Overseas State Outsiders as New Sources of Patient Capital: Government Policies to Welcome Sovereign Wealth Fund Investment in France and Germany

Socio-Economic Review, (Forthcoming)

29 Pages Posted: 8 Jul 2016 Last revised: 22 Aug 2016

Mark Thatcher

London School of Economics & Political Science (LSE)

Tim Vlandas

University of Reading

Date Written: July 5, 2016

Abstract

The strong debates in the varieties of capitalism literature as to whether financial liberalisation and internationalisation undermine ‘insider’ corporate governance systems based on patient capital in coordinated and state-led market economies have focused on ‘impatient’ overseas private capital. However, cross-border state investment has also grown. We examine government policies towards a different type of overseas investment- state equity purchases by Sovereign Wealth Funds. We argue that policy makers in insider’ corporate governance systems can see such investment as an attractive international source of patient capital that can offset declines in traditional sources of patient capital. We compare two polities -- Germany and France -- and show that policy makers actively welcome and seek SWF investment, driven by coalitions of ‘insiders’ composed of the managements of large industrial firms and governments who seek passive patient capital and beneficial relationships with overseas investors. Thus, overseas state investors can provide new sources of patient capital.

Keywords: sovereign wealth fund, corporate governance, patient capital, cross-border investments, varieties of capitalism

JEL Classification: Politics

Suggested Citation

Thatcher, Mark and Vlandas, Tim, Overseas State Outsiders as New Sources of Patient Capital: Government Policies to Welcome Sovereign Wealth Fund Investment in France and Germany (July 5, 2016). Socio-Economic Review, (Forthcoming) . Available at SSRN: https://ssrn.com/abstract=2804949

Mark Thatcher

London School of Economics & Political Science (LSE) ( email )

Tim Vlandas (Contact Author)

University of Reading ( email )

Humanities and Social Sciences Building
Whiteknight campus
Reading, RG6 6AH
United Kingdom

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