Shareholder Value, Management Culture and Production Regimes in the Transformation of the German Chemical-Pharmaceutical Industry

Abstract

One of the greatest points of controversy in the recent literature in political economy is the extent to which shareholder value oriented institutional investors are drivers of change in national systems of corporate governance. This article argues that the key question is how management cultures shape managerial responses to pressures for change from capital markets. Empirical evidence for this argument is provided through an examination of changes since the mid-1990s at the Big Three German integrated chemical/pharmaceutical companies: Hoechst, Bayer and BASF. Despite facing similar demands from shareholder-value oriented investors, management at the three companies have pursued quite different strategies. The end result, however, may be the same from a production regime perspective, that is, the long-run withdrawal of Big Pharma from Germany as a location for R&D due to a more favorable institutional framework in the US.

Keywords: Corporate Governance, Shareholder Value, Chemical Industry, Pharmaceuticals, Germany

JEL Classification: G3, L6, J5