tsgrowthdependence n,economicdominance ver,and capacity o exit fromtsheadquartersocationFriedland nd Palmer1984;Palmer nd Friedland1987).

Corporations ary n the extent o which their uccesshingeson theconditions egulatingocal growth.Growth ependent orporations,uchas thosemaintainingocal production acilities, ave an incentive o ointheir ocal growth oalition Molotch 1976). Corporations hat funnel

largevolume of resources ntotheeconomieswherethey re headquar-tered, elative o the nvestmentsf otherfirms,re dominant conomicactors n their ommunitiesLincoln 1977).Dominantcorporations aveless need to participaten local growth oalitions n orderto influencelocal statepoliciesbecausetheypossess systemic ower.Local coalitionschampion ominant irms' nterestsnorder osustain he ocal presence

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oftheresources hey ontrol, llowing hem o avoid costly irect ction(Crenson 1971; Molotch 1979;Friedland1983). Corporations mbedded

in geographically xpansive financial nd nonfinancialmarketspossesslocational flexibilityBluestone and Harrison 1982; Harrison 1994). Inparticular, he more ocations n which corporations roduce, he betterpositioned hey re to shift roduction utsidetheirheadquartersoca-tion, itherby downsizing nd transferringersonnel r by closing ndrelocating ntire lants Pred 1977). The greater firm's apacity o exitits headquarters ocale,the ess t needs to participaten the ocal growthcoalition. Like economic dominance,mobilitys a source of systemicpowerthat auses local growth oalitions opursue corporation'snter-

ests.Thus, growth ependence hould be associated withhigh evels oflocal interlocking, hile dominanceand mobility hould be associatedwith ow levels of ocal interlocking.

Financial nstitutions ere economically ominant ut growth epen-dent and immobile vis-'a-vis heir headquarters ocales in the 1960s(Friedland and Palmer 1984). Local financial nstitutions egulated e-gionalgrowth, hannelingheflow f ocal private nd public capital n-vestment. heirprosperity as largely ependent n the successof ocalnonfinancialirms hatgeneratedhedeposits nd loans upon which heirmoney-makingctivities inged. inally, heir perationsweregeographi-cally ircumscribedy aw.Hence,financialnstitutions ere t the enteroftheurbangrowthmachines fthe1960s.Growth ependent,mmobile,and nondominantorporationshouldhave been particularlynterestedin oiningwith ocal financialnstitutionso foster r control ocal growthbecause local financialswere dominant conomic ctors.And,financialinstitutionshould have been particularly illing o work with ocal in-dustrial irms o this nd becausetheyweregrowth ependentnd immo-

bile.Thus, the effects fgrowth ependence, conomicdominance, ndcapacityto exiton local interlockinghouldhave been mostevident nconnectionwithties withfinancial nstitutions.

Onlyone studyhas explored herelationship etween hegeographyofcorporate perations nd interlocking-andonlytangentiallyt that.Allen 1974) observed hatfinancialnstitutions ad a higher ercentageof ocal interlockshandid industrial orporationsnd attributedhistothepresumed patialconstrictionf financialnstitutionperations.

OwnershipRelations

Separationofownershipnd control.The traditional esource epen-dence perspective ssumes that corporate eaders seek stable growth,which eadstothepursuit fenvironmentalertainty,hich nturn eads

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to interlockingPfeffernd Salancik 1978).However, owner managersmay be less preoccupiedwith table growth nd morefocused n profit

maximization han professionalmanagers.Ownermanagers ccumulatewealth n theform f stock ppreciation iedtotheir irm's rofitability,whileprofessionalmanagers arn salariespegged o their irm's ize Gal-braith1971; Bell 1973). Additionally,he expertisend friendshiphesisand theupper-class ocial interaction iewpresume hatcorporateman-agers eekprotectionrom hreats o their enure,which eads to the pur-suit of trusted usiness llies,which n turn eads to interlocking. ow-ever,ownermanagersmayhave less need to arrayoutsidedirectorssallies n times fcrisis. he tenure fownermanagers s more ecure han

thatofsalaried professionalmanagersbecausetheir tockholdings re abarrier ocorporate akeoverBarber,Palmer, nd Wallace 1995;Palmeretal. 1995).Thus, corporations hosestock s concentratedn the handsof a few related ndividuals nvolved n management hould maintainfewer nterlocks han firmswhosestock s held by unrelated nd unin-volved outsiders. ome ownermanagers eside n their irm's eadquar-ters ocale, while others ive indistant laces.Local ownermanagers remore nvolved n their irms' ay-to-day ffairs,nd thisprovides hemwith nformationnd contacts hatbolster heir olitical ecurityPfeffer1992). This implies hat the negative ffect fmanagerial wnership ninterlockinghouldbe most vident n connectionwithownership y o-cally residentmanagers.

Intercorporatewnership.Researchers have long thought hat nter-lock relations t least partly hadow intercorporatewnership elations(Perlo 1957;Zeitlin1974;Mintz nd Schwartz 98 b; Mizruchi 982).Cor-porations nd financial nstitutionsan prevailon the firmshey wn toestablish nterlock elationswiththem,n order o monitor hesefirms'

affairs. hey mayalso press he severalfirmshey wn to interlock itheach othernorder o coordinate heir phere f nfluenceSweezy 1953).Bank control heorists elievetherelationship etweenfinancial wner-ship nd interlockingsparticularlytrongFitch ndOppenheimer 970;but see Kotz 1978). Thus, corporationswhose stock s ownedby otherfirms, speciallyfirmshat control tillother arge firms,may maintainmore nterlockingirectorateshanfirms ot embedded nintercorporatestockholdingelations. ome believe ocalized orporatenterlock atternsreflectocalized ntercorporatewnershipelations,nchored y ocal cap-

italistfamilies.n this view, nterlocksriseas the result f tiesamonglocallysituateddirectors ssociated withthe same families,n ordertofacilitate oordination etween he ocal firms nder hesefamilies' om-mon control Sweezy 1953). Thus, ownership y locally headquarteredindustrial nd financialnstitutionshouldgive rise to local interlocks,

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and ownershiprelationswithfirmswhose headquarters re not localshouldfoster onlocal nterlocking.hat is, the predicted ositive ffect

of ntercorporatewnership n interlockinghouldbemost videntntherelationship etween local intercorporate wnership nd local inter-locking nd in the ssociation etweennonlocal ntercorporatewnershipand nonlocal nterlocking.

DATA AND METHOD

Sampleand DependentVariables

Oursample onsists f he500 argestU.S. industrialorporationsn 1964,

as reported yFortune 1965).We focuson 1964because data on manydifficult-to-collectariables in particular nterlockingirectorates,lantlocations, nd ownership elations)were already vailable for hisyear.Five agricultural ooperatives nd fivewholly wned subsidiaries f par-entorganizations ereexcludedfrom hesamplebecause their inancialdata werenotcomparable o thoseof other op 500 firms.We measuredthenumber ftotal, ocal,and nonlocaldirectionalnterlockshese orpo-rationsmaintainedwithother ndustrial irms nd financialnstitutions.We focuson directionalnterlocks, hichconnect wofirmswhenan in-

side directoran officerrprincipal wner)of one also sitson theboardofanother, ecausethey reconsideredhemostpurposefulnd themostconsequential orm f nterlocking.5nterlocksinking orporationsead-quarterednthe samecitywere consideredocal,while thoseconnectingfirmsheadquartered in different ities were considered nonlocal.6 Infor-

I Directionalnterlocksremore ikely hannondirectionalnterlockso betheresult

of conscious nitiativesn thepartofconnectedirms ecause nondirectionalnter-locks re automaticallyreated etween wofirms hen hey oth ppoint he amedirectorrom third irm otheir oards.Hence,directionalnterlocksre referredto as "primary," hilenondirectionalnterlocksre termed secondary"Mintz ndSchwartz 985,p. 186). Further,manybelieve hatdirectionalnterlocksre morelikely hannondirectionalnterlockso serve s instrumentsf ntercorporatenflu-ence and informationxchange ecause they re created y personswho are morewilling ndable toserve s representativesfone of hefirmshey onnectMizruchiandBunting 981;Ornstein 984;Palmer1983;Palmer t al. 1986; tearns nd Miz-ruchi1987;but see Palmer, enningsnd Zhou 1993;Palmer t al. 1995).Regionalclusters r cliqueswithin hecorporate etwork re most pparentn analyses e-

strictedodirectionalnterlocksMizruchi 982;Mintz nd Schwartz 985).6 Use ofcity oundaries, ather hanStandardMetropolitantatistical rea SMSA)orregional oundaries,odistinguishocalfrom onlocal nterlocksllowsus to morepreciselyest heoriesbouttherole nterlockslay norganizing usiness articipa-tion ntheurbanpower tructure-insofars SMSAs and regions re not politicalentities er e.Further,se of MSAs wouldhavebeenproblematicrom nempiricalstandpoint.ome of our ndependent easures-inparticular,hoserelated o the

874



Lost in Space

mation n corporatenterlocks asobtained rom data archive ompiledbythe MACNET research roupat theStateUniversityf New York,

StonyBrook Atwood t al. 1985). t contains nformationnthe nterlockconnections ur corporationsmaintainedwith otherfirms hat wereamong the 500 largestU.S. industrial orporationsn any yearbetween1962and 1973, the 50 largest ommercial anks, nsurance ompanies,and diversified inancials verthe same period, nd the 57 leading n-vestment anks in the 1960s.The headquarters ocationsof the 1,131MACNET corporationswere obtainedfrom he Standardand Poor'sDirectory f Corporations, irectors, nd Executives 1965).

