Tuesday, June 25, 2013
A1.18D (Oudemanhuispoort)
How did takeover bids go from being outrageous to being business as usual? My paper identifies four mechanisms that help explain why political resistance to active markets for corporate control has declined since the 1950s. It thereby complements previous research on the causes of financialization, which has focused more on the forces that drive market expansion than on the political response, and research on Varieties of Capitalism, which has focused more on differences across countries than on developments over time. The mechanisms that explain why decades can pass before market expansion elicits regulatory counter-action are labeled symbiosis, habitat erosion, routinization and constrain-thy-neighbor dynamics. First, the market for control encourages the symbiotic growth of its proponents, by nurturing a financial services industry that “feeds” on hostile bids. As a result, the pro-market political clientele grows as the market expands. Second, the market for corporate control erodes the habitat that accomodates its opponents, namely stakeholders reliant on network-based coordination. As a result, the anti-market clientele shrinks as the market expands. Third, takeover scandals contribute to a growing sophistication of the regulatory framework. As a result, political salience declines over time. Fourth, territorial expansion of the market for corporate control benefits both beneficiaries and potential targets. The former want a larger pool of potential targets, while latter seek safety in numbers. This constrain-thy-neighbor dynamic channels complaints toward Europe, and away from the domestic market for corporate control. The decline in political resistance explained by these four mechanisms is documented through a qualitative analysis of British, French and German parliamentary debates from 1950 onward.
