Competing Rationales for Corporate Governance in France: Institutional Complementarities between Financial Markets and Innovation Systems

Abstract

ABSTRACTManuscript Type: ConceptualResearch Question/Issue: This paper identifies the causes and consequences of corporate governance reform with reference to the French case. By disaggregating institutional complementarities into global and domestic dimensions, we analyze the path of institutional change compelled by financial efficiency and cooperative innovation.Research Findings/Results: Our analysis of the French case shows that both converging and diverging forces of institutional change coexist, shaping selective responses to globalization. While the adoption of the shareholder model is necessary for resource acquirement from the global capital markets, resource allocation in the cooperative innovation systems reinforces the stakeholder model. The French case confirms the sustainability of distinctive institutional complementarities, albeit with selective adaptation based on a sense‐making social compromise.Theoretical Implications: The French case reminds us of the importance of distinctive institutional traditions and dominant social rationalities to understand the underlying logic of governance reform. The comparative research on corporate governance needs to address not just the cross‐country variations in institutional arrangements and practices, but also the clash of competing rationales for reform explicitly in comparative terms within a single country context.Practical Implications: For foreign investors, it is vital to understand the unique institutional environment of state‐centred stakeholder economies if they are to negotiate the best terms of return and to avoid unnecessary conflicts. French managers are expected to devise strategic choices responding to the competing rationales of governance. Managerial sense‐making is essential for achieving sound long‐term performance, upon which the legitimacy and sustainability of the constellation of selective governance rests.