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5361. Institutional Change and the Uses and Limits of Path Dependency: The Case of German Finance

Author:
Richard Deeg
Publication Date:
06-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
How can we determine when an existing institutional path or trajectory is ending and being replaced with a new one? How does such a process take place? How can we distinguish between institutional innovation within an existing trajectory and a switchover to a new trajectory or path? This paper explores these questions by examining the pattern of institutional change in the German financial system. The paper advances four theoretical claims: First, that endogenous developments can disrupt an institutional path and lead to a new one. Second, that an event sequence involving a move to a new institutional path may not follow from a contingent event yet may nonetheless be marked by increasing returns processes. Third, that increasing returns in politics are not automatic and must be cultivated by actors in order to be realized. Finally, that the concept of path is still in need of a measurable conceptualization before any further advances in path dependent arguments can be made.
Topic:
Economics and International Trade and Finance
Political Geography:
Germany

5362. Corporate Governance in Transition: Ten Empirical Findings on Shareholder Value and Industrial Relations in Germany

Author:
Martin Hopner
Publication Date:
05-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Within the context of debates over national “varieties” of capitalism, this paper discusses the shareholder value orientation of the 40 largest listed German companies. Three dimensions of shareholder value are distinguished: the communicative dimension, the operative dimension and the dimension of managerial compensation. A shareholder value index compiling data on accounting, investor relations, variable top-management compensation and the implementation of profitability goals makes it possible to compare the shareholder orientations of the companies. The shareholder value phenomenon is explained first by the exposure to markets – the international product market, capital market pressures and the market for corporate control – and, secondly, by internal developments – changing management careers, increasing management compensation and reduced monitoring by banks and corporate networks – which cause external impulses to increase shareholder value to fall on fertile ground. Conflicts over shareholder orientation result in changing coalitions between shareholders, management, and employees. Shareholder value does not make companies opt out of central collective agreements or endanger the existence of employees' codetermination, but it does lead to more market-driven industrial relations.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
Germany

5363. An Emerging Market for Corporate Control? The Mannesmann Takeover and German Corporate Governance

Author:
Gregory Jackson and Martin Hopner
Publication Date:
04-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Corporate governance in Germany is often described as a bank-oriented, blockholder or stakeholder model where markets for corporate control have not played a significant role. This case study of the hostile takeover of Mannesmann AG by Vodafone in 2000 demonstrates how systemic changes during the 1990s have eroded past institutional barriers to takeovers. These changes include the strategic reorientation of German banks from the “house bank” to investment banking, the growing consensus and productivity orientation of employee codetermination and corporate law reform. A significant segment of German corporations are now subjected to a market for corporate control. The implications for the German model are examined in light of both claims by agency theory for the efficiency of takeover markets, as well as the institutional complementarities within Germany's specific “variety” of capitalism. While the efficiency effects are questionable, the growing pressures for German corporations to achieve the higher stock market valuations of their Anglo-American competitors threaten the distributional compromises underlying the German model.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
America and Germany

5364. What Have We Learned?[1] Problem-Solving Capacity of the Multilevel European Polity.

Author:
Fritz W. Scharpf
Publication Date:
07-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
This Working Paper is an attempt, occasioned by the evaluation of the Max Planck Institute for the Study of Societies, to provide a conceptual framework within which institute research on multi-level European problem solving could be discussed in the context of a more comprehensive overview of the literature. The framework combines an institutional dimension (distinguishing between supranational, joint-decision and intergovernmental modes of EU policy making) and a policy dimension (distinguishing between market-creating, market-enabling, market-correcting and redistributive policies). As institutional modes differ in their capacity for conflict resolution, and as policy types differ in the likelihood of severe policy conflict, greater or lesser problem-solving capacity can be explained by the location of a particular policy area on both of these dimensions.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Europe

5365. Globalization, Tax Competition, and the Fiscal Viability of the Welfare State

Author:
Philipp Genschel
Publication Date:
05-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Does globalization undermine the fiscal basis of the welfare state? The conventional wisdom believes so: open borders cause tax competition, which in turn leads to a race to the bottom in capital taxation. However, the data show that revenues from capital taxation are fairly stable in OECD countries. Some observers conclude from this that globalization does not pose much of a challenge to the welfare state. This conclusion is unwarranted because it overlooks that tax competition was not the only challenge facing welfare states during the 1980s and 1990s. There was also slow growth, rampant unemployment, and high levels of precommitted spending. These problems exerted countervailing pressures that prevented a race to the bottom in taxation. Yet, this does not mean that national autonomy has not been diminished. The welfare state is trapped in between external pressures to reduce the tax burden on capital and internal pressures to maintain revenue levels and relieve the tax burden on labor.
Topic:
Economics, Globalization, Human Welfare, and International Trade and Finance

5366. How Bargaining Mediates Wage Determination: An Exploration of the Parameters of Wage Functions in a Pooled Time-Series Cross-Section Framework

