Reinhard Bachmann (University of London, U.K.)/Christoph Clases, Albert Vollmer and Theo Wehner (Institute ETH Zürich, Switzerland)
How to Understand the Creation and Erosion of Trust in Virtual Organizations'
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In the last decade or so trust has increasingly been recognized as a central category in explaining both the structure and the dynamics of business relationships. This holds for research in organization theory, economic sociology as well as occupational psychology. From the authors' point of view, the relevance of trust is particularly striking in the case of so-called virtual organizations. The performance potential of virtual organizations is deeply rooted in their capacity to develop and continuously reproduce trust-based relationships among their members. As being argued widely in the literature, trust not only fosters the willingness of partners to cooperate (Loose and Sydow 1994; Wehner, Clases and Bachmann 2000) but also significantly lowers transaction costs in exchange relationships (Zaheer, McEvily and Perrone 1998). Trust, in other words, can help to reduce complexity, particularly in hybrid forms of collaboration, e.g. in virtual organizations. Following Luhmann (1979), we assume that trust represents a functional equivalent to other forms of complexity reducing mechanisms such as, for instance, power, but also has valuable characteristics which, in many contexts, makes it preferable to other coordination mechanisms.
Virtual organizations can be seen as a paradigmatic field for investigating dimensions of trust in inter-organizational collaboration. The socio-economic regime governing virtual organizations can neither be reduced to principles of market-behaviour nor can it be described in terms of hierarchy and authority. In the context of virtual organizations, contracts represent mechanisms for selecting partners and are a means of constraining opportunistic behaviour. Nevertheless, trust plays a crucial role in hybrid forms of cooperation and it may not be opposed to contracts, nor may contracts be looked upon as a self-sufficient means of generating trust (Bachmann 2001).
In this paper we pursue two general aims. The first is to argue in favour of an innovative methodological approach to analysing the meaning of trust in virtual organizations. The second aim is to present empirical results from a study in the meaning of trust in two Swiss and one Swiss-German virtual organizations in the engineering sector (Clases, Bachmann and Wehner 2003).
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Olivier Butzbach (European University Institute, Italy)
E-mail: olivier.butzbach@iue.it
Understanding Sectoral Change: The Case of Italian Savings Banks
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What constitutes a sector, why does it exist, and why does it change? Economic sociology literature (with authors such as Hollingsworth and Whitley) has produced useful concepts to answer those questions, such as the distinction between top-down (regulation) and bottom-up (market forces) factors. Building on this literature and on an analysis of balance sheet data and a series of semi-structured interviews with bank staff, this paper seeks to explain the changes undergone by the Italian savings banks sector over the past two decades. The latter provide a good case for the study of sectors. In the late 1970s, Italian savings banks formed a distinct and cohesive, though heterogenous sector; in the late 1990s, by contrast, savings banks no longer existed as a distinct category, and individual banks pursued divergent strategies. Regulatory changes (de-segmentation in particular) did play a major role in re-drawing sector boundaries, while increased competition undermined savings banks' sectoral cohesion. But those two exogenous factors do not suffice to explain change; in particular, they do not help understand the persistent sectoral specificities displayed by most small and medium savings banks. Change in sectoral boundaries resulted from endogenous dynamics as well, such as economic compartmentalization and organizational path dependence.
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Kuangchi Chang (University of Wisconsin-Milwaukee, USA)
E-mail: kcchang@uwm.edu
Keeping Companies: The Formation Process of Relational Embeddedness
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This paper presents a process model of network formation in situations of steady and repeated economic transactions among companies. I explain how relational embeddedness emerges, establishes, and stabilizes in a formal exchange inter-firm relationship through different stages, and suggest that different factors throughout these various stages may contribute to the degree of relational embeddedness. Embeddedness, I argue, is a concept that not only is about how social relations shape actors' economic behaviors, but also includes the possibility that actors' social behaviors are affected by their economic relationships. Embeddedness development, therefore, is a dynamic and evolutionary process involving actors' interactions and learning, where actors construct social structures in which they are embedded and at the same time are influenced by the social structures in which they participate and help develop. In this development process, even small events in the earlystage of the process may have significant effects on the degree of embeddedness. This development process is further illustrated using ethnographic evidence from my fieldwork in Taiwan's computer motherboard industry.
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Elena Danilova (Insitute of sociology, Russian Academy of sciences, Russia)
E-mail: elenadan@mtu-net.ru
Role of Informal Arrangements in the Russian Taxation Regime
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This paper aims to describe a context of the relationship between taxation bodies and taxpayers in Russia, mostly at a lower level and to identify the principal factors affecting taxpayer behavior with respect to compliance with tax legislation and factors that promote the spread of informal and corrupt practices among tax service employees. Based on the substantial empirical data obtained through surveys and ethnographic study the paper argues that the role of informal arrangement is important in taxation regime, which lacks or avoids clear cut formal rules. Ad-hoc arrangements, corruption and tax evasion are not only wide-spread, but frequently justified by the both sides of the taxation mechanism. Informal arrangements configure certain "rules of the game", and contain a danger to be transformed into "norms-in-use" which may effect the institutional level. The paper questions the relations of tax inspector and taxpayer as those who are on the opposite sides of ˜the barricade". Both the rank-and-file tax inspectors and taxpayers are rather on the same side, but in opposition to the higher level tax authorities and the state.
