The Social Times of Network Spaces: Sequence Analysis of Network Formation and Foreign Investment in Hungary, 1987-2001

Abstract

To model, from its inception, inter-enterprise network formation and its interaction with foreign investment across an entire epoch of rapid and profound economic transformation, we gathered data on the complete ownership histories of 1,696 of the largest Hungarian enterprises from 1987 to 2001. We develop a combination of network and sequence analysis to identify distinctive pathways whereby firms use network resources to buffer uncertainty, hide or restructure assets, or gain knowledge and legitimacy. During the period, networked property grew, stabilized, and involved a growing proportion of foreign capital. Cohesive networks of recombinant property were robust, and in fact integrated foreign investment. Although multinationals, through their subsidiaries, dissolved ties in joint venture arrangements, we find evidence that they also built durable local networks. Our findings suggest that developing economies do not necessarily face a forced choice between networks of global reach and those of local embeddedness.