The Politics of the German Company Network

For over 100 years, the company network was a major feature of organized corporate governance in Germany. This paper uses network visualization techniques and qualitative-historical analysis to discuss the structure, origins and development of this network and to analyse the reasons for its recent erosion. Network visualization makes it possible to identify crucial entanglement patterns that can be traced back historically. In three phases of network formation– the 1880s, 1920s and the 1950s– capital entanglement resulted from the interaction of company behaviour and government policy. In its heyday, the company network was de facto encompassing and provided its core participants, especially the banks, with a national, macroeconomic perspective. In the 1970s, increased competition among financial companies set in. In the 1980s and 1990s, declining returns from blockholding and increased opportunity costs made network dissolution a thinkable option for companies. Because of the strategic reorientation of the largest banks toward investment banking, ties between banks and industry underwent functional changes. Since the year 2000, the German government's tax policy has sped up network erosion. Vanishing capital ties imply a declining degree of strategic co-ordination among large German companies.