Can Interlocking Directorate Ties Relieve Resource Dependence Relationship Between Upstream And Downstream Enterprises?

Resources, as the basis of life and the source of power in companies, are the key to companies’ survival and development. Throughout companies’ development process, from material resources, technical resources, to financial resources, human resources, and even management resources which undoubtedly determine companies’ long-lasting development path and positions in the industry. The supply chain relation, as a relationship that companies strongly develop and maintain, plays a vital role in obtaining resources. Although existing studies about supply chain, value chain and industry chain have focused on different perspectives, in fact their purposes are all about how to enable companies to facilitate access to resources in vertical direction, to gain advantageous resources and to reduce their costs in access to resources, thereby to maximize companies’ profits. Because the enterprise itself dose not have all these resources, it may lack one or several kinds of resources, so companies need to seek access to resources from outside organizations. In addition to the direct purchase from resource providers, in order to save intermediate costs, reduce the risk of acquiring scarce resources, reduce the uncertainty of the environment, enterprises may seek cooperation with other resource providers. Such cooperation could be mergers, acquisitions, joint ventures which can obtain parts of ownership, of course, may be other forms such as a interlock directorate tie and other informal way. However, existing research also shows that the first way will have high cost, face a higher risk and have a complex cooperation process. In this condition, interlocking directorate tie becomes an effective and practical way for companies to relieve resource dependence between the upstream and downstream enterprises.This article focuses on the role that interlocking directorate tie play in relieving resource dependence between the upstream and downstream enterprises. The theory basis of the article is the resource dependence theory. Shanghai and Shenzhen A-share companies’ broken-tie of interlocking directorates data between 2002 to 2008 are the sample. The logistic regression method is used for testing whether one organization will maintain interlocking directorate tie between them in order to relieve resource dependence between the upstream and downstream companies. In order to analyze the role that interlocking directorate tie play in relieving resource dependence between the upstream and downstream enterprises, I establish the following three assumptions:(1) in comparison to the non-upstream companies, it is more possible to reconstruct the broken ties between upstream and downstream companies; (2)the greater strength of resource dependence between upstream and downstream companies, the greater likelihood they have to reconstruct the ties between each other; (3) the greater concentration ratio of industry between upstream and downstream companies, the greater likelihood they have to reconstruct the ties between each other.Compared with the prior studies, this paper may contribute as follows:(1) to explore the possibility that interlocking directorate ties relieve resource dependence between the upstream and downstream enterprises, and provide a broader perspective to research resource dependencies between the upstream and downstream enterprises; (2) in this paper, I use the input-output analysis table to analyze the upstream and downstream companies relations and the strength of resource dependence, thus provide a new perspective and idea to study vertical relationship between upstream and downstream companies; (3) from a practical viewpoint, through the relevant conclusions obtained in this study, readers can recognize clearly the relation between enterprises relieving resource dependency and they building interlocking directorates ties, so they can see the important role that interlocking directorates play in obtaining scarce resources and winning the core competitiveness. Through this study, companies will be more inclined to build interlocking directorates ties with their upstream and downstream companies in order to increase their convenience and dominance in accessing resources and help companies have sustainable development and growth.