Presentation Details

The Fourth International Conference on Knowledge, Culture and Change in Organisations

Effects of Corporate Networks on Company's Performance

Pahor Marko.

Companies don't act independently from one another, but instead they form ties with other companies. They don't form these ties randomly - they are carefully chosen in order to maximize company's social capital. This social capital as a productive means has the possibility of increasing company's performance.

Social capital is produced in networks in two ways - as network closure and as network possibilities. Although the first one is usually associated with dense networks, which would normally preclude the existence of brokering possibilities (or structural holes), they can coexist in a network that has the characteristics of a "small world" network. In a small world network, locally dense cluster in a generally sparse network exist.

How the social capital will be produced for a company depends on the characteristics of company's egonetwork, which is in turn dependent on the general strategy of the company. For a company that chooses cost-leadership strategy, a mechanistic egonetwork is more appropriate, and the social capital will be produced in the form of network closure. On the other hand, companies that choose differentiation as their generic strategy, will find advantage in maintaining an organic network and will gain social capital from brokering possibilities.

The theory will be modeled in the framework for the joint evolution of networks and behavior. Company's properties, that affect and also reveal the chosen strategy, also affect the selection of ties to other companies, giving the company more network closure or more brokering possibilities. Network configuration in turn affects company's performance, measured by the added value of the company. Model will be tested on the data for Slovenian joint-stock companies in the period 1998-2002.


Pahor Marko  (Slovenia)
Research assistant
Faculty of Economics
University of Ljubljana

  • Corporate Networks, Corporate Performance, Dynamic Networks, Social Capital, Small Worlds

(30 min. Conference Paper, English)