IndependentVariables

The number fotherndustrial irms ndfinancial nstitutionseadquar-tered n a corporation's eadquarters itywas measuredbythe numberofMACNET organizationsf achtypeheadquarteredheren 1964.Thepresence f xclusive pper-classocial clubs n a corporation's eadquar-ters itywas measuredbya dummy ariable, oded"1" ifat leastoneofDomhoff's lubswas situated here nd"0"otherwiseDomhoff 970,pp.233-24).7

geographyfproduction-were ot eadilyvailable t the MSAlevel.Andfor irmsnotheadquarteredn an SMSA ofwhich hereweremany n 1964),many ariablese.g., hose elatedo thenumberfother irms eadquarteredna corporation'sead-quartersocation-couldnot have beencalculated t all. Finally, se of state ndregional oundaries ouldhavebeenproblematic,nsofars bothmight ampen ndeven distortmeasurementf the covariate ffects hattap socialprocesses iedtolocalcommute istances-suchas theeffect hat ocal upper-classlubsmay haveon interlockingKono 1990).Distant itiesmaybe located n the same arge tatesand regions, hile roximateitiesmaybe locatedndifferenttates ndregions. orexample,fwe used tate oundaries,nterlocksetween irmseadquarterednNew

YorkCity and Buffalo N.Y.) wouldhave been consideredocal interlocks, hileinterlocksetween irmseadquarteredn New YorkCity ndTrentonN.J.)wouldhave beenconsideredonlocal, ven though rentons much loser hanBuffalo oNewYorkCity.'Domhoff1970)used fourmethodso dentifyis40 exclusivemetropolitanpper-class socialclubs. Clubs wereconsidered xclusive nd upperclass in characterftheymet t eastoneofthefollowingriteria:1)membershipnthemwasassociatedwith he ikelihood hatpersonsistedn Who'sWho n Americawere lso listednoneofthemetropolitanocial registers idely ecognizedo be indicative f upper-class tatus,2)theywere dentifieds exclusive pper-classnstitutionsynewspapersociety age editorsurveyedn cities hatpossessed local chapter f the Junior

League,a national pper-classervice rganization,3) the officers/partnersftheleading orporations,anks, oundations,nd law firmsn 15citiesnotcovered nthe orrelationalnalysis escribed bovetended o belong othem, nd 4)theywereidentifieds upper-classnstitutionsythe uthors fone of smallnumberfcom-munityase studies Baltzell1958;Kavaler 1960).We focus n exclusive pper-classsocialclubsrather hanmore nclusive lassheterogeneouslubsbecausetheir res-ence norabsence rom city an be usedto differentiateeadquartersocations n

875




We measured ompetitive ncertaintyytheabsolutevalue ofthedif-ference etween hefour-firmoncentrationatio n a corporation's ri-

mary nput-outputIO) sector nd theaverageconcentrationatiofor llmanufacturingO sectorsn 1963. Competitive ncertaintys consideredgreatestn ndustries ith ntermediateoncentrationevels. n unconcen-trated ndustries, ther irms' mpacton a corporation'smarket hancesis slight. n highly oncentratedndustries,ther irms'mpact n a corpo-ration'smarket hances are greatbuttheirbehavior s easilymonitoredand predicted Pfeffer 972;Pfeffernd Salancik 1978).A corporation'sprincipalO sectorwas determinedy translatingtsprimary our-digitstandard ndustrial lassificationSIC) code,obtained romheCenter or

Research n StockPrice's 1991NYSE/AMEX MasterStockFile, nto neof77 O categories, sing heBureau oftheBudget'sStandard ndustrialClassificationManual for1967 and 1972.The 10 sectorconcentrationscoreswere taken fromBurt 1986b,pp. 15-16).

Buyer-supplieronstraint asmeasured ythe xtent o which corpo-ration's rimaryO sector ransactedwith nly few ther ighly oncen-trated O sectors represented ythe"aggregate upplier/consumeron-straint" corescomputedbyBurt 1986b,pp. 16-17]),theconcentrationlevel in a firm's rimary ndustry nd the nteraction f thesetwo vari-ables-all measuredin 1963. Buyer-supplieronstraints consideredgreatestn ndustrieshat ransactwith nly fewother ectors hat hem-selves are highly oncentrated.n such industries,orporationsannoteasily pit prospective ransaction artners gainsteach other o obtainfavorable erms f exchange.However,totalbuyer-supplieronstraint,as well as the mpactofaggregate upplier/consumeronstraint n totalconstraint,s expected o be reduced n industries here oncentrationshigh.Corporations roducingnoligopolisticndustriesnjoy ountervail-

ing poweroverother irms ithwhich hey ransact. inancial constraintwas measuredby a firm's ebt-to-equityatio long-termebt/commonequity) nd quick ratio current ssets/currentiabilities). inancialde-pendence s greatestwhenthe debt-to-equityatio s highand thequickratio s low (Stearns nd Mizruchi1993). nformationn long-term ebt,common quity, urrentssets, nd currentiabilitieswas obtainedfromtheStandard nd Poor's COMPUSTAT annualdatafile r fromMoody'sIndustrialManual for1965.

Industrial iversity as measuredbythe number f two-digit IC in-

dustriesnwhich orporations roduced n 1964, s reportednStandard

thebasisof thecompletenessf their pper-classrganization.llcities ossessnu-merous ocialclubsofdifferentypes, utonly 0 ofthe175citiesnwhich he1964top500 corporationsere headquartered ossessed ne of theclubsonDomhoff'slist.

876



Lost in Space

and Poor's Register f Corporations, irectors, nd Executives 1965).Corporate ize wasmeasured ythevolume f firm's otal ssets n 1964,

as reportednthe COMPUSTAT annual data file r Moody's IndustrialManual (1965).Three dimensions f corporate eographywere tracked o provide n-

formationn each firm's eographic omplexitynd centralitynnationalcapitalflows,s well as each firm's rowth ependence n,economic om-inanceover, nd capacity o exitfrom tsheadquarters ity-all for1964.We calculated heproportionfproductionacilitiesorporationsituatedintheir eadquarters ity.The higher hispercentage, he essgeographi-cally complex corporation's perations,he moreperipheralts position

in national capitalflows, nd the greater ts growth ependenceon itsheadquarters ity.We also calculatedthe percentage f all productionfacilitiesituatedna corporation's eadquarters ity hatwas ownedbythecorporation. he higher hispercentage,hegreater corporation'sdominance ver tsheadquarters ity.Lastly,we calculatedthe numberof U.S. states n which each corporation peratedproduction acilities.The higher hisnumber, hemoregeographicallyomplex corporation'soperations,he morecentral tspositionnnational apitalmarkets,ndthegreatertscapacity oexitfrom ts headquarters ity.Corporate lantlocationswere obtainedfromTheFortunePlant and ProductDirectory(Fortune1963).

