The Great and the Small: The Impact of Collective Action on the Evolution of Board Interlocks after the Panic of 1907

Conventional research in organizational theory highlights the role of board interlocks in facilitating business collective action. In this article, I propose that business collective action affects the evolutionary path of interlock networks. In particular, large market players' response after a collective action to the classic problem of the "exploitation" of the great by the small provides a mechanism for interlocks to evolve. Through studying the two types of collective action that banks organized during the Panic of 1907, I find that the experience of issuing currency substitutes, a course of collective action that needed to mobilize community support, made bankers more aware of their responsibility for community welfare. In the post-crisis period, bankers were thus more supportive of the market stabilization strategy of assisting small banks. In contrast, the experience of organizing mutual lending, a course of collective action that highlighted the power of businesses independent of the communities in which they were located, led bankers to focus more on their sectional interest and favor the market stabilization strategy of eliminating small banks. These different attitudes toward small banks affected the evolution of the interlock networks between large and small banks.