The Diffusion of Ideas over Contested Terrain: The (Non)adoption of a Shareholder Value Orientation among German Firms

This study offers a sociopolitical perspective on the international spread of corporate governance models. We unpack the heterogeneity of interests and preferences across and within types of shareholders and senior managers over time in an analysis of the adoption of a shareholder value orientation among contemporary German firms. Using extensive data on more than 100 of the largest publicly traded German companies from 1990 to 2000, we find that the influence of major shareholder groups (e.g., banks, industrial corporations, governments, and families) and senior manager types (differing educational backgrounds and ages) can be clearly observed only after redefining these key actors according to common interests and preferences. We also find evidence that German firms engage in decoupling by espousing but not implementing a shareholder value orientation but show that the presence of more powerful and more committed key actors reduces the likelihood of decoupling. We discuss the implications of our findings for research on symbolic management, the diffusion of corporate practices, and the debate over the convergence of national governance systems. *

[1]  Edward J. Zajac,et al.  Decoupling Policy from Practice: The Case of Stock Repurchase Programs , 2001 .

[2]  James D. Westphal,et al.  Customization or Conformity? An Institutional and Network Perspective on the Content and Consequences of TQM Adoption , 1997 .

[3]  P. Bonacich.  Factoring and weighting approaches to status scores and clique identification , 1972 .

[4]  Paul M. Hirsch,et al.  From Ambushes to Golden Parachutes: Corporate Takeovers as an Instance of Cultural Framing and Institutional Integration , 1986, American Journal of Sociology.

[5]  Ronald Dore,et al.  Stock Market Capitalism: Welfare Capitalism: Japan and Germany Versus the Anglo-Saxons , 2000 .

[6]  Krishna G. Palepu,et al.  Globalization and Similarities in Corporate Governance: A Cross-Country Analysis , 2002, Review of Economics and Statistics.

[7]  P. Allison.  Survival analysis using the SAS system : a practical guide , 1995 .

[8]  Gary Herrigel.  Industrial Constructions: The Sources of German Industrial Power , 1995 .

[9]  C. Kwok,et al.  Multinational Corporations vs. Domestic Corporations: International Environmental Factors and Determinants of Capital Structure , 1988 .

[10]  John L. Ward,et al.  The family business : its governance for sustainability , 1998 .

[11]  Theresa S. Cho,et al.  The Influence of Top Management Team Heterogeneity on Firms' Competitive Moves , 1996 .

[12]  Ronald C. Anderson,et al.  Founding‐Family Ownership, Corporate Diversification, and Firm Leverage* , 2003, The Journal of Law and Economics.

[13]  Francisco Gabriel Heidemann.  Executive defense: shareholder power and corporate reorganization , 1997 .

[14]  Brad M. Barber,et al.  Challengers, Elites, and Owning Families: A Social Class Theory of Corporate Acquisitions in the 1960s , 2001 .

[15]  Mark C. Casson.  The economics of the family firm , 1999 .

[16]  K. Meyers.  Why companies lose their best people— and what to do about it , 1981 .

[17]  Studies in international corporate finance and governance systems : a comparison of the U.S., Japan, and Europe , 1997 .

[18]  Andrei Shleifer,et al.  Corporate Ownership Around the World , 1998 .

[19]  Xueguang Zhou,et al.  Late Adoption of the Multidivisional Form by Large U.S. Corporations: Institutional, Political, and Economic Accounts , 1993 .

[20]  G. Davis.  Agents without Principles? The Spread of the Poison Pill through the Intercorporate Network , 1991 .

[21]  Beverly B. Tyler,et al.  Strategic decision models: Integrating different perspectives , 1991 .

[22]  H. Demsetz,et al.  The Structure of Corporate Ownership: Causes and Consequences , 1985, Journal of Political Economy.

[23]  L. Zucker.  ORGANIZATIONS AS INSTITUTIONS , 2006 .

[24]  Michael Jensen,et al.  Corporate Elites and Corporate Strategy: How Demographic Preferences and Structural Position Shape the Scope of the Firm , 2004 .

[25]  Mathias Moersch,et al.  Competition and convergence in financial markets : the German and Anglo-American models , 1998 .

[26]  J. Walsh,et al.  The Purposes and Accountability of the Corporation in Contemporary Society: Corporate Governance at a Crossroads , 1999 .

[27]  L. Bagwell.  Dutch Auction Repurchases: An Analysis of Shareholder Heterogeneity , 1992 .

[28]  P. Lawrence,et al.  Managers and management in West Germany , 1980 .

[29]  Paul D. Allison,et al.  Event History Analysis : Regression for Longitudinal Event Data , 1984 .

[30]  R. Burt.  Social Contagion and Innovation: Cohesion versus Structural Equivalence , 1987, American Journal of Sociology.

[31]  John A. Davis,et al.  Generation to Generation: Life Cycles of the Family Business , 1997 .