Data on managerial tockownershipwereobtainedfrom he Manage-rial RevolutionReassessed (Burch 1972),which coversthe largest500U.S. industrial orporationsn 1964.Blocks ofstock ownedbya firm'smanagementwere quantified s a percentage f outstanding ommonstock when greater han3%). Blocks associatedwith ownermanagerswho ived nthefirm's eadquartersMSA weredistinguishedrom hose

associatedwith wnermanagers esidinglsewhere. wnermanager esi-denceswereprimarilybtained romWho'sWho nCommercend Indus-try Marquis 1965).Data on corporate tockownershipwere also takenfrom urch 1972).Again,ownership lockswerequantifieds a percent-age ofoutstandingommon tock.Further, locksweredistinguishednthebasis of whether r nottheowning orporations ereheadquarteredin the owned firm'sheadquarters ity.We also constructed compositemeasureof the number f other orporate wnership elationshipshatcorporationsmaintainedwithother ndustrial irms-which ncluded he

number f other irmsnwhich hey wned a recognizablehareand thenumber fotherfirms wned by thesame family rfirm hatowned arecognizable harein them.These "other orporate wnership elation-ships"were also distinguishedn thebasis of whether rnot the relatedcorporationswereheadquarteredn thesame or a differentity s thefocalcorporation. ata on financial wnershipwere obtainedfrom om-

877




mercialBanks and TheirTrustActivitiesU.S. Congress 968),which ov-ers the largest500 U.S. industrial orporationsn 1966. Each block of

stock with at least partial votingrights) wned in a corporation y afinancial nstitution as quantified s a percentage fthefirm's otalout-standing ommon nd preferredtock.Further, wnership locks weredistinguishedn thebasis ofwhether heowningfinancialswerehead-quarteredntheownedfirms headquarters ity.Missing inancial wner-shipdata was theprimary eason for ase exclusion-45 ofthe63 firmseliminated romhefinancialnterlocknalysesweremissing ank owner-ship nformation.8

The independent ariablesmeasured or his tudy, s wellas thetheo-

retical onstructshey ndex, hetheories romwhich hese onstructsredrawn, ndthevariables'predicted ffectsn nterlockingre alldepictedintable2. Some ofour variables ndexmore hanone theoreticalonstructdrawnfrom ifferentheories.n these ases,we offermore hanone pre-dictionregarding variable's effect n interlocking.or example,thenumber fU.S. states nwhich corporation perates roduction acilitiesis one indicator f the complexity f ts geographical tructure. s such,traditional esource ependence heorists ouldpredicttto be positivelyrelated ototal nterlockinglocaland nonlocal like).However,geograph-ically dispersedproduction lso indexes a firm's entralityn nationalcapital flows. As such, bank hegemony heoristswould expect thepositive ssociation etweentand interlockingo be particularlyvidentin connectionwith nonlocal interlocking. inally, geographically is-persedproduction lso indexes firm's apacity oexit tsheadquarterslocale. As such,growthmachine heorists ould expect tto be negativelyassociatedwith ocal interlocking.ables 2 and3 providedescriptiveta-tisticsforand correlationsmongthe independent ariables described

above.98Because bank tock wnershipataweremissing rimarilyor irmshathaddroppedut f he ortune00between964nd1966 ue o cquisitionrdecliningassetrank, hesampleusedfor ur financialnterlocknalysess probably lightlybiased n favor fthe argest nd bestperformingf the 1964 Fortune 00 firms.Thispossible ias, hough, ad noapparentnfluencen theresults eobtained.Weconductednalyses arallel othose eportedere hat mittedhe inancialwnershipvariables nd thusreduced he evel ofmissing ata. The results f theseparallelanalyseswereessentiallydentical o thosewe report ere.We did notattemptomeasure therorporatewnershipelationshipshatmightrisefrominancial wn-

ership e.g., ommon wnership ythe same financialnstitution)ecausedoing owouldrequire onsiderableffortndour results evealedittle vidence hatdirectfinancialwnershipnfluencednterlocking.9Wealso tested or hepossible ffectsf everal ther ariables n nterlocking:seofthemultidivisionalorm, wnership y ocally ndnonlocallyesidentersons otrepresentednmanagement,ndownership y ocally ndnonlocally eadquartered

878



Lost in Space

Method

The numerical istributionsf our dependent ariables e.g., ocal indus-trial, onlocal ndustrial,ocal financial,tc.) re highly kewed,withmostfirmsmaintaining o interlocks fthetype nquestion,manyfirmsmain-taining fewsuch interlocks,nd a handful f firmsmaintainingargenumbers f interlocks. reliminarynalysesusing Poissonand negativebinomial ountregressionmodels Cameron nd Trividi 1986,1990) ndi-cated thatour resultswereheavily nfluenced yfirms ossessing argenumbers f interlocks,specially hose with extremely ighnumbers finterlocks. his led us to stronglyuspect hatthe effects fsome of our

covariates n interlocking erenonmonotonicnd, more mportant,hatinclusionn our analysesoffirmswithextremely ighnumbers f nter-locks-the "biggestinkers"-distorted ur countregressionesults.

To accommodate heseproblemswhile retaining he biggestinkers nour study,we used theunivariatedistributionseportedn figure tocategorize ur firms nto three pproximatelyqual sizedgroupsfor heanalysisofeach typeof nterlock: irmswithno interlocks fthetype nquestion, irms ithone nterlock,nd firmswith wo or more nterlocks.The effects f covariates n the ikelihood hat corporationsmaintained

one rather han no interlocksthenone/one ontrast) nd two or morerather hanno interlocksthenone/two-or-moreontrast)wereestimatedusingmultinomialogistic egressionGreene 1993;Whitten nd Palmer1996).This allows us todetermine hether he covariatesmeasuredherewereassociatedwith themaintenance finterlocks fparticular ypes,while imitinghepotential esult-distortingnfluence f firms hatmain-tainextremelyargenumbers f nterlocks o the none/two-or-moreon-trast.fcovariates ffectsreapparentnconnection ithboth henone/one and none/two-or-moreontrasts, e infer hatthey nfluencenter-

locking fthe ypenquestion-serving odistinguishirmshatmaintainno interlocksfthat ype rom hose hatmaintain ne ormore. fcovari-ate effectsre apparent nconnectionwithonlyone ofthetwocontrasts,we consider he results ess conclusive.f covariate ffectsre apparentonly nconnection ith henone/two-or-moreontrast, e inferhat heymightnfluencenterlockingfthat ypebutonly thigherevelsof nter-locking-distinguishingirmshatmaintain o interlocks romhose hatmaintain wo or more nterlocks. nd ifcovariateeffects re apparentonly n connectionwiththenone/one ontrast,we infer hattheymight

influencenterlockingf he ypenquestion utthat heuniqueattributes

firms hatwerenot ntheMACNET data set,most fwhichwereforeign. oneofthesevariableshad noticeable ffects n total, ocal,ornonlocal nterlockingithother ndustrial irms r financialnstitutions.

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Lost in Space

of the biggest inkersmasks thiseffectmongfirmswithmorethan oneinterlock.'0

This approach o analyzing ur data is empirically ather han heoreti-callymotivated. urther,tforfeitsheopportunityo estimate ow ourcovariates nfluence ariationn interlockingmongfirms hatmaintaintwoor more nterlocks. owever, xtensive xperimentationith lterna-tive approaches o analyzing ur data suggest hatthismethod roducedthe most traightforwardnd faithfulepresentationf therelationshipsbetween nterlockingnd itshypothesized eterminants,s they re con-ceptualized n this tudy."

RESULTS

Comparison f Total withLocal and Nonlocal Interlocking

The fundamentalssumptionsmotivatinghis tudy re that nterlockingis a spatialphenomenonnd thatprevious esearch, ecause t fails o takethis ntoaccount,may have overlooked r misconstrued eterminantsfinterlocking.o determine he extent o whichthismay be the case, weconductedan aspatial analysisof total industrial nd financial nter-

locking, resentedntable 4. The results fthis nalysis an be comparedwith heresults four eparate nalyses f ocaland nonlocal nterlocking,presented n tables 5 and 6. If the aspatial analysisof interlocking is-apprehends he effectsfhypothesized eterminantsf nterlocking,heresults of the separate local and nonlocal interlock nalyses shoulddiffer ubstantially rom he results fthetotal nterlock nalysis.Most

10The effectsf ovariatesn the ikelihoodhat irms aintainedwoormore atherthan ne nterlockf a particularype an be obtained y subtractinghecoefficient

estimates or henone/two-or-moreontrastromhe stimatesor henone/oneon-trast.We chosenot oreporthese ffects ecause heywere eldom tatisticallyig-nificant,ndicatinghat he factors egulatingnterlockingavea greaternfluenceonwhetherr notcorporationsstablish firstnterlockf a particular ype hanthey o onwhetherrnotfirms stablish second ne." Weoriginallystimated oisson ndnegative inomialount egression odelswithand without hebiggestinkerse.g., nthe ocalindustrialnterlocknalysis, irmswith 4 ormorenterlocks)nd other ig inkerse.g., nthe ocal ndustrialnterlockanalysis,hosewith our r morenterlocks)nd dentifiedhose ovariate ffectshatappeared o be stableregardlessfwhetherr notthesebiggestrbig inkerswereincluded nthe analysis. hismethodwas abandonedbecause tentailed epeated

reconfigurationfoursamplebasedonthevaluesfirms xhibitednthedependentvariables, roducingesults hatwere umbersomeoreport.We also estimated ino-mial ogitmodelsrunon the full ample.Thismethodwas abandonedbecause tdid not ake nto ccount hepossible esults-distortingffectsfthebiggestinkers.Although e deemed hese lternativepproachesnferioro themethodwe describeabove,wefoundtreassuringhat heresultsfthese lternativenalyses enerallyagreedwith hosewe reportnthetext.

