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Corporate governance versus economic governance: banks and industrial restructuring in the US and Germany

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  • Vitols, Sigurt
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    Abstract

    This paper critically examines the debate on corporate governance and the claim (often made in Anglo-American companies) that the close links between German banks and industry are primarily responsible for the longer-term investment strategies and greater quality competitiveness of German manufacturing. Instead, it is argued here that manufacturing investment and bank behavior must be examined within a broader system of economic governance. In particular the regulation of labor markets is a key factor influencing company choices between price and quality-competitive strategies. The corporatist regulation of German labor markets has encouraged quality-competitive strategies by keeping labor costs out of competition to a greater extent than in the US, where a collapse in pattern bargaining in core manufacturing industries and the strategic use of bankruptcy was motivated by companies' attempts to gain a comparative price advantage on the basis of lower labor costs. This argument is supported through a case study of the restructuring of the steel industry in Germany and the US in the 1980s. -- Gegenstand dieses Discussion Papers ist eine Untersuchung der These, daß die langfristig angelegten Investitionsstrategien und die hohe Wettbewerbsfähigkeit der deutschen Industrie primär den engen Beziehungen der deutschen Universalbanken zu Industrieunternehmen (Stichwort: Corporate Governance) zuzuschreiben sind. Im Gegensatz dazu wird hier die These vertreten, daß Investitionen und das Verhalten der Banken wesentlich von einem breiteren institutionellen Umfeld (Stichwort: Economic Governance System) abhängen. Vor allem ist die Regulierung des Arbeitsmarkts ein entscheidender Einfluß auf die Entscheidung in Unternehmen, ob die Produktionsstrategie auf niedrigen Kosten oder auf hoher Produktqualität basieren soll. Die korporatistische Regulierung des Arbeitsmarkts in Deutschland und die dadurch relativ geringe Möglichkeit, durch Lohnsenkungen Kostenvorteile gegenüber Konkurrenten zu erzielen, hat stark zu einer Qualitätsstrategie beigetragen. Im Gegensatz dazu haben in den USA große Industrieunternehmen Anfang der achtziger Jahre ihre auf freiwilliger Basis koordinierten Lohnverhandlungen aufgegeben und zum Teil Insolvenzverfahren eingeleitet, um Kostenvorteile zu erreichen. Dieses Argument wird durch eine vergleichende Fallstudie der Umstrukturierung in der usamerikanischen und deutschen Stahlindustrie in den achtziger Jahren unterstützt.

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    Bibliographic Info

    Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economic Change and Employment with number FS I 95-310.

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    Date of creation: 1995
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    Handle: RePEc:zbw:wzbece:fsi95310

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    1. Cable, John R, 1985. "Capital Market Information and Industrial Performance: The Role of West German Banks," Economic Journal, Royal Economic Society, vol. 95(377), pages 118-32, March.
    2. Audretsch, David B & Elston, Julie Ann, 1994. "Does Firm Size Matter? Evidence on the Impacts of Liquidity Constraints on Firm Investment Behaviour in Germany," CEPR Discussion Papers 1072, C.E.P.R. Discussion Papers.
    3. Coase, R. H., 1990. "The Firm, the Market, and the Law," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226111018, May.
    4. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    6. Ben S. Bernanke & John Y. Campbell, 1988. "Is There a Corporate Debt Crisis?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 83-140.
    7. Williamson, Oliver E, 1988. " Corporate Finance and Corporate Governance," Journal of Finance, American Finance Association, vol. 43(3), pages 567-91, July.
    8. Charles W. Calomiris, 1993. "Corporate-Finance Benefits from Universal Banking: Germany and the United States, 1870-1914," NBER Working Papers 4408, National Bureau of Economic Research, Inc.
    9. Audretsch, David B. & Elston, Julie Ann, 2000. "Does firm size matter? Evidence on the impact of liquidity constraint on firm investment behavior in Germany," HWWA Discussion Papers 113, Hamburg Institute of International Economics (HWWA).
    10. Edwards,Jeremy & Fischer,Klaus, 1996. "Banks, Finance and Investment in Germany," Cambridge Books, Cambridge University Press, number 9780521566087, November.
    11. Santomero, Anthony M, 1984. "Modeling the Banking Firm: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 576-602, November.
    12. Prowse, Stephen D, 1992. " The Structure of Corporate Ownership in Japan," Journal of Finance, American Finance Association, vol. 47(3), pages 1121-40, July.
    13. Alexander, Ian & Mayer, Colin, 1990. "Banks and Securities Markets: Corporate Financing in Germany and the UK," CEPR Discussion Papers 433, C.E.P.R. Discussion Papers.
    14. Roe, Mark J., 1990. "Political and legal restraints on ownership and control of public companies," Journal of Financial Economics, Elsevier, vol. 27(1), pages 7-41, September.
    15. Prowse, Stephen D., 1990. "Institutional investment patterns and corporate financial behavior in the United States and Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 43-66, September.
    16. Chirinko, R-S & Elston, J-A, 1997. "Finance, Control, and Profitability : An Evaluation of German Bank Influence," Papers 28, American Institute for Contemporary German Studies-.
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    Cited by:
    1. Steven Casper & Catherine Matraves, 1997. "Corporate Governance and Firm Strategy in the Pharmaceutical Industry," CIG Working Papers FS IV 97-20, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    2. Ojo, Marianne, 2009. "The role of external auditors in corporate governance: agency problems and the management of risk," MPRA Paper 47346, University Library of Munich, Germany, revised 02 Jun 2013.

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