State Intervention Mode, Network Relationship Between Property Rights And Organization

Taking the formation mechanism of interlocking directorates networks as an example, this dissertation investigates how the state constructs market structure by manipulating the property activity. The interlocking directorate networks are very important kind of inter-organizational networks, which are formed by one person that has directorship at two or more firms simultaneously. The literature, which focuses on the formation of interlocking directorates networks, usually takes the perspective of economic or management efficiency. We called this wave of research market theory. The market theory has several mainstream viewpoints that include resources dependency theory, monitoring and controlling theory, financial control theory, collusion theory, and geography and space mechanism.The market theory usually omits the key role of institutional elements in the process of forming the interlocking networks. Based on this argument, we propose an institutional theory to explain the networks formation. We argue that Chinese interlocking networks, which represent the social structure, are configured by the state intervention. The network formation of non-SOE follows the market logic, while the SOE-SOE’s and SOE-non-SOE’s network formation are interfered by the state.Since the mid-1990s, the history of economic reform shows that the pattern of state intervention changed substantially. The state intervention, especially the regulation of state assets, changed into a new pattern of top-down squeezing intervention. The new pattern of state intervention will influence SOE-SOE’s and SOE-non-SOE’s network formation through two ways:firstly, state control the governance structure of SOE by dominating state property rights, which forms a special structure named political corporate governance structure, and this will influence the formation of SOE-SOE’s interlocking networks; Secondly, the new pattern of state intervention configures the market structure, in which many firms have unequal market status, this will influence the formation of SOE-non-SOE’s interlocking networks.To the first path aforementioned, the political corporate governance structure is likely to form interlocking networks between SOEs, because there are two kinds of institutional arrangements enforce it. First of all, state popularizes the outside director system among SOEs. Secondly, state promotes the leaders of SOEs exchange system among SOEs. Based on these two kinds of institutional arrangements, the state maintains the absolute dominance of the national economy. This leads to the SOE-SOE’s formation of interlocking networks is more frequent than non-SOE-non-SOE’s. The logic of SOE-SOE’s formation of interlocking networks is based on the political corporate governance structure, while non-SOE-non-SOE’s is based on market theory. According to these arguments, we propose a dual divides theory to interpret the formation of interlocking networks between firms which have the same property rights.To the second path, state interferes the economy implies it configures the market structure and market status as well. Because the party-state dominates state property rights by the pattern of top-down squeezing intervention, there is an unequal market status in the market. Since SOEs gain much preferential policy treatment from the state, they have higher market status than those non-SOEs, and they are at the central place of the interlocking networks. According to these arguments, we propose a state intervention-based market status theory to interpret the formation of interlocking networks between firms which have different property rights.This dissertation has two main contributions:Firstly, by investigating the formation mechanisms of interlocking networks between firms that have the same property rights, we provide empirical tests to the abstract concept named political corporate governance structure, which was presented by Walder and Nee independently; Secondly, by investigating the formation mechanisms of interlocking networks between firms that have different property rights, we extend the market status theory that first proposed by Podolny. These two arguments jointly illustrate the institutional logic of formation mechanism of Chinese interlocking networks.Using the listed company data in China within2000-2010, the appointment and removal information about SOE leaders disclosed by State-owned Assets Supervision and Administration Commission of the State Council (SASAC), and the news publicized by famous economic websites in China, we test those predictions of institutional theory aforementioned. The results show that:the property right is a critical dimension to demarcate interlocking networks in China, and SOEs are much more likely to form interlocking networks with each other because of the influence of the political corporate governance structure; under the condition of top-down squeezing state intervention, the higher hierarchy of the government that SOEs affiliated to, SOEs will be intervened more strongly, and they will have higher probability to form interlocking networks; the pattern of state intervention configures the unequal market status, since SOEs always have higher market status, they may have higher probability to posit the central place of the interlocking networks. Overall, our research supports the institutional theory’s predictions; however, market theory still has strong power of explanation.