[32]  Tracy A. Thompson,et al.  A Social Movement Perspective on Corporate Control , 1994 .

[33]  Michael Useem,et al.  Investor Capitalism : How Money Managers Are Changing the Face of Corporate America , 1996 .

[34]  Joachim Rupp,et al.  Shareholder value in an adverse environment: the German case , 2000 .

[35]  Donald Palmer.  The Economics and Politics of Structure: The Multidivisional Form and the Large U.S. Corporation. , 1987 .

[36]  Mauro F. Guillén,et al.  The Limits of Convergence: Globalization and Organizational Change in Argentina, South Korea, and Spain , 2001 .

[37]  M. Hudson,et al.  Banking and Finance in West Germany , 1984 .

[38]  G. Becker.  A Theory of Social Interactions , 1974 .

[39]  Krishna G. Palepu,et al.  Product and Labor Market Globalization & Convergence of Corporate Governance: Evidence from Infosys and the Indian Software Industry , 2001 .

[40]  Gerald F. Davis,et al.  Organization Theory and the Market for Corporate Control: A Dynamic Analysis of the Characteristics of Large Takeover Targets, 1980-1990 , 1992 .

[41]  Eric Abrahamson.  Managerial Fads and Fashions: The Diffusion and Rejection of Innovations , 1991 .

[42]  Gosta Carlsson,et al.  Age, Cohorts and the Generation of Generations , 1970 .

[43]  A. B. Sørensen,et al.  OWNERSHIP ORGANIZATION AND FIRM PERFORMANCE , 1999 .

[44]  George W. Downs.  Bureaucracy, innovation, and public policy , 1976 .

[45]  W. Espeland,et al.  Ownership changes, accounting practice and the redefinition of the corporation , 1990 .

[46]  V. Vroom,et al.  Relationship between age and risk taking among managers. , 1971 .

[47]  Pamela R. Haunschild,et al.  When Do Interlocks Matter?: Alternate Sources of Information and Interlock Influence , 1998 .

[48]  H. White.  A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity , 1980 .

[49]  J. Galaskiewicz,et al.  Stock Ownership and Company Contributions to Charity , 1988 .

[50]  Patricia Robinson,et al.  Safety in Numbers: Downsizing and the Deinstitutionalization of Permanent Employment in Japan , 2001 .

[51]  L. Bagwell.  Shareholder Heterogeneity: Evidence and Implications , 1991 .

[52]  J. Coffee.  The Future as History: The Prospects for Global Convergence in Corporate Governance and its Implications , 1999 .

[53]  Charles R. Schwenk.  THE COGNITIVE PERSPECTIVE ON STRATEGIC DECISION MAKING , 1988 .

[54]  M. Mizruchi,et al.  The Social Construction of Organizational Knowledge: A Study of the Uses of Coercive, Mimetic, and Normative Isomorphism , 1999 .

[55]  C. Oliver.  STRATEGIC RESPONSES TO INSTITUTIONAL PROCESSES , 1991 .

[56]  D. Hambrick,et al.  Top-management-team tenure and organizational outcomes: The moderating role of managerial discretion. , 1990 .

[57]  P. Hall,et al.  Varieties of Capitalism , 2001 .

[58]  H. W. Jong.  The Structure of European Industry , 1981, Studies in Industrial Organization.

[59]  Kimberly D. Elsbach,et al.  Acquiring Organizational Legitimacy Through Illegitimate Actions: A Marriage of Institutional and Impression Management Theories , 1992 .

[60]  Edward J. Zajac,et al.  The Social Construction of Market Value: Institutionalization and Learning Perspectives on Stock Market Reactions , 2004 .

[61]  David J. Teece,et al.  The Diffusion of an Administrative Innovation , 1980 .

[62]  Gregory Jackson,et al.  Corporate Governance and Employees in Germany: Changing Linkages, Complementarities, and Tensions , 2004 .

[63]  Karel Williams,et al.  Shareholder value and Financialization: consultancy promises, management moves , 2000 .

[64]  M. Shubik,et al.  A Behavioral Theory of the Firm. , 1964 .

[65]  Douglas M. Branson.  The Very Uncertain Prospect of 'Global' Convergence in Corporate Governance , 2000 .

[66]  Andrew Pettigrew,et al.  The Handbook of Strategy and Management , 2001 .

[67]  Gerald F. Davis,et al.  Top Management, Company Directors and Corporate Control , 2001 .

[68]  Michael Useem,et al.  Corporate Leadership in a Globalizing Equity Market , 1998 .

[69]  J. M. Stevens,et al.  Assessing personal, role, and organizational predictors of managerial commitment. , 1978, Academy of Management journal. Academy of Management.

[70]  Terrence C. Sebora,et al.  Comparative corporate governance: Competitive implications of an emerging convergence , 1998 .

[71]  J. Franks,et al.  Bank control, takeovers and corporate governance in Germany , 1998 .

