Decoupling and the Cultures of Global Finance

Is there a global financial culture? Neo-institutional world polity researchers demonstrated a surprising amount of legitimacy-driven practice conformity across a wide range of transnational settings. While this research claims that observed isomorphism is mainly driven by global-level legitimacy processes, one of the major limitations of this line of work is its inattention to the actual content of nation-state practices. Drawing on an examination of the spread of stock and stock option exchanges, we argue that neo-institutional world polity research can be usefully expanded by shifting attention away from legitimacy and toward a focus on systematic variation in nation-state culture. Concentrating on financial institutions and surrounding infrastructures, we argue that a "modern" global financial culture unites some countries that have a robustly functioning financial sector that consists of active stock and stock option exchanges as well as a healthy endowment of financial expertise. The vast majority of countries, however, are united by a "ceremoniously modern" global financial culture in which stock markets exist but are weakly functioning entities that are decoupled from the core aspects of a country's economy. By highlighting these two cultures of global finance, we suggest that a focus on systematic dimensions of practice variation will enable researchers interested in globalization to develop a deeper understanding of the broader institutional sources of nation-state convergence and divergence.