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important, e shouldfind hat somecovariateshave no effect n totalinterlockinguthave noticeable ffectsn either ocal ornonlocal nter-

locking.We might ven find hat omehypothesized eterminantsnflu-ence local and nonlocal nterlockingn different ays. We should,how-ever, findfew nstances f covariates nfluencingotal nterlockingutnot ocal or nonlocal nterlocking.his is preciselywhatwe observe.

The presenceof exclusiveupper-class ocial clubs in a corporation'sheadquarters ity, heproportion flocally ituatedproduction acilitiesthat corporationwns, henumber f tates nwhich corporation ro-duces,beingrelated y ownershipononlocally eadquartered irms,ndthemean-deviatedoncentrationevel na corporation's rimaryndustry

all influence ither ocal or nonlocal ndustrialnterlockingut not totalindustrial nterlocking.he numberof financial nstitutionseadquar-tered na firm's eadquarters ity, hepercentage fa corporation's ro-ductionfacilitiesocated n itsheadquarters ity, hepercentage f ocalplants wnedbya corporation,nd thepercentage f corporation'stockowned by nonresident utsiders ll influence ither ocal or nonlocalfinancialnterlockingutnot otalfinancialnterlocking.ndeed, hepres-ence ofupper-class lubs n a corporation's eadquartersity as anoppo-site effect n local and nonlocal ndustrialnterlocking.nd the numberof financial nstitutionseadquarteredn a corporation'sheadquarterscity nd thepercentagef ocalplants wnedbya corporation ave oppo-site ffectsn ocal and nonlocal inancialnterlocking.nlyonecovariateeffect bservedn thetotal nterlocknalysis snot lso observedn eitherthe ocal or nonlocal nterlocknalysis.And this ffect, positive ssocia-tion betweenownershipby nonlocal banks and total financial nter-locking, s onlymarginally ignificantat the 10 level). Thus, analyzinginterlockings an aspatial phenomenonppearsto overlook nd mischar-

acterizedeterminantsf nterlocking. ext we analyze nterlockings aspatial phenomenon.

Local and Nonlocal Interlocking

Expertise ndfriendship.-The results rovideonlyweak support orthe expertise nd friendship xplanationof interlocking. orporationsheadquarteredn citieswithmanyother ndustrialheadquartersweremore ikely o maintain ocal industrialnterlocks nd thoseheadquar-

teredncitieswithmany inancial eadquartersweremore ikely o main-tain ocal financialnterlocks. owever, heformerffect as only ppar-ent n connectionwiththe none/two-or-moreontrast,he atter nly nconnection ith henone/oneontrast,ndboth ffects ereonlymargin-ally statisticallyignificantat the 10 level). Further, orporations ead-quartered n citieswithmanyfinancialheadquarterswere ess likely o

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Lost in Space

maintainnonlocal financial nterlocks. hus, being headquarterednearlarge numbers f other ndustrial nd financial eadquarters,witheasy

access to a large supplyof qualified nd presumably amiliar orporateboard candidates,may increase a corporation's ropensityo interlockwith ther ocal ndustrial irmsnd financialnstitutions.owever,beingheadquarteredn a majorfinancial eadquarters omplex ecreases cor-poration'sneed to invite he nsidedirectors f nonlocalfinancial nstitu-tions o serveon itsboard.

Upper-classocial interaction.The resultsweremore onsistent iththeupper-class ocial interaction ccountof interlocking. orporationsheadquarteredn citieswith xclusiveupper-class lubswere more ikely

to maintain ocal ndustrial ndlocalfinancialnterlocks. owever, orpo-rationsheadquartered n citieswithupper-class lubs were ess likely omaintainnonlocal ndustrialnd nonlocalfinancial nterlocks. hese lat-ter effects ere onlyapparent n connectionwiththenone/two-or-morecontrast, uggestinghatbeingheadquarteredn a citywithupper-classclubsonly istinguishedirms hatmaintained ononlocal nterlocks romthosethatmaintained substantial umber. hus,exclusiveupper-classsocial clubsappear toprovide ettingsn whichmanagers nd directorsbecome ntimatelycquaintedwithoneanother,making ocal elitespar-

ticularly ttractive andidatesfor corporation's oard. However, ndo-ing so, local upper-class lubs appear to reduce a corporation's eed torecruit or ts board the nsidedirectors f nonlocalfinancial nstitutions.

Resourcedependence elations.The results ndicate hatresource e-pendencerelations nfluencenterlocking. ompetitive ncertainty,netypeof nterindustryonstraint,nd largesize increase he ikelihood finterlocking.urther, heeffect f ndustrial iversitys evidentwithre-spectto both ocal and nonlocal nterlocking. orporationshatproducein manydifferentndustries re more ikely o maintainboth ocal andnonlocal ndustrial nterlocks,lthough he atter ffects only pparentinthenone/two-or-moreontrast. his suggests hatproducingn a largenumber findustriesncreases firm'sneed to obtain nformationndinfluencever tsenvironmentnd that hisneed motivatesnterlocking.

The pattern f theseresourcedependenceeffects, hough, onformsmoreclosely o bankhegemony heory han the traditional esource e-pendence erspective. raditional esource ependence heoristsonsiderfinancial nd nonfinancial ependence o be equally problematic. ow-

everwe find hatthe effect f nterindustryonstraints only vident nconnection ith inancial ependence.Allen 1978) speculated hat egion-alizedinterlockings a consequence fregionalized esource ependence.However,we find hatthe effect ffinancial ependence, s well as theeffect f competitive ncertainty, as onlyevident n connectionwithnonlocal nterlocking. orporationswithhigh debt-to-equityatios, l-

891




though ot ow quick ratios,weremore ikely o maintain onlocalfinan-cial interlocks. orporations hoseprimaryndustryoncentrationevels

departed romwere owerorhigher han) hemanufacturingector ver-age were more ikely o maintainnonlocal ndustrial nterlocks. ur re-sults re more onsistent ith hebankhegemonyssumptionhat apitaldependence s themostproblematic ypeofdependence nd, thus,thekind most ikely o stimulate nterlocking. hey also fit he bankhege-monyview that financial ependenceunderpins orporate entralitynnationalcapital flows, hus ncreasing he ikelihood hat ndustrial or-porations erve as bridgesbetweentheirheadquarters ocale and thenational nterlock etwork.

Moreover, arge ize was primarilyssociatedwith inancial,s opposedto nonfinancial,nterlocking. arge corporationswere more likely tomaintain ocal and nonlocal financial nterlocks. arge firmswerealsomore ikely o maintainmorenonlocal ndustrialnterlocks,ut thisrela-tionshipwas only pparentnconnection ith henone/two-or-moreon-trast. he traditional esource ependence erspectivessumes hat argercorporations eneratemoreuncertaintyor ther irmsnd thus re morefrequentlyhe target fother irms' ttemptso acquire nformationndinfluence. ut the evidence s weak that ndustrial irms nterlockmore

with argecorporationshantheydo with maller orporations.he pat-tern feffectss more onsistent ith hebankhegemony iewthat argecorporationserve as bridgesbetweenother irms n theirheadquarterslocale and thenationalnetwork y nterlocking ithnonlocally eadquar-teredfinancial nstitutions.f large corporationserve as bridges o na-tionalfinancialnstitutions,hough, heydo so by establishingnterlockswith ocal financialnstitutionss well.

