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Diversification and Internationalization in the European Single Market: The British Exception


This article examines the long-run impact of the 1992 completion of the European Single Market on the diversification and internationalization of European business. It does so at a particular moment of crisis: the exit of the United Kingdom from the European Union (“Brexit”). The article finds that completion of the European Single Market is indeed associated with significant and widespread changes in the strategies of European businesses between 1993 and 2010. European business has converged on more focused diversification strategies and followed similar patterns of internationalization. The most significant exception is the consistently low level of British business's commitment to European markets. The distinctiveness of British internationalization is, in a sense, Brexit foretold.

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1 On the significance and context of the creation of the European Single Market, see, for example, Sandholtz Wayne and Zysman John, “1992: Recasting the European Bargain,” World Politics 42, no. 1 (1989): 95128 ; and Bruce Leigh, “Europe's Locomotive,” Foreign Policy, Spring 1990, 6890 . For a history of the negotiations leading to the formation of the Single Market, see Moravcsik Andrew, “Negotiating the Single European Act: National Interests and Conventional Statecraft in the European Community,” International Organization 45, no. 1 (1991): 1956 .

2 For a discussion of the wider historical context, see, for example, Schröter Harm G., “The German Question, the Unification of Europe, and the European Market Strategies of Germany's Chemical and Electrical Industries, 1900–1992,” Business History Review 67, no. 3 (1993): 369405 . Fligstein Neil and Mara-Drita Iona, “How to Make a Market: Reflections on the Attempt to Create a Single Market in the European Union,” American Journal of Sociology 102, no. 1 (1996): 133 .

3 Winters L. Alan, “The Welfare and Policy Implications of the International Trade Consequences of ‘1992,’American Economic Review 82, no. 2 (1992): 104–8.

4 Rosamond Ben, “Imagining the European Economy: ‘Competitiveness’ and the Social Construction of ‘Europe’ as an Economic Space,” New Political Economy 7, no. 2 (2002): 169; Commission of the European Communities, Growth, Competitiveness, Employment: The Challenges and Ways Forward into the 21st Century White Paper, Parts A and B, Com (93), 700 final, Bulletin of the European Communities, Supplement 6/93 (Dec. 1993).

5 Moravcsik, “Negotiating the Single European Act,” 19–56; Neven Damien J., “Regulatory Reform in the European Union,” American Economic Review 82, no. 2 (1992): 98103 . For an early economic analysis that linked economic liberalization and economic integration in Europe, see Haberler Gottfried, “Economic Aspects of a European Union,” World Politics 1, no. 4 (1949): 431–41.

6 See Bouwens Bram and Dankers Joost, “The Invisible Handshake: Cartelization in the Netherlands, 1930–2000,” Business History Review 84, no. 4 (2010): 751–71; and Bottasso Anna and Sembenelli Alessandro, “Market Power, Productivity and the EU Single Market Program: Evidence from a Panel of Italian Firms,” European Economic Review 45, no. 1 (2001): 167–86. See also Commission of the European Communities, Communication from the Commission to the Council, the European Parliament, the Committee of the Regions and the Economic and Social Committee: The Competitiveness of European Enterprises in the face of Globalisation—How It Can be Encouraged Com (98), 718 final,

7 Derek F. Channon, “The Strategy and Structure of British Enterprise” (doctoral thesis, Harvard Business School, 1971); Dyas Gareth P. and Thanheiser Heinz T., The Emerging European Enterprise (Boulder, 1976); Gareth P. Dyas, “The Strategy and Structure of French Industrial Enterprise” (doctoral thesis, Harvard Business School, 1972).

8 Schreiber Jean-Jacques Servan, The American Challenge (New York, 1969); Djelic Marie-Laure, Exporting the American Model: The Post-War Transformation of European Business (Oxford, 1998).

9 Binda Veronica, “Strategy and Structure in Large Italian and Spanish firms, 1950–2002,” Business History Review 86, no. 3 (2012): 503–25; Heinrich Thomas, “Product Diversification in the U.S. Pulp and Paper Industry: The Case of International Paper, 1898–1941,” Business History Review 75, no. 3 (2001): 467505 ; Davis Gerald F., Diekmann Kristina A., and Tinsley Catherine H., “The Decline and Fall of the Conglomerate Firm in the 1980s: The Deinstitutionalization of an Organizational Form,” American Sociological Review 59, no. 4 (1994): 548.

