Nº 21-79: On the Purpose of New Board Overlap Enabled by Corporate Opportunity Waivers

The staggered introduction of Corporate OpportunityWaivers (COWs) in nine U.S. states since 2000 reduced legal risk to directors serving on multiple boards and substantially increased intra-industry board overlap among firms with high research intensity. We explore the motivation behind this new board overlap.We find that only firm pairs with strong competitive spillovers experience new board overlap, whereas strong technology spillovers do not trigger new board overlap. The new intra-industry board overlap results in higher firm profitability and increased operating margins, which are achieved through reduced investments and greater differentiation in product development.