Abstract
Savings banks were a key component of the banking industry in Western European countries in the early 1980s – a distinct, not-for-profit form of banking organizations existing alongside joint-stock banks. After 1980, three decades of banking consolidation and pro-market regulatory reforms were widely expected to make savings banks disappear. Yet, in some countries at least, savings banks have survived, as persistently distinct organizational forms. Moreover, in countries as similar as France and Italy, organizational diversity as epitomized by the survival of savings banks has taken two apparently diverse routes. To solve this double puzzle, this article builds on the “new organizational synthesis” in organizational theory and on the comparative neo-institutional literature, and draws on a comparative case study analysis of savings banks consolidation in France and Italy, from 1980 to 2012. The study contributes to the literature on the co-evolution of institutions and organizations by focusing on meso-level coordination and fully incorporating the relevance of state actors and policies in the analysis of organizational change.
Keywords
Introduction
In the early 1980s, savings banks were an important part of the financial system in Western European countries. In France, Germany, Italy, Spain and the Netherlands, savings banks held sizeable shares of the personal savings market and of various segments of the credit market (see Butzbach & Von Mettenheim, 2014, for an overview). Savings banks, which are not-for-profit financial institutions historically specialized in collecting savings and funding mortgage loans, were then a quite different type of organization than for-profit commercial banks. European savings banks have historically been small, local, non-profit, specialized banks catering for the needs of low wage earners (Moster, 2000). As such, therefore, savings banks embodied organizational diversity within the banking industry.
Three decades later, the banking industry, in Western Europe and elsewhere, has radically changed: legal and regulatory reforms have de-segmented banking markets, ending rents and paving the way for a dramatic fall in product and market specialization among financial intermediaries (see Grossman, 2010). The state has effectively withdrawn from being a direct actor in the banking industry, in particular through ownership and control of financial institutions. Governments have liberalized interest rates and lifted direct regulations on prices and credit quantities, where these were in place. Nowhere have these changes been more spectacular than in the financial systems of “interventionist states”, such as France and Italy (Loriaux, Woo-Cummings, Calder, Maxfield, & Pérez, 1997). Furthermore, efforts towards the creation of a single retail banking market in Europe, effective in January 1993, led to the elimination of barriers at entry and facilitated foreign bank entry. Partly as a result of these legal and regulatory changes, but also as a consequence of technological innovation, competition has markedly increased among European banks in the three decades since 1980.
Such changes were widely expected, by banking scholars, economists and policy-makers, to lead to a sharp decline in organizational diversity in the banking industry through a fall in the number and variety of heterogenous organizational forms (Gardener & Molyneux, 1991; Institute of European Finance [IEF], 1999). Indeed, whereas higher competition might lead to product market specialization and the emergence or strengthening of niches, as demonstrated by the resource partitioning literature (see, for instance, Hannan & Freeman, 1989), the combination of higher competition and pro-market reforms was expected to homogenize banking structures in most countries, through, in particular, three mechanisms: (i) the end of statutory protection and tax benefits for non joint-stock banks; (ii) mergers and acquisitions between different types of banks; and (iii) selection processes that would drive inefficient banks out of the market (Zimmerman, 1995).
Homogenizing pressures were particularly stringent for non-profit banks such as savings banks: indeed, the latter have had to compete for similar resources (savings, shares of the lending market) with larger banks mustering much broader financial and organizational resources, less constrained by their governance and business model and favored by regulatory reforms (Hardie & Howarth, 2013). As Canning, Jefferson, and Spencer (2003, p. 244) put it, “a central issue is why not-for-profit banks arise and survive in a world dominated by investor-owned banks, run for profit”. In other words, European savings banks were largely expected to disappear as the outcome of the revamping of the banking industry that took place between 1980 and 2012 (IEF, 1999).
Yet, in some countries at least, this has not been the case. In Germany, savings banks today still constitute the second pillar of a “three pillar system” consisting of joint-stock banks, savings and cooperative banks (Schmidt, Bülbül, & Schüwer, 2014). In France, savings banks merged with cooperative banks in 2006 to form the country’s third largest banking group, whose governance, mission and organization make it still sharply distinct from joint-stock banks. On the other hand, Spanish savings banks have almost entirely disappeared, wiped out by the 2007–2008 global banking crisis and its aftermath; and in Italy, while the savings banks brand has been kept alive as a marketing device for what are now subsidiaries of joint-stock banking holding groups, savings banks as a distinct organizational form have effectively ceased to exist.
The persistent organizational diversity in banking embodied by the survival of savings banks in some European countries is puzzling, given the homogenizing pressures mentioned above. In addition, organizational diversity itself varied across countries – even in countries as similar as France and Italy. Indeed, the latter two, while sharing with other Western European countries a tradition of a strong savings banks sector at the outset of the period under study, were also quite singular (and alike) in the extensive role played by the state in finance. While “state-administered credit” unravelled in both countries (and elsewhere) in the late 1970s (see Loriaux et al., 1997), the Italian and French states continued to play an active role in shaping the processes of bank consolidation. In addition, the two countries were exposed to similar external shocks, i.e. financial globalization and the integration of European banking markets. How is it, then, that French savings banks survived as a distinct organizational form while Italian savings banks almost completely disappeared?
Given the importance of institutional dynamics in the organizational changes that have taken place in banking during the period under study, the most appropriate theoretical framework to analyze those changes seems to be that proposed by works collectively but loosely known under the “new organizational synthesis” label (see, for instance, Haveman & Rao, 1997; Haveman, Rao, & Paruchuri, 2007; Schneiberg, 2011). According to such perspective, organizational diversity is a durable feature of modern capitalism, based on the co-existence of multiple institutional logics acted upon by social agents (Schneiberg, 2011). Furthermore, organizational change at population level is the outcome of collective agency mediated by institutional change (Haveman & Rao, 1997; Haveman et al., 2007). In other words, there is co-evolution between institutional and organizational change.
