3 - The Evolution of a Corporate Network: A Longitudinal Network Analysis of 259 Large Firms

Summary

The network metaphor has become increasingly popular with social scientists; it has even penetrated the conservative precincts of economics. … [A]ttempts to develop the metaphor into operational concepts have taken two directions. One has emphasized the paths or “threads” in a single network: the manner in which long chains of contact wind their way through large social systems. … The second has emphasized the “knittedness” of interconnections within a network and the overlaps between multiple (many-stranded) types of networks for a given population.

White, Boorman, and Breiger, 1976:730

Introduction

Some 25 years after the publication of White, Boorman, and Breiger's classic paper on blockmodeling, most uses of the network idea in economic and organizational research remain metaphoric. They convey a quality of fluidity, permeability, even embeddedness in a set of relationships, but are typically silent on how one might measure and analyze such properties in testing hypotheses about network causes and consequences. This chapter offers a quantitative analysis of structural change in Japan's corporate network. We use some well-known methods of formal network analysis to map the evolution of business networks in Japan from longitudinal data on the country's largest financial institutions, trading companies, and industrial corporations. We will see that, to an extraordinary degree, Japanese economic organization in a network sense was built around keiretsu clusterings. Second, consistent with much recent commentary, this structure has eroded over time. Yet the decline has not been even or continuous.