Research project 1: Corporate networks in Germany, France, and the United States (1900-2010)

Corporate networks which connect the largest corporations in each country emerged in the early 20th century. The networks served several purposes: they developed into a medium of self-control in managerially run companies; they became an instrument of bank control in capital-intensive companies; furthermore, they were institutions to regulate competition in the age of mass production. The networks reached a high density during the interwar period, particularly in Germany (1928: 16.2%). During the period 2000 to 2010 we observe the dissolution of corporate networks in almost all Western countries (cf. Figure 1)

Figure 1: Density (%) of the corporate network in Germany (G), France (F) and the United States (US), 1900-2010

We collected data for the largest 250 corporations in Germany, France, and the United States for the sample years 1900, 1914, 1928, (1934), 1938, 1995, 2010. For each year, the names all members of the management/supervisory board (Germany),  conseil d’administration (France), and the board of directors (US) have been collected. The corporate networks (ties among firms) and the elite networks (ties among the top-big linkers) have been analyzed for each country and each sample year. A list of firms included in the sample in each year is available here.


Paul Windolf: Corporate Networks in Europe and the United States. Oxford 2002: Oxford University Press.

Paul Windolf: Coordination and Control in Corporate Networks: United States and Germany in Comparison, 1896 - 1938. European Sociological Review, Vol. 25 (2009), pp. 443-457.

Paul Windolf: Aufstieg und Auflösung der Deutschland AG: Unternehmensver­flech­tung in Deutschland, Frankreich und in den USA (forthcoming).

The research project was funded by the German Science Foundation and the Hans-Böckler-Foundation.

Research project 2: The Jewish economic elite (1900-1930): Germany, France, Britain, and the United States in comparison

The question of what role the Jewish minority played in the development of capitalism during the late 19th and early 20th century was controversial in scholarly literature already before the First World War. Werner Sombart saw Jews as the “founders of modern capitalism” and emphasized their “great importance for modern economic life, one that far surpassed all other influences”. Max Weber rebuffed Sombart’s hypothesis. He argued instead that it was not possible to attribute the characteristic form of capitalistic rationality to the Jewish religion or Jewish traditions.

We have collected biographical data for the big linkers in the corporate networks in Germany, France, Britain, and the United States (religious affiliation, education, social background). Our analysis shows that about 16% of the big linkers in the German corporate network were of Jewish origin (1914). The percentage of Jews in the general population was less than one percent in 1914. What comparative advantages did the Jewish minority enjoy that enabled them to succeed in the competition for leading positions in the German economy? In the United States, Britain, and France, the percentage of big linkers who were of Jewish origin was considerably lower.

Jewish members did not create a network of their own that was separate from the overarching corporate network. Instead, Jewish and non-Jewish members had contact with one another through their seats on the supervisory boards of big firms. Both groups were integrated into this network. Figure 2 illustrates this point. It shows a graphical representation of the ego-network of one of the most prominent industrial leaders of Jewish origin during the Weimar Republic, Paul Silverberg (blue circle in the centre). In 1928 he sat on the supervisory board of 25 big German firms. By holding so many seats, Silberberg regularly met 171 other members of the corporate elite (big linkers), who are symbolized by the smaller circles in Figure 2.

Figure 2: Ego-network of Paul Silverberg (1928) - (Note: B: big linker is a banker; J: big linker is of Jewish origin.)

We computed logistic regressions to explain the central role of Jewish members in the German corporate network. Dependent variable: centrality in the elite network. Independent variables: Jewish origin, education, nobility, banker, honorary title (e.g., Kommerzienrat). Results of the regression analysis can be found in the following publications:

Paul Windolf: The German-Jewish Economic Elite (1900-1930). Zeitschrift für Unternehmensgeschichte, Vol. 56 (2011), pp. 135-162.

Paul Windolf:Das Netzwerk der jüdischen Wirtschaftselite: Deutschland (1914 – 1938), in: P. Windolf, R. Stichweh (eds.), Inklusion und Exklusion. Wiesbaden 2009: VS-Verlag, pp. 275-302.

The research project was funded by the German Science Foundation.

Research project 3: Financial market capitalism

Capitalism is not a static mode of production. It evolves over time and continuously changes its institutional structure. The process of ‘creative destruction’ (Schumpeter) not only transforms the production technology and human capital, but also the institutions of capitalism and the composition of the economic elite. One economic elite is replaced by another elite - a process which Pareto called the ‘circulation of elites.’

During the early 20th century, the institutional structure of family capitalism has been transformed into what Berle and Means have called ‘manager capitalism.’ The owner-entrepreneur was replaced by professionalized managers who henceforth controlled the large corporations. Since the 1970s we observe again a major shift in the institutional structure of capitalism and its dominant mode of accumulation. The new type of capitalism which is called here financial market capitalism is charac­terized by the dominance of global financial markets, a new mode of control of the large corporation (shareholder value), and the rise of a new economic elite (institutional investors).

The term ‘institutional investor’ covers a large group of economic actors, among them pension-, investment-, and hedge funds, private equity, money managers, and insurance companies. In the early 1970s the institutional investors owned about 12% of the share capital of the thousand largest US-corporations; in 2010 they owned about 75% of the share capital. The institutional investors hold the majority of the share capital in almost all large listed corporations, and they are able to control the general meetings of these corporations. A similar transformation of ownership has taken place in the large German and French corporations which are included in the stock exchange indices (DAX, CAC40).

The institutional investors are majority owners. They legally dispose of property rights which enable them to exercise the option ‘voice (Hirschman). Institutional investors compel management to follow the maxim of shareholder value which has been  defined by Adoph Berle already in the 1930s: “Business corporations exist for the sole purpose of making profits for their stockholders” (emphasis added).

Our research will examine the following hypotheses:

●  The market for institutional investors is fragmented and highly competitive. The intense competition drives institutional investors to promise high rates of return to their customers. However, only few of them are able to stick to their promises.

●  Institutional investors are the owners of the large corporations. They compel managers to maximize profits and “to make as much money as possible for the shareholders” (Milton Friedman). The higher the profits of the firm, the easier it is for institutional investors to stick to their promises (shareholder value).

● Higher rates of return engender higher levels of risk. The principle of shareholder value (profit maximization) tends to increase the level of risk in the economy. Recent examples are the financial market crises (Enron, subprime).

● Institutional investors change the incentive structure for managers. Stock options are likely to align the interests of managers and institutional investors. Managers and institutional investors are both interested in maximizing the stock price of the company (community of interest). These institutionalized incentives also increase the level of risk in the economy (stock market bubble).

● Institutional investors are not the ultimate risk bearers. They are owners without risk. Institutional investors are likely to follow high-risk strategies. If their strategies are successful, they earn a lot of money. If their strategies fail, their customers lose their money. Institutional investors (usually) have “no skin in the game”. The ultimate risk bearers are the customers of the fund.

We have collected a data set for the largest corporations included in the stock indices of 22 OECD countries. Total sample size: N=1380. The data base includes the following variables: Ownership (%) of the 20 largest stockholders for each company; percentage of stock owned by foreign institutional investors; total assets; total liabilities; return on equity; turnover rate (liquidity); etc.

Statistical analysis of the data is ‘work in progress’ and will be available by the end of 2014.


Paul Windolf: Was ist Finanzmarktkapitalismus? In: P. Windolf (ed.), Finanzmarkt-Kapitalismus. Sonderheft 45 der Kölner Zeitschrift für Soziologie und Sozialpsychologie. Wiesbaden: VS Verlag, pp. 20-57. 

Paul Windolf:  Die rechtliche Regulierung feindlicher Übernahmen, in: M. Bach (ed.), Der entmachtete Leviathan. Zeitschrift für Politik, Sonderband 5: Baden-Baden 2013: Nomos, pp. 301-323.

The research project is funded by the Hans-Böckler Foundation.