However, the cases under study also raise some challenges to this framework. First, a potential theoretical problem arises from relying on the same co-evolutionary mechanisms to explain organizational change (such as the bureaucratization of thrifts) and organizational diversity at population level (e.g. thrifts versus corporations). Co-evolutive organizational change might actually lead to a decline in diversity. While Haveman and Rao (1997) acknowledge the problem and conceptualize it as a conflict of logics (see, also, Reay & Hinings, 2009), they do not explain why ecological dynamics would maintain or reproduce organizational diversity over time. The problem is made even more acute when analyzing situations where population-level organizational change does not occur through the birth of new organizational forms. In such context, how may one account for persistent or renewed organizational diversity? In other words, unless one conceives an organizational world as a place where new institutional resources are continuously produced by collective agency (for instance, social movements) to support the emergence of new organizational forms, what factors, if any, may sustain and renew organizational diversity?
This question leads to a second issue with the framework proposed by the new organizational synthesis. Organizational diversity in late 20th century banking seems to have been much more predicated upon the institutionalization of thick sectoral boundaries than was the case in early 20th century banking (see, for instance, Grossman, 2010). Thus, the removal of such boundaries through regulatory change has acted as a powerful homogenizing force in banking in the past 30 years. Therefore, the persistent organizational diversity observable in some systems cannot be explained by the same co-evolutionary dynamics that led to the emergence of distinct organizational forms in the first place. Indeed, new possibilities for collective action within organizational fields are opened up by this greater institutionalization. As a consequence, by contrast with the diffuse and indirect effects of institutions prevalent in the new organizational synthesis, recent changes in banking suggest a more direct action of institutions – and a different form of institutional change, where meso-level coordination and state intervention appear to play a much more important role.
These theoretical challenges to the new organizational synthesis might have to do with the characteristics of the empirical investigations carried out within that theoretical tradition – namely, a prevalent focus on “young” (versus mature) fields in a system often associated with a “weak state” (Simons & Ingram, 2003). This is precisely what this article tries to address by looking at mature fields in two countries with a “strong state” tradition.
This study makes three contributions to the analysis of the institutional dynamics of organizational populations in general and to the “new organizational synthesis” in particular. First, by shifting away from the prevalent temporary and spatial focus of the population ecology literature on non-for-profit banks (i.e. the early 20th century United States), this study underlines the importance of different institutional factors in the (re) production of organizational diversity – in particular, meso-level factors that reflect the higher institutionalization of sectoral boundaries in a mature field such as (not-for profit) banking in the late 20th century. Second, the present study fully incorporates the role states play in shaping organizational change at population level, in particular through provoking or directing shifts in (sub) population boundaries. Third, through a comparative analysis, rarely used in the organizational-institutional stream of studies (for an exception, see Ashworth, Boyne, & Delbridge, 2009), this study shows how different patterns of state-society interactions might give rise to different evolutionary outcomes, thus uncovering the role of macro-level factors in weakening, producing or reproducing organizational diversity.
But why does organizational diversity matter in the first place? In banking, the heterogeneity of organizational forms has been recently acknowledged, in the policy and academic literature alike, to play a crucial role in financial stability – especially in the wake of the 2007–2008 global financial crisis. First, a banking system composed of diverse organizations does better at mitigating systemic risk than a homogeneous banking system, whatever the source of heterogeneity (Haldane, 2009; Haldane & May, 2011). Second, diversity is good for the functioning of the (banking) system in evolutionary terms – in other words, as Michie (2011) puts it: “In a situation of uncertainty and unpredictability, we cannot know which model will prove to be superior in all possible future circumstances, so we ought to be rather cautious before destroying any successful model.” These arguments have found their way in a series of policy documents in various settings: in the United Kingdom, the government recently recognized “the need to maintain diversity in the financial services sector (for example, by removing barriers to entry where possible, and ensuring that its rules do not disadvantage mutually owned financial institutions)” (HM Treasury, 2010, p. 32). At the European Union level, the Liikanen Report, commissioned by the European Commission and made public in October 2012, devotes to the “necessary” diversity of the European banking industry one full chapter (Liikanen, 2012, ch. 3).
The article is structured as follows: a first section will lay out the theoretical framework used here, drawing both on the “new organizational synthesis” in population ecology and comparative neo-institutional analysis. A brief methods and data section follows. The discussion of empirical evidence will be then divided into two sections: a first section that focuses on the process of savings banks consolidation in the two countries; a second section that deals with the contrasting evolution of sector coordination. A final section concludes with a discussion of the empirical findings uncovered here in light of the main theoretical issues raised next.
Theory
Organizational diversity in banking is arguably a multi-dimensional issue. In a recent study, Michie and Oughton propose a classification of the various dimensions along which banking diversity can be measured – ownership, competition, “balance sheet resilience” and geographical spread (Michie & Oughton, 2013). Similarly, the European Liikanen Report, mentioned above, identifies six characteristics or attributes of banking diversity: size, ownership, capital and funding, “activities” that are revealed by banks’ balance sheet and income, corporate and legal structure, and geographical scope (Liikanen, 2012).
This article takes the view that the existence and persistence of organizational diversity in banking can be best asserted by looking at the existence of distinct organizational forms within the banking industry. The existence (persistence) of distinct organizational forms, in other words, is used here as a proxy for organizational diversity in banking. This choice is motivated by the assumption that such attributes as size and geographical scope are not strong enough guarantees of the maintenance of diversity over time – in other words, small banks can become big fast and local banks can broaden their scope, therefore getting closer to the large banking group held as a (negative) benchmark in the literature on diversity. Moreover, and perhaps more importantly, organizational forms do include and crystallize various elements of diversity.