10 Whittington Richard and Mayer Michael, The European Corporation (Oxford, 2000); Binda, “Large Italian and Spanish Firms.”

11 For conceptual articles, see Verbeke Alain and Kano Liena, “The New Internalization Theory and Multinational Enterprises from Emerging Economies: A Business History Perspective,” Business History Review 89, no. 3 (2015): 415–45; and Jones Geoffrey and Khanna Tarun, “Bringing History (Back) into International Business,” Journal of International Business Studies 37, no. 4 (2006): 453–68. Illustrative empirical papers include Chandler Alfred D. Jr., “The Growth of the Transnational Industrial Firm in the United States and the United Kingdom: A Comparative Analysis,” Economic History Review 33, no. 3 (1980): 396410 ; Donzé Pierre-Yves, “Siemens and the Construction of Hospitals in Latin America, 1949–1964,” Business History Review 89, no. 3 (2015): 475502 ; Keneley Monica, “Does Organizational Heritage Matter in the Development of Offshore Markets? The Case of Australian Life Insurers,” Business History Review 87, no. 2 (2013): 255–77; and Ryggvik Helge, “A Short History of the Norwegian Oil Industry: From Protected National Champions to Internationally Competitive Multinationals,” Business History Review 89, no. 1 (2015): 341 . For an overview of historical considerations of the multinational enterprise, particularly in Business History Review, see Wilkins Mira, “The History of Multinationals: A 2015 View,” Business History Review 89, no. 3 (2015): 405–14.

12 Winters, “International Trade Consequences.”

13 Amdam Rolv Petter and Bjarnar Ove, “Globalization and the Development of Industrial Clusters: Comparing Two Norwegian Clusters, 1900–2010,” Business History Review 89, no. 4 (2015): 693716 .

14 Binda, “Large Italian and Spanish Firms.”

15 Fligstein Neil and Merand Frederic, “Globalization or Europeanization? Evidence on the European Economy since 1980,” Acta Sociologica 45, no. 1 (2002): 722 .

16 See, for example, Binda, “Large Italian and Spanish Firms.”

17 Whittington Richard, “Alfred Chandler, Founder of Strategy: Lost Tradition and Renewed Inspiration,” Business History Review 82, no. 2 (2008): 267–77; Pitelis Christos N., “Globalization, Development, and History in the Work of Edith Penrose,” Business History Review 85, no. 1 (2011): 6584 .

18 Ghemawat Pankaj, “Competition and Business Strategy in Historical Perspective,” Business History Review 76, no. 1 (2002): 3774 ; Zuckerman Ezra W., “Focusing the Corporate Product: Securities Analysts and De-diversification,” Administrative Science Quarterly 45, no. 3 (2000): 591619 ; Chandler Alfred D. Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990); Heinrich, “U.S. Pulp and Paper Industry”; Hoskisson Robert E., Johnson Richard A., Tihanyi Laszlo, and White Robert E., “Diversified Business Groups and Corporate Refocusing in Emerging Economies,” Journal of Management 31, no. 6 (2005): 941–65; Jones and Khanna, “Bringing History (Back).”

19 Penrose Edith, The Theory of the Growth of the Firm (London, 1959); Colli Andrea, “Multinationals and Economic Development in Italy during the Twentieth Century,” Business History Review 88, no. 2 (2014): 303–27.

20 Pitelis, “The Work of Edith Penrose,” 68; Hautz Julia, Mayer Michael C. J., and Stadler Christian, “Ownership Identity and Concentration: A Study of Their Joint Impact on Corporate Diversification,” British Journal of Management 24, no. 1 (2013): 102–6; Lynskey Michael J., “The Locus of Corporate Entrepreneurship: Kirin Brewery's Diversification into Biopharmaceuticals,” Business History Review 80, no. 4 (2006): 689723 .

