The Application of Directorate Interlock Network (Between State Power…
The Application of Directorate Interlock Network
Between State Power and Familism-The network in Taiwan
Familism- a vision involving primordial social networks that emphasizes
Development theory, a concept from political economy
Although different schools of thought attribute Taiwan’s economic development to the intervention of the state on the one hand, and to corporate networks on the other, few people have attempted to either integrate or compare the effectiveness of these two different perspectives. This raises a thought-provoking question.
Focus on the interorganizational positions occupied by the state and private organizations.
Sample Taiwan (8 benchmark years)
Phase I: 1941~1960s (Japanese colonial period)
Phase II: 1960~1980s (KMT State involvement)
multiple relations is very high
Phase III: 1980 (economic liberalization)
“familism” to become the most important
Linking Important Companies
One of the most direct means by which the authoritarian state controlled companies was by holding shares in companies with important positions in the market.
1.Public owned banks
2.Privately owned companies
Companies with shares held by publicly owned banks can be roughly divided into three categories.
Indigenous companies that inherited the profits of the Japanese colonial era.
In certain respects, these companies represented the incorporation of local profit. Sometimes, the directors of these companies served concurrently as directors of other publicly owned companies or banks, symbolizing their eminence and esteem.
Companies came from the textile industry
The second category of companies came from newly industrialized industries, such as textile. Most of the industrialists in this group moved with KMT from Mainland China to Taiwan.
Emerging indigenous entrepreneurs in the pet- nonchemical and heavy industries.
A third category of firms is formed by the petrochemical industry, the typical industry bringing together indigenous capitalists and foreign multinational companies.
Multiple Network Control
A group of successful public and private sector companies became intimately intertwined, invisibly affecting the formation of solid relationships between the state and business communities.
The Coherent Core
Using highly duplicated, intersecting share ownership illustrated how the KMT controlled the leveraging power of publicly owned banks in order to achieve the objective of industrial control through financial capital.
‘INNER CIRCLE’ under the state patronage
The close relation that the inner circle of directors maintained with the political world is a further sign of the dominance of the government. Heavy state involvement resulted in a distinct quasi-corporatist network structure, with a highly centralized, close-knit and exclusive inner circle and a high level of multiple ties.
NETWORK TRANSFORMATION THROUGH A SHIFT FROM CONSOLIDATION TO PRIVATIZATION, 1990–2000
Public firms still played an important role in the network well into the 1990s, when liberalization has already been in place for around a decade.
The entire network became less dense over time, but the networks of private company directors became sparser much more rapidly than those of directors of state-owned enterprises or interlocking public and private firms.
Considered in light of this, the evolution of the network and the decline of state-owned enterprises is perhaps more a consequence of the rise of private firms, rather than due to a decline of the government-run firm in Taiwan.
Since liberalization, the state has receded from its dominant position in the network; it is no longer is a crucial player in shaping the network structure.
This aspect reflects, on the one hand, the fact that private companies in Taiwan only deal with trusted partners in the intercorporate network, and on the other, the intimate involvement of publicly owned companies. This inadvertently leads to a relatively high proportion of particularistic network relationships.
In the process of market development, political power and markets often evolve concurrently and influence each other.
In this way, this chapter bring the state into intercorporate network research to examining Taiwan’s particular historical experience and corporate networks.
Using the Analysis, Critique, and Assessment of Research on Interlocking
An interlocking directorate occurs when a person affiliated with one organization sits on the board of directors of another organization.
It was common for several firms within industries to share directors.
Within –industry interlocks continue to occur suggests that some interlocks may restrict competition.
Cooptation and monitoring
Cooptation- as the absorption of potentially disruptive elements into an organization’s decision making structure.
Profitability (or lack of profitability) drives interlocks.
Legitimacy may be a prerequisite for securing of resources discussed in the previous section.
Interlocks occurs between organization, but they are created by individuals.
Interlocks reflected both interorganizational and intraclass ties.
Even ties developed for organizational purposes could have the consequence of facilitating interfirm political unity.
Interlocks as Indicators of Network Embeddedness
The emphasis on interlocks has moved increasingly toward their value as a communication mechanism rather than as a mechanism of control.
Interlocks were viewed as indicative of business political cohesion, which was expected to increase corporate political power.
Interlock networks among large corporations were indicative of the cohesion within the capitalist class, which helped solidify business into an effective, and dominant, political actor.
The Process of Embeddedness: An Example
Interlocks and longitudinal analyses
Interlocking itself can be viewed as a strategy. The factors that predict decisions to expand or restructure could affect decisions to interlock as well.
Two criticism of interlock research
Accepts the legitimacy of the use of quantitative indicators to predict corporate behavior.
Criticism- interlocking directorates fail to predict corporate behavior, has been presented most forcefully in a recent article
Quantitative indicators together and suggests that interlock analyses fail to capture the rich and complexity and the general outlines of board dynamics and interfirm relations.
Criticism- interlock analyses fail to capture the richness and complexity of board dynamics and interfirm relations, has been made by several analysts.
From institutional perspective
to see Taiwan's company
Shaped the network by