In line with Pólos, Hannan, and Carroll (2002) and Hsu and Hannan (2005), an organizational form is conceived here as a specific kind of collective organizational identity, which relies on “codes (or rules) that audience members hold as defaults for an organization” (Hsu & Hannan, 2005, p. 476). In the case of banks, an organizational form consists of three main elements: the organization’s corporate governance (i.e. the structure and relationships between ownership and control); the organization’s corporate charter (i.e. the goals and prerogatives given by its statutes); and the organization’s size and territorial rooting. These various characteristics are interrelated, thus confirming our choice of organizational forms as a key dimension of diversity. For instance, in the case of savings banks, stakeholder-oriented models of corporate governance, together with local rooting, operate a check on dimensional growth; non-profit objectives limit diversification and nurture stakeholder-oriented corporate governance; small size reinforces links with local stakeholders; local stakeholders strengthen the non-profit orientation of these organizations.
As an organizational form, French and Italian savings banks were clearly distinct from other types of banks, especially joint-stock banks, in the early 1980s. By contrast with the latter, French and Italian savings banks were not-for-profit financial institutions, without clear owners, specialized in collecting savings and making long-term personal loans and investing in government securities. Table 1 summarizes the main differences between savings banks and joint-stock banks along the three main dimensions of their organizational form, as defined above.
French and Italian savings banks’ organizational form vis-à-vis joint stock banks, 1980.
However, by 2012, the term of our analysis, the singularity of savings banks as a distinct organizational form had been radically altered in both countries – but, crucially, change went opposite directions in the two cases. In France, despite vast transformations, savings banks were still, in 2012, a distinct organizational form with respect to joint-stock banks, with a different legal status (cooperative versus joint-stock), a different internal organizational structure, in particular with respect to savings banks’ territorial rooting, and a different corporate charter. In Italy, by contrast, the few remaining savings banks (in name) had adopted the dominant organizational form of joint-stock banks. Table 2 summarizes these features. 1
French and Italian savings banks’ organizational form vis-à-vis joint-stock banks, 2012.
How to explain this change in organizational diversity, epitomized by the changing (persistent, in the case of France) distinctiveness of savings banks vis-à-vis joint-stock banks? And how to understand the different outcomes, in terms of the organizational distinctiveness of savings banks, in the two countries?
Organizational diversity, and its evolution over time, lies at the heart of the literature on the “new organizational synthesis” (henceforth, NOS) developed by Haveman and Rao, Schneiberg, Simons, and Ingram and others. Schneiberg, for instance, undertakes to replace the history of cooperative economic organizations at the heart of US capitalism, pointing out that these cooperative forms were very strong during the “era of corporate consolidation” of the late 19th–early 20th century in the United States, previously seen as being dominated by large corporations (Schneiberg, 2011). The relevance of NOS works for understanding the evolution of organizational diversity with respect to French and Italian savings banks is reinforced by the focus of some of these works (in particular, Haveman and Rao, 1997; Schneiberg, 2011) on a very similar kind of organizations as the ones under study here: namely, thrifts and mutual banks (in the early 20th century in the United States). Such organizations represent “durable and important elements of American corporate capitalism”, as Schneiberg (2011, p. 1412) points out.
According to the NOS perspective, changes in organizational diversity must be understood by linking institutional change and population ecology dynamics. Haveman and Rao talk of “co-evolution” of institutions and organizational forms: they see various organizational forms as the embodiment of “institutional logics” strongly tied to the external environment (Haveman & Rao, 1997). There is, the same authors argue, a recursive relationship between institutions and organizations: first, organizations “materialize” (specific) institutions; second, (general) institutions legitimize organizations (Haveman & Rao, 1997). Legitimation is performed, at population level, by “interpretive schemas” – “ways of understanding that have the potential to reshape that population” (Haveman et al., 2007, p. 118). Other authors also emphasize the key role of institutions in legitimizing or constraining organizational change (Barnett & Carroll, 1993; Baum & Olivier, 1992).
Positing the interdependence between institutions and organizations leads to formulate hypotheses on organizational change that rely on theories of institutional change. Thus, Schneiberg (2012, p. 653) explains organizational change in the thrift industry with “the combination of standard diffusion processes and collective mobilization in support of new practices”. The use of institutional theory has allowed NOS scholars to re-introduce agency within the analysis of structural organizational change. In particular, social movements are seen here as the key agents for change, constantly mediating between organizational forms and institutionalized fields. In the early 20th century United States, for instance, social movements used cooperatives “to confront, transform, or bypass corporations and markets” (Schneiberg, 2011, p. 1412). This focus on social movements enables a shift of “the explanatory focus from isomorphism and diffusion to contestation and the production of multiple logics within fields” (Schneiberg, King, & Smith, 2008, p. 636).
This article builds on the “new organizational synthesis” by focusing the analysis on the close interactions of institutions and organizations in determining the dynamics of organizational diversity, and by paying particular attention to the shifts in “interpretive schemas” that drive diverse organizational forms. However, the dynamics of bank consolidation in late 20th century France and Italy also present some challenges to this framework. In particular, both the peculiarity of banking in the late 20th century and the context in which these changes have taken place (two countries with a state-centered credit system) require closer attention to be paid to meso-level coordination dynamics and to the role of the state, which is sidelined in several of the works mentioned above. This is the case, in particular, of those studies focusing on the thrift movement in early 20th century United States (Berk & Schneiberg, 2005; Haveman & Rao, 1997; Schneiberg et al., 2008). In a successive work, Haveman and colleagues do pay attention to the role state laws and state authorization play in the legitimation of organizational forms. Yet these factors are not deemed sufficient to explain the conversion of “interpretive schemas into imperatives” (Haveman et al., 2007, p. 118). As Simons and Ingram point out, this propensity to downplay the role of the state may have to do with the fact that in the early United States the state was a “weak state” (Simons & Ingram, 2003). 2 This, however, is a hypothesis worth testing or assessing.