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Cristina de Abreu (Universidade Portucalense, Portugal)
E-mail: cabreu@upt.pt
Cooperative Industrial Alliances as a Proxy for FDI Regulation
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This paper focus on the architecture of a conceptual and empirical socio-political-economic model explanatory of Japanese FDI Forms in Europe and USA. These Revealed Modes of Entry serve as a proxy for effective, but non-official Regulation, in the automobile industry. This model breaks with the orthodox theory-I view Forms of Japanese FDI as an emerging Rent-Seeking result over potential receptors Nation-States in the context of a globalized and exceptionally informed world. I follow Public-Choice theory and methodology articulated with three additional theoretical fields-Social Anthropology, Cognitive Social Psychology and Nations History.
At the empirical level specific determinants of Japanese FDI Regulation are identified by means of an Ordered Probit panel model. The dependent variable-degree of Japanese FDI Regulation-is a categorical ordered variable with three levels mutually exclusive, which capture the level of Japanese capital participation and the revealed modes of entry. This structure is first used for estimations following the Rent-Seeking model tout court. At a second level of the research I introduce a socio-cultural matrix which allows capture conditioned effects of the exogenous variables.
Finally I submit to empirical validation the main hypothesis: Non-Equity Cooperative Alliances, which dominate in Continental Europe, configure a proxy for anti-FDI Regulation.
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Julio Cesar Donadone (Universidade federal de São Carlos, Brazil)
E-mail: donado@power.ufscar.br
The Growth, Diversification and Forms of Dispute of the International Market for Consulting and their Relationships with the Forms of Corporate control and the Changes in the Space and Activity's Form of the State
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Over the last two decades, consulting firms, as a group, stand out among the most dynamic global organizations.So, the article's focus is on the market of international consulting in an effort to identify the major characteristics and the main changes during these last decades, the growth, the way these consulting firms operate and their relationships with with the forms de coorporate control, especialy pension funds, and the changes in the space and activity's forms of the state
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Shawn Donnelly (University of Bremen, Germany)
E-mail: donnelly@uni-bremen.de
Negotiating European Company Legislation
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European company law, and takeover law in particular, has developed rapidly since 2001. This paper presents research on the politics of establishing the relevant directives, including the European Company Statute and the Takeover Directive, showing how the impact of inherited institutionalised norms and values had a greater impact on both decision makers and lobby groups than epistimic communities within the European Court of Justice, the Commission, and the High Level Group of Company Law Experts when establishing legislation.
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Halis Yunus Ersoz (University of Istanbul, Turkey)
The Effects Of Privatization On The Industrial Relations Through Employee Ownership: Kardemir Case
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Privatization is not a concept with an economic content only; it has also important social effects. The shift of an enterprise from the public to private sector also results in radical changes in its administration and labor and industrial relations practices. Employer-employee relations, union activity and collective bargaining traditions, working conditions, wages and career systems are exposed to some radical alterations. As a result, employees and their organizations turn out to be the most affected parties in the process.
In this study changes in industrial relations as a result of what may be termed joint privatizationare explored in Kardemir Inc. where the shares were bought by the investors and the employees in designated ratios. The outcome was an appropriate combination of internal buyers where the enterprise was bought by the managers and employees of the enterprise and the external agents from the private sector that obtained the enterprise ownership from the state. Our study has focused on its industrial relations implications by administering a questionnaire as part of a field research project.
An employee ownership procedure has been used in the privatization of Kardemir, as the leading method which apparently decreases adverse social effects of privatisation. Here the positive effects of the employee ownership procedure must be stated. Similarly, for the first time in Turkey, Karab
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Henry Farrell (University of Toronto, Canada)
E-mail: farrell@utsc.utoronto.ca
Autonomous Authorities or Points of Control? The Changing Role of State-Private Actor Relations in the Governance of E-Commerce
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The Internet and other new communications technologies are throwing up new political challenges for policy makers. In spite of predictions that these technologies would undermine state authority, states have shown themselves able to adapt to these technologies, and to reapply them to their own purposes. However, the means that states have used to do this are poorly understood. In many instances, states have worked at a remove, using private actors as proxies to carry out their policy preferences. When are states likely to succeed in their objectives, and when not? What are the consequences of state choices for regulatory outcomes? In this paper, I propose to provide initial answers to these questions through the controlled comparison of cases in the regulation of information. The paper examines three cases, drawn from disputes between the EU and US where states have chosen to work through private transnational actors, testing a framework that draws its basic propositions from bargaining theory and the 'varieties of capitalism' literature, and examining the consequences of new state-private actor relationships for politics at both the international and domestic levels.
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Jean-Michel Glachant, Ute Dubois and Yannick Perez (ADIS research centre, University of Paris XI, France)
E-mail: jean-michel.glachant@univ-paris1.fr/groupe.electricite@jm.u-psud.fr
Deregulation with no Regulation: Is Germany Electricity Transmission Regime Institutionally Correct?
