What happens after privatization? Globalization, corporate governance and adjustment at British Telecom and Deutsche Telekom

Abstract:

This article examines corporate governance arrangements and the adjustment paths of British Telecom and Deutsche Telekom. Both firms have been facing similar adjustment pressures, stemming from the globalization and liberalization of telecommunications markets, privatization, and technological progress, but are situated in the most differing corporate governance systems in Europe. Convergence theory suggests that these similar pressures translate into similar behaviour at the firm level, whereas the 'varieties of capitalism' approach argues for different adjustment paths depending on the wider institutional environment in which firms operate. The paper shows that the strategic behaviour of British Telecom and Deutsche Telekom differs significantly, although to varying degrees, in the areas of organizational change, internationalization, employment policy, and restructuring owing to different institutional contexts and their impact on company decision-making and priorities. Although the evidence is much closer to the 'varieties of capitalism' approach, institutionalist approaches should be complemented by systematic firm-level research in order to understand firm behaviour.

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