Indeed, it is hard to overvalue the role played by state policies and regulation in the evolution of banking systems, especially during the 20th century (see Grossman, 2010, for an overview). 3 The importance of the role of the state has of course been acknowledged in the post-2007 crisis context (Freixas & Mayer, 2011). The exposure of regulatory failure during and after the crisis should not, however, obfuscate the extensive legal and regulatory involvement of the state in banking even at the peak of the “deregulatory” movement (Dewatripont & Tirole, 1994). The role of state policies and actors in banking was especially strong, of course, in countries such as France and Italy, which were precisely described as instances of “interventionist states” in the 1970s and 1980s (Loriaux et al., 1997).
In addition, the focus on organizational forms and their evolution warrants taking state policies and laws into full consideration. As Hsu and Hannan argue, the notion of organizational form involves an “abstraction from the uniqueness of individual organizations and a typification of commonality” (Hsu & Hannan, 2005, p. 477); such abstraction, as Hsu and Hannan point out, may arise top down from state orientation (Hsu & Hannan, 2005), in line with the focus of the present study. The notion of organizational form is, therefore, sensitive to the extension of organizational boundaries, both within the banking population and across sub-groups within this population (sectoral boundaries). Since, moreover, organizational boundaries are shaped to a large extent by organizations’ institutional environment (legal and regulatory norms, interactions with state agencies, with accounting bodies …), organizational forms are therefore sensitive to changes in or constraints originating from their institutional environment. This is especially the case in the banking industry, as argued above.
Beyond the studies cited above, there are works within the population ecology tradition that attribute a greater role to the state in the ascent and the fall of organization forms: some emphasize the legitimizing role of the state for new organizations (Barnett & Carroll, 1993; Baum & Oliver, 1992; Carroll, Goodstein, & Gyenes, 1988); others underline the role states play in shaping competition (Dobbin & Dowd, 1997). Ingram and Rao analyze how business firms mobilize for the enactment of laws designed to enhance their interest and facilitate their survival; indeed, “the careers of organizational forms depend critically on legal support from the state” (Ingram & Rao, 2004). However, Simons and Ingram point to the limits of these approaches in that they see only one-way influences between the state and organizations; by contrast, their own work on kibbutzim in Israel emphasizes the interdependence of states and organizations as, potentially, “joint contributors to the production of social order” (Simons & Ingram, 2003). The same authors go on to propose to explore the “possibilities of symbiosis, competition, and rivalry between states and organizations” (Simons & Ingram, 2003, p. 612). The present article will follow their approach and counterbalance the weak state bias of other NOS works by choosing two cases with “strong states” (at least, strong in the starting point of the period under study). In addition, through the methodology chosen (qualitative case studies), the analysis proposed here will attempt to balance the quantitative methods prevailing in population ecology to shed light on the processes by which the state and organizations might interact.
The state will be conceptualized here in three complementary ways: (i) as a set of specific actors within the “bureaucratic field” (state agencies, policy-makers, regulators), shaping organizational boundaries from the outside, and therefore influencing the nature and extent of organizational heterogeneity; (ii) as a set of institutional resources and opportunities shaping the transformation of organizational forms, through their appropriation by organizational actors; (iii) as a source of legitimacy for specific organizational forms. The latter two are similar to the variables used by Skocpol and colleagues in their study of the institutional origins of the large civic associations in 19th and early 20th century United States (Skocpol, Ganz, & Munson, 2000). The first variable, however, is especially important when it comes to changes in boundaries between organizational forms: as in other contexts, the extent of change “predominantly reflects decisions taken by state actors” (Lister & Marsh, 2006, p. 258).
The hypothesis formulated here is that the evolution of organizational diversity as epitomized by the persistent (or not) distinctiveness of savings banks in the two countries reflects a direct coordinated effort between key state actors (the Treasury in France, the central bank in Italy) and powerful savings banks actors – by contrast with the soft, indirect effect emphasized in the literature (Simons & Ingram, 2003, 2004).
This is where meso-level dynamics become very relevant. Indeed, in the highly institutionalized sectors within late 20th century banking, organizations, the state, and other actors, are often involved in “neo-corporatist” coordination. The analysis, therefore, also builds on the insights of Scott, Meyer, Hollingsworth and others who have shown the importance of meso-level organization and coordination to explain the trajectories of populations of organizations or of whole business systems (see, in particular: Berk & Schneiberg, 2005; Hollingsworth, 1991; Lindberg, Campbell, & Hollingsworth, 1991; Scott & Meyer, 1991). This focus calls for a more appropriate articulation of the various dimensions of the state, from state actors’ strategic action to the legitimation effects sought by organizational actors in the transformation of organizational forms. In addition, the co-evolutionary processes observed here are fundamentally different from those observed in the case of early 20th century thrifts. Thus, the nature of organizational diversity also differs. Within the new organizational synthesis, organizational diversity is an evolutionary outcome linked to the emergence of (diverse) organizational forms (Schneiberg, 2011; see also Carroll & Swaminathan, 2000). By contrast, organizational diversity in our two cases might be seen as the outcome of coordination processes at population and sub-population level.
This shift in focus also enables a better understanding of cross-country divergence in the degree of organizational diversity. This study contributes to the new organizational synthesis by shedding light on important macro-structural (or macro-institutional) variables influencing organizational diversity – or, to be more precise, influencing the co-evolution between institutions and organizations that generates or weakens organizational diversity. By contrast with the little comparative work in the new organizational synthesis tradition, comparative studies of business systems or national political economies have convincingly established the importance of macro institutional factors in generating peculiar types or varieties of capitalism (see Hall & Soskice, 2001; Whitley, 1999). 4 Political or state-level variables are often used in comparative historical accounts to explain cross-country divergence in social or economic outcomes (see Mahoney & Rueschemeyer, 2003). In explaining variation in the extent of neo-liberal reforms in several countries, for instance, key variables usually cluster around policy-making structures (Prasad, 2006) and institutionalized patterns of state-society relations (Fourcade-Gourinchas & Babb, 2002). However, the literature has shifted away from a focus on formal channels of policy-making towards less formal institutions and institutional resources, such as the structure and representation of collective interest (Culpepper, 2007) and institutions that bear on the shaping of actors’ preferences (Schnyder, 2010). At the same time, an increased attention has been paid to the cognitive framework of policy-makers or strategic actors (Fourcade-Gourinchas & Babb, 2002) and “shared beliefs” among strategic actors (Culpepper, 2005).
