Social Network and Firm Performance: An Empirical Analysis of Canadian Boards

Despite a still low level of theorization of firm’s management, we have some proposals pointing in the direction of an effect of the Board composition on the performance. The Resource based view of the firm would explain this relationship by the social capital (networks) of Board’s members. This study examines the influence of social relationships of board of directors’ members on the performance of the firm using a sample of the 100 largest listed Canadian companies. Social relationships are measured by three factors: economic affiliations, political affiliations and social affiliations. The performance of the firm is measured by the return on assets. The results of regression analysis suggest that only the political affiliations of board of directors’ members have a significant although negative impact on the performance of the firm. These results suggest that separating business and politics might be a good idea as politics appear to be harmful to business.