Decoupled Corporate Performance from Network Structures within Business Groups

• In Event: 571 - Section on Economic Sociology Roundtables (one-hour)
  In Refereed Roundtable: Table 08. Networks among Firms and Economic Partners

Abstract

Figuring out a systematic association between patterned inter-corporate relations and the corporate performance of agents – individuals, teams, or firms – that are embedded in those inter-corporate relations has been one of the key issues in the field of economic and organizational sociology. Despite an intense interest in this subject, it has been relatively rare to dig out this association by examining business groups in particular. The focus of this research is on relational configurations of each Korean business group and the effect of its network structure on the corporate performance of affiliated firms. Unlike an expectation, the findings of this research show that the estimated influence of inter-firm network structure on the corporate performance of affiliated firms is minimal while affiliated firms having direct connections with family members show relatively better performance than those that do not have these connections. I claim that for the purpose of overall corporate control at the group level, utilizing chaebol’s inter-corporate network structure is an effective corporate practice; but for the purpose of pecuniary gain, having direct ties with affiliated firms is a more effective way for family members. Finally, corporate control and corporate gain do not always go hand in hand, and economic practice need to be understood by the simultaneous consideration of pecuniary and not necessarily but still related interests, such as control and social relations where economic practices are anchored in.

Author

• Ho-Dae Chong, Sogang University