In accordance with the three-dimensional conceptualization of the state proposed earlier (tying together strategic action by key state actors and “legitimation effects”), and in line with the assumptions spelled out above concerning the important role of the state in shaping boundaries between organizational forms, two key variables will be looked at here to compare the role of the state in the transformation of the Italian and French savings banks: the structure of policy-making, first, with specific attention paid to the degrees of fragmentation and centralization of the policy-making process; and the “cognitive framework” of strategic actors both within the state and within the savings banks movement as well, which incorporate institutional legacies shaping actors’ worldviews (Fourcade-Gourinchas & Babb, 2002).
Following a brief description of methods and data, the next two sections will present the analysis of the two cases studied here, i.e. the transformation of French and Italian savings banks within the broad process of bank consolidation that has taken place in the past three decades. The two sections concern, first, the shift in savings banks’ corporate boundaries through mergers and acquisitions; and, second, the transformation of savings banks’ sector organization.
Methods and Data
The analysis relies on qualitative case study analysis. This methodology seems more suited to analyze the processes of organizational change both at population level and from a more macro-level perspective, while producing more insights into the motivations of key actors in the process of organizational change. As Eisenhardt has argued, case study analysis focuses on the “dynamics present within single settings” (1989, p. 534). In addition, qualitative case studies might provide a better fit for interpretive inquiries (Denzin & Lincoln, 2011).
The period under study was chosen to encompass the vast changes undertaken by the banking industry, mentioned above, which started in the early 1980s in most countries. Moreover, as mentioned above, the study adopts a “most different cases” strategy to identify the potential factors of differentiation between the two countries. Table 3 presents important background information for the two cases; while Table 4 summarizes the main data about the organizational variable (changes in savings banks’ organizational form between 1980 and 2012) and the institutional variable (structures of policy-making and shared beliefs among key actors).
Background information on the two cases.
Summary data about the dependent variables.
In both France and Italy, the banking sector in the early 1980s was fragmented, with a strong “interventionist” role played by the state (see Loriaux et al., 1997); both countries were similarly involved in a large scale consolidation of the banking sector in the 1980s and 1990s. In both countries, furthermore, savings banks did represent a distinct organizational form from joint-stock banks (see Table 1 above). However, the two countries also exhibited significant differences in terms of (i) the degree of organizational autonomy enjoyed by savings banks at the beginning of the period under study; and (ii) the nature of the patterns of state-society interactions. In 1980, Italian savings banks were much more autonomous from the state, both financially and economically; they were, in effect, full-fledged banks with full sovereignty over their balance sheets. In France, by contrast, savings banks were fully integrated within the Treasury circuit and deprived of commercial autonomy. This difference, as we will see, had a bearing on savings banks’ ability to draw on institutional resources provided by the state.
Another key difference concerns the characteristics of patterns of state-society relations in the two countries: while state interventionism was high in both countries, the French policy-making structure was very centralized, with the key role in credit policies played by the Treasury, at the heart of the state administrative apparatus. Policy-making was conceived as a “heroic” effort made by technocratic elites located in the Treasury and elsewhere (Schmidt, 1996). In Italy, by contrast, the Bank of Italy had emerged, over the previous decades, as the locus of effective power within the state apparatus, both central and outside of the realm of traditional state bureaucracies (see McCann, 2007). In addition, the “shared beliefs” of Bank of Italy officials reflected the strong territorial bases (and divisions) of the Italian economy – the “Three Italies” emphasized in the socio-economic literature on industrial districts (Bagnasco, 1977). The first post-war Governor of the Bank of Italy, Donato Menichella, was an ardent supporter of policies aimed at nurturing the “localistic” bases of the country’s credit system (Conti & Ferri, 1997; Locke, 1995).
The analysis that follows will thus highlight the processes by which French and Italian savings banks changed (or not) organizational form in the three decades after 1980, and seek to identify within these processes how the key differences spelled out above played out and, ultimately, influenced the organizational distinctiveness of savings banks by the end of the period under study.
The data used here comes from various sources: (i) official legal and regulatory documents; (ii) French and Italian savings banks’ official documents; and (iii) 38 semi-structured interviews. Interviewees were sampled according to their position within savings banks’ organizations or within state agencies during the period under study. In particular, four types of informants were targeted, both in France and Italy: (i) senior staff at randomly selected savings banks; (ii) senior staff at savings banks’ peak organizations; (iii) senior staff within relevant state agencies; (iv) other participants in the policy-making process (such as members of Parliament, 2 in our sample). The interviews were conducted on the basis of a list of open-ended questions and lasted between 60 and 90 minutes. Interviews were recorded and subsequently transcribed by the author. The semi-structured format was chosen on the basis of its fitness with the research agenda and the focus on historical processes of change and persistence. Each interviewee was asked a series of more than 30 questions, which varied slightly according to the interviewee’s position, and related to (a) the interviewee’s perception of sources of organizational change; (b) the interviewee’s assessment of the specificity of savings banks’ organizational form with respect to other banks, and how this assessment changed between 1980 and the interview’s date; (c) the interviewee’s perception and analysis of the transformation of sectoral organizations within the savings banks movement; (d) the interviewee’s interpretation of the factors behind the aggregation processes; and (e) the interviewee’s perception and analysis of the role of state actors, laws and regulations in the evolution of savings banks’ organizational forms over the period under study. Interviews were conducted over a four-year period (2002–2006).
Population-Level Organizational Change in Savings Banks: Persistent Organizational Diversity in France, Declining Diversity in Italy
Demographic dynamics within savings banks: Consolidation and restructuring
Bank consolidation has been a key dynamic feature of the banking industry in France and Italy over the past three decades. As shown in figures 1 and 2, the total number of French credit institutions has fallen from 1975 in 1980 to 556 in 2011; the total number of banks stricto senso 5 from 1025 to 301. Similarly, the total number of Italian banks has decreased from 1250 in 1980 to 730 in 2011. All types of banks have been affected in both countries: commercial banks, cooperatives and savings banks.