21 Pierre Jon, “Varieties of Capitalism and Varieties of Globalization: Comparing Patterns of Market Deregulation,” Journal of European Public Policy 22, no. 7 (2015): 908–26; Fligstein and Merand, “Globalization or Europeanization?”; Thatcher Mark, “European Commission Merger Control: Combining Competition and the Creation of Larger European Firms,European Journal of Political Research 53, no. 3 (2014): 443–64.

22 Winters, “International Trade Consequences,” 104; Meyer Klaus E., “Globalfocusing: From Domestic Conglomerates to Global Specialists,” Journal of Management Studies 43, no. 5 (2006): 1109–44; Adriaan Dierx, Fabienne Ilzkovitz, and Khalid Sekkat, “European Integration and the Functioning of Product Markets: Selected Issues,” European Commission, Special Report Number 2, in European Integration and the Functioning of Product Markets, ed. Dierx Adriaan, Ilzkovitz Fabienne, and Sekkat Khalid (Brussels, 2002), 932 ; Ilzkovitz Fabienne, Dierx Adriaan, Kovacs Viktoria, and Sousa Nuno, “Steps toward a Deeper Economic Integration: The Internal Market in the 21st Century—A Contribution to the Single Market Review” in Economic Papers, no. 271 (Brussels, 2007).

23 Fligstein and Merand, “Globalization or Europeanization?”

24 Wilkins Mira, “Chandler and Global Business History,” Business History Review 82, no. 2 (2008): 251–66; Hautz Julia, Mayer Michael, and Stadler Christian, “Advance and Retreat: How Economics and Institutions Shaped the Fate of the Diversified Industrial Firm in Europe,” International Studies of Management and Organization 45, no. 4 (2015): 319–41.

25 Jong Abe de, Röell Ailsa, and Westerhuis Gerarda, “Changing National Business Systems: Corporate Governance and Financing in the Netherlands, 1945–2005,” Business History Review 84, no. 4 (2010): 773–98; Verbeke and Kano, “New Internalization Theory,” 427.

26 Berghoff Hartmut, “The End of Family Business? The Mittelstand and German Capitalism in Transition, 1949–2000,” Business History Review 80, no. 2 (2006): 263–95.

27 Jones Geoffrey, Multinationals and Global Capitalism (New York, 2005), cited in Verbeke and Kano, “New Internalization Theory,” 426. A similar case has been made for the importance of the colonial past; see da Silva Lopes Teresa, “Competing with Multinationals: Strategies of the Portuguese Alcohol Industry,” Business History Review 79, no. 3 (2005): 559–85.

28 Wellings Ben and Baxendale Helen, “Euroscepticism and the Anglosphere: Traditional Dilemmas in Contemporary English Nationalism,” Journal of Common Market Studies 53, no. 1 (2015): 123–39.

29 Jacquemin Alexis P. and Berry Charles H., “Entropy Measure of Diversification and Corporate Growth,” Journal of Industrial Economics 27, no. 4 (1979): 359–69; Palepu Krishna, “Diversification Strategy, Profit Performance and the Entropy Measure,” Strategic Management Journal 6, no. 3 (1985): 239–55.

30 See, for example, Bowen Harry P. and Wiersema Margaret F., “Foreign-Based Competition and Corporate Diversification Strategy,” Strategic Management Journal 26, no. 12 (2005): 1153–71; Hitt Michael A., Hoskisson Robert E., and Kim Hicheon, “International Diversification: Effects on Innovation and Firm Performance in Product-Diversified Firms,” Academy of Management Journal 40, no. 4 (1997): 767–98; Chakrabarti Abhirup, Singh Kulwant, and Mahmood Ishtiaq, “Diversification and Performance: Evidence from East Asian Firms,” Strategic Management Journal 28, no. 2 (2007): 101–20; and Hoskisson Robert E., Hitt Michael A., Johnson Robert, and Moesel Douglas D., “Construct Validity of an Objective (Entropy) Categorical Measure of Diversification Strategy,” Strategic Management Journal 14, no. 3 (1993): 215–35.

31 Channon, “British Enterprise”; Dyas and Thanheiser, Emerging European Enterprise; Dyas, “French Industrial Enterprise”; Binda, “Large Italian and Spanish Firms”; Whittington and Mayer, European Corporation.