Our results lso indicate thattheeffects fnonfinancial ependence(mean-deviated rimaryndustryoncentrationeveland industrial iver-sity)were largelyrestricted o industrialnterlocking, hile the effectsof financial ependence debt-to-equityatio)were restrictedo financialinterlocking.n fact,because preliminarynalysesrevealed no effect fcompetitive ncertaintynd buyer-supplieronstraint n financial nter-lockingnorany effect f financial ependence n industrialnterlocking,indicators fcompetitive ncertaintynd buyer-supplieronstraint eredroppedfrom hefinancialnterlockingnalyses nd indicators f finan-cial constraintweredroppedfrom he industrialnterlockingnalyses.

Resourcedependence-basedmotivations or stablishingndustrial ndfinancial nterlocksppear tobe relatively istinct.Further, wo anomalousfindingswere observed.First, corporations

withhigh debt-to-equityatios were less likely o maintain ocal inter-locks, lthough his elationship as only pparentnconnection ith henone/two-or-moreontrast. ennings 1980)observed negative elation-

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ship betweendebt ratios nd total financialnterlocking.e speculatedthathighdebtratios re ndicative fpoorperformancend that hedirec-

tors of poorlyperformingirms ind t difficulto obtain seats on theboards offinancial nstitutions.f correct, ur results uggest hatthisdynamic s a local phenomenon. econd, s observednprevious tudies,none of the three omponents f buyer-supplieronstraintnfluenced i-ther ocal or nonlocal nterlockingnthe predicted irection.n fact, on-trary o theory,orporations roducingnindustries ithhigh oncentra-tion evels were more ikely o maintainnonlocal ndustrial nterlocks-although his elationship as only pparent nconnection ith henone/one contrast.We speculateabout the meaningof this nullresult n the

conclusion.The results ertainingo thegeography f orporate roduction rovide

support orboth thebankhegemony nd growthmachineperspectives.Corporations oncentratinghighpercentagef heir lants n their ead-quarters itywere more ikely o maintain ocal financialnterlocks. hisis preciselywhat our version fgrowthmachine heory redicted. irmsconcentratingheirproductive ctivityn theirheadquartersocale de-pendon theconditionshaping rofitabilityhere nd thushavean incen-tivetoparticipatenthe ocal growth oalition, specially y establishing

interlocks ith he mostcentral ocal economic ctors-financial nstitu-tions.

Firmsowning large proportionf thecorporate roduction acilitiesin their eadquarters itywere ess ikely o maintain ocal industrial ndlocal financial nterlocks.While these effects ere apparent n both thenone/one nd none/two-or-moreontrasts, he effectn industrialnter-lockingwas onlymarginally ignificantn the none/one ontrast nd theeffect n financial nterlocking as only marginally ignificantn thenone/two-or-moreontrast. ecause firms wning large proportionftheplants n theirheadquarters ity conomically ominate heirhead-quarters ocale, they an eschew direct nvolvementn the ocal growthcoalition.Corporationshatowna largeproportionftheplants ituatedin theirheadquartersocalemayeven maintainmorenonlocal financialinterlocks,ndicating hat ocal dominancefrees hemto participatennonlocal oalitionsnwhich hey avea stake.We profferhis nterpreta-tion entatively,hough, ecausetheeffect f ocal dominance nnonlocalfinancialnterlockings only apparent n connectionwith the none/one

contrast nd is onlymarginally ignificantt that.Finally, here sevidence hat orporations roducingna largenumberofU.S. statesweremore ikely o maintain onlocal ndustrial nd nonlo-cal financialnterlocksnd possiblyocal industrialnterlocks. owever,the effect fgeographic ispersion n nonlocalfinancial nterlockingsonly marginally ignificantn the none/one ontrast. urther, he effect

893




on nonlocal ndustrialnterlockings only videntnthenone/one ontrastand the effect n local financial nterlockings only vident n thenone/

two-or-moreontrast. his patterns mostconsistent iththe bank he-gemony iew,which rgues hatfirms ithgeographicallyxtensive ro-duction tructuresre central o national apital flows nd thus relikelyto serve as bridgesbetweentheirheadquarters ocale and thenationalinterlock etwork, rimarily y nterlocking ithnationalfinancial nsti-tutions.

Ownership elations.The effects fmanagerial wnership n indus-trial nterlockingorrespondo ourexpectations. wnership ymanagersresiding n the headquarters ocale reducedthe ikelihood hat corpora-

tionsmaintained ocal and nonlocal ndustrialnterlocks,lthough heeffect n local interlocking as onlyapparent n the none/one ontrast.Nonlocal insider wnership lso reduced he ikelihood hatfirmsmain-tained ocal ndustrialnterlocks; owever,his ffect as only pparentnthe none/two-or-moreontrast nd was onlymarginally ignificant.hissuggests hat ownermanagershave less incentive o reduce uncertaintyplaguing heir irms nd/or ess need to protect hemselves gainstchal-lengers hreateningheir enure.t also supports ur speculation hat o-callyresident wnermanagers re more nvolved n theday-to-dayffairsof their irms nd are thusmorepoliticallyecure ntheir ositions. hisdiminished oncernwithuncertaintyeduction, oupledwithrelative o-litical ecurity, akes ocallyresidentnsidersess nterestednestablish-ing nterlock elationships etween heir irmnd others.

The effectsf managerial wnership nfinancial nterlocking,hough,divergefrom urexpectations. wnershipby locallyresidentmanagersdid not reduceeitherocal ornonlocalfinancialnterlocking.erhaps o-cally resident wnermanagersare as motivated s theirprofessional

counterpartso establishrelationshipso financial nstitutions ecausethecontrol fcapitalflows s a particularly ressing mperative.n fact,ownership ynonlocalownermanagersncreased he ikelihood hat or-porationsmaintainedocal financial nterlocks. onlocal residencemayprecludeclose and frequent ontactwith ocal financial lites and thusreduce ccess to nformationbout and influencever ocal capitalflows.Ifso,nonlocalownermanagersmay experience heightened eedto linktheirfirmswith ocal financial nstitutions,n orderto compensate ortheir ackofparticipationn the ocal socialnetworksnwhichfinancial

elites re assumed to be central.The effects f ntercorporatewnership n industrialnterlockingrelargely onsistentwith our expectations. eing ownedby locallyhead-quartered ndustrial irms nd beingotherwise elatedbyownership olocallyheadquarteredndustrialse.g., beingownedbythe same familyor firm s another ocal firm)ncreased he ikelihood hatcorporations

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maintained ocal industrial nterlocks. eingownedby nonlocally ead-quartered ndustrial irmsnd being otherwise elatedby ownership o

nonlocallyheadquarteredndustrials ncreased helikelihood hat firmsmaintainednonlocal ndustrial nterlocks. owever,almost all of theseeffects ereapparent nly nconnectionwith henone/two-or-moreon-trast.While corporations endto interlockwithfirms eadquarterednlocationscontaining irms o which they re relatedby ownership, heinfluence f ntercorporatewnership pparently perates nly t theup-perend of the nterlockange-servingtodistinguishorporationsmain-tainingno interlocks rom hosemaintainingwo ormore.Bank owner-ship,though, as no impacton financial nterlocking. his is consistent

withpast research,fnot bank control heory,uggestinghatbank own-ership nd financialnterlockingreonlyvery oosely inkedKotz 1978).Perhapsbankspossessothermechanisms o monitor nd control hefirmsthey wnand towhichtheymaytendto lendcapital e.g., egaldevicessuch as receiverships).

DISCUSSION

Interlockings a Spatial Phenomenon

Interlockings a spatialphenomenon. he spatial structurefcorporaterelations-the geographyfcorporate eadquarters ocation, lant sites,and ownership elationships-is a criticaldeterminantf interlocking.Further,nterlocks re spatially tructured.o understand hedetermi-nantsof nterlocking,nemust ake that patialityntoaccount.While afewhypothesizedeterminantsnfluenced oth ocal and nonlocal nter-locking n the same way,mosthad significantffects n local or nonlocalinterlockingutnotboth. n some nstances,herewasnodiscernible ela-

tionship etween hypothesizedeterminantndtotal nterlocking,hiletherewere ignificantelationshipsetween hefactor nd local or nonlo-cal interlocking.n severalcases,covariate ffects anin oppositedirec-tions. n a few nstances, pposing ovariate ffectsn local and nonlocalinterlockingounterbalanced ne another.n these ases,had we notdis-tinguishedetween ocal nterlockingnd nonlocal nterlocking,e wouldhave erroneouslyoncludedthatthehypothesized eterminantsad noinfluence n interlockingt all.