Number of banks in France.
Number of banks in Italy, 1980–2011.
This drop in numbers mostly reflects mergers and acquisitions, while bankruptcies or bank closures remained, if not a rare event, much less frequent than M&As.
Savings banks have taken full part in this consolidation process in both countries. In France, there were 17 Caisses d’épargne in 2011, down from 451 in 1980. In Italy, there were 90 Casse di risparmio in 1980, 43 in 2011. 6 Although on a different scale, these changes do reflect the same decreasing trend, continuous over time. Moreover, such drop in numbers among savings banks has occurred in other European countries as well: the number of Spanish savings banks has fallen from 81 in 1984 to 45 in 2010 (and 12 in 2011 following a brutal concentration process ordered by the government in the wake of the collapse of the Spanish real estate market); in Germany, there were more than 800 Sparkassen in 1980, down to 423 in 2011.
This restructuring wave was not the work of, say, an aggressive group of investors desirous of building financial groups. First, mergers were numerically much more important than acquisitions in both countries (Fazio, 2002; Focarelli, Panetta, & Salleo, 1999; Lacoue-Labarthe, 2001). Second, no hostile acquisition took place during the period examined here – something that banking authorities took pride in (for Italy, see Fazio, 2002). Thus, one can say that this restructuring wave was the expression of a shared view, which emerges from interviews: from bank regulators’ perspective, “friendly” mergers were encouraged to proceed to an ordered restructuring of the system; from banks executives’ perspective, it was necessary to increase individual bank size in front of the seemingly irresistible de-segmentation of the banking markets.
These views are consistent with the prevalent “domestic and defensive” nature of M&As in banking, as noted in a 1993 report (Altunbas & Molyneux, 1993, p. 9). In fact, that motivation emerged from interviews with savings banks actors as well. All interviewees having played a direct role in that M&A wave of the 1980s–1990s (31 interviewees in the two countries) emphasized the “irresistible” character of such moves.
But the numbers reported above do not tell the whole story about bank consolidation. First of all, mergers and acquisitions are but one peculiar way to restructure business. Other restructuring options (less easy to document) were undertaken by many banks in both France and Italy, two of which can be emphasized: strategic partnerships or alliances and banking groups. Mergers and acquisitions were thus part of a wider restructuring process that took place within the banking system as a whole. Second, not all banks participated into this restructuring or aggregation process: many local banks, especially in Italy, remained as of 2012 both economically and legally independent.
This is not, however, the case of savings banks. In both countries, most savings banks did participate in the aggregation process and thus contributed the emergence of national or regional banking groups. Here, however, differences are visible between Italy and France.
The contrasted outcomes of shifts in organizational boundaries
Table 5 summarizes the key differences in the aggregation process across the two countries.
Evolution of the structure and status of savings banks over time.
France
All of France’s (remaining) savings banks are now part of a single banking group. This group is the outcome of a three-step aggregation process consisting of: first, mergers between and among local savings banks in the late 1980s and throughout the 1990s – resulting in the existence of 17 regional savings banks, legally autonomous entities as of December 2011; second, the tightening of operational and organizational bonds among these 17 regional savings banks, which occurred in the same time; third, the merger of the Caisse d’Épargne group with the Banque Populaires group (a cooperative banking group) in 2006. The group includes, besides regional savings banks and Banques populaires, several subsidiaries and partly owned specialized financial firms.
The BPCE Group significantly differs from the vertically integrated banking groups that have risen around former public banks that were privatized in the late 1980s–early 1990s – especially the largest joint-stock French banks, BNP-Paribas and Société Générale. The key differences (as of 2012) between the latter and the former were that (a) the BPCE Group has a cooperative status, unlike BNP-Paribas and SocGen, which are joint-stock banks; (b) the BPCE Group is organized as a federation of regional cooperative banks, with a strong peak organization – while BNP-Paribas and SocGen are vertically integrated universal banks. In other words, the end result of organizational change in the case of France is that savings banks maintained their distinctiveness even as they changed form.
Italy
The Italian case is slightly different. There, too, there has been a clear tendency towards the constitution of vertically integrated banks. But within the savings bank sector itself, one can distinguish three different aggregation patterns, which led savings banks towards three different organizational forms.
The first pattern characterizes the constitution of national banking groups, building on the alliance between a large savings bank and one of Italy’s former large public banks. This pattern corresponds to the emergence the country’s two largest banking groups: 7 IntesaSan Paolo and Unicredit.
A second aggregation pattern characterizes the formation of regional banking groups with a strong territorial basis and (often) alliances with the Banche popolari, a form of cooperative bank – which one could call, therefore, the “regional group” pattern. The territorial element is fundamental within that pattern: the aim of such aggregation, it seems, has been to strengthen savings banks’ retail market positions through specialized joint-ventures – while keeping the local clientele networks and organizational flexibility. A third pattern characterizes those (small) savings banks that have remained independent, or formed a group on their own. Those banks, or mono-banking groups are characterized by circumscribed territorial rooting and almost exclusive reliance on the retail market.
Out of 43 surviving savings banks 8 in December 2011, 11 were independent (the third pattern); 12 were owned, controlled by or headed a small to medium-sized regional group (the second pattern); and 20 belonged to or were controlled by national universal banking groups – especially IntesaSanPaolo (the first pattern).
Along with the different aggregation patterns, Italian savings banks have also changed status – although, here, the statutory change was common to all savings banks: indeed, all savings banks became joint-stock banks 100% owned by not-for-profit entities thanks to a 1990 law. Over time, the equity of savings banks was diluted, allowing for the consolidation process to take place – by 2012, all savings banks were majority-owned by private owners.
