Europe, like other regions around the globe experienced a considerable ‘structural break’ during the 1990s due to extensive liberalization policies. Indeed, European countries were involved in a unique project of harmonization and coordination of their policies within the framework of the European Union. These changes had multiple consequences for the functioning and organisation of European economies, including non-EU members. However, there has been little exploration of their consequences for the national corporate governance regimes. In this chapter we analyze the impact of structural breaks related to the liberalization and integration of European markets, on a core aspect of corporate governance regimes: corporate networks. Corporate networks are part of the institutional framework of national economies. Typically, the architecture of these networks reflects the national varieties of capitalism. Corporate networks can be expected to be affected by liberalization and market integration. Indeed, networks of interlocking directorates and capital ties may serve as a competition regulating mechanism and have been often considered a sign of collusion. We would hence expect networks to be weakened by increasing liberalization of formerly ‘coordinated market economies’ CME. Different studies find indeed signs of a certain ‘decomposition’ of corporate networks in Europe in terms of their overall density and/or connectivity. However, it has been argued that these changes in network structure do not necessarily affect their function. Thus, Kogut and Walker (2001) have shown for the German case that despite considerable changes in network density, the network maintained its “small world” characteristics, and could still play its role as institutional infrastructure for coordination, information exchange, and control. Small World networks facilitate fast information diffusion given their short average path length, and this property operates also in sparse networks. We argue, however, that small world measures might not be sufficient to explain the paths followed by corporate governance regimes. Indeed, small world coefficients, as any structural approach, can help us understand how network structures constrain or facilitate actors’ behavior. At the same time, by neglecting the identities and the behavior of these actors, small world analysis of corporate networks may lead us to posit continuity in coordinated market economies – based on the continuity in the structural features of the network, – while important changes actually took place. In this chapter, we analyze the evolution of corporate networks in three countries belonging to the German variety of capitalism (Germany, the Netherlands, and Switzerland) and three belonging to the Latin type (France, Italy, and Spain) by comparing their ownership and interlock networks for two points in time, one in the early 1990s one in the early 2000s. We first show that, in terms of network topology, the countries follow multiple change trajectories but they also experience some convergence. This continuity and convergence does not necessarily translate into the reproduction of the same corporate governance form. Change may be hidden beneath the persistence in topological and functional characteristics of the network. We argue that despite a certain ‘convergence’ in network structures, the implications of these changes for the functioning of the economy largely depend on agency. In other words, corporate network are first and foremost opportunity structures for social action. The impact that structural breaks will have on a national production system depends very much on which actors use these opportunity structures and how they use them. Similar changes in network structures, may indeed lead to very different outcomes across countries.

Structural breaks and governance networks in Western Europe

CORRADO, RAFFAELE;
2012

Abstract

Europe, like other regions around the globe experienced a considerable ‘structural break’ during the 1990s due to extensive liberalization policies. Indeed, European countries were involved in a unique project of harmonization and coordination of their policies within the framework of the European Union. These changes had multiple consequences for the functioning and organisation of European economies, including non-EU members. However, there has been little exploration of their consequences for the national corporate governance regimes. In this chapter we analyze the impact of structural breaks related to the liberalization and integration of European markets, on a core aspect of corporate governance regimes: corporate networks. Corporate networks are part of the institutional framework of national economies. Typically, the architecture of these networks reflects the national varieties of capitalism. Corporate networks can be expected to be affected by liberalization and market integration. Indeed, networks of interlocking directorates and capital ties may serve as a competition regulating mechanism and have been often considered a sign of collusion. We would hence expect networks to be weakened by increasing liberalization of formerly ‘coordinated market economies’ CME. Different studies find indeed signs of a certain ‘decomposition’ of corporate networks in Europe in terms of their overall density and/or connectivity. However, it has been argued that these changes in network structure do not necessarily affect their function. Thus, Kogut and Walker (2001) have shown for the German case that despite considerable changes in network density, the network maintained its “small world” characteristics, and could still play its role as institutional infrastructure for coordination, information exchange, and control. Small World networks facilitate fast information diffusion given their short average path length, and this property operates also in sparse networks. We argue, however, that small world measures might not be sufficient to explain the paths followed by corporate governance regimes. Indeed, small world coefficients, as any structural approach, can help us understand how network structures constrain or facilitate actors’ behavior. At the same time, by neglecting the identities and the behavior of these actors, small world analysis of corporate networks may lead us to posit continuity in coordinated market economies – based on the continuity in the structural features of the network, – while important changes actually took place. In this chapter, we analyze the evolution of corporate networks in three countries belonging to the German variety of capitalism (Germany, the Netherlands, and Switzerland) and three belonging to the Latin type (France, Italy, and Spain) by comparing their ownership and interlock networks for two points in time, one in the early 1990s one in the early 2000s. We first show that, in terms of network topology, the countries follow multiple change trajectories but they also experience some convergence. This continuity and convergence does not necessarily translate into the reproduction of the same corporate governance form. Change may be hidden beneath the persistence in topological and functional characteristics of the network. We argue that despite a certain ‘convergence’ in network structures, the implications of these changes for the functioning of the economy largely depend on agency. In other words, corporate network are first and foremost opportunity structures for social action. The impact that structural breaks will have on a national production system depends very much on which actors use these opportunity structures and how they use them. Similar changes in network structures, may indeed lead to very different outcomes across countries.
The Small Worlds of Corporate Governance
151
182
F. Ferraro; G. Schnyder; E. Heemskerk; R. Corrado; N. Del Vecchio
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/109281
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