32 Cassis Youssef, Big Business: The European Experience in the Twentieth Century (Oxford, 1997).

33 Channon, “British Enterprise”; Dyas and Thanheiser, Emerging European Enterprise; Dyas, “French Industrial Enterprise”; Binda, “Large Italian and Spanish Firms”; Whittington and Mayer, European Corporation.

34 Channon, “British Enterprise”; Dyas and Thanheiser, Emerging European Enterprise; Dyas, “French Industrial Enterprise”; Binda, “Large Italian and Spanish Firms.”

35 Although our data is based on a quantitative diversification measure and therefore differs from the qualitative measures of the Harvard Studies tradition, we can offer some indicative comparison due to the convergent validity of the measures; see Hoskisson et al., “Construct Validity.” Previous studies have shown that for France, the proportion of firms adopting a diversified strategy increased from 36 percent in 1950 to 59 percent in 1993. In Germany the proportion of diversified firms increased from 40 percent in 1950 to 77 percent in 1993, whereas in the U.K. the figure increased from 27 percent in the 1950's to 82 percent in 1993. See Channon, “British Enterprise”; Dyas and Thanheiser, Emerging European Enterprise; Dyas, “French Industrial Enterprise”; and Whittington and Mayer, European Corporation.

36 Marseille Jacques, Alcatel-Alsthom: Histoire de la Compagnie générale d’électricité (Paris, 1992).

37 Berghoff Hartmut, “Varieties of Financialization? Evidence from German Industry in the 1990s,” Business History Review 90, no. 1 (2016): 81108 .

38 For an overview of RWE's history, see “RWE AG History,” Funding Universe, accessed, May 2017,; Pohl Hans, Vom Stadtwerk zum Elektrizitätsgroßunternehmen: Gründung, Aufbau und Ausbau der “Rheinisch-Westfälischen Elektrizitätswerke AG” (RWE) 1898–1918 (Stuttgart, 1998); Maier Helmut, ed., Elektrizitätswirtschaft zwischen Umwelt, Technik und Politik: Aspekte aus 100 Jahren RWE-Geschichte 1898–1998 (Freiberg, 1999); Mez Lutz and Osnowski Rainer, RWE—Ein Riese mit Ausstrahlung (Cologne, 1996); and RWE , 2010 Annual Report (Essen, 2011), 55.

39 On the interaction of global, European, and national-level factors in the defense industry, see Fligstein Neil, “Sense Making and the Emergence of a New Form of Market Governance: The Case of the European Defense Industry,” American Behavioral Scientist 49, no. 7 (2006): 949–60.

40 Jones Adam, “Europe Cries Foul as New BAe Emerges,” Times (London), 20 Jan. 1999 .

41 Peter Spiegel, “Oil or Missiles, the Constant Is Power,” Financial Times, 7 Dec. 2004.

42 Matthias Loke, “Expansion in den Wachstumsregionen USA und Asien geplant Siemens will sein Industriegeschäft weltweit an die Spitze führen,” Berliner Zeitung, 3 Sept. 1997.

43 Gerhard Hegmann and Andre Tauber, “Siemens verabschiedet sich aus unserem Alltag,” Die Welt, 22 Sept. 2014.

44 “Siemens übernimmt Kraftwerkssparte,” Die Welt, 15 Nov. 1997.

45 See Legrand Timothy, “The Merry Mandarins of Windsor: Policy Transfer and Transgovernmental Networks in the Anglosphere,” Policy Studies 33, no. 6 (2012): 523–40; and Willetts David, “England and Britain, Europe and the Anglosphere,” Political Quarterly 78, no. S1 (2007): 5461 .

46 Wilkins Mira, Thelen Kathleen, Whitley Richard, Miller Rory M., Martin Cathie Jo, Berghahn Volker, Iversen Martin Jes, Herrigel Gary, and Zeitlin Jonathan, “‘Varieties of Capitalism’ Roundtable,” Business History Review 84, no. 4 (2010): 637–74.

47 Jones, Multinationals and Global Capitalism; Verbeke and Kano, “New Internalization Theory”; Lopes, “Competing with Multinationals”; Binda, “Large Italian and Spanish Firms.”

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