The shift in organizational boundaries that characterized the restructuring of savings banks in France and Italy led, therefore, to two opposite outcomes: persistence of a distinct organizational form in the first case, quasi-disappearance of a distinct organizational form in the second case. In other words, shifts in organizational boundaries have occurred, in France, exclusively within sub-population boundaries (commercial banks with commercial banks, savings banks with other savings banks …). By contrast, this has not been the case in Italy, where, as we just saw, the biggest savings banks choose to form groups by forging alliances with non-savings banks. In the process, most savings banks lost their distinctive organizational features with respect to joint-stock banks. In fact, Italian savings banks shifted their organizational boundaries prevalently along territorial lines, accentuating what scholars identify as the “localistic” character of the Italian economy (Locatelli, 1998).
The role of institutional factors in shifting sub-population boundaries
In the case of French and Italian savings banks, population-level organizational change is the outcome of a co-evolutionary process whereby (i) institutional actors changed the institutional resources available and (ii) organizational actors used those institutional resources to generate organizational change. It is differences in the macro variables structuring the institutional side of the process (namely, characteristics of the state in each case) that may then explain differences in outcomes.
In France, the shift in organizational boundaries among savings banks occurred in an incremental, territorial way: at the departmental, cross-departmental, and then regional level, 9 suggesting a very ordered consolidation process (no cross-regional or cross-sector merger). In fact, sector institutions played a key role in encouraging mergers and shaping the emergence of integrated regional banks. In late 1989, for instance, the CENCEP – Centre National des Caisses d’Epargne et de Prévoyance, savings banks’ peak organization – commissioned a report from a consulting firm about the network’s future restructuring needs and “optimum” size. The report’s conclusions were presented in May 1990, and the restructuring scheme was adopted by the CENCEP General Assembly in June 1990, where the director of Caisse des dépôts, Robert Lion, announced, obviously in agreement with the CENCEP, the plan to re-group the 187 existing savings banks into 50 units that should be “strong, autonomous and accountable”. That decision had been long expected at the CENCEP, but any idea of further re-organizing the sector had previously met with strong reluctance from the unions, and was a bone of contention between the Caisse des dépôts and the CENCEP. In July 1991, the new law institutionalized the re-organization of the network. In 1991–1992, following both CENCEP’s decision and the 1991 reform, savings banks underwent the most radical wave of mergers in their history: in a few months, the number of savings banks fell from 187 to 34 – a further reduction compared to the 1990 consulting firm report.
Interestingly, this process was largely driven by the group’s top executives: the chronology of events clearly points to the legislator playing a follower’s role in the 1991 transformation. In a special issue of La Lettre de l’Association pour l’Histoire des Caisses d’Épargne (n. 5, December 2001), one can even read “The size of changes undertaken by savings banks
The evolution of organizational diversity, analyzed here from the prospective of the shifting boundaries of the savings banks sector in France and in Italy, fits with the “co-evolutionary” hypothesis formulated within the new organizational synthesis (see section 1 above). Institutional factors, and in particular state-level institutional factors, have indeed played an important role in the (re) production of organizational diversity over time. First of all, legal changes have clearly driven the transformation of organizational forms through imposed statutory change (through the 1990 “Amato-Carli” reform in Italy, making savings banks become joint-stock companies; the 1999 legal reform in France, which made them become cooperatives). Second, legal and regulatory reforms have not only punctuated the consolidation process in both countries; they have actually shaped the outcomes of the process as well: the 1991 law in France, as mentioned above, clearly enabled the further aggregation process within the savings banks industry; the 1990 legal change in Italy, by transforming savings banks into joint-stock companies, and therefore by “levelling the playing ground” in statutory terms (i.e. by homogenizing previously heterogeneous statutes among Italian credit institutions), paved the way for the subsequent wave of consolidation. Moreover, the Bank of Italy had a very active role in steering banks’ consolidation process in the 1990s and 2000s – by using its very effective moral suasion and its peculiar position at the center of the corporate networks in the Italian banking system (see McCann, 2007). The key role played by legal and regulatory changes in re-drawing organizational boundaries in banking – and therefore re-producing organizational heterogeneity – should not, however, mislead us into thinking that state actors acted in full autonomy from the savings banks world. Actually, as all interviewees confirmed when asked about it, there was a very intense collaboration between state actors (regulators, policy-makers) and savings banks executives and national representatives. Even in France, where policy-making is traditionally viewed as a top-down affair (see Schmidt, 1996), most of the contents of the 1983 and 1991 legal reforms were drafted earlier within the savings banks industry. This validates our hypothesis about the first of the conceptualizations of the state as spelled out in the first section – that of a set of actors within the bureaucratic field actively engaged in re-drawing organizational boundaries.
Second, the variety of aggregation patterns – and therefore, the re-drawing of organizational boundaries – reflect the importance of the macro-structural causal factors identified in the previous sections. A more centralized structure of policy-making in France, together with the key role played by a central technocratic elite within the Treasury (the locus of regulatory authority towards savings banks) and with a “heroic” pattern of policy-making, 10 have generated a more coordinated aggregation process among savings banks, while supporting a clearer vision of organizational diversity in banking (for-profit versus not-for-profit). In Italy, by contrast, in the absence of strong, centralized institutions and coherent national policies, and where political infighting among the country’s key socio-economic actors is pervasive (Locke, 1995), multiple aggregation processes have compounded the “localistic patterns of industrial regulation” (Locke, 1995). 11 In addition, the “shared beliefs” carried by one isolated but powerful institution, the Bank of Italy, whose influence was central in the determination of the direction of banking aggregation processes (McCann, 2007), pretty much fed into the “localistic” tendencies of the restructuring process within Italian banking.
However, the shifts in French and Italian savings banks’ organizational boundaries also reflect other institutional factors at play, linked to the structure and function of sectoral organizations in the two countries – thus illustrating the operation of the other two conceptualizations of the state mentioned in the first section.
Sector Coordination – A New Source of Organizational Change in Highly Institutionalized Fields?
