Hierarchical Network Governance: An Examination of Keiretsu Networks

Abstract

This chapter elaborates network governance on the basis of information and influence. A network structure is defined in terms of boundaries and differentiation of interdependencies between firms. Two hypotheses allow examination of the relative role of relational versus hierarchical governance, through the mechanisms of information sharing versus influence respectively. In an empirical examination of the Keiretsu networks of Toyota and Mazda, we find a strong correlation between network centrality, measured as out-closeness, and firm profitability. This result suggests that influence proceeds mainly in the direction of share ownership and that these networks are hierarchical. The final sections of the chapter discuss the limitations of the research and future research. © 2010 Nova Science Publishers, Inc. All rights reserved.