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

  • Michael Mayer, Julia Hautz, Christian Stadler and Richard Whittington

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.

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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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