The Evolution Of Interlocking Directorate’s Network And Its Formation Mechanism

Interlocking directorates, as an important mechanism via whichcompanies tie to each other, have great impacts on companies`strategy,governance and performance. However, most research focuses on studyinginterlocking directorates`impacts on companies`behavior but ignoringnetwork characteristics`evolution and its formation mechanism. Thispaper aims to fill this blank.Based on a comprehensive sample of China`s listed companies from2000-2012, this article aims to lever on the social network theory andempirical models to conduct a comprehensive analysis of the evolution ofChina`s interlocking directorates from an overall perspective and industrialand geographical features from a partial perspective, also try to discussinterlocking directorates`impact on firm`s performance.The longitudinal study of overall characteristics showed that China`sinterlocking directorates`network has significantly evolved based on thefacts that the size and cohesion has expanded and enhanced, the structureof the network is not fully connected but exist a giant componentcomposed by the majority of the members with isolated small piecesspreading around and several structural holes detected, the members of thenetwork can lever on more resources and has less monopolistic controlover the information flow than before. Compared to other countries, Chinais still at the early stages of interlocking directorates`development.The empirical study of the industrial and geographical featuresshowed that the provinces with higher degree of marketization are morelikely to have higher centrality, the closer two companies are the higherpossibility for them to build connection, as to the spatial informationtransfer mechanism, it primarily took place intra-regionally, then switchedto inter-region to seek more diversified info resources`channel. As toindustry, companies prefer to build connection with companies instrategic-related industry, and financial institutions are more likely toestablish ties with capital-intensive industries.The empirical study of firm performance showed that the centrality has significant positive effect on the company`s performance, provingresource dependence theory.