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It seems hard to believe that electricity transmission lines can be open to "third party access" only with a "negotiated access regime" and no regulator supervision. It seems contradictory with the notion of "ex post contractual hazards" promoted by V. Goldberg and O. Williamson. If such a weak institutional arrangement is really implemented it actually has to be harmful to network and market access. If not, why and how could it work? 1° when looking in Germany at rules and prices for accessing the transmission network and the corresponding wholesale markets, the "club" arrangement for transmission opening doesn't appear so harmful. 2° accordingly we have to reconsider the ex ante and ex post institutional mechanism of such a "club" arrangement. Ex ante we first reconsider skills and strength of industrial consumers and German Business associations in defining and assessing rules of transmission access, as well as weaknesses coming from incomplete vertical and horizontal integration of German electricity companies impeding extensive cartel collusion. Ex post we first look at a strong Competition Authority backing. Then we discover that ex ante and ex post dimensions are much more mixed and reinforced in an open "cumulative pro-competition process" framed by the Competition Authority.
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Emiliano Grossman (CEVIPOF/Sciences Po Paris, France)
E-mail: emiliano.grossman@sciences-po.fr
The French financial system: Closing the Statist Interlude?
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This paper discusses the evolution of the role of the French state in French finance. Building on Verdier's work on "state banking", we analyse the way in which the reforms of the past twenty years have transformed the French state-finance nexus.
It is true that strongly centralized states, such as France, have been able to reform and liberalise finance more quickly than more decentralized states. The high degree of concentration and the convergence of the strategies of the major banking groups provide clear evidence. However, some elements of the former regime still remain.
Compared to states with less important state-banking traditions, current restructurings and reforms still reveal a great degree of state presence and interest. This is true, first, for the creation of major national banks, able to face the challenge of international competition. Second, the state also continues to try to orient credit allocation to some extent. Finally, the ambiguity of the "destatification" of the French financial system remains clearly visible in the area of regulatory reform and architecture.
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Roberto Grün (Universidade Federal de São Carlos, Brazil)
E-Mail: grun@power.ufscar.br
Corporate Governance in Brazil: From a "Neo-liberal Zealot" Issue to a "Practical Consultant" Business*
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Firstly, in the mid-90', corporate governance was a issue of a bunch of Brazilian Lawyers and Economists coming back to the US Universities with PHD or MBA degrees seeking to find a place in the very crowded market for Corporate and nationwide economical solutions. Their approach was "Do-exactly-as-in-the-US". So they founded the Brazilian Institute for the Corporate Governance and they pushed for a very deep reform in the Brazilian Corporate Law. Some of these zealots were recruited for important economical governmental posts and most of them had easy access to the business press, so they made their case: adopt the good corporate governance will bring the Brazil in the Economic "I World". Eventually their militancy had just a halfway success. The new Brazilian Corporate Law enhanced some minorities' rights and the CVM - the Brazilian SEC - gained more powers. But their main issues on takeover and accounting issues remained untouched.
Meanwhile, with the diffusion of corporate governance as a kind of social and cultural movement, Brazilian consultants "tropicalized" the subject. Their approach is to sell Corporate Governance as a device to regulate dynastic successions for the mainly familiar Brazilian big economic groups. In the other hand, the political left-wingers closed to the President Lula made their moves too. Some of them were former pension fund's managers, others were very closed to that industry. So, they pushed for a deeply change in the corporate law suited for their empowerment in the battle for the funds' control and vis-à-vis the financial markets, to prove their allegiance to the Capitalist order.
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In the end, pushed for those Social Actors, we are seeing in Brazil a kind of "re-inventing-the-wheel" diffusion of Corporate Governance. My aim in the paper is to present a chronology and some of the results of that process.
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Eelke Heemskerk (University of Amsterdam, The Netherlands)
E-mail: e.m.heemskerk@uva.nl
Corporate Ownership and Governance Issues: The Netherlands in Comprative Perspective
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The idea that there are several modes market organization has gained momentum in the past few years. The 'varieties of capitalism' literature tries to understand the differences in the constellation of institutions, and their comparative advantages. Typologies include coordinated vs liberal market economies, Rhineland vs Anglo-American, or Stakeholder vs Shareholder regimes. Although quite compelling in a way, these approaches often neglect the fact that at both ends of the gamut, networks and embeddedness play an important role in the economy.
This paper asks the question whether and how networks can be used to understand and classify certain economic systems. The case under study is the Netherlands, an open and internationally oriented economy. We will map the ownership relations that underpin the Dutch corporate community. It will be shown, that ownership ties serve to maintain hierarchies within the business community. We compare these findings with network relations in several other countries in search for characteristic and common elements. We conclude with some preliminary findings on convergence between corporate regimes with different origins.
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Utz Hoeser (UADE, Argentina and CSO/CNRS, France)
E-mail: uhoeser@uade.edu.ar
Towards a Market for Development Projects? Multilateral Development Banks Formatting their Contexts
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Multilateral development banks (MDBs) are the key organizational arrangement "developed" countries use to channel aid (loans, subsidies and expert advice) to "developing" countries in order to promote economic growth. MDBs are among the most powerful and most strongly criticized economic institutions that exist today. This paper, based on more than 200 semi-directive interviews with actors within and around MDBs, analyses the latter as organizations that operate under extreme uncertainty and with unusually long operating horizons. Using Callon's (1998) concept of "formatting calculative agencies" and taking into account recent developments in the sociology of markets, we argue that MDB staff, in order to increase the calculability of its actions and reduce the extreme complexity of their interventions, create "clients" and "projects" that can be analyzed according to economic criteria of worth. Projects are transformed into commodities that can be exchanged in market-like transactions. Competition among MDBs for the best projects has emerged as a consequence. Beginning public criticism of the overflows of this frame (due mainly to its social and economic impacts) has motivated the internalization of additional criteria of worth in the evaluation of projects. Paradoxically, however, reform has led to even greater discontent with MDB action.
