This theory proposes the need for environmental linkages between the firm and outside resources. Here, directors connect the firm with external factors by co-opting the resources needed to survive. Thus, BOD are an important mechanism for absorbing critical elements of environmental uncertainty into the firm. Environmental linkages or network governance tends to reduce transaction costs associated with environmental interdependency.
The organization requires resources and this creates dependency or gives rise to exchange relationships or network governance between organizations. The scarcity and unequal distribution of required resources result in interdependence amongst organizations. Thus, this theory focuses on reducing transaction costs of external association.
According to this theory, the directors pool in resources such as information, skills, key constituents (public policy decision makers, suppliers, buyers, social groups) and legitimacy that reduces uncertainty. This theory is in view of the appointment of directors to multiple boards as it would ensure exposure to opportunities to gather information and enhanced network.