Microstructure and the dynamic polarization effect of the competition field of an interlocking directorate network
(2.Institute of Finance and Economics, Shanghai University of Finance and Economics, Shanghai, China 200433)
(3.Social Sciences Research Center, Sloan School of Management, Massachusetts Institute of Technology, Boston, US)
【Abstract】In the era of competition among network relationships, interlocking directorate networks, embedded in social, cultural and institutional backgrounds, has the characteristic of nepotism governance, and are an important factor affecting the competitiveness of enterprises. Based on the new perspective of competition field, the authors study the microstructure, characteristics and patterns of interlocking directorate networks, analyzing their dynamic evolution mechanism and rules, and formulating the theory on the competition field of an interlocking directorate network. The following findings are obtained. (1) In the competition field of an interlocking directorate network, a “core-marginal” structure is formed by nodes, relationships and resources, where the core enterprises dominate the association model and interest structure of the interlocking directorate network, and is able to control the flows of value, information and resource. (2) Based on different microstructural features and the interaction between elements, the competition field of an interlocking directorate network shows typical “wave-particle duality.” (3) Interlocking directorate networks are a kind of hyper market contract, which plays a role of coordination and control through information diffusion and exchange, trans-organizational cooperation and connection rules between enterprises in order to achieve the functions of resource access, risk aversion and supervision and control. (4) The competition field of an interlocking directorate network will undergo dynamic evolution of contraction, turbulence, consolidation and expansion, and the resources and market opportunities are gathered in core enterprise through the polarization effect. This study not only contributes to deepening the understanding of the interlocking directorate network structure, but also helps enterprises to establish more effective related strategy to promote competitiveness.
【Keywords】 interlocking directorates; competition field; link structure; dynamic polarization effect;
(Translated by LIAO Guo)
. ① Interlocking directors are directors in two or more than two boards of directors.(Mizruchi, 1996) Different from leaders and their subordinates in corporate bureaucracy, the interlocking directorates network is multi-dimensional, disperse, weak connections. Each enterprise builds a network around itself to strengthen interactions and exchange with board members in other enterprises. [^Back]
. ① Salman and Saives (2005) used centrality as a proxy index to measure enterprises’ core positions, and verified that centrality and competitiveness were in positive correlation. However, based on the resource dependency theory, poorly-performed enterprises have less power to protect them from risks. Thus, they hope to build connections with other enterprises to improve the ability of resource acquisition and business performance. [^Back]
. ② A social network is a graph from the perspective of graph theory, and is a collection of nodes and relations. Therefore, a social network includes the two subsets of nodes and lines. Social network analysis discusses the social relations between nodes and the network structure. [^Back]
. ① The media in interlocking directorate networks are channels, resources and relations for enterprises to build such networks, in other words, tangible and intangible resources in the networks. [^Back]
 Armstrong C S, Core J E, and Guay W R. Do Independent Directors Cause Improvements in Firm Transparency. Journal of Financial Economics, 2014, 114, (3): 383–403.
 Bian Y J, and Ang S. Guanxi Networks and Job Mobility in China and Singapore. Social Forces, 1997, 75, (3): 981–1005.
 Bian Y J. Bring Strong Ties Back in: Indirect Ties, New Bridges and Job Searches in China . American Sociology Review, 1997, 62, (3): 366–385.
 Burris V. Interlocking Directorates and Political Cohesion Among Corporate Elites . American Journal of Sociology, 2005, 111, (1): 249–283.
 Burt R. Structural Holes and Good Ideas . American Journal of Sociology, 2004, 110, (2): 349–99.
 Burt R. Structural Holes: The Social Structure of Competition. MA: Harvard University Press, 1992.
 Cheung Y, Chung C, Tan W, Wang W. Connected Board of Directors: A Blessing or a Curse. Journal of Banking and Finance, 2013, (37): 3227–3242.
 Coleman J S. Social Capital in the Creation of Human Capital . American Journal of Sociology, 1988, 94, (Supplement): 95–120.
 Custódio C, and Metzger D. Financial Expert CEOs: CEOs Work Experience and Firms Financial Policies . Journal of Financial Economics, 2014, 114, (1): 125–154.