Thus, previousmodels ofinterlockingave beenmisspecified.When

researcherstudy nterlocking ithout egard othegeographictructureof firmsnd therelationshipsn whichthey re embedded, hey gnoreimportant eterminantsf nterlocking.ndwhenresearcherstudy n-terlockswithout egard o the ocation fthecorporationshey onnect-failingodistinguishies inking irms hosedirectors ork nd liveprox-imateto one another who likely re involved n dense, nformal,nd

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inexpensive etworks f ocial nteraction)rom hose inking irms hosedirectors ork nd live distant rom neanotherwho ikely ommunicate

and interact nfrequently,n non-face-to-faceettings, t greater ost)-theyconfound wo different henomenon,with different eterminantsand possibly ifferentunctions.

Understandingocal interlocking.-Interlocksre concentratedmongfirms eadquarteredn the same locale. What are the processes hatun-derpin ocal interlocking? ocal interlocking,s distinct romnonlocalinterlocking,s most learly functionfthe presence fexclusive pper-class clubs in a firm'sheadquarters ity.Proximityo theheadquartersof other arge ndustrial irmsnd financialnstitutions ayallow local

corporate irectors o become cquaintedwithone another.However, o-cal upper-class lubs facilitatentense nd intimate ocal elite nteractionthroughwhich directors eveloptrust nd thuslay the foundation orlocal interlocking.t is notsufficientor lites obe proximate; heymusthave an institutionalontext onducive o nteractionfthey re toselectone another o serveon each others'boards.Many researchers ave ar-guedthat he orporatelite sorganized roundupper-classocial nstitu-tions.However,theyhave focusedon how upper-class lub affiliations,conceptualized s personal ttributes,ffecthe ikelihood hat ndividualelites re centralwithin hecapitalist lass,as reflectednthe acquisitionofcorporate op management ositions, orporate oard seats, nd publicpolicy-making roupmembershipsSoref 976,1980;Useem1979;Useemand Karabel 1986;Bearden and Mintz 1987; Johnson nd Mintz 1989).Our results uggest hatupper-class ocial nstitutionsre importantco-logical facts nd thatproximityo them hapes corporate nterlocking.

What is the broader ignificancef the local interlocks acilitated ylocal upper-class lubs?We cannot nswer his uestion efinitively,nso-

far as we have no informationn thecorporate ehaviorsor outcomesthatmight ollow rom pper-class-club-facilitatedocal interlocks. ow-ever, fclub-facilitatedocal interlocks re established ohelpfirmsopewith esource ependence,weshouldhave observed positive ssociationbetweenresourcedependence nd local interlocking. urther, hispre-dicted association should have been morepronouncedwhen the localupper-class lubmeasurewas removed rom urmodels, ndicating hatlocal upper-class lubs mediate heeffectf dependence n interlocking.We might ven have observed positiventeractionffect f ocalupper-

classclubs and resource ependence ninterlocking,ndicatinghat ocalclubs facilitatehecreation f nterlocksmotivated y dependence.How-ever, heresults eportedntables5 and 6,as well as supplemental naly-ses (available on request), eveal none of this.

This suggests hatclub-facilitatedocal interlocks re social class phe-nomena, eflectinghestatus oncerns fcorporate litesrather han the

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organizationalnterests f thecorporationshey ommand.Exclusiveso-cial clubs may be the big cityupper-class quivalentof the small town

working-class ar-providing a venue forelitesto become acquaintedand intimatewith ne another. ut,theymay lso be themedium hroughwhich bounded ocal upperclass is formedDomhoff 970). f so, localupper-class ormations likelydrivenby individual lite nterestsn ad-vancement, rivilege,nd thepublic displayofmembershipn a closedstatusgroup.This accords well withour unexpected inding hat highdebt-to-equityatiosreduce ocal financialnterlocking.he directors ffailing orporationsmay obtainfew nvitations o sit on the boards ofother ocalfirms ecause onlydirectorsf successful irms reallowedto

enjoyand displayupper-class tatus.Local interlocking,specially local financial interlocking,s also

uniquely function ftwo dimensions f thegeographyf corporate ro-duction. ocal growth ependencencreasesocal nterlocking,hile ocaleconomicdominance educes t.A corporation'snterestsnd powervis-a-vis ocalpolitical rocesses hat hape ocalgrowth ystematicallyffectits participationn the ocal interlock etwork. hus the ocal interlocknetworks a corporatenfrastructuralomponentf thegrowthmachine.While the growthmachine thesishas enjoyedwidespread acceptanceamong community owerresearchers,his s the firstystematic xposi-tionof the mplicationshisthesisholdsfor orporatenterlocking.

Finally, ocal ndustrialnterlockings a functionf ocal ntercorporateownership. owever, ur resultsndicate hat ocal intercorporatewner-shiprelations perateprimarilyt theupperend of the nterlockange-distinguishingirms hat maintainno local interlocks rom hose thatmaintainmany.Examination fthebiggestinkersnourstudyndicatesthat he effectsf ntercorporatewnership isproportionatelyeflect hetendencyfhigh evelsof ntercorporatewnershipo be associatedwithsubstantialnterlocking.his is typifiedyfourKaiserfamily irms ead-quarterednOakland,California-all linkedby high evelsof ntercorpo-rate ownershipbetween 2% and 79%) and all tied by argenumbers finterlocksbetween 4 and 26). However,manyof thereportedntercor-porate wnershipffectsersist venwhenmajority-ownedorporations,suchas thefourKaiser family irms,re eliminated rom ursample-suggestinghateven moremodest evels of ntercorporatewnershipreassociated with elevated levels of interlockingresults vailable on re-

quest).As noted bove, ocal nterlockingsnotrelated o resource ependencerelations mphasized ypastresearchers-whetherndustrialrfinancial.This nullresults importantn tsownright. irst,tsuggestshatregion-alization f he orporatenterlocketworks not heresult fregionalizedresource ependence elations. erhaps his houldnotbe surprising,nso-

897




far as mostfirms ituated substantial roportion f theirproductionfacilities utside heir eadquarterstatebythe1960s Friedland, almer,

and Stenbeck1990). By thistimecompetitionnd exchange mong pro-duction acilities ad becomenational nd evenglobal Barnet ndMuller1974).Second, tsuggests hatbank centralitynregionalnetworkss nota consequence f ocalizedfinancial ependence nd thusthatbank cen-tralitynthenationalnetworksnot he ggregate utcome f multiplic-ity fregionalized inancial ependence elationships.fdebt dependenceis a source fbankcentralitynregional lusters,t sa generalized epen-denceexperienced yall firms, hichoperates egardless f a firm's ar-ticularreliance n loan capital.

Understanding onlocal nterlocking.-Nonlocal nterlocking,s dis-tinct romocalinterlocking,s a product fbeingheadquarteredna citywithfew financialheadquarters nd no upper-class lubs."2 his mightsimply reflect he fact that corporations eadquartered n cities withupper-class lubsand manyfinancial eadquarters eed look no furtherthan ocally ituated lites o find ualified andidates ofill oard vacan-cies. Alternatively,eingheadquartered earfinancial eadquarters ndupper-class lubs mightbe a functional ubstitute ornonlocal inter-locking. eingheadquarteredna financial entermight rovide orpora-tionswith thermeanstoobtain nformationbout, ccessto, nd controlover nationalcapitalflows nd might rovidenonlocalfinancial nstitu-tionswithothermeansto obtain nformationbout and influence verthe nvestment ecisions f ocal firms. orporationsmight vensituatetheirheadquarters roximate o financialheadquarters nd upper-classclubs in order o gaininformationbout and influence ver firms ead-quarteredn distant ocalesuponwhichtheydepend.Economicgeogra-phersmaintain hatmajor financial entersprovidecorporationswith

strategicnformationbout thenational ndglobaleconomiesPred 1977;Cohen 1981; Noyelleand Stanback1984). Further, omhoff1970) andRatcliff1980a, 1980b)maintainthat local upper-class lubs integratelargefirms nto thenationaleconomy.However, twould be surprisingifproximityofinancial eadquarters nd upper-class lubs operates sa substitute or, s opposedto a complement r facilitatorf, nonlocalinterlocking.unctional lternativeso nterlockingvailabletocorpora-tionsheadquartered earfinancial eadquarters, hich n turnmayrepre-

12Ourupper-classlubresultsun ounterothose fJohnsonnd Mintz 1989),whichimply hat ocal clubsprovide ehicles or ocal directorsoassociatewithnonlocaldirectorsnd consequentlyoserve n the same corporateoards.Perhaps hisdis-crepancytems rom hefact hat urstudy nd their tudy ave very ifferentur-poses ndmethodologies. hilewe nvestigateinks etweenorporationsnd ncludeonlydirectionalnterlocks,hey xamine inksbetween irectorsnd include nlymultipleonnections.

