Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Bankers, Industrialists, and Their Cliques: Elite Networks in Mexico and Brazil During Early Industrialization
    05 Jul 2006Working Paper Summaries

    Bankers, Industrialists, and Their Cliques: Elite Networks in Mexico and Brazil During Early Industrialization

    by Aldo Musacchio and Ian Read
    Mexico and Brazil had different institutional structures in the early 20th century. Did entrepreneurs in these two countries organize their business networks differently to deal with the different institutional settings? And, how can we compare the impact of the institutional structure of Mexico and Brazil on the networks of entrepreneurial finance and entrepreneurship in general? In this research, Musacchio and Read look at the networks of interlocking boards of directors of major joint stock companies in two large Latin American societies in 1909. Key concepts include:
    • Business networks were more important for entrepreneurs, bankers, and politicians in Mexico, supplanting formal institutions to the great benefit of connected Mexican elite.
    • In Mexico, informal monitoring and enforcement provided by the network compensated for the relatively weak rule of law.
    • The Mexican network successfully substituted for formal institutions because it included many politicians. In Brazil, politicians were uncommon in the network because of the stronger formal institutions.
    • At low levels of development, there is no significant difference in how a country grows, either through strong formal institutions or by substituting networks for some of those institutions.
    LinkedIn
    Email

    Author Abstract

    The historiographies of Mexico and Brazil have implicitly stated that business networks were crucial for the initial industrialization of these two countries. Recently, differing visions on the importance of business networks have arisen. In the case of Mexico, the literature argues that entrepreneurs relied heavily on an informal institutional structure to obtain necessary resources and information. In contrast, the recent historiography of Brazil suggests that after 1890 the network of corporate relations became less important for entrepreneurs trying to obtain capital and concessions, once the institutions promoted financial markets and easy entry for new businesses. Did entrepreneurs in Brazil and Mexico organize their networks differently to deal with the different institutional settings? How can we compare the impact of the institutional structure of Mexico and Brazil on the networks of entrepreneurs and entrepreneurial finance in general? We explore these questions by looking at the networks of interlocking boards of directors of major joint stock companies in Brazil and Mexico in 1909. We test whether in Mexico businessmen relied more on networks and other informal arrangements to do business than in Brazil. In Brazil, we expect to find less reliance of businesses on networks given that there was a more sophisticated system of formal institutions to mediate transactions and obtain capital and information. Our hypothesis is confirmed by three related results: 1) the total number of connections (i.e., the density of the network) was higher in Mexico than Brazil; 2) In Mexico there was one dense core network, while in Brazil we find fairly dispersed clusters of corporate board interlocks; and most importantly, 3) politicians played a more important role in the Mexican network of corporate directors than their counterparts in Brazil. Interestingly, even though Brazil and Mexico relied on very different institutional structures, both countries grew at similar rates of growth between 1890 and 1913. However, the dense and exclusive Mexican network might have ended up increasing the social and political tensions that led to the Mexican Revolution (1910-1920).

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: April 2006
    • HBS Working Paper Number: 06-048
    • Faculty Unit(s): Business, Government and International Economy
      Trending
        • 17 Jan 2023
        • In Practice

        8 Trends to Watch in 2023

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 10 Jan 2023
        • Research & Ideas

        How to Live Happier in 2023: Diversify Your Social Circle

        • 24 Jan 2023
        • Research & Ideas

        Passion at Work Is a Good Thing—But Only If Bosses Know How to Manage It

    Find Related Articles
    • History
    • Banking
    • Latin America
    • South America

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College