 Falato A, Kadyrzhanova D, Lel U. Distracted Directors: Does Board Busyness Hurt Shareholder Value. Journal of Financial Economics, 2014, 113, (3): 404–426.
 Fich E M. Are Some Outside Directors Better than Others Evidence from Director Appointments by Fortune 1000 Firms . Journal of Business, 2005, 78, (5): 1943–1971.
 Granovetter M. Economic Action and Social Structure: the Problem of Embedness. The American Journal of Sociology, 1985, (91): 481–510.
 Lechner C, Frankenberger K, and Floyd S W. Task Contingencies in the Curvilinear Relationships between Intergroup Networks and Initiative Performance. Academy of Management Journal, 2010, 53, (4): 865–889.
 Lee C, Lee K, and Pennings J M. Internal Capabilities, External Networks, and Performance:A Study on Technology–based Ventures. Strategic Management Journal, 2001, 22, (6–7): 615–640.
 Lee J, Lee K J, and Nagarajan N J. Birds of a feather:Value Implications of Political Alignment between Top Management and Directors. Journal of Financial Economics, 2014, 112, (2): 232–250.
 Masulis R W, and Mobbs S. Are all Inside Directors the Same Evidence From the External Directorship Market . Journal of Finance, 2011, 66, (3): 823–872.
 Masulis R W, Mobbs S. Independent Director Incentives: Where do Talented Directors Spend their Limited Time and Energy. Journal of Financial Economics, 2014, 111, (2): 406–429.
 Mizruchi M S, Stearns L B. A Longitudinal Study of the Formation of Interlocking Directorates. Administrative Science Quarterly, 1988, 39, (2): 194–210.
 Mizruchi M S. What do Interlocks do An Analysis, Critique, and Assessment of Research on Interlocking Directorates. Annual Review of Sociology, 1996, 22, (2): 271–298.
 Pfeffer J, Salancik G. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper and Row, 1978.
 Salman N, Saives A L. Indirect Networks:An Intangible Resource for Biotechnology Innovation. R and D Management, 2005, 35, (2): 203–215.
 Shropshire C. The Role of the Interlocking Director and Board Receptivity in the Diffusion of Practices. Academy of Management Review, 2010, 35, (2): 246–264.
 Simoni M, Caiazza R. Interlocking Directorates’ Effects on Economic System’s Competitiveness. Business Strategy Series, 2013, 14, (1): 30–35.
 Tsai W. Knowledge Transfer in Intraorganizational Networks: Effects of Network Position and Absorptive Capacity on Business Unit Innovation and Performance . Academy of Management Journal, 2001, 44, (5): 996–1004.
 Uzzi B. Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness . Administrative Science Quarterly, 1997, 42, (2): 35–67.
 Zaheer A, Bell G. Benefiting from Network Position: Firm Capabilities, Structural Holes, and Performance. Strategic Management Journal, 2005, 26, (9): 809–825.
 Chen, Y. & Xie, D. Management World (管理世界), (7) (2011).
 Lin, N. 社会资本—关于社会结构与行动的理. Shanghai: Shanghai People’s Publishing House, 2005.
 Lu, C. & Chen, S. Management World (管理世界), (5) (2009).
 Luo, M. & He, C. China Industrial Economics (中国工业经济), (5) (2006).
 Luo, M. & Ren, L. China Industrial Economics (中国工业经济), (1) (2010).
 Peng, Z. & Liao, T. Nankai Business Review (南开管理评论), (1) (2008).
 Qian, X., Xu, W. & Yang, Y. China Industrial Economics (中国工业经济), (2) (2010).
 Ren, B., Qu, Y. & Lin, Z. Management World (管理世界), (6) (2001).
 Tian, L., Yao, X. & Wu, H. Journal of Management Science (管理科学), (3) (2011).
 Wang, L., Yao, X. & Wu, H. Business Management Journal (经济管理), (6) (2016).
 Xu, J. & Wang, F. Journal of Systems Science and Mathematical Sciences (系统科学与数学), (7) (2008).