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sent ending onsortia omposed fnonlocal inancials,nclude pecializedbusiness onsultingnterprises,ommon eighborhoodesidences,hared

civicgroup ssociations, nd informalocial gatherings.13Nonlocal as opposed to local interlockings also a function f geo-graphic, ompetitive,nd financial esource ependence.There are twopossible explanations f this result.Corporationsmight endto situatetheirheadquarters ar from hose of the firms pon whichtheyrelyforresources.f so, as their ependence n other irmsncreased, orporationswould be compelled o increasenonlocal rather han ocal interlocking.This is unlikely.Whileheavily ndebted irms robablymust ook beyondlocallyheadquartered inancial nstitutionso secure ufficientupplies f

loan capital,we knowthat hefinancial nstitutionsesignated y corpo-rations s theirprimary ank and the lead bank of anybank consortiatowhich they re indebted end to be headquarteredocally Friedlandand Palmer1994). We also know thatthetendency fcorporationsro-ducing n thesameindustryocolocate locatetheirheadquartersn thesamecity) s quite high n theUnitedStates Gardinali t al. 1996).Morelikely, eingheadquartered ear other ndustrial ndfinancial eadquar-ters, ndthe ow-cost ocial nteractiontaffords,s a functionalubstitutefor ocal nterlocking.n an earlier tudy,we found hat nterlockartnersinvolvednsomeform f ntercorporateoordination,uchas a jointven-ture or long-termontract,were less likely o renew"accidentally is-rupted" nterlockonnectionsftheywereheadquarterednthe ame city(Palmeretal. 1986;see also,Burt1986a). Corporationsmight vencolo-cate their eadquarterstrategicallynresponse o market ncertaintyndconstraint. here s evidence hat nterindustryariationnheadquarterscolocation evels s associatedwith nterindustryariationnmarket on-centrationGardinaliet al. 1996).

The significance fexclusiveupper-class ocial clubs. The pervasiveandinsomerespectsurprisingssociation etween hepresence f xclu-siveupper-class lubs na city nd theextent owhich orporationsead-quartered heremaintain ocal and nonlocal nterlocks aises other ues-tions. n particular,s thepresence fexclusive pper-class lubs n a citya consequence f orcorrelatedwithother ocialprocesses?Andifso,are

13 Indeed, henumber f financialnstitutionsnd industrial irms eadquarteredna city re highly orrelatedr = .99). And prior esearch ndicates hat henumber

ofspecialized usiness ervice nterprisesn a city s a function f the number fcorporate eadquartersituatedherend the trengthf his ssociationsnegativelyrelated o the evelofnonlocal nterlockingypical f he ocallyheadquarteredirms(Palmer t al. 1990). urther,he argest orporations,resumablynneedof hegreat-est mount f trategicnformation,end o ocate nthe argest orporate eadquar-ters omplexes, resumablyhe richest ources f strategicnformationGardinali,Friedland, nd Martinotti 996).

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these other ocial processes he moreproximate eterminants f inter-locking?

Clearly, heformationf exclusiveupper-class lubs na city s contin-gent n the ocal residence nd ascendance fupper-classndividuals.Andin 20th-centurymerica, his n turnhas been predicatedprimarily nthe coincidental iting nd development f capitalist nterprises-inpar-ticular, he administrative omponents f large industrial orporationsand financial nstitutions.he formationfupper-class lubs s also con-tingentn theperceptionf ocalupper-classndividuals hat hey elongto a distinct nd closed social group.Thus, t s not urprisinghat orpo-rateheadquarters omplexeswithexclusiveupper-class lubs have more

industrial orporate nd financial nstitutioneadquarters hando citieswithout uchclubs.Further, pper-class lub cities re more ikely hannonclub ities ohave a socialregister, hich ists ocal upper-classndi-viduals and theirdefiningharacteristicse.g., prep school and collegeattendance,lubmemberships,nd summerddresses) nd thuspresumesthe existence fa local upperclass as a self-consciousntitytable 7).

Do the preconditions f upper-class lub formation,ather han thepresence fupper-class lubs per se,shape interlocking? e cannot n-swer his uestion efinitivelyere. nsofar s the stablishmentfupper-class clubs is likely o be integrally elated-as bothconsequence ndcause-to upper-class ormation,tmaybe difficulto answerthisques-tionwithfuture esearch s well.However,ourresults ndicate hattheassociation etween hepresence fupper-class lubs and corporatenter-locking n a city s not imply reflectionfa deeperrelationship etweenthepresence f ocalheadquartersnd interlocking.ur clubeffects er-sist, nd indeedevendominate,whenthenumber f ndustrial nd finan-cial headquartersn a corporation's eadquarters ity re controlled.n-

deed, theypersist, s do our other esults, ven when a dummy ariableindicatingwhether r not firms re headquarteredn either f the twolargestheadquarters omplexes-New York City and Chicago-is in-cluded n theanalysis results vailable on request).

Do other ocial processes, orrelatedwiththe establishmentfupper-classclubs n a city, xplain heobserved lubeffects? nemighturmisethatupper-class lubs tend to be situated n particular egions-regionswithuniquecultural redispositionso nterlocking.o examine hispos-sibility, e examined he ssociation etween city's egion ndthe ikeli-

hood that tcontained n upper-class lub tables8 and 9). Green 1981a,1981b) rguesthatfirms eadquarterednthe South maintainmoregeo-graphically ispersed nterlock atterns nd speculatesthat thispartlyaccounts for the South's recentdramatic conomicgrowth.Mightourupper-class lub effectsctually ignifyouthern ity ffects?We doubtit. Cities withupper-class lubs are as likely o be located n the South

900



TABLE 7

CORPORATE HEADQUARTERS COMPLEXES WITH AND WITHOUT SOCIAL CLUBS

No. of No. of

Industrial FinancialCorporate Institution Existence fCorporateHeadquartersComplex Headquarters Headquarters Social Register

With a club:Seattle,Wash ................................. 1 4 +Providence, R.I . ................................. 2 0

Richmond, Va . ................................. 2 2

Buffalo, N.Y . ................................. 2 3 +

Houston, Tex ................................. 3 3 +

Denver, Colo ................................. 4 0

Portland, Oreg ................................. 4 2Dallas, Tex .................................. 8 4

Boston, Mass . ................................. 8 5 +

Minneapolis, Minn ................................. 9 5

Milwaukee, Wis ................................. 10 4

San Francisco, Calif ................................. 10 7 +

Detroit, Mich ................................. 12 4 +

St. Louis, Mo ................................. 12 6 +

Los Angeles, Calif ................................. 13 9 +

Philadelphia, Pa . ................................. 14 10 +

Pittsburgh,Pa . ................................. 22 2 +

Cleveland, Ohio ....................... .......... 22 3 +Chicago, Ill ................................. 48 11 +

New York City ..................... ............ 171 67 +

Without a club:

Birmingham, Ala ................................. 2 1

Beverly Hills, Calif ................................. 3 5

Indianapolis, Ind ................................. 4 0

Fort Wayne, Ind ................................. 4 1

Rochester, N.Y . ................................. 5 0

Akron, Ohio .............. ................... 5 0

Toledo, Ohio ............... .................. 5 0

Oakland, Calif ................................. 5 0

Wilmington, Del . ................................. 5 1

Cincinnati, Ohio ................................. 5 5 +

NOTE.-Cities are considered orporate eadquarters omplexesfat leasttwoMACNET industrialcorporate rfinancial nstitutions ereheadquarteredheren 1964. Eightcitiespossessingn exclusiveupper-class lub had fewer han two MACNET firm eadquarters-New Orleans, Charleston, almBeach, Hartford, altimore, ew Haven, Atlanta, nd San Diego. Two citiespossessing socialregisterhad fewer hantwoMACNET firms-Baltimore nd New Orleans.




