Political Origins of Firm Strategies a Dissertation
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POLITICAL ORIGINS OF FIRM STRATEGIES A DISSERTATION SUBMITTED TO THE DEPARTMENT OF POLITICAL SCIENCE AND TO THE COMMITTEE ON GRADUATE STUDIES OF STANFORD UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY Alexander G. Kuo September 2010 © 2011 by Alexander Guanshin Kuo. All Rights Reserved. Re-distributed by Stanford University under license with the author. This work is licensed under a Creative Commons Attribution- Noncommercial 3.0 United States License. http://creativecommons.org/licenses/by-nc/3.0/us/ This dissertation is online at: http://purl.stanford.edu/jj651ff0390 ii I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. Jonathan Rodden, Co-Adviser I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. Isabela Mares, Co-Adviser I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. Stephen Haber I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. David Laitin Approved for the Stanford University Committee on Graduate Studies. Patricia J. Gumport, Vice Provost Graduate Education This signature page was generated electronically upon submission of this dissertation in electronic format. An original signed hard copy of the signature page is on file in University Archives. iii Abstract What explains the emergence of different kinds of capitalist systems across advanced industrialized democracies? In particular, why do highly coordinated employer associations form in some states and not others, and why do such organizations change over time? Because different kinds of contemporary employer coordination or varieties of capitalism are linked to long-term outcomes of unemployment, inequality, social policy generosity, and product innovation, it is important to understand their historical origins and development. Given the recent attention to historical economic institutions and their long-term policy consequences, understanding their origins and divergence is of obvious historical, normative, and theoretical interest. In this dissertation I propose an alternative account of the development of highly coordinated employer associations and their absence in advanced industrialized states. I provide a new framework for conceptualizing these outcomes as strategic decisions of firms. I go on to argue that major collaborative employer associations emerged largely out of major threats to firms posed by workers, during key historical moments in the early twentieth century and the inter-war period. When the threat posed by workers was extremely high, firms agreed to form institutionalized arrangements with unions, such as encompassing collective bargaining institutions. When firms felt that the threat could be contained, they pursued strategies of collective repression of workers, in the form of repressive employer associations. However, the collective strategies that these firms pursued could only succeed if there were not incentives to defect from such arrangements. Lower industrial heterogeneity in iv economies that facilitated collective action increased the likelihood of collective firm strategies succeeding. This proposed theory is more consistent with the historical evidence of the actual development and changes in employer organizations than existing literature. To test the theory I provide evidence that confirms the preferences and strategies of firms, and demonstrate how they change in response to differing levels of the variables described above. I use a combination of empirical approaches to achieve these goals. First, to substantiate the predictions about the strategies pursued by firms, I gathered primary data on the main employer organizations in the United States and Germany from the late nineteenth to mid twentieth century. The new evidence, constituting publications, meeting notes, and internal correspondence supports the main predictions of the theory about the determinants of firms‘ strategies and formation of early employer associations. Second, I leverage the extensive sub- national variation in the strategies pursued by firms in both countries to confirm observable implications of the theory. I statistically test the key mechanisms of the theory using new sub-national data on membership in different employer organizations in the US and Germany between 1880 and 1930. Third, to test the portability of the theory, I present evidence of changes in firm strategies between 1880 and 1950 for other countries, including Australia, Britain, Denmark, France, Japan, and Sweden. I conclude the dissertation with discussion of broader implications for comparative politics, in particular the importance of understanding collective action among firms and instruments of repression. v Acknowledgments I take great pleasure in thanking all the individuals who have helped make this dissertation possible. I would first like to thank the members of my dissertation committee. My greatest emotional and intellectual debts go to my advisor, Isabela Mares. Since the day I walked into her office with a set of barely formed ideas about the history of varieties of capitalism, she has been a wonderful mentor through my years as a graduate student. Her critical and helpful intellectual insights, amazing patience, generosity with her time, sense of humor, and contagious enthusiasm have encouraged my interest in comparative politics, and vastly improved this manuscript. I have met with her to talk about the project in a variety of geographical locales, and each time, she devoted maximum energy and effort to improve what I had written and to constructively criticize what I was thinking. I feel lucky to have had her as a mentor and I look forward to learning more from her throughout the rest of my professional career. I could not have asked for a better or more caring advisor. I owe a great deal of thanks to Jonathan Rodden. I feel lucky that he joined the department just as I was coalescing some of the ideas and drafting more of the manuscript. Jonathan always provided a host of useful suggestions and energetic encouragement on the project, and had particularly insightful and creative ideas for gathering new data and for framing the ideas. His generosity with his time, patience, and obvious interest in the implications of my research are much appreciated. David Laitin taught my first few courses in comparative politics in graduate school, and I have learned a tremendous amount from him and his approach to doing social science; this manuscript is my first real (and hopefully not last) attempt to do vi justice to his teaching. At critical points throughout the writing, he gave important suggestions about improving the argument, testing, and pushing to make the project more relevant to a broader audience of comparative politics scholars. I look forward to continue learning from him the professor who some students affectionately and admiringly refer to as ―Gandalf.‖ Steve Haber, the final member of the dissertation committee, encouraged my early interest in comparative political economy and the study of business history and the role of business organizations in politics. He also pressed me to think about how the arguments in the manuscript could generalize to developing states, and to apply insights from other literatures to my own thinking and writing about advanced industrialized states. I will continue to learn more from him and from his work. Fieldwork for the dissertation was partially funded by the Littlefield Graduate Fellowship and the Graduate Research Opportunity Dissertation Grant. Gerald Feldman kindly met with me before I left for Germany and gave great feedback on the project, as well as how to get acquainted with German historical research. I spent a stimulating year as a visiting doctoral student at the Max Planck Institute for the Study of Societies (Max Planck Institut für Gesellschaftsforschung) in Cologne, Germany, for which I have Jens Beckert and Wolfgang Streeck to thank. I had a wonderful time doing research there, due in large part to the community of doctoral students and scholars, including Michael Blauberger, Helen Callaghan, Steffen Ganghof, Philipp Klages, Martin Höpner, Olga Maletz, Philip Manow, Cornelia Woll, and Armin Schäfer. These friends and colleagues made me feel at home while doing research. Many archivists and librarians in Germany assisted my research and the gathering of vii many historical materials there. I would like to thank in particular Christian Hillen at the Rhineland-Westphalian Economic Archive; Hans-Hermann Pogarell at the Bayer Archive; and Norbert Uersfeld at the Institute for the German Economy in Cologne. A host of librarians and archivists in the United States were also extremely helpful in tracking down sources and data. I would like to thank the staff at the Indiana Historical Society, the US National Archive, and Hagley Museum and library, in particular Marge McNinch. At Stanford, Tony Angiletta and Ron Nakao patiently helped with numerous requests and questions. Patrick Galloway shared data on Prussia demographics and kindly answered questions about data sources. Gerald Friedman kindly shared