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Kriti Jain (Delhi University, India)
E-mail: jka050855@hotmail.com
The OECD, Developing Nations, and Applying Corporate Governance-Conceptual Issues and Frameworks
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There is research evidence that large family-controlled businesses have successfully contributed to the tasks of social responsibility and good citizenship, supporting economic and social infrastructure growth. In India, for example, insider models (that includes State-controlled corporations) have created Institutional foundations for industrial growth. In such cases, there has been little or no 'conflict of interests' between creating shareholder value and stakeholder value, as determined by the markets. A State-controlled undertaking holds today the No 1 rank of largest market capitalized firm in India.
This paper deals with these issues, and creates a framework for policy-making and Institutional capacity building. It argues that for most developing countries, the main issue apart from quality of corporate governance is improving Institutional capabilities and capacities for bringing about increased awareness about the rights and responsibilities. The State has to create credible institutions that help maintain a credible economic and financial system in place. These include the various Regulators, Municipalities, Development Boards, Land Allotment agencies, etc. These Institutions have to spend time to have a relook at their 'value-proposition' - they must put in shape new codes, rules, bye-laws, Acts, and rating systems. Market distortions often originate at such places.
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Guillermina Jasso (New York University, USA)
E-mail: gj1@nyu.edu
Distributive Justice and CEO Compensation
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This paper develops a framework for studying individuals' ideas about what constitutes just compensation for chief executive officers (CEOs) and reports estimates of just CEO pay and the principles guiding ideas of justice among students pursuing a Master's of Business Administration (MBA) degree in Sweden and the United States. The framework, based on justice theory and making use of Rossi's factorial survey method, enables assessment of three main sets of quantities: (1) the just CEO compensation, in the eyes of each observer; (2) the principles of microjustice - observers' ideas about "who should get what" based on characteristics of CEOs and their firms; and (3) principles of macrojustice - ideas about the just variability in compensation across all CEOs. Discerning ideas of justice about CEO compensation is important because substantial gaps between actual CEO pay and what people regard as just CEO pay generate judgments of injustice, setting in motion a train of negative consequences for economy and society. In the first application of the framework, reported here, we target one pivotal segment of the population - MBA students - in two countries, Sweden and the United States, generating three samples, Swedish male MBA students, Swedish female MBA students, and U.S. male MBA students. Our main findings are: First, there is substantial inter-individual variation in the principles of justice. Second, there is remarkable similarity in the distributions of the principles of justice across the three samples, suggesting the existence of a global business culture which, consistent with ideals of risk, innovation, and individualism, accommodates wide individual differences. Third, estimates of the principles of microjustice provide a variety of useful and suggestive results, such as higher just rate of return to schooling in the eyes of Swedish men (8-9%) than in the other two samples (5-6%) and a median elasticity of just CEO compensation with respect to firm capitalization in the range of .14-.26%; further, the median respondents regard as just an amount of pay for women CEOs that is 84% to 94% that of otherwise identical male CEOs. Fourth, estimates of the principles of macrojustice indicate that the MBA students regard as just rather high levels of inequality in CEO compensation (e.g., median Gini index values of .76-.78), possibly dulling the senses to economic inequality in the larger population, where a Gini of .50 would be considered too high by most observers.
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Raimund Hasse and Håkon Leiulfsrud (RWI - Institute for Economic Research, Germany, and NTNU, Norway)
E-Mail Addresses: hasse@rwi.essen.de and hakon.leiulfsrud@svt.ntnu.no
Formal Organization as Mediator of Stratification - Some Notes on a Neglected Impact of Institutional Factors
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Organization theory based on Charles Perrow and Klaus Türk, and Charles Tilly's work on durable inequality, suggest that organizational factors have profound impacts on social differentiation. Our aim is to outline a perspective that considers formal organizations as mediators, maybe even as generators, of social stratification. Firstly, we highlight upon the neglect of organizational factors in prevailing concepts of inequality research. This is done with reference to traditional and more recent contributions to stratification research in general, and to class analysis in particular. Research in this field often tends to define classes on the bases of occupations and the micro context of work. In a second step stratification and its change across time and space will be related to prevailing organizational structures. In so doing, emphasis is on the business firm and its organizational form which profoundly influence the composition of occupations and the micro context of work. Thirdly, it will be argued that organizations neither are fully determined by market factors nor by the work process as such. Instead, institutional factors and managerial concepts of organizations have profound impacts on organizational structures. Institutional factors and managerial concepts thus affect both the organization of work and social differentiation. In the conclusion, reflections will be made on the extent to which organizational changes may contribute to a trend towards convergence in social stratification patterns and structures. Comparative data from European Social Survey 2002 will be presented.