TABLE 8

REGION OF CITIES WITH AND WITHOUT EXCLUSIVE UPPER-CLASS CLUBS

No. ofCities % East % Midwest % West % South

Club City ... ...... 121 28.6 23.8 28.6 19.0

Non-Club City .... ..... 136 37.3 38.7 9.3 14.7

as they re to be headquartered lsewhere.More generally,ne might

guessthatupper-class lubs tend to be situated n older Easterncities,which re bastions f nbred usiness ractices.fso,ourupper-class lubeffectsmight eallyproxyEasterncity ffects. ut this too is doubtful,insofar s citieswithupper-class lubsare actually ess likely han citieswithout uch clubs to be situated n the East. If anything,urclub cityeffects ouldhavetorepresentWestern rMidwestern ity ffects. ow-ever, here s no theory r conventionalwisdomthatwouldpredict uchan effect.

Finally, nemight urmise hatupper-class lubstendto be located ncitieswhereparticularndustries redominate-industriesnwhich essaggressive nd spatially xpansiveenvironmental onitoringnd man-agement trategiesre prevalent. uch strategiesmight eflect he olderage (i.e., position n theproduct ifecycle)or other haracteristicsi.e.,inputs nd outputs) fthe ndustriesnquestion. o evaluatethispossibil-ity,we grouped ach ofourfirmsntoone of 10 primaryndustry atego-ries suggested y Schmenner1982).The categories apture he extent owhich firmsproducing n themface differentocational imperatives,

partly s a consequence f their ge andpositionn theproductife ycle,and thuspossibly ossessdifferenteeds tomaintain ocal and nonlocalinterfirmies. On the one hand, firmspecializingn agriculture, orest,and miningndustriesmight ave moregeographically ispersed rgani-zational nterests ecause theirnputs re moredispersednspace.Thoseproducingn market ensitive nd labor-rate ensitive ndustriesmightalso tend to have moredispersedorganizational nterests ecause theymustmaximize ccess todispersed onsumer nd labor markets.On theotherhand, firms pecializing n industrialmachinery/transportation

equipment,high technology,nd specialty hemicalsmighthave rela-tively eographicallyircumscribednterests ecausethey re dependenton agglomerativeconomies. irmsproducingn twoindustries-heavymetals and heavy chemicals-experiencecontradictoryocationalpres-sures (Friedland, Palmer, and Stenbeck 1990). However, cities withupper-class lubs do not differ oticeably rom ities without lubs, n

902



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regards o the primaryndustriesn which the corporateheadquartersthey ontainproduce table9). Thus,for hetimebeing,we conclude hat

exclusive ocal upper-class ocial clubs have an independent ffect ninterlocking.

Implications, imitations,nd FutureResearch

These speculationshave a number f theoreticalnd practical mplica-tions.First, he ocal capitalist lass socialorganizationmadepossiblebythecolocation fcorporate eadquartersndupper-class lubsmaybe aninstrument y whichcorporate lites managetheir rganizational nvi-

ronments, aining nformation,rusted ontacts, nd access to nationalnetworks f elites.However,this ocal capitalist lass organizationmaynot serveorganizationalnterests hrough he creation f nterlocks. ec-ond,the structuref theinterlock etworkmaybe as much a result ftherelativeheadquartersocations fresource ependent orporationssit s a consequence f themagnitude fthe resource ependence elation-shipsbetweenfirms erse. In particular, ankcentralityn the nationalnetworkmay not be theresult ffinancial ependencengeneral.Ratherit might temfrom hegeographic isjuncture etween he headquartersofdebt-dependentndustrials nd theirfinancial ntermediaries.hird,previousresearchersmay have underestimatedheassociationbetweenresource ependence ndinterlockingecause theyhave lumped ogethernonlocal nterlocking, otivated ythedesire o manage resource epen-dencies, nd local interlocking,uperfluouso the conductofsuch rela-tions.Zajac's (1988)argumenthat nterlocksre seldom reated o man-age resource ependencemay onlybe truefor ocal interlocking.ourth,future esearchers hould consider orporate eadquartersocation s a

potential trategyor he management fmarket ncertainty.There is some evidenceto support hesespeculations.f the desiretomanageresource ependencemotivates orporationso locatetheir ead-quartersncitieswheremanyotherndustrial irms nd financial nstitu-tions are headquartered nd whereupper-class lubs are situated, henmeasuresofresource ependence hould be associatedwithbeinghead-quartered n such cities.The bivariatecorrelations eportedn table 2show that arge orporations aintaining eographicallyomplex roduc-tionstructures, hich situatea high percentage f theirplantsoutside

their eadquarters itynmanydifferenttates, end o be headquarteredincitieswithnumerous ndustrialndfinancial eadquarters nd at leastone upper-class lub.They also show that diversifiedorporationsendto be headquarteredn citieswith an upper-class lub.

Nevertheless,here re at leastthree oticeable imitationsfourstudy.First,we failedto measurethespatialstructurefresource ependence

904



Lost in Space

relations.Competitionnd resource xchangeundoubtedly ave a geo-graphical s well as an industrial tructure. urther,while the ndustrial

structure f market elations s very table Burt 1988), their erritorialstructures probably uite dynamic Bluestone nd Harrison1982; Har-rison 1994; Romo and Schwartz 1995). Ultimately, e need to developmeasures hat eflectheextent o which corporation's roduction acili-ties and administrativeffices re situated lose to ordistant rom hoseofits actual and potential ompetitors, uyers, nd suppliers.Then weneed to theorize ssociationsbetweenthese measuresand interlocking.We have taken tentative irsttep nthisdirection y speculating romour results hat corporations eadquartered roximate o theheadquar-

tersof firms pon whichthey re dependenthave less need to interlockwith hem ecause the olocation fheadquartersllowsthe lites f nter-dependent irms o nteract ith ach other utside heboardroom.Muchmoreremains o be done alongthese ines, hough,fwe are to advanceour understandingf therelationshipsetween esource ependence ndcorporate nterlocking.n particular, ecausemost argecorporationsrehighly iversified,uturettemptsomeasure hegeographyfa corpora-tion'sresource ependence elationshipseedtotake nto ccount hefullrange f ndustries-notusttheprimaryndustry-inwhich tproduces.If we do not, even themost precisemeasurements f the geography fresource ependence elationships ay be too crudeto apprehend he re-lationship etweendependence nd interlocking.'4

Second,our data pertain o the 1960s. Our earlierremarksnot with-standing, echnologicalnnovations uch as facsimile ransmission,ele-conferencing,nd high-speed omputer etworking, hich have furtherpropelled he globalization feconomic ctivity,may have minimized raltered hesignificancef thespatial processesuncoveredhere.Finally,

we have only analyzedcross-sectionalssociations.Thus, our ability odraw causal inferencesrom ur data is severely estricted.We have shownthatthespatialstructurefcorporate elationsnflu-

ences the extent nd spatial character f interlocking.oes the spatialstructuref nterlockingnfluenceorporate ehavior?One study uggeststhat patially ispersednterlockieschannelmanagement onsultingndadvertisingontracts ut ofa firm'sheadquarters ityto enterprisesnother ocales (Palmeret al. 1990).We suspectthat thespatialstructure

14Wecalculated series fmeasuresnwhichndicatorsf he esourceependencetowhich corporationassubjecte.g., hemean-deviatedoncentrationevel n afirm's rimaryndustry) ereweighted ythe extent owhich heheadquartersfother irmsponwhich t was resource ependent ere ocated n itsheadquarterscity e.g., henumber ffirmsroducingn tsprimaryndustryhatwere lso head-quarteredn itsheadquartersity).However, oneof thesemeasureswerefound oinfluencenterlocking.

905




ofcorporate nterlocking ay also influence ther spectsof corporatebehavior, uchas a firm's ropensityo locatenew production acilities

in its headquarters ocale, relocate tsheadquarters o new locales, andbecome nvolvedn ocal and nonlocal cquisitionsPalmer nd Friedland1987). Further,f, s our results ndicate,ocal and nonlocal nterlockinghave differentntecedents,mightnottheyhave differentonsequences?To answer hisquestion,we may need a better nderstandingfthe pro-cesses that underpinthe relationshipsnterlocks-local and nonlocalalike-facilitate Mizruchi1996).

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