Changing Faces of Network Capitalism in Korea: A Case of Corporate Board of Directors’ Network

다국어 초록 (Multilingual Abstract)

The concept of network capitalism among scholars was coined to capture unique
characteristics of East Asian market (Gerlarch and Lincoln 1992; Biggart and Hamilton
1992). The goal of this paper is to examine the changing faces of network capitalism in Korea
after the economic crisis in 1997 particularly focusing on the composition of corporate board
of directors. Our research questions are: (1) Has the “homophily” rule of group composition
dominant in the boardroom prior to the economic crisis shifted to “functional” rule after the
economic crisis?; (2) What types of firms, if any, rely on homophily more heavily than others?
Major findings of our paper are summarized as the following. First, corporate boardrooms in
Korea are still dominated by directors who graduated from top-tier high schools and
universities. We also have observed high levels of concentration of directors representing
specific schools and regions. The analyses of inequality of high school, college, and region
measured by Gini indices and their dominance ratios show that a strong “homophily” effects
still operate in the boardroom of Korean firms throughout the observed period. Second, the
homogeneity of board members began to decline before the economic crisis, but it increased as
firms overcome financial difficulties. Third, larger firms tend to have a higher level of
heterogeneity in the boards of directors. Older firms also have lower level of homophily in the
board. And lastly, debt ratio has the significant and positive relationships with all three
dominance ratios.

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