[72]  D. Hambrick,et al.  Upper Echelons: The Organization as a Reflection of Its Top Managers , 1984 .

[73]  Robert C. Pozen.  Institutional investors: The reluctant activists , 1994 .

[74]  David M. Reeb,et al.  Systematic Risk of the Multinational Corporation , 1998 .

[75]  Ivan Lansberg,et al.  Succeeding Generations: Realizing the Dream of Families in Business , 1999 .

[76]  M. Roe.  Political Foundations for Separating Ownership From Corporate Control , 2000 .

[77]  M. Wiersema,et al.  Top Management Team Demography and Corporate Strategic Change , 1992 .

[78]  Reinier Kraakman,et al.  The End of History for Corporate Law , 2000 .

[79]  A. Shleifer,et al.  A Survey of Corporate Governance , 1996 .

[80]  B. Kogut,et al.  The Small World of Germany and the Durability of National Networks , 2001, American Sociological Review.

[81]  Kazuo Yamaguchi,et al.  Event History Analysis. , 1992 .

[82]  R. Daft,et al.  Toward a Model of Organizations as Interpretation Systems , 1984 .

[83]  Hyosun Kim,et al.  The Circulation of Corporate Control: Selection of Functional Backgrounds of New CEOs in Large U.S. Manufacturing Firms, 1981–1992 , 1999 .

[84]  Pamela R. Haunschild.  Interorganizational imitation: The impact of interlocks on corporate acquisition activity , 1993 .

[85]  N. Ryder.  The cohort as a concept in the study of social change. , 1965, American sociological review.

[86]  J. Visser,et al.  Trade unions in Western Europe since 1945 , 2000 .

[87]  P. Barr,et al.  Cognitive change, strategic action, and organizational renewal , 1992 .

[88]  Y. Schroder,et al.  The Changing Role of Banks and Corporate Governance in Germany: Evolution Towards the Market? , 1997 .

[89]  A. Shleifer,et al.  Politicians and Firms , 1994 .

[90]  J. March,et al.  A Behavioral Theory of the Firm , 1964 .

[91]  Pravin K. Trivedi,et al.  Regression Analysis of Count Data , 1998 .

[92]  Edward J. Zajac,et al.  Substance and Symbolism in CEOs' Long-Term Incentive Plans , 1994 .

[93]  Brad M. Barber,et al.  The Friendly and Predatory Acquisition of Large U.S. Corporations in the 1960s: The Other Contested Terrain , 1995 .

[94]  Paul D. Allison,et al.  Logistic Regression Using the SAS System : Theory and Application , 1999 .

[95]  Stephan Haggard.  The Limits of Convergence: Globalization and Organizational Change in Argentina, South Korea and Spain. By Mauro F. Guillen. Princeton, N.J.: Princeton University Press, 2001. Pp. xiii+282. , 2002 .

[96]  C. O'Reilly,et al.  Social Capital at the Top: Effects of Social Similarity and Status on CEO Compensation , 1996 .

[97]  Neil Fligstein,et al.  FROM THE TRANSFORMATION OF CORPORATE CONTROL , 2021, The New Economic Sociology.

[98]  B. Mintz,et al.  Executive Defense: Shareholder Power and Corporate Reorganization. , 1993 .

[99]  Daniel P. Sullivan.  Measuring the Degree of Internationalization of a Firm , 1994 .

[100]  G. Davis,et al.  Corporate Elite Networks and Governance Changes in the 1980s , 1997, American Journal of Sociology.

[101]  J. Bartunek.  Changing Interpretive Schemes and Organizational Restructuring: The Example of a Religious Order , 1984 .

[102]  R. Whittington,et al.  The European Corporation , 2002 .

[103]  Gregory Jackson,et al.  An Emerging Market for Corporate Control? The Mannesmann Takeover and German Corporate Governance , 2001 .

[104]  A. Shleifer,et al.  Legal Determinants of External Finance , 1997 .

[105]  Neil Fligstein.  The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies , 2001 .

[106]  P. Katzenstein,et al.  Policy and Politics in West Germany: The Growth of a Semisovereign State , 1987 .

[107]  Uwe Jirjahn,et al.  Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages , 2001, SSRN Electronic Journal.

[108]  Jeremy Edwards,et al.  Banks, Finance and Investment in Germany. , 1995 .

[109]  Caroline M. Fohlin.  The History of Corporate Ownership and Control in Germany , 2005 .

[110]  Rhonda K. Reger,et al.  REFRAMING THE ORGANIZATION: WHY IMPLEMENTING TOTAL QUALITY IS EASIER SAID THAN DONE , 1994 .

[111]  Samuel B. Bacharach,et al.  Research in the Sociology of Organization. , 1994 .

[112]  M. pner.  Corporate Governance in Transition: Ten Empirical Findings on Shareholder Value and Industrial Relations in Germany , 2001 .

[113]  Gary B. Gorton,et al.  Universal Banking and the Performance of German Firms , 1996 .