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Christel Lane and Jocelyn Probert (Cambridge University, UK)
E-mail:
Between the Global and the Local: A Comparison of the British and German Garment Industry
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The garment/apparel industry is held to be one the most globalised industries of developed economies (Dicken 2003). This view is derived from the fact that most analyses of this industry to date have focused on the geography of production and the increasingly global organisation of the supply chain. The geography of trade in this industry, however, has received scant attention.
This paper will focus on the way garment firms in two developed countries respond to the pressures of globalisation, by examining both their supply chain organisation and their market strategy, including their relations with retailers. The paper thus will cover the whole network of relationships garment firms have established and demonstrate the interdependencies between their strategic responses in different stages of the value chain. We will show that relationships with both suppliers and customers have strongly defined these two national industries and their firms, albeit in different ways. Hence this study will demonstrate that, in many cases, a globally organised supply chain goes hand in hand with a totally domestically focused sales strategy, constraining also adaptation to globalisation in the organisation of other aspects of the firm and its value chain. .
By considering the cases of the British and German garment industries, this paper widens the perspective beyond an investigation mainly of the US case (e.g. Abernathy et al 1999; Gereffi 1994). It will be able to show that the US pattern is only one specific variant which has been over-generalised. Instead, it will be demonstrated that the institutional framework of both the industry and wider economy significantly have shaped both the development and current state of specific national garment industries. But the global context of the garments industry and the common pressures experienced by the two national industries also receives consideration. The information presented relies both on industry statistics and on early impressions from interviews, conducted in garment firms and retailers in both countries during 2003.
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Soo Hee Lee and Christine Oughton (Birkbeck College, University of London, United Kingdom)
E-mail: s.lee@bbk.ac.uk
Globalisation and National Diversity of Corporate Governance System
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Despite the widespread rhetoric of global convergence and market-led institutional reform, we argue that national specificity and societal variance of corporate governance systems are still conspicuously resilient in reality and pertinent to issues of regulation, policy and business strategy. Our discussion focuses on the limitations of agency theory and its primary objective, shareholder value maximisation, on the one hand, and the determinants and consequences of institutional diversity across societies on the other. In particular, we suggest that the integration of the literature on employee participation and innovation systems into comparative institutional analysis will serve as a promising alternative to shareholder-centred theories and policy prescriptions while complementing the arguments based on legal and political origins of national systems.
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Nicole Marwell (Columbia University, USA)
Paul-Brian McInerney (Columbia University, USA)
E-mail: npm8@columbia.edu
The Nonprofit/For-profit Continuum: Making Forprofit Markets from Nonprofit Activities
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A growing body of research has emerged on "mixed-form" markets, i.e., markets for goods and services in which for-profit, nonprofit, and government providers coexist. This paper seeks to understand the dynamics between for-profit and nonprofit organizations operating within the same market. We propose a five-step theoretical framework that includes both nonprofit and for-profit actors to capture what is fundamentally a temporal process: market identification; market growth; increasing cost for goods/services; increasing price for goods/services; and cross-sector competition. We use data from extended qualitative investigations in distinct service industries to analyze the unique contributions and capacities of each organizational form, and the transformation of market structure over time. We conclude that the dynamic interplay between nonprofit and for-profit forms within markets produces three possible outcomes: stratified, displaced, and defended markets.
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Sophie Muetzel (Hmboldt-University of Berlin,Germany)
E-mail: sophie.muetzel@sowi.hu-berlin.de
Business Discourses in the Innovative Cancer Treatment Research Market in Europe: Emergence of a Market
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The paper discusses preliminary findings of ongoing research, which aims to elucidate empirically and theoretically the structures and strategies in markets of innovations over time. The empirical analysis focuses on European biotechnology companies, which are integral in pioneering oncological research, specifically in breast cancer therapeutics. Complementing existing studies on the biotech industry, on institutional conditions, and on R&D strategies, the paper employs an original approach to explain changes and shifts in research over time: it examines the specific business discourses of the different players (buyers, sellers, and producers) involved in the innovative cancer treatment research market in Europe. The analysis of business discourses in science journals and newspapers shows that the market's players are engaged in conversations and disputes against and with each other. In observing and communicating with each other, market competitors are found to reevaluate and reconfigure their R&D strategies in order to establish a niche and secure an identity. Sequentially retracing developments in the emerging market of the mid 1990s, the analysis points to processes of translation and signaling. Markets are found to be created, used, and reproduced by participating actors in a network of discourse as the principal medium of this social construction.
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Nicole Pohl (Franklin & Marshall College, USA)
E-mail: nicole.pohl@fandm.edu
Japanese Corporate Governance and the Sarbanes-Oxley Act: Channels for International Convergence
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The Sarbanes-Oxley Act was the latest piece of U.S. securities legislation that was intended to apply not only to U.S. companies, but also to U.S.-listed foreign companies. The Act provides a useful case study for analyzing channels for the international convergence of corporate governance standards. While there is a relatively broad literature that takes a comparative perspective on corporate governance across countries, studies on the concrete channels for a possible convergence (versus persistence of varieties of capitalism) are more fragmented. Our paper aims to add to this second category of papers analyzing the particular implications of the Sarbanes-Oxley Act on Japanese corporate governance. One of the reasons for this choice is the fact that the most recent revisions of the Japanese commercial code have permitted new structures concerning the auditing functions of large companies that at first sight seem to resemble those postulated in the Act, but at second sight retain strong idiosyncratic features of the Japanese corporate governance system. This creates interesting challenges for Japanese companies exposed to U.S. standards.
