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I develop a multi-sector model to examine the network implications of idiosyncratic volatility spillover, conceptualizing firms as nodes and inter-firm idiosyncratic risk spillover effects as directed edges. I introduce two factors to characterize the network dynamics: the Risk-Dominance factor, which quantifies the dominance in risk propagation, and the Risk-Intensity factor, which measures the average inter-firm spillover intensity. In equilibrium, higher Risk-Intensity and lower Risk-Dominance impede risk diversification and increase aggregate volatility. Empirically, I construct the network factors using stock data and validate the underlying mechanism. Consistent with the model, I find annual return spreads of +5% and -4% on Risk-Dominance and Risk-Intensity beta-sorted portfolios, respectively.