This article returns to the issue of how ownership matters. It does so by developing a critique of the ‘advantage-value-return’ framework of assumptions about value creation from the product market, ...which are recurrent in resource based strategy and many other discourses that highlight what managers can do and the variable governance of management by owners. It then uses a case analysis of private equity and presents empirics which show how the financier general partners capture value so that general partners are enriched regardless of the performance of their investment funds. While private equity publicly claims to represent ownership with control for strategic decision making and operating efficiency, the undisclosed generic business model is the control of ownership through constructing a hierarchy of ownership claims for debt and equity suppliers in the capital market. Before or after the financial crisis that began in 2007, what matters is the position of the general partner as first among owners, not the motives, identity and actions of managers or the different suppliers of debt and equity.
(HOW) DO DEVICES MATTER IN FINANCE? Erturk, Ismail; Froud, Julie; Johal, Sukhdev ...
Journal of cultural economy,
08/2013, Volume:
6, Issue:
3
Journal Article
Peer reviewed
This article distinguishes between different concepts of device. In traditional English usage, as in the Foucauldian or Deleuzian concept, devices exist in a context of power, opportunism and force. ...Through argument and evidence about hedge funds and financial innovation, we argue that this kind of non-Callonian device is ubiquitous in finance so that the idea of device can be part of a much more political analysis of the present-day capitalism. Capitalist devices are not neutral tools with fixed uses and predictable results because they vary in purpose and effects from one context to another. This is the point Deleuze makes in the context of nomadic war machine when he explains how a tool can be a weapon; and it is an issue in the present-day capitalism where we can ask whether politically strong financial elite have turned tools like short-selling into weapons that may harm other stakeholders in the economy. This article also connects devices in finance and the process of innovation with the desires of financial elites who enrich themselves and are negligent about the costly consequences of their bricolage for society. In this political frame, financial devices are products of a banking system that works for itself generating fees and bonuses and incidentally recreating pre-1914 levels of income inequality of historic proportions. This goes unchallenged because a democratic deficit allows financial elites to socialise losses and privatise gains.
Against the background of the French 2007 presidential campaign, this article presents evidence that since the early 1990s French firms used stock market finance to expand internationally so that ...they could use their acquired US and UK operations to keep things going in France. Behind these specific issues about the French case are larger general questions about whether the stock market is a disciplinary institution. This article presents new empirics on the French case that refute the disciplinary market premise and the thesis of obligatory corporate response by relatively unprofitable firms; the same empirics also complicate an understanding of the French compromise as they show how the stock market facilitated foreign acquisitions by large French firms with unrecognised consequences for the regime of accumulation.
The academic discussion of power in supply chains has changed from a discussion of the use of coercive power to one which emphasizes the role of trust in embedding co-operation and disincentivizing ...opportunism. Whilst a number of empirical studies have suggested the former is alive and well, this paper argues that power relations may also be constituted by the self-perceptions of weaker actors as much as by the explicit actions of more powerful ones. This study explores the role of power through the perceptions of subjugated actors, which set the ‘rules of the game’. Our case centres on perceptions of Northern Irish beef farmers and their reflections on their ‘powerlessness’ in relation to the larger, more consolidated processors that they sell to. We find that the way farmers make sense of the power relations they encounter is influenced by the individuating character of the power relations exercised by the processors, which debilitates their ability to collaborate and resist collectively. What emerges is a story about the process of accommodation whereby farmers pragmatically resign themselves to play by ‘the rules of the game’ to remain ‘part of the game’.
This Debates and Controversies contribution introduces the notion of an employment portfolio to explore how economies create combinations of employment. It is not simply the number of jobs but the ...factor share distributed to labour and the sectoral mix and composition that matter. Three case studies of employment portfolio (Australia, California and the UK) are used to show how previous attempts at structural reform failed to deliver sustainable employment, even though economies need to offer a portfolio of jobs as a hedge against an uncertain future. The article argues that new ideas and non-standard policies are required to help create employment of sufficient quality and quantity in the current difficult conditions.
•Evaluates Apple Inc.’s post-2003 business model.•Apple's physical supply chain demonstrates the shortcomings of its business model.•Apple's content supply chain has become dependent on extensive ...legal protection.•Apple exerts control over retailers using its brand power and own retail stores.•Apple's multi-channel platform allows it to “own the consumer”.