We suggest that the direct impact on U.S.-listed Japanese companies is only one of several ways how the Act impacts on Japanese corporate governance models.
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Nicole Pohl (Franklin & Marshall College, USA)
E-mail: nicole.pohl@fandm.edu
Japanese Corporate Governance and the Sarbanes-Oxley Act: Channels for International Convergence
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The Sarbanes-Oxley Act was the latest piece of U.S. securities legislation that was intended to apply not only to U.S. companies, but also to U.S.-listed foreign companies. The Act provides a useful case study for analyzing channels for the international convergence of corporate governance standards. While there is a relatively broad literature that takes a comparative perspective on corporate governance across countries, studies on the concrete channels for a possible convergence (versus persistence of varieties of capitalism) are more fragmented. Our paper aims to add to this second category of papers analyzing the particular implications of the Sarbanes-Oxley Act on Japanese corporate governance. One of the reasons for this choice is the fact that the most recent revisions of the Japanese commercial code have permitted new structures concerning the auditing functions of large companies that at first sight seem to resemble those postulated in the Act, but at second sight retain strong idiosyncratic features of the Japanese corporate governance system. This creates interesting challenges for Japanese companies exposed to U.S. standards.
We suggest that the direct impact on U.S.-listed Japanese companies is only one of several ways how the Act impacts on Japanese corporate governance models.
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Vadim Radaev (Higher School of Economics, Russia)
E-mail: radaev@hse.ru
Winner Takes All? A Clash of Foreign and Domestic Retailing Chains in Russia
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Transnational retailers entered the domestic market in Russia at the edge of 2000s to bring fundamental shifts in the competitive environment. They make greenfield investment and introduce new store formats. They easily subordinate local producers and distributors by establishing buyer-driven commodity chains. Cut-price approach, wide product range and international standards of service are used to attract local customers.
This produces a serious challenge for domestic retailing chains emerged at the end of 1990s to replace traditional independent stores and open-air markets. Local retailers start struggling for the resources to expand. They elaborate new conceptions of control (N.Fligstein)and demonstrate a great capacity for intense structural and institutional isomorphism (P.DiMaggio, W.Powell) to imitate the leading international sellers before they establish themselves in the domestic market. Still the main problem to be resolved in a few years is whether the leading Russian sellers would survive or loose to be pushed out of the market as it happened to many local retailing chains in Eastern Europe.
Empirical data comes from two series of in-depth interviews conducted with the owners and top managers of 38 companies from two newly emerged business associations RATEC and ACORT (2001-2002).
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Vanessa Redak (Oesterreichische Nationalbank, Austria)
E-mail: vanessa.redak@oenb.at
Financial Governance, Private Agents and Financial Market Regulation: The Case of Basel II
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The Asian crisis of 1997 and other financial market turbulences sparked intensive debates on the need to redesign the international financial market architecture. In the course of re-regulation efforts, the focus has increasingly shifted from macroeconomic to microeconomic factors. More and more, the spotlight is on the behavior of individual financial market agents and institutions, be it a singular bank's approach to risk management with regard to Basel II, be it fraudulent practices of individual fund or corporate managers who - in the post-Enron debate - are blamed for the default of a company. Crisis prevention, which used to be a systemic task, is increasingly becoming a risk management task of individual agents and institutions. These institutions and agents, in turn, wish to reinforce their new role and therefore seek to influence the standards negotiated by financial regulators. By concentrating on the evolution of Basel II, this paper attempts to show to what extent the shift in regulatory policies in the financial sector has brought forth new forms and techniques of financial governance, and vice versa, how the action of individual agents has contributed to the development of new forms of financial market regulation.
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James R. Rhodes National Graduate Institute for Policy Studies, Japan)
E-mail: rhodes@grips.ac.jp
Japan's "Convoy System" of Financial and Economic Regulation
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During the "bubble economy," two radically different interpretations of Japan's political economy competed for attention. The "development state" interpretation argued that Japan's postwar economic success resulted from neo-mercantilist trade policies, market-distorting institutions, and micro-based regulation. Neoclassical and neo-institutional economists, following neo-liberal principles, argued that success was a consequence of relatively free markets and market-enhancing institutions. Ironically, these same principles have led some economists to deduce that Japan's post-bubble stagnation results from an overly-regulated economy. This paper argues that a more appropriate metaphor for Japan's political economy is "convoy system." This interpretation, popularized by bureaucrats, emphasizes the financial regulatory system at the heart of Japan's managed economy. This hybrid of the neo-liberal and development state systems is characterized by bureaucratically guided (financial) markets, macro-based regulation (financial policy), and significant market-displacing institutions (e.g. life-time employment and seniority-based wages and promotions). It is a neo-liberal mystery how this system could work so well for so long. This paper takes the mainstream theory seriously in attempting to resolve this puzzle.
