Do Family Networks Matter? An Analysis of Chaebols’ Organizational Structure on the Samsung vs. Apple Rivalry

Abstract

This thesis investigates the effect of the chaebol organizational structure, which is essentially a family network, on the returns of Samsung Electronics, a global leader in smartphone production, as a case study. It measures this effect first for Samsung Electronics alone in absolute terms and then in relative terms against its global competitor Apple to see if the network provides a competitive advantage. Using data over the time period 2001-2015, the multifactor regression analyses find that cross holdings have a positive association with Samsung’s returns, while direct ownership by the holding family has a negative association, and the number of affiliates in the Samsung Group has a small, negative association, indicating that ownership by the holding family is not always profit-maximizing for the affiliate and that cross holdings are important for returns. Surprisingly, Apple’s returns are impacted by Samsung’s network variables in a very similar manner, suggesting that the market may view Samsung and Apple as producers of complements rather than substitutes. Because the network variables affect both companies’ returns similarly, most of them are not significant in explaining the difference in the two companies’ returns.