Bruce M. Kogut (ed.), The Small Worlds of Corporate Governance, Massachusetts Institute of Technology, Cambridge, MA, 2012, ISBN 978‐0‐262–01727‐5, pp. xiii, 388.

• Author: Francesca Franco
• Published date: 01 January 2014
• DOI: http://doi.org/10.1111/corg.12045
• Date: 01 January 2014

Book Review

Bruce M. Kogut (ed.), The Small Worlds of Corporate Governance, Massachusetts Institute of

Technology, Cambridge, MA, 2012, ISBN 978-0-262–01727-5, pp. xiii, 388.

Over the last few decades, the study of social networks –

communities of agents (people or f‌irms) and the ties

among them – has evolved from a traditional sociological

subject to a relatively novel topic in other research f‌ields,

including management, economics, and other social sci-

ences. This broadened scholarly attention stems from the

important insights that network analysis can provide in

understanding the behavior of the actors within an eco-

nomic system and their governance rules. Based on an

impressive cross-national data collection and innovative data

analyses, The Small Worlds of Corporate Governance signif‌i-

cantly contributes to our understanding of the role of corpo-

rate elites, through their ownership and board networks, in

explaining institutional diversity in national economies. The

conventional claim of this book is that corporate networks

have structures (or topologies), which can be characterized

by different degrees of local density. These “small worlds”

constitute the hidden dimension of corporate governance, a

fundamental one, the authors of the book claim, for under-

standing the reasons behind the often different reactions by

nationaleconomic actors to common systemic changes, such

as the privatization wave in the 1990s and the more recent

globalization phenomenon.

The book consists of ten chapters and two appendixes. The

chapters provide a careful analysis of the relations between

network properties and systemic shocks. Instead of being

designed around single countries, the book looks compara-

tively at changes in the properties of national networks in

response to “structural breaks”. Thechapters examine a wide

range of topics, including the substantial heterogeneity in

network structures across “Anglo-Saxon” countries; the

effect of globalization on the survival of national business

groups in emerging countries; the rise of business groups

within formerly communist countries; signs of divergence in

response to common structural breaks in Western Europe;

the growing corporate power of women in Scandinavia; the

merger and acquisition activity in corporate networks of

Germany and the United States; and the propertiesof central

actors in trans-national governance networks. The two

appendices provide a guide to the research tools used in the

analysis, as well as documentation of some of the principal

name-matching algorithms. The data and codes used in the

analyses have been made available by the authors on the

Columbia Business School Sanford C. Bernstein & Co. Center

for Leadership and Ethics website (http://www8.gsb

.columbia.edu/leadership/research/smallworlds).

Chapter 1 introduces the book and describes its aims

and methodology. The chapter proposes its sociological

approach to governance, by def‌ining the properties of gov-

ernance network structures and “small worlds,” anchoring

this discussion to the mainstream governance research, i.e.,

the economics of f‌inancial markets, the law of governance as

legal institutions, and the political theory of governance.

Chapter 2 describes the patterns of ownership and control

in the “Anglo-Saxon” countries – Canada, the United

Kingdom, and the United States. The chapter notes that the

mercantile origins of Canada have fostered family-controlled

f‌irms to re-emerge in importance, while in the United States

and United Kingdom institutional investors have become

the primary ownership actors. These trends have led to a

situation where similarities across countries now coexist

with marked differences, such as different degrees of inter-

connectedness across owners. A major conclusion from the

chapter is that there is no uniform corporate governance

model among these countries, suggesting caution in using

the too general label “Anglo-Saxon model.”

Chapter 3 focuses on business groups and the effects of

liberalization in six emerging countries (namely, Brazil,

Mexico, South Korea, Israel, Taiwan, and Chile). The authors

analyze the institutional factors that explain the survival of

business groups in these economies, as well as the observed

changes in ownership networks. The key difference is seen

in the extent to which the local economy facilitates new

entry, with the interesting insight of a negative association

between entry rates and network centralization. The authors

conclude the chapter by observing that business groups can

foster economic growth in emerging economies in so far as

they do not dampen competition and entry. Chile, Israel,

South Korea, and Taiwan are relatively successful examples

of these dynamics.

Chapter 4 analyzes the emergence of capitalism in the

formerly communist countries of Poland, Romania, Bul-

garia, and Russia, and in China. The f‌indings that emerge

from this analysis emphasize the importance of actors such

as institutional investors, business groups and, most impor-

tantly, the continued signif‌icant portion of state ownership

in the country’s industrial economy. The authors’ main f‌ind-

ings are that countries that liberalized but with a weak state

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Corporate Governance: An International Review, 2014, 22(1): 68–69

© 2014 John Wiley & Sons Ltd

doi:10.1111/corg.12045