Small Worlds Evolving: Governance Reforms, Privatizations, and Ownership Networks in Italy

Abstract

How do ownership networks among business enterprises evolve over time? What roles do corporate governance reforms and privatization programs play in shaping the structural characteristics of these networks? This article addresses these questions by leveraging on small-world analysis techniques applied to the ownership networks among Italian enterprises in 1990 and 2000. Italy underwent a significant program of privatizations over the decade under study, coupled with changes in the corporate law aimed at strengthening the defense of minority shareholders. The data show signs of significant fragmentation of the overall network, but at the same time of stability in the structure of its main component, as measured by small-world coefficients. Further, the role of the key players in the network seems to remain relatively stable despite the major turbulence at the institutional level as well as in the structural characteristics of the complete network.