‘Interlocked’ business groups and the state in Chile (1970–2010)

Abstract

In this article we examine the relationship among business groups (BGs) in Chile in the long run, focusing on the relations between the state, viewed as a BG, and privately-owned BGs from 1970 to 2010. Our analysis proceeds within the methodological perspective of interlocking directorates (IDs) analysis. Working with a unique database of the boards of firms affiliated to BGs, we consider IDs as a way to learn about the cohesion and relation between these BGs. We include a period of political change and institutional and economic modernisation in Chile, which also involved a transformation in the character of the entrepreneurial class in the country. We find that the state BG has played an important role in the networks of Chilean capitalism. Our work complements the literature on BGs and state capitalism, showing the rich nature of social networks in a capitalist society.

Keywords:

• Business groups (BG)
• networks
• interlocking directorates (ID)
• state capitalism
• political and economic transitions
• Chile

Acknowledgements

The authors wish to thank Fernando Lefort, Rolf Lüders and Hugo Lavados for their useful conversations and valuable insights. We also want to thank the comments of Andrea Lluch, the editor María Ines Barbero and the three anonymous reviewers.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Colpan et al., The Oxford Handbook of Business Groups; Granovetter, ‘Business Groups and Social Organization’.

2. Khanna and Yafeh, “Business Groups,” 331.

3. See, for example, Colpan, Hikino, and Lincoln, The Oxford Handbook; Barbero, “Business History”; Dávila, “The Current State”; Grosse, “The Role.”

4. Mizruchi, “What Do Interlocks Do?,” 271.

5. Mizruchi and Marquis, “Interlocking Directorates,” 375–377.

6. Friedman and Jones, “Business History.”

7. Lluch and Salvaj, “Longitudinal Study.”

8. Musacchio and Lazzarini, “Leviathan in Business.”

9. Lazzarini, Capitalismo de Lacos.

10. Khanna and Palepu, “Policy Shocks,” 272.

11. This is the translation from Majluf, Abarca, Rodriguez, and Fuentes, “Governance and Ownership Structure,” 112.

12. Lefort, “Business Groups,” 395.

13. Khanna and Rivkin, “Interorganizational Ties,” 340.

14. del Solar, 20 Grandes. We are grateful to Fernando Lefort for this point.

15. Lluch, Salvaj, and Barbero, “Corporate Networks.”

16. Borgatti, Everett, and Freeman, Ucinet for Windows.

17. Ventresca and Mohr, “Archival Research Methods,” 818–819.

18. Hachette and Lüders, La privatización; Garretón and Cisternas, Algunas características; Movimiento de Acción Popular. El libro de las 91: las empresas monopólicas y el área social de la economía chilena.

19. CEEN-UDD, “Ranking.”

20. Silva Vargas, “Notas sobre”; Couyoumdjian, “El alto comercio”; Llorca-Jaña, “The Organization.” As Jones has commented, around the world trading houses evolved from merchants to multinational; Jones, Merchants to Multinationals.

21. Rojas, “Los grupos”; Islas, “Gobierno Corporativo.”

22. For some evidence on the utilities sector, see Nazer, Couyoumdjian, and Camus, CGE.

23. Lagos, La concentración; Zeitlin, Ewen, and Ratcliff, “New Princes for Old?”; Garretón and Cisternas, Algunas características; Dahse, Mapa de la extrema.

24. Zeitlin et al., “New Princes for Old?,” 109.

25. Garretón and Cisternas, Algunas características, 31.

26. Chumacero, Fuentes, Lüders, and Vial, “Understanding Chilean Reforms.”

27. Dahse, Mapa de la extrema.

28. Gálvez and Tybout, “Microeconomic Adjustments”; Khanna and Yafeh, “Business Groups.”

29. de la Cuadra and Valdés, “Myths and Facts”; Lefort and Walker, “The Effects.”.

30. Hachette and Lüders, La privatización; Lefort, “Business Groups.”

31. Iglesias, “Pension Reform.”

32. Lefort, “Business Groups in Chile,” 390; also Lefort and Walker, “The Effects.”

33. Lefort, “Business Groups in Chile.”

34. Paredes and Sánchez, “Grupos Económicos.”

35. Majluf et al., “Governance”; Khanna and Palepu, “The Future”; Lefort and Walker, “Ownership.”

36. Leff, “Industrial Organization”; Khanna and Palepu, “The Future.”

37. Mizruchi, “What Do Interlocks Do?”

38. Lluch et al., “Corporate Networks.”

39. Scott, “Theoretical Framework.”

40. Lagos, La concentración; Zeitlin and Ratcliff, Landlords; Garretón and Cisternas, Algunas características.

41. Zeitlin and Ratcliff, Landlords, 8.

42. Salvaj, “Cohesión,” 61.

43. Bucheli and Salvaj, “Adaptation Strategies.”

44. Silva, “Business Elites.”

45. Brookfield et al., “Liberalization.”

46. Given the relationships between different local companies owned by these MNEs, they are labeled as BGs by the Chilean regulator.

47. Khanna and Yafeh, “Business Groups”; Majluf et al., “Governance.”

48. Six BGs appeared in three of the four benchmark years (Guilisasti, Errázuriz, Yarur, Briones, Marín-Correa, and Claro). It is interesting to note that some of these groups existed in 1970, and probably throughout the whole period, but were not classified as such by the Chilean SVS. Forty-three appeared in two benchmark years, and 97 BGs were present in only one period each.

49. Bortolotti and Perotti, “From Government.”

50. The Economist, “State Capitalism.”

51. For an interesting historical analysis of some of these issues, see also Frieden, “The Modern Capitalist.”

52. Musacchio and Lazzarini, “Leviathan in Business,” 3–4.

53. Ibañez, Herido.

54. Hernán Briones refers to these problems when he recalls the founding of Cementos Bío Bío in the late 1950s. See Briones, 90 años.

55. Muñoz and Arriagada present a list of the investments undertaken by this organisation in 1943; see “Orígenes politicos,” 5–58.

56. Garretón and Cisternas, Algunas características, 74–77.

57. Khanna and Yafeh, “Business Groups.”

58. Ortega, Corporación.

59. Ibáñez, “El liderazgo.”

60. On these points, see for example the histories of the Banco del Estado de Chile and the Compañía de Aceros del Pacífico: Echenique and Rodríguez, Historia de compañía; Cordero, Historias del Banco.

61. Menges, “Public Policy.”

62. When in 1991 the Chilean state was first classified as a BG, it had much fewer associated firms; the state BG was presented closer to its actual size in 1996, when the SVS assigned it 23 affiliated companies.

63. Montero, La revolución; Larraín and Vergara, La transformación.

64. Salvaj, “Cohesión.”

65. Bucheli and Salvaj, “Embrace Your Enemy.”

66. Etzion and Davis, “Revolving Doors,” 1. This type of analysis is also possible in the context of the military government. After all, one should recall that many members of the economic team in the Chilean military participated in the private sector since the 1980s, and many have been board members of important BGs.

67. Hoskisson, Eden, Lau, and Wright, “Strategy in Emerging Economies.”

68. Colli, Rinaldi and Vasta, “The Only Way to Grow?”

69. Khanna and Yafeh, “Business Groups.”

70. For comparative studies, see Bucheli and Salvaj, “Multinational Corporations”; Lluch and Salvaj, “Longitudinal Study”; Lazzarini, Capitalismo de Lacos.

71. Khanna and Rivkin, “Interorganizational Ties”; Pak, Gentlemen Bankers; Lluch et al., “Corporate Networks.”