Competing Rationales for Corporate Governance in France: Institutional Complementarities between Financial Markets and Innovation Systems

• Author: Soo H. Lee,Taeyoung Yoo
• DOI: http://doi.org/10.1111/j.1467-8683.2008.00669.x
• Published date: 01 March 2008
• Date: 01 March 2008

Competing Rationales for Corporate

Governance in France: Institutional

Complementarities between Financial Markets

and Innovation Systems

Soo H. Lee and Taeyoung Yoo*

ABSTRACT

Manuscript Type: Conceptual

Research Question/Issue: This paperidentif‌ies the causes and consequences of corporate governance reform with reference

to the French case. By disaggregating institutional complementarities into global and domestic dimensions, we analyze the

path of institutional change compelled by f‌inancial eff‌iciency and cooperative innovation.

Research Findings/Results: Our analysis of the French case shows that both converging and diverging forces of institu-

tional change coexist,shaping selective responses to globalization. While the adoption of the shareholder model is necessary

for resource acquirement from the global capital markets, resource allocation in the cooperative innovation systems

reinforces the stakeholder model. The French case conf‌irms the sustainability of distinctive institutional complementarities,

albeit with selective adaptation based on a sense-making social compromise.

Theoretical Implications: The French case reminds us of the importanceof distinctive institutional traditions and dominant

social rationalities to understand the underlying logic of governance reform. The comparative research on corporate

governance needs to address not just the cross-country variations in institutional arrangements and practices, but also the

clash of competing rationales for reform explicitly in comparative terms within a single country context.

Practical Implications: For foreign investors, it is vital to understand the unique institutional environment of state-centred

stakeholder economies if they are to negotiate the best terms of return and to avoid unnecessary conf‌licts. French managers

are expected to devise strategic choices responding to the competing rationales of governance. Managerial sense-making is

essential for achieving sound long-term performance, upon which the legitimacy and sustainability of the constellation of

selective governance rests.

Keywords: Business–Government relations, corporate governance codes, corporate innovation, France, institutional

theory

INTRODUCTION

The comparative corporate governance literature has

been concerned with the question of global con-

vergence or national divergence of legal codes, f‌inancial

systems and corporate practices. On the one hand, some

argue that convergence is indispensable due to increasing

competition and eff‌iciency (Coffee, 1999; Gilson, 2001; Lane,

2003). Thus, formulas of corporate governance reform

around the world have invariably embraced the virtues of

the shareholder model such as the market for corporate

control and outside monitoring mechanisms (Kosnik, 1987;

Hart and Moore, 1990; Thomsen and Pedersen, 2000). On the

other hand, others suggest that the rationale for national

systems of corporate governance is largely shaped by dis-

tinctive institutional contexts, and therefore their diversity is

maintained (Aguilera and Jackson, 2003; Lee, Michie and

Oughton, 2003; O’Sullivan, 2003; Boyer, 2004; Charreaux,

2004). Even the adoption of the US style principles across

different countries has shown divergent processes and out-

comes because of “institutional complementarities” (Aoki,

1994; Amable, 2000; Hall and Soskice, 2001), “political path

dependence” (Roe, 2003) or “conventions” of socially con-

structed beliefs (Gomez and Jones, 2000).

*Address for correspondence: School of Management and OrganisationalPsychology,

Birkbeck College, University of London, Malet Street, London WC1E 7HX, UK. Tel:

44-20-7079 0708; Fax: 44-20-7079 0663; E-mail: t.yoo@mbs.bbk.ac.uk

COMPETING RATIONALES FOR CORPORATE GOVERNANCE IN FRANCE 63

Volume 16 Number 2 March 2008

© 2008 TheAuthors

Journal compilation © 2008 BlackwellPublishing Ltd

doi:10.1111/j.1467-8683.2008.00669.x