The shifts in organizational boundaries generated by mergers and acquisition and aggregation patterns, analyzed above, show how savings banks actors drew on the new institutional resources created by law-makers and regulators (through a string of reforms implemented in the 1980s and 1990s), therefore corresponding to the state-organizations symbiosis authors such as Simons and Ingram had in mind for their own cases (Simons & Ingram, 2003, 2004). However, another type of symbiosis appears at the meso-level of sectoral institutions, whose transformation compounded the effects of aggregation patterns on the fate of savings banks’ organizational form, and where state actors played a more active and direct role. These sector-level changes are summarized in Table 6 below, and concern both the savings banks sector banks and their sector associations.
Structure of savings banks’ sectoral organization in France and Italy.
The logic of vertical integration and the diverging fates of the sector banks
France
In France, the centripetal dynamic that has characterized savings banks’ aggregation patterns over the years has gone hand in hand with an increased centralization of financial flows within the group, through the emergence of a “sector central bank”.
At the outset of the 1980s, savings banks were indeed part of a financial circuit essentially directed by the state-owned Caisse des Dépôts et Consignations (CDC) – the so-called “Treasury circuit”. The CDC managed administered savings resources collected by the savings banks, and gave back part of those resources to the banks to be used in financing local governments’ housing investment needs.
Such circuit deprived savings banks of autonomy in the management of their financial resources and in the choices to be made in the use of those resources and maintained the unbalance between their large presence on the savings market and their marginal role in lending. Successive legislative changes substantially changed this architecture: first, in the late 1960s and then, more decisively, in 1983 when a law organized an actual financial network among savings banks.
A second, major change operated by the 1983 reform was the creation of a “network head”, the Centre National des Caisses d’Épargne et de Prévoyance (Savings banks national center, or CENCEP). In addition, two funding facilities were created by the 1983 law, which laid the bases for group-level risk management. Following Duet (2001), one can interpret the 1983 law as creating two parallel, but distinct, financial or intermediation circuits: a first, public one, based on the Livret A, regulated and headed by the CDC; a second one, private, based on all other resources, from then on managed within the network.
The 1991 law brought further substantial modifications to this architecture. First, it gave savings banks full autonomy in the management of their balance sheet. In addition, the law created two national financial institutions, fulfilling the functions of a central cashier, which then merged into a Caisse Centrale des Caisses d’Épargne et de Prévoyance (savings banks central cashier, CCCEP) in 1995. To take, again, the German system as a comparison, the CCCEP was conceived as a Girozentralbank.
The last step in French savings banks’ road towards autonomy was the 1999 reform, which merged the CENCEP and the CCCEP together into the Caisse Nationale des Caisses d’Épargne (savings banks national cashier, or CNCE) 12 – the “associational” components of the CENCEP being spun off to create the Fédération Nationale des Caisses d’Épargne (savings banks national federation, or FNCE), which will be analyzed in the next section. In addition to centralizing financial flows within the network, the CNCE also inherited all the specialized subsidiaries that, since 1988, were controlled by the CNCE through the holding Écureuil Participations.
Strengthened coordination and reinforced autonomy were the twin outcomes of this process. However, coordination was subsumed into centralization. The rise of the savings banks national cashier parallels, indeed, the radical shift of savings banks’ organizational boundaries during the 1980s and early 1990s, which gave rise to a “federal” banking group, where products are designed at the central level (through specialized subsidiaries), not at the regional one.
Importantly, at each important step of the process – that is, right before and after the passing of each of the three laws that led to the strengthening of the network head, in 1983, 1991 and 1999 – key savings banks actors played a decisive role in both (i) shaping the contents of the reform through an active lobbying with law-makers and (ii) exploiting the new institutional resources created by the state so as to lever their own position within the savings banks themselves. All French interviewees who were involved in the savings banks sector strongly identified the emergence of a powerful group of reform-minded savings banks executives around the newly created GREPS in the 1970s and the CENCEP in the 1980s.
Italy
At this level of analysis, the Italian case displays fundamental differences with the French one. Starting situations were altogether different: first of all, at the outset of the period under study, Italian savings banks were full-fledged (albeit specialized, in line with savings banks’ specific history) banks, which had kept full autonomy over their balance sheets since their creation. Second, since 1919 Italian savings banks’ intermediation built on the guarantees and services provided by the Istituto di Credito delle Casse di Risparmio Italiane (Italian savings banks credit institute, or ICCRI).
ICCRI’s role, which grew in importance over the 20th century, was fundamentally altered in 1986, when savings banks were integrated into an inter-bank national network that removed ICCRI’s monopoly over transactions between savings banks; and in 1993, when ICCRI was transformed into a joint-stock company, whose shares were then held by several major Foundations. ICCRI was therefore privatized along savings banks – although its ownership still remained within the former savings banks sector. In subsequent years, ICCRI was acquired by a joint-stock bank and disappeared as a legally independent entity. Showing the exact opposite tendency with respect to France, the weakening of Italian savings banks as distinct organizational forms was compounded by the disappearance of what had functioned as the sector central bank.
The diminishing power of sector associations
The existence of strong sector associations has long characterized savings banks in Germany, Spain and the Netherlands. In those countries such organizations play a key role in representing savings banks’ interests, steering exchanges between category members, and keeping the cohesion of the whole sector. They generally are responsible for all issues pertaining to contacts with regulatory authorities, common strategies and lobbying. Their organization mirrors that of the political institutions with whom they are dealing (Deeg, 1999). France and Italy show again, from this point of view, two contrasting trends.
France
In France, savings banks had no formal sector association until the late 1960s. In 1969, French savings banks set up the Union nationale des caisses d’épargne de France (French savings banks national union, or UNCEF), which was the first formal organization (with its own staff and a legal status) to represent savings banks’ interests. UNCEF, with the 1983 law, disappeared and its missions were transferred to the CENCEP – which was, however, more than an association representing savings banks. As seen above, the CENCEP was conceived as the head of the savings banks