In this first-ever regional assessment of firm-level governance networks in East and Southeast Asia, the author describes the structure of these interfirm networks and documents their dramatic growth and integration between 2006 and 2020. In addition to offering a descriptive account of the structure of these networks, the analysis describes suggestive structural factors that offer insight into the future of regional integration.
Mapping Cross-Border Business Networks in the Asia-Pacific Region
Published Nov 9, 2021
- How have the patterns of preexisting business relationships in the region developed?
- How have organic patterns of interfirm relationships evolved to tie regional economics together?
- Which structural factors offer insight into the future of regional integration?
Over the past 20 years, the economies of East and Southeast Asia have more than doubled in size. As they've grown, the activities of Asian firms have become increasingly interdependent and have integrated with ever-more global supply chains and markets. This integration has led to the formation of enduring partnerships that provide an underlying structure for the regional economy. Rather than operating as atomized firms that interact through arms-length contracts on the open market, firms create enduring partnerships and persistent rivalries that shape the patterns of economic activity both within and between national economies in the Asia-Pacific region.
The author of this report examines these interfirm relationships and maps the business networks that extend throughout the region by focusing on board-of-director interlocks within nations' borders and across them. Tracing the dramatic growth of these interlocks between 2006 and 2020, he provides a first-ever regional assessment of firm-level governance networks in East and Southeast Asia.
- Whereas there were only 243 cases in which Asian firms from different countries shared the same director in 2006, the total number of firms in the sample more than doubled by 2020, from 9,111 to 21,552. The number of cross-border director ties increased almost tenfold, from 243 to 2,624.
- One significant difference between the interlock networks of East Asian and Southeast Asian nations is that although the former have three times as many exchange-listed firms as the latter, they have only one and a half times as many shared directors.
- Shared linguistic and ethnic ties provide both an important basis for cross-border integration in the region and a mechanism that allows Chinese firms to partner with firms that might be less accessible to firms from other East Asian countries.
- The disproportionate representation of Chinese firms on boards in the region will likely have long-term positive effects on Chinese integration into the regional economies, encouraging such path-dependent decisions as the adoption of norms—including Chinese technology standards—that could produce a durable orientation toward China.
- However, although the number of cross-border interfirm ties is increasing, particularly between countries with large populations of ethnic Chinese businessmen, the intensive networking within the national economies of the region will likely exercise a moderating influence by offering some degree of resistance to foreign interventions.