This paper uses a business model framework to analyze the main limitations of Apple Inc. post-2003, a significant turning point in the company's history. As such, we move beyond an exclusive focus on what makes Apple unique or different by evaluating the mundane and out-dated elements of its business model. To do so, we examine the end-to-end supply chain, from source to store, to present a more holistic evaluation of the Apple business model. Drawing on the existing literature, we argue that the quintessential element of the Apple business model is its ability to ‘own the consumer’. In short, the Apple business model is designed to drive consumers into its ecosystem and then hold them there, which has been hugely successful to date and has allowed Apple to wield enormous power in the end-to-end supply chain. We demonstrate this through a detailed evaluation of Apple's physical and content supply chains and its retailing strategy. Moreover, we find that the very business processes that enable unparalleled corporate control bring with them new problems that Apple has thus far been unable, or unwilling, to adequately address.
Unsurprisingly, private equity trade associations and industry representatives were quick to adopt the language of agency theory to explain the source of the industry's success - and the broader ...benefits of its activity. ... the British Venture Capital Association (BVCA) argued that: 'private equity makes managers into owners, giving them the freedom, focus and finance to enable them to revitalise their companies and take them onto their next phase of growth'.3 Similarly, the industry-sponsored Walker report contrasted the 'attenuation and impairment of the agency relation between owner and manager in the public company' with the 'direct alignment between shareholder and executive (which) minimises and may substantially eliminate agency tension in private equity'.4 By resolving agency problems, private equity would improve operating efficiency, providing benefits to the firm, consumers, the UK economy and even to the pensioners whose funds provide the equity component in private equity investment.
•Meat supply chains have become a matter of public concern.•The power of supermarkets over food supply chains threatens their financial viability and sustainability.•This paper opens up new ways of ...thinking about how to create a sustainable national supply chain in pig meat production in the mass market where low price is crucial.
The scandal surrounding the presence of horsemeat in UK supermarket meat products has focused public attention on the problems of complex, fragmented food supply chains. Through a study of the UK's pig meat supply chain, this paper proposes a new framing of the problem in terms of opportunistic dealing adopted by the supermarkets in vertically disintegrated supply chains, where all actors attempt to pass the risks and costs onto somebody else. This outcome is the result of cultural practices and competences in buyer-led supermarket organizations where strong supermarket chains have the power to capture processor and producer margins. One consequence is that mass-market meat production and processing is close to unviable, as evidenced here by the analysis of the VION Food Group. However, there are mainstream alternatives to the retail-led dysfunctional supply chain. This paper presents an alternative integrated supply chain model using the case of Morrisons, the UK's fourth largest supermarket chain. If fragmented supply chains are not inevitable, the important issue explored in the conclusion is how the inadequacies of government policy, which understands the problem of the sector but is stuck with a competition-based mindset, obstruct the creation of a more sustainable supply chain.
Using case study material on French pharmaceutical firm Sanofi-Aventis, this article aims to elaborate on recent criticisms of the varieties of capitalism (VoC) perspective. The article claims that ...the VoC approach is not so much ‘wrong’ as limited, both by its narrow focus on the national and its exclusive concern with mapping national institutional organization. The article highlights the important role of sectoral and global institutions, and discusses the difficulty of reading firm strategy directly from national institutional change, when ownership and personnel changes often provide senior management with greater autonomy to pursue divergent strategies which are difficult to generalize from the national level. In the case of Sanofi, the article finds that, whilst domestic institutional shifts explain the timing of the company's strategic change, sectoral and global institutions play a more important role in understanding the form and direction of that change. Meanwhile, Sanofi's PDG, Jean-François DeHecq, drew on non-national institutions — notably US- and UK-based institutional shareholders who bought the new share issues, and foreign investment banks which brokered acquisitions — to operationalize a discretionary strategy of expansion in the US market. The article argues that VoC's emphasis on national institutional configurations fails to adequately engage with these complexities. Further, it presents empirics on Sanofi's geographical accumulation and reinvestment of profit, which highlights how funds generated in the US were recycled in France to support well-paid research and manufacturing jobs. The article concludes that Sanofi is better thought of as part of a disorganized but interconnected economic world, where firms operate as a kind of conduit for cross-subsidy between national social settlements. This requires us to question VoC's emphasis on national complementarities and encourages us to think divergently about the degree of separateness between national capitalisms.
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