Business Groups and Financial Markets

<p>This work builds on the classical sociological contributions of Weber Simmel and Toennies and makes the case for different and alternative ideal-typical models of business relations which the author calls English and German.</p><p>The English model of business relations is characterized by free competition between firms. They abide by the ethical rules of fair business and the moral economy in market exchanges. Their relations are accordingly based on mutual trust. As a rule they do not cultivate privileged relations with political authorities.</p><p>By contrast the German model involves hierarchical relations between a group's major firm and its smaller units. There is no moral community binding together the different groups and therefore no mutual trust between them. Business groups maintain close relations based on reciprocal favours with authorities.</p><p>The author compares the London and New York Stock Exchanges in the late nineteenth century finding the former better approximates the English model and shows this model's superior performance. English model countries such as Taiwan have been shown to be more competitive in market exchanges than countries such as South Korea which approximate the German model. A new epilogue makes use of more recent information and confirms Segre's arguments.</p>