Property rights and the formation of interfirm networks: a network analysis of the interlocking directorates in China’s listed companies

Abstract

Interfirm networks are one of the core modes of corporate governance. However, its formation mechanism is not clearly and adequately delineated. This article highlights the significance of property rights to the formation mechanism of interfirm networks. Using interlocking directorate data from Chinese listed companies during the years 2000-2010, we investigate the association between ownership and network formation, at both the individual attribute level and dyadic level. Results show that companies owned or controlled by the state are more likely to form interlocking networks, and these relations tend to emerge among companies that have identical ownership. The higher the administrative level to which state-controlled companies are affiliated, the more likely they are to form interlocking networks. Theories of economic efficiency also have some explanatory power regarding network formation.