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Joyce Rothschild (Virginia Tech University, USA)
E-mail: joycevt@aol.com
The Right to Dissenting Speech Vs. The Employment-at-Will Doctrine: A Collision in the Workplace
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In the past decade, employee disclosures of criminal or wrongful conduct on the past of their employer, what has come to be called 'whistleblowing', has burgeoned. Based on a multiple-year national study of whistleblowers in the US involving interviews with over 300 whistleblowers, the author discusses their understanding of their rights and obligations as citizens and as people, an understanding that often leads them to making their disclosures. The author then discusses how this citizen right to dissenting speech often comes to collide with management/owners' understanding of their right to hire and fire at will. Indeed, one of the most striking findings of this study is that the larger and more systemic the organizational wrongdoing that is the subject of the whistleblower's report, the more certain and severe the retaliation is likely to be. The public's interest in protecting such disclosures in the workplace is discussed, along with suggestions of structural organizational changes that would enable organizations to learn and self-correct in the face of critical information and before damages become magnified.
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Anna Sher (State University of New York at Stony Brook, USA)
E-mail: asher@ic.sunysb.edu
Overseeing the Wealth: Directors from the State, Corporate Networks and Groups in the Russian Economy
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One of the central issues in contemporary Russian politics is the outcome of the post-privatization struggle over industrial complexes involved in extracting and processing of the natural resources. Although these privatized companies gave rise to a number of powerful financial-industrial groups and private fortunes, the state has retained some amount of stock in them and remained involved in their governance. Based on the network analysis of a first-of-its-kind dataset of interlocking directorates among 100 largest industrial corporations and 47 leading banks in Russia, I show that there is a large component of 70 interconnected companies and banks, and several completely separate groups. In the center of the component and on its periphery, a number of cohesive subgroups can be identified. The network is centered on two largest industrial corporations of Russia and three banks, all of which have close relations to the state. In this paper, I will focus specifically on the "directors from the state": their representation on the corporate boards and their consequent position in the network.
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Jolanta Solnyskiniene (Kaunas University of Technology, Lithuania)
E-mail: jolanta.solnyskiniene@ktu.lt
Privatization, Peculiarities of Corporative Control and Property Control Efficiency in Lithuania
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Privatization in the East and Central Europe countries can be treated as the primary stage of property structure and corporative control system creation. Lithuania scientists analyzed property control and inspection efficiency, corporative control topic provide a lot of arguments, saying that property structure influences enterprise activity efficiency/productivity indicators. Having reorganized public enterprises to stock companies the primary corporative control system begun to form.
Transformation processes in the East and Central Europe countries have become specific scientific cognition and research object. However in economical research very different approaches to property structure and enterprise activity efficiency links are met, insufficient attention is paid to uniqueness of the conditions under which went and go property structure changes. Little number of scientific works shows that these problems are not widely examined in Lithuania.
In the paper preconditions of post-privatization property structure formation in the Baltic States are analyzed, are provided results of research about:
-Corporative control peculiarities in Lithuania stock companies Privatization peculiarities in the East and Middle European countries and its influence on the initial privatization structure formation, by emphasizing situation in Lithuania;
-Property structure changes in the Baltic States in 1990-2003 years period, by emphasizing situation in Lithuania;
-Corporative control peculiarities in Lithuania stock companies
-Property structure, capital concentration influence on the enterprises activity efficiency on the basis of research carried out in Lithuania enterprises.
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Thomas David, Martin Lüpold, André Mach and Gerhard Schnyder
E-mail: andre.mach@iepi.unil.ch
The Origins of Non-Liberal Corporate Governance Systems: Switzerland and Germany in Comparison
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Until the beginning of the 1990s, Germany and Switzerland shared some common features regarding the functioning of their corporate governance system. Both countries were characterised by a "bank-based" financial system, by the high density of interlocking directorships, particularly between banks and industry, by the importance of non-competitive market regulations (trust and cartels) and the concentration of ownership. Both countries belong thus to the non-liberal model of corporate governance. However, these similarities should not hide some important differences, especially concerning the role of labor in companies, which is very weakly codified in Switzerland, in contrast to Germany, and the importance of self-regulation in Switzerland, which leaves much freedom for to corporations to adopt their own sectoral regulations. Another important difference is related to the existence in Switzerland of mechanisms of selective protectionism, in particular through the existence of dual class shares allowing traditional shareholders to keep the control over a firm while holding only a small fraction of its equity. These mechanisms while existing in both countries, are much more developed in Switzerland.
Our paper will focus on the historical construction of corporate governance mechanisms from the end of the 19th century until nowadays, and provide a systematic comparison between the two countries. We will also emphasize one important element, which is often neglected by comparative studies: the interactions between the two countries, in particular the influence of Germany on Swiss business elites and on the Swiss industrial and financial systems, especially during the formative phase of the Swiss corporate governance system. It is impossible to understand the evolution of the latter without taking into account the role and influence of the German economy on its small neighbor.
