Corporate Strategy and National Institutions: The Case of the Man-Made Fibres Industry

This article discusses the impact of national policies and institutions on the strategies that companies adopt when they are faced with disruptive changes in their external environment. The article focuses on the man-made fibres industry in the U.S., Western Europe and Japan between 1980 and 2010 and describes the different ways in which the leading fibre manufacturers in those regions responded to the shift in textile, clothing and later fibre production to low-cost countries, principally in Asia. These companies had to decide whether they could continue to compete profitably in the man-made fibres industry, and, if not, what non-fibre businesses they should invest in. In countries such as the U.S. and the UK, where capital markets are powerful and companies are under pressure to enhance shareholder value, virtually all the former leaders have withdrawn from the industry and a set of new entrants, including private equity firms, have taken their place. In Japan, by contrast, leading companies such as Toray and Teijin remain committed to man-made fibres, although they have also diversified in other directions. Despite the increasing role of Anglo-American investors in Japan, Japanese companies see themselves as responsible to a broad range of stakeholders, not just to shareholders; the continuity of the enterprise and of employment is given a higher priority than in the U.S. or the UK. In Continental Europe, the restructuring of the man-made fibres industry has involved numerous divestments and demergers, and this partly reflects the growing influence of Anglo-American investors, but in some of these countries the stakeholder view of the enterprise continues to carry considerable weight. Lenzing in Austria, which is now the largest European man-made fibre manufacturer, is an example of a company which has combined commercial success with a strong sense of responsibility to the region where its main factory is based. In reviewing these different strategies the article shows how Japanese-style "long-termism" can be a source of strength in certain industries such as carbon fibre, but has the disadvantage of allowing companies to persist for too long with low-return businesses which might do a better under different owners. Some further movement towards the Anglo-American model is likely in Japan and in Continental Europe, but these countries have a different view of what companies are for, and this will continue to affect how their companies respond to industrial change.