Channels of Convergence: Investor Engagement and Interlocked Directorates

Abstract

IntroductionIt is little disputed that the spread of financial capitalism has led to significant integration and interdependence of national economies (Perraton et al, 1997). It is within this setting, since the 1970s, that corporations have gained their``present, more general economic significance as an extra-national network of inter-and intra-firm linkages spreading rapidly over the globe'' (Taylor and Thrift, 1982, page i). A well-rehearsed question arising from such global integration is whether or not national economies are converging upon similar structural and cultural foundations (North, 1994). As some have presented the case of complete market-driven convergence (Hansmann and Kraakman, 2001) others have presented path dependence as an insurmountable obstacle (Bebchuk and Roe, 1999). Seminal contributions by La Porta et al (1997; 1998; 1999) initiated a rich comparative corporate governance research agenda surrounding this question and effectively emphasized the path-dependent divergence of national models, a finding they continue to observe a decade later (La Porta et al, 2008). In their seminal work on the geography of finance, Clark and Wo¨jcik (2007) demonstrate that, although capital may circulate relatively unimpeded on a global scale, a fact often employed to support arguments of complete convergence, it originates and operates in different context-specific economic geographies, a reality which maintains the consequentiality of path dependence. Although the convergence versus divergence debate is rich with empirical and theoretical research, little effort has yet been expended to identify specific channels by which convergent market forces interact with divergent path-dependent forces to establish national models of corporate governance.A recent review of empirical research concerning the convergence/divergence of national economies within globalized markets has concluded that the bulk of the evidence supports the notion that history matters in contemporary economic development (Nunn, 2009). A wealth of research has further documented that convergent trends are witnessed in national models of corporate governance but that idiosyncratic national characteristics remain the prominent explanatory variable [see Doidge et al ( 2007), Khanna et al ( 2006),