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Sebastien Tran (Université Paris IX Dauphine, France)
E-mail: sebastientran@voila.fr
A New Competition Dynamic in the B2B E-Commerce : the Electronic Marketplace Case
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This article focus on Business to Business electronic commerce, which has attracted considerable interest. Electronic commerce are changing the relations between firms. Many information systems can serve as intermediaries between the buyers and the sellers in a market. So, the electronic marketplaces, as an inter-organisational information system, are not limited to a simple compromise dimension. Indeed, those having survived the consolidation phase gradually widened their functions and contribute to a new competing dynamics. The latter is at the origin the relations evolution between firms which rest on the one hand on a logic of competition between the actors and, on the other hand, on the formation of network organizations more flexible and adapted better to the needs for the firms. The electronic marketplaces raise some issues for the legal institutions, especially for the corporate laws. In the first part, we present the role of electronic marketplace as a new coordination structure for some firms. Yet, we study the effects for the competition from an example, the automotive industry. Finally we highlight the issues raised for the different institutions as the The Federal Trade Commission in the USA or The European Commission in Europe.
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Eduardo Villegas H. & Rosa M. Ortega O. (Universidad Autónoma Metropolitana, México)
E-mail: evillegash@hotmail.com
Valuation of Small and Medium Enterprises (SMEs) in Mexico
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The purpose of this work is to define de main characteristics of the small and medium enterprises (SMEs) in Mexico for then evaluating how these enterprises create value, too calculate if these SMEs are really creating it. The main variables will be related to the strategic decisions and how the variables related to these, make the SMEs create or destroy value. The work will be based in the work of Stern & Stewart known as EVA (Economic Value Added).
The main objectives of our work are:
o To reach an approach where corporate strategy concepts may be applied in the SMEs.
o To make this approach useful in the SMEs decisions.
o To valuate, even without a sound financial market, whether the SMEs in Mexico are creating economic value added.
The specific objectives are:
o To find out the main characteristics of the SMEs in Mexico
o To adapt the use of EVA Model (Economic Value Added Model) to the SMEs in Mexico.
As a conclusion, we will adapt a model of value that may be applied to SMEs in Mexico. The work begins with the historical foundations of SMEs in Mexico, the corporate strategy concepts and the financial concepts known as Economic Value Added (EVA).
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Klaus Weber (Northwestern University, USA)
E-mail: klausweber@northwestern.edu
International Social Structures and Corporations' Cultural Toolkits
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This paper examines a proximate mechanism that links globalization to cultural change: changes in the social formations that situate firms' cultural resources in organizational fields. For organizations, three social structures compete with national societies: industry-based segments, collaborative interfirm ties, and competition in product and capital market interfaces. Hypotheses predict the repertoires firms select from a fieldwide cultural register at different points in time, based on their location in the field's social space. Empirically, I examine comprehensive toolkits used by US and German pharmaceutical firms in their public statements, over 21 years. I develop an inductive inventory of cultural resources available in this setting, quantify cultural similarity at the level of firm dyads, and test hypotheses with hierarchical models that reflect organizations being situated in competing structures. I find that cultural toolkits vary significantly within countries, that country aggregate differences declined, and that market overlap leads to cultural similarity between, and differentiation within industry segments. The theoretical contribution is to generalize the global convergence hypothesis to similarities and differences induced by alternative social formations in organizational fields. Methodological innovations are measures of cultural similarity between comprehensive repertoires, and analyses of cultural similarity at a disaggregate level using multilevel models.
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Stephen Wilks (University of Exeter, UK)
E-mail: s.r.m.wilks@exeter.ac.uk
Markets and Law: The Juridification of the Economic Sphere
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The concept of the regulatory state has become a standard approach to the analysis of relations between the state and private sector providers of quasi-public services. As market actors become subject to more ambitious and sophisticated regulatory regimes a series of issues come to the fore. One is the relationship between political principals and the agencies that implement regulation. A second is the legal basis of regulation, the influence of legal actors and the growth of a legal discourse.
Drawing on the work of Teubner the paper examines the proposition that law has successively colonised the spheres of politics, social welfare and industrial relations and is becoming constitutive in economic relations that have traditionally been regarded as enjoying economic freedom. The paper draws on reform of competition policy in the UK and Europe to demonstrate the development of a legal discourse which gives exceptional authority to legal actors and skews market transactions towards a calculus of competition that excludes societal and community preferences that a political, rather than a legal, process would have sought.
The paper draws on work recently published in WEP and Governance but incorporates new empirical material. Some of the material was given at a REITI seminar in Tokyo in May 2003 (see website).
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Arnold Wilts (Free University, Netherlands)
E-mail: as.wilts@fsw.vu.nl
Corporate Political Action
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Analyses of the political activities of business firms generally draw on two different bodies of literature, namely those from management studies and political science. The aim of the paper is to use these literatures and construct a research model for analysing the political activities of firms. Notions from management studies are very useful for understanding why companies differ in terms of their abilities to formulate political strategies and integrate those with their market activities. Focusing on questions of strategy formation at firm level, however, many empirical studies in this field do not recognize the recurrent nature of business-government interactions. These studies alone, then, are less helpful in an European context, where institutionalised relations between private and public actors are common. Studies from public policy and business system theories offer a vocabulary for analysing the inclusion of private actors in public decision-making. Empirically, however, much of this work tends to concentrate on questions of the effectiveness of interest representation towards policy institutions, often overlooking firm-level conditions for political strategizing. Connecting these various strands of literature, the paper specifies propositions for comparative research into questions of corporate political action in EU Member States.
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