Author:
Bernhard Kittel
Publication Date:
03-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The process of wage determination is mediated by the institutional framework of the labor market. Bargaining systems differ not only in their mode of governance, but also in the way that wages are related to unemployment, inflation, and productivity growth. Based on annual data for the period 1971–1996 from 20 OECD countries, the paper uses a pooled time-series cross-section model to show that bargaining modes affect the speed at which wages are adjusted and the extent to which macroeconomic factors affect wages. Contrary to the expectations of mainstream economics, uncoordinated bargaining does not turn out to be the most flexible mode. Pattern setting and peak-level coordination, if legally enforceable, are modes of labor market governance that are at least as flexible and responsive, if not more so. Hence these labor market institutions cannot be blamed for excessive rigidity.
Topic:
Economics and International Trade and Finance

5367. Minority Governments and Party Politics: The Political and Institutional Background to the "Danish Miracle"

Author:
Christoffer Green-Pedersen
Publication Date:
01-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The performance of the Danish economy in the 1990s has been successful to the extent that scholars are talking about a "Danish miracle". The importance of government policies to Denmark's economic success is taken as a point of departure in investigating why Danish governments have been able to govern the economy successfully in the 1990s. The paper argues that two factors have been important. First, the functioning of Danish parliamentarianism has been reshaped to strengthen the bargaining position of minority governments, which became the rule in Danish politics after the landslide election in 1973. Today, Danish minority governments can enter agreements with changing coalitions in the Danish parliament. The paper thus challenges the conventional wisdom about minority governments as weak in terms of governing capacity. Second, the changed socioeconomic strategy of the Social Democrats after returning to power in 1993 has been important because it has created a political consensus around a number of controversial reforms.
Topic:
Economics, Government, Political Economy, and Politics
Political Geography:
Europe and Denmark

5368. Special Policy Forum Report: Turkey In The Twenty-First Century

Author:
Niyazi B. Gunay and Ismail Cem
Publication Date:
04-2001
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
On March 28, 2001, His Excellency Ismail Cem, foreign minister of Turkey, addressed The Washington Institute's Policy Forum. The following is a rapporteur's summary of his remarks. Over the past four years Turkish foreign policy has been experiencing a transformation. Turkey now sees itself not only as part of Europe but also as part of Asia. The Asian character of Turkey, which has been downplayed for decades, has been revitalized, making Turkish foreign policy more active in the Middle East and the former Soviet Union and helping Turkey to improve relations simultaneously with the Arabs and Israel. Turkey's relations with the European Union are progressing favorably; EU membership is a goal, but not an obsession for Turkey.
Topic:
International Relations, Foreign Policy, and Economics
Political Geography:
Europe, Washington, Turkey, Middle East, and Arabia

5369. At The Bottom Of The Bush-Mubarak Agenda? The Slow Pace Of Political Reform In Egypt

Author:
Amy W. Hawthorne
Publication Date:
04-2001
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Urgent regional matters — such as Iraq and the Arab–Israeli peace process — will dominate the agenda during Egyptian president Hosni Mubarak's visit to Washington this week, while Egypt's transition to a free-market economy and U.S.– Egypt trade ties will also receive attention. Egyptian domestic politics, however, will register little, aside from U.S. frustrations over anti-Semitism in the Egyptian press and concern about the status of Egypt's Coptic Christians. Although the regime appears quite stable, having secured a "victory" in its 1990s conflict with violent extremist groups, the state of political reform in Egypt, America's most important Arab ally, merits a closer look. That is because Egypt's long-term economic reform — in which Washington has invested so much — can succeed only if accompanied by meaningful political liberalization.
Topic:
Security, Economics, Human Rights, Political Economy, and Politics
Political Geography:
United States, Iraq, America, Washington, Middle East, Israel, Arabia, and Egypt

5370. Turkey And The Bush Administration: The Question Marks

Author:
Alan Makovsky
Publication Date:
03-2001
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Turkey's economic crisis is naturally the leading issue in bilateral U.S.-Turkish relations, and it is almost certainly topping the agenda of today's meetings of Foreign Minister Ismail Cem with Vice President Richard Cheney and other senior officials. Of course, these meetings pose the difficult question of how much Washington should do, if anything, to bail out its strategically vital ally. But this is only one of several uncertainties characterizing U.S.-Turkish relations in the early days of the Bush administration. Because so much of Turkey's importance to the United States derives from its critical strategic location, bilateral relations are greatly affected by U.S. policies toward other states in Turkey's region. Of most concern to Turkey will be the evolution of Bush administration policy toward Iraq, Iran, and Russia, and also toward Europe's nascent bid to develop an autonomous security capacity.
Topic:
International Relations, Security, Defense Policy, Economics, and Energy Policy
Political Geography:
Russia, United States, Iraq, Europe, Iran, Washington, Turkey, and Middle East