Key boundary spanners

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shown that although some of the board members remained isolated in the network this trend was declining over time.

Firm “B”

I. External network size

In 2003 firm “B” got publicly listed on the Shanghai Stock Exchange, and thus this year marked a starting point for our analysis, because of data availability and disclosure requirements for publicly listed companies in China. We analyzed the available data from 2003 to 2011. To start the investigation of firm’s network created by its board members, we first looked at the size of the network. In comparison to the other selected cases, network size of firm “B” was relatively small and this relation continued over the analyzed years (see Table 2 in the text and Table 2 in the Appendix). In the year of IPO the network contained only few network ties to shareholding companies and one tie to an investment company that had been created by an inside director (see Table 2 in the Appendix). The network enlarged substantially in 2005 and reached its biggest size in 2010. The increase of the network size between 2005 and 2010 resulted from adding only single network ties. Also, in 2006 and 2009 we reported slight decreases in network size. The decreasing trend occurred again in 2011. Although we could not have obtained data on firm expansion in 2012, the network data for this year confirmed continuation of the decreasing trend. Hence, we concluded that 2010 was a pivotal point in evolution of network size, as it marked a significant change in the growth pattern. Similarly to the analysis preformed for firm “A”, in the next step we aimed to identify board members, who were leading changes in the firm’s network. As in the previous case, we labeled these individuals as the key boundary spanners.

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chairman in an investment company. This individual network extension enriched firm’s “B”

network with a political tie and tie to a financial institution.

Table 3. Dynamics of board social capital: strength, diversity of ties, and network cohesion

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Figure 2. Examples of network structures developed amongst board members of the selected firms in 2009

Firm A

Firm B

Firm C

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The further development of firm’s “B” network was a result of individual networking activities performed by the newly appointed independent directors. Interestingly, none of the inside directors or executives was engaged in the process of building up the firm’s external network to the same extent as the independent directors. The CEO of firm “B” played a rather passive role in this process. It is worth to mention that individuals serving as CEOs were replaced two times in 2004 and 2007. The individual, who was appointed first as CEO and served until 2004, did not have any external affiliations. Then he was replaces by an individual, who was serving as an independent director in another firm operating also in the construction machinery sector. Likewise, the CEO appointed in 2007 held only a board post in a firm affiliated with the same business group as firm “B”. In the following years, the CEO had not extended his network beyond this affiliation.

Our investigation has shown that the process of accumulating external social capital was driven primarily by independent directors, who were jointly acting as boundary-spanners for firm “B”. This pattern continued over the entire analyzed period. Over time firm “B” attracted independent directors, who contributed to enriching its network with new connections to external actors. To give an example, in 2010 firm “B” appointed 10 new members out of whom 6 had other external affiliations (see Table 8 in the Appendix). The newly appointed inside directors were already affiliated with the same business group as firm “B”, while the new independent directors had more wide-spread individual networks. For instance, they were holding board posts in other firms operating in the construction machinery sector and were members of prestigious industry associations, such as China Engineering Machinery Industrial Association.

III. Diversity and strength of external network ties

In the beginning of the analyzed time period the external network of firm “B”

demonstrated a relatively low diversity of ties. In fact in 2003 and 2004 the network contained only single ties to shareholding companies and a tie to a financial institution, which was created by an inside director. Therefore, the Blau’s index reached a very low value in 2003 and even dropped to zero in 2004 (see Table 3 in the text and Table 5 in the Appendix). Although the values of the index increased in the following years, in comparison to the other analyzed cases, overall diversity of network ties was relatively medium (compare Tables 4,5, and 6 in the Appendix). Since 2005 the Blau’s index had been increasing, until it reached its highest value in

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2008, which marked a pivotal point for evolution pattern of diversity. From this point diversity of ties started successively decreasing and its lowest value (0.58) was observed in 2012.

Network ties to business type of actors, namely to shareholding companies and to other firms, were representing the strongest connections of firm “B” over the entire analyzed period (see Table 3 in the text and Table 5 in the Appendix). Particularly in years 2003 and 2004 these types of ties were the strongest, owing to homogenous external affiliations of board members. In the following years, despite the growing diversity of network ties, firm “B” sustained its relatively strong business ties and ties to shareholding companies through affiliations of already appointed inside and independent directors. Even after a substantial change in board composition that occurred in 2010 and brought ten new members to the board, strength of these network ties did not decrease. In fact the new inside directors had been already affiliated with the same business group as firm “B”, thus increased the strength of firm’s ties to shareholding companies. Likewise, the new independent directors simultaneously held board posts in other firms, thus strengthened business ties of the firm.

Despite numerous ties to business actors, firm “B” was able to establish relatively strong non-business ties, particularly to universities. This type of ties appeared in the network owing to external affiliations of independent directors, who were holding academic positions simultaneously to directorships in firm “B”. Over time the connections to academic environment were sustained by already appointed and new board members. For example a new independent director, who was appointed in 2007, linked firm “B” to Renmin University of China where he had an academic position. Moreover, appointments of new independent directors in 2010 strengthened the non-business ties through directors’ connections to industry associations, such as China Engineering Machinery Industrial Association and China Engineering Machinery Federation.

In the analyzed period firm “B” did not establish any explicit international ties, as its board members had not held any external affiliations in foreign entities. Yet, in 2012 a foreign individual was appointed to the board. By the time of appointment, this board member had been already affiliated with the same business group as firm “B”. Moreover, he previously held a CEO position in a firm in Europe, which was acquired by the business group. After the acquisition, the CEO was nominated to the board of directors of the acquirer and subsequently to the board of firm “B”.

External affiliations of independent directors were connecting firm “B” also to political actors and financial institutions, though these ties were relatively weak in comparison to other

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network ties. These ties appeared in the network in 2005, owing to new external affiliations of the already appointed independent directors. Particularly one independent director was the only reported political connection for the firm, as in 2005 he had become the Secretary of the Party Leadership Group in another firm. However, he left the board in 2010, and thus the political tie was dissolved. The initial network ties to financial institutions, though also dissolved as a result of directors’ replacements in 2010, had been strengthened through affiliations of the independent director appointed in 2007. The new director linked the firm to Bank of Beijing, where he served as an independent director, and to an investment company.