The Politics of the German Company Network

MPIfG Working Paper No. 2003-9

28 Pages Posted: 6 Feb 2004

See all articles by Martin Höpner

Martin Höpner

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for the Study of Societies

Lothar Krempel

Max-Planck-Institute for the Study of Societies

Date Written: November 2003

Abstract

For over 100 years, the German company network was a major feature of organized corporate governance in Germany. This paper uses network visualization techniques and qualitative-historical analysis to discuss the structure, origins and development of this network and to analyze the reasons for its recent erosion. Network visualization makes it possible to identify crucial entanglement patterns that can be traced back historically. In three phases of network formation - the 1880s, 1920s and the 1950s - capital entanglement resulted from the interplay of company behavior and government policy. In its heyday, the company network was de facto encompassing and provided its core participants, especially the banks, with a national, macroeconomic perspective. In the 1970s, a process of increased competition among financial companies set in. In the 1980s and 1990s, declining returns from blockholding and increased opportunity costs made network dissolution a thinkable option for companies. Because of the strategic reorientation of the largest banks toward investment banking, ties between banks and industry underwent functional changes. Since the year 2000, the German government's tax policy has sped up network erosion. Vanishing capital ties imply a declining degree of strategic coordination among large German companies.

Keywords: Corporate governance, political economy, network analysis

JEL Classification: G21, G30, G38, L13, L22, N13, N14, N22, N24

Suggested Citation

Höpner, Martin and Krempel, Lothar, The Politics of the German Company Network (November 2003). MPIfG Working Paper No. 2003-9. Available at SSRN: https://ssrn.com/abstract=494722 or http://dx.doi.org/10.2139/ssrn.494722

Martin Höpner (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for the Study of Societies ( email )

Paulstr. 3
50676 Koln
Germany

Lothar Krempel

Max-Planck-Institute for the Study of Societies ( email )

Paulstr. 3
50676 Koln
Germany

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