Initial stage of expansion (from 2007 to 2010)

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external affiliations with these individuals. The other subgroup was formed by board members sharing affiliations with board chairman. Only after 2009, and the following replacement of board chairman, CEO and the chairman were directly connected through a common external affiliation (see Figure 2), until then an inside director had been connecting these two individuals.

The director could have been acting as a broker in the CEO-board chairman relations. Despite reshuffling of ties between CEO and board chairman, the network structure with clearly defined two subgroups remained stable over time.

Network dynamics and firm expansion

This section presents how the selected firms were expanding in the analyzed periods and how their external and internal networks were evolving over time. For each case we analyzed expansion events and network changes that occurred in an initial and a later stage of expansion.

This differentiation between stages of expansion allowed for a clear identification of patterns typical for each stage. For better demonstration of results, in Figure 3, 4, and 5 we graphically present expansion timelines and for each case together with the identified evolution patterns of networks. We additionally summarize our findings in Table 4.

Firm “A”

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the expansion of operations in 2010 affected firm “A” to a greater extent than the previous expansion events. It was in fact the highest reported growth in terms of total assets and operating revenues between years 2007 and 2012.

Figure 3. Expansion timeline and dynamics of board social capital of firm “A”

During the first analyzed years, namely in 2007 and 2008, the external network of board members, although its size remained constant, demonstrated a slight change in diversity of ties.

The firm strengthened its ties to shareholding companies and political actors, while ties to international and non-business actors slightly decreased. For this reason we observed also a decreased value of the Blau’s index in 2008 (see Table 4 in the Appendix). However, already in 2009 network size as well as diversity of network ties increased, as board members thorough their external affiliations had strengthened firm’s ties to financial institutions, non-business, political, and business actors. In the following year and simultaneously to the extensive firm growth, the external network did not show significant increase in terms of its size. However, diversity of network ties reached its maximum level reported for this period. The value of the Blau’s index in 2010 was 0.8 and this high value was a result of further strengthening of previously weak ties, such as international ties. Moreover, the key boundary spanners, namely the CEO and the inside director, were actively stretching their networks to accumulate potential resources deriving from political ties and ties to financial institutions. ,

A thorough investigation of the internal relationships amongst board members has revealed the following pattern. In the initial stage of expansion board members typically had common external affiliations with the CEO and not necessarily with each other. This led to formation of a subgroup within the board that was centered around the CEO (see Table 4 in the

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text). At this stage, however, the subgroup was only emerging and the entire internal network was still very fragmented, as demonstrated by the high degree of network fragmentation between 2007 and 2010 (See Table 13 in the Appendix). Despite the high fragmentation, the increasing values of average degree, density, and connectedness had confirmed that the internal network started becoming more cohesive over time.

Table 4. Dynamics of board social capital and firm expansion

166 II. Later stage of expansion (from 2011 to 2012)

In 2011 firm “A” entered a stage of intensive expansion in terms of the number of established domestic and foreign subsidiaries (see Table 10 in the Appendix). On the domestic market the firm had opened six new subsidiaries and expanded its operations across 16 provinces in China. Moreover, three new foreign subsidiaries were established in the USA, the UAE, and Singapore. Although over this year firm “A” indeed spread its operations geographically and increased the value of its assets by about 18%, it did not report a substantial growth of employment. The data has shown that at this stage of expansion, firm “A” rather concentrated on geographical spread of its operations. After establishment of new foreign subsidiaries in 2011, the firm continued its international expansion. In 2012 the already diverse portfolio of foreign markets where the firm had its subsidiaries was further enriched through expansion to Russia, India, Luxembourg, Germany, and again to Singapore. The investment in these five new foreign subsidiaries caused a substantial increase in the number of employees working for firm “A”, yet it did not increase firm’s assets to the same extent. Also, on the domestic market the firm opened only one new subsidiary in 2012 and in total its operations were covering in 16 provinces in China.

The geographical expansion of firm “A” covered with a substantial increase of network size. In fact in 2011 the network reached the biggest size reported for the period from 2007 to 2012 (see Table 1 in the Appendix). However, diversity of network ties dropped from the high level observed in the previous year. The decrease was a result of weakening of already weak ties, such as ties to non-business actors, and strengthening of ties, which already had been strong in the network (see Table 4 in the Appendix). In other words, board members were networking with less dissimilar actors than in the previous years. Business ties and ties to shareholding companies, which in general were relatively strong in the entire analyzed period, became even stronger, because of the new board posts held by the CEO and the inside directors of firm “A”.

In the following year firm “A” experienced a decrease in its network size. Moreover, when board members dissolved their ties to non-business and political actors, it had a substantially decreasing effect on diversity of network ties. Board members, however, still kept single international ties and ties to financial institutions, while at the same time business ties and ties to shareholding companies were being further strengthened. In this way the external network became more centralized around business actors, although it lowered the diversity of ties to a minimum level observed in the analyzed period.

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The observed strengthening of ties to business actors and shareholding companies also had an impact on the relationships amongst board members. It facilitated further bonding amongst members through having common external affiliations outside firm “A”. The CEO, in particular, was actively developing his individual network in firms affiliated with the same business group as firm “A”. Moreover, the new board members, who were appointed in this period, usually, had been already affiliated with this business group. This increasing cohesiveness was clearly reflected in the increasing measures of network cohesion (see Table 13 in the Appendix). The measures indicated a growing number of ties amongst board members, increasing density and connectedness of the internal network. Hence, over time more board members had common external affiliations with each other, and particularly with the CEO. However, some of the board members remained isolated in the internal network, thus had not shred any external affiliations with other members. This was also shown by the high, yet decreasing, values of network fragmentation. The case of the inside director, who was identified as the key boundary spanner for firm “A”, is a good example depicting partial isolation in the network. Though the director had a wide-spread network outside firm “A” and was connected to the CEO, he had not engaged in networking with other board members. Also, it was the case for independent directors, who indeed had established network ties to numerous actors in firm’s environment, but did not have any affiliations in common with other directors.

Firm “B”