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My research has been primarily concerned with the effects of institutions and organization on economic and social performance. Within this context, my work has evolved as unexpected events have produced empirical ‘puzzles’ serving to challenge the conventional wisdom and drive the direction of economic theory and policy.

My early work focused on the interrelationship between corporate governance (broadly defined) and employment relations, and the effect this might have on the deployment of human resources in the effective management of production. In this, my interest was ignited during the early 1980s, when I spent a year working in the area of human resource management (HRM) and industrial relations at Usines Gustave Boel Steelworks in La Louviere Belgium as part of my work for a Masters Degree in International Business from the University of South Carolina. This was a period of growing industry and regional crisis – not only in Europe but also in the United States – during which ‘deindustrialization’ (with its heavy associated social and economic costs) was bringing industrial giants – and the regions in which they were located – to their knees. My experience at Boel offered unique insight into the production process for steel, the nature of relationships within the firm, their impact on performance effectiveness, and the competitive and technological challenges confronting firms during a very difficult time in the industry’s history. It formed the basis for my PhD research at the University of Notre Dame and has had a profound influence on the work I have done in this area ever since.

Following from this, there have been two significant streams in my research. The first explores the question of why cooperative ‘high performance’ work systems are so fragile in the Anglo-American context, despite empirical evidence of – and theoretical support for – their effectiveness. In addressing this question, my work has contributed to the literature explaining the influence of ownership and corporate structures – ‘corporate governance’ – on the ability of firms to implement and maintain cooperative work systems in different industry and national contexts.  I have also contributed to the literature on strategic choice and the inter-relationship between corporate-level strategic approach, plant-level outcomes and social and economic performance at the level of the firm, industry and regional or macro-economic environment.

The second research stream, conducted in collaboration with colleagues in the Cambridge Centre for Business Research (CBR), examines the impact of corporate governance on stakeholder relationships, social and economic performance in the context of takeovers and other forms of corporate reorganization, including downsizing and outsourcing. In this, we found that the prioritization of shareholder interests (in firms that have widely dispersed shareholder ownership) sets up disincentives for other stakeholder groups to make asset specific investments in the firm. However, there are cases where firms that are active in the market for corporate control (the stock market) have managed to build constructive long-term relationships with employees.  Building on these insights, we explored the degree to which the UK system of corporate governance operates as a constraint on partnership in employment relations by forcing managers to prioritise short-term shareholder interests above all others, in particular employees.  Here, we found that although companies operating under dispersed shareholder ownership face difficulties in making credible long-term commitments to employees, some have been able to gain an important competitive edge by demonstrating the ability to better handle long-term stakeholder relations than rivals.

The collapse of Enron and the corporate scandals of the early 2000s provided a fascinating empirical case to explore in extending this research – only to be eclipsed by the ‘global financial crisis’ that erupted in 2008. In this, my research has followed two main streams.

The first stems from my interest in the ‘varieties of capitalism’, comparative business systems and comparative corporate governance literatures, which seek to understand and explain the variation that can be discerned across contemporary capitalist systems. In the wake of the financial crisis, recognition of the ‘variety’ within the ‘liberal market’ (LME) category of capitalist system provided another interesting empirical puzzle. This motivated the establishment of an International Research Network, with partners in each of the six LMEs, to examine this phenomenon in greater depth. The first stage of our research focused on the cross-country variation within the LME variety of capitalism; and as discussed in the Research Section above, it produced a book (Banking Systems in the Crisis: The Faces of Liberal Capitalism) and numerous journal articles, papers and presentations. The second stage of the research, investigating our discovery of significant within-country variation – The Alternatives Within – is now underway. In this, I have a keen interest both in the design and implementation of industrial strategy aimed at rebalancing the economy away from such a heavy reliance on the financial services sector and in financial reforms designed to curb speculative activities and encourage a return to the financial sector’s role in supporting the productive side of the economy.

The second stream of this research has been increasingly inspired by Galbraith’s notion of the ‘conventional wisdom’ which, in his view, yields not to the power of new ideas but to the ‘massive onslaught of circumstances with which [it] cannot contend’. This clears the way for new ideas, which have been fermenting as the onslaught gathers pace, to become sufficiently acceptable to form the basis for the new conventional wisdom.

The financial crisis – which quickly spilled over into the real economy – can be viewed as a ‘massive onslaught of circumstances’ with which mainstream economic theory (at first) seemed unable contend. This was made worse by the collapse of Lehman Brothers in 2008, which caused panic in the international financial markets as large financial institutions (that had believed they were too big to be allowed to fail) begged their governments for a rescue – and the response a decidedly ‘Keynesian’ one. But within 18 months of the emergency measures, fears of a Greek sovereign debt default (and concerns about the sovereign debt of other weaker Eurozone members) produced a sharp reversal – and austerity replaced stimulus. The deepening Eurozone Crisis and the social and economic consequences of austerity have been a focus of my recent research.

Research interests include:

  • The structuring role of economic theory and policy
  • The political economics of austerity
  • Corporate governance, stakeholder relations and economic performance
  • Productive systems
  • Varieties of capitalism
  • Organizational, industry and macro-system behaviour and performance

Dr Sue Konzelmann