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The Political Economy of Corporate Governance in Germany

Listed author(s):
  • Mary O'Sullivan

    (The Jerome Levy Economics Institute)

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    To understand the potential economic implications of challenges from the real and financial sectors for the system of corporate governance - the social process that shapes who makes investment decisions in corporations, what types of investments they make, and how the returns from successful investments are distributed - we need an economic theory if governance. In previous work, I have argued that, if it is to be relevant, a theory of corporate governance must take account of innovation, that is, of the process through which productive resources are developed and utilised to generate higher quality and/or lower cost products than had previously been available (O'Sullivan 1997; Lazonick and O'Sullivan, 1997a; 1997b; 1997c; O'Sullivan, 1996). Innovation is central to the dynamic through which successful economies improve their performance over time as well as relative to each other. Historical research on innovation in all of the advanced industrial nations has highlighted the importance, as loci of innovation, of corporate resource allocation and its governance must therefore incorporate an understanding of the central characteristics of the innovation process. On the basis of the extensive literature on the subject, innovation, and the learning process that is its substance, can be characterised as one that is collective and cumulative and, hence, organisational. A system of corporate governance, if it is to support innovation, must generate the social conditions that permit collective and cumulative learning to take place. Specifically, it must provide support for financial commitment -- the commitment of resources to irreversible investments with uncertain returns -- and organisational integration -- the integration of human and physical resources into an organisational process to develop and utilise technology (Lazonick and O'Sullivan, 1996).

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    Paper provided by EconWPA in its series Macroeconomics with number 9805004.

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    Length: 49 pages
    Date of creation: 08 May 1998
    Handle: RePEc:wpa:wuwpma:9805004
    Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on PostScript; pages: 49; figures: included
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    1. William H. Lazonick, 1997. "Organizational Learning and International Competition: The Skill-Base Hypothesis," Economics Working Paper Archive wp_201, Levy Economics Institute.
    2. Harry C. Katz, 1993. "The Decentralization of Collective Bargaining: A Literature Review and Comparative Analysis," ILR Review, Cornell University, ILR School, vol. 47(1), pages 3-22, October.
    3. William H. Lazonick, 1998. "The Japanese Financial Crisis, Corporate Governance, and Sustainable Prosperity," Economics Working Paper Archive wp_227, Levy Economics Institute.
    4. William Lazonick, 1997. "Organizational Learning and International Competition: The Skill- Base Hypothesis," Macroeconomics 9712011, EconWPA.
    5. Christoph Dörrenbächer & Michael Wortmann, 1991. "The internationalization of corporate research and development," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 26(3), pages 139-144, May.
    6. Giersch,Herbert & Paqué,Karl-Heinz & Schmieding,Holger, 1994. "The Fading Miracle," Cambridge Books, Cambridge University Press, number 9780521358699.
    7. William Lazonick, 1998. "The Japanese Financial Crisis, Corporate Governance, and Sustainable Prosperity," Macroeconomics 9805008, EconWPA.
    8. John Turner & Noriyasu Watanabe, 1995. "Private Pension Policies in Industrialized Countries: A Comparative Analysis," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ppp.
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