The Networked Boardroom: Director Network Centrality and Firm Performance in Malaysia

Abstract

Achieving consistent firm performance is a crucial issue in strategic management and corporate governance research. This study uses Social Network Theory to present a network-based perspective and Resource Dependence Theory to suggests that directors' networks can serve as strategic governance resources. These networks help firms obtain essential external resources and reduce their dependence on the environment, thereby improving firm performance, as indicated by changes in return on assets. Additionally, the study claims that directors with extensive and influential interlocking networks give firms easier access to valuable information, legitimacy, and resource pathways. This support enhances strategic decision-making, resulting in better performance. Using secondary data from 579 publicly listed Malaysian firms in the consumer products and services sectors between 2017 and 2019, and applying content analysis of social networks and panel regression methods, the findings firmly back the proposed framework. The results indicate that a director's network positively and significantly impacts firm performance across all centrality dimensions. This finding means that firms with more centrally located and well-connected directors achieve better performance improvements. Overall, this study emphasizes a director's network as a unique source of performance advantage, distinct from traditional governance methods. By combining network-based corporate governance with the dynamic capability perspective, the study broadens our understanding of how firms in emerging, relationship-driven institutional settings use director networks to boost adaptive efficiency and maintain performance improvements.