Business Systems and Corporate Governance

Since the beginning of the 1990s a large number of economic and legal studies have documented the existence of significant international variations in corporate governance (Franks and Mayer, 1990, 1995; La Porta et aI., 1997, 1999; Moerland, 1995; Pedersen and Thomsen, 1997; Prowse, 1995; Roe, 1991, 1994a; Shleifer and Vishny, 1997, as well as more descriptive work by Baums, Buxbaum, and Hopt, 1994; Charkham, 1994; Porter, 1992; Prentice and Holland, 1993, and others). But apart from the investor-protection explanation launched by La Porta et al. (1998), which regards ownership diversification as a function of legal protection of small investors, little systematic research has been done on the determinants of international differences in corporate governance. Instead, the existence of international differences as such has been advanced as an argument against economic ownership theory. As Roe (1994a, p. 28) put it: "The differences suggest that differing histories, cultures and paths of economic development better explain the differing structures than economic theory alone."
This article turns to sociology - to the business-systems analysis of Richard Whitley (1992, 1994; Whitley and Kristensen, 1996) - for a deeper understanding of the origins of corporate governance systems. By testing the business-systems framework, this article contributes to the ongoing dialogue between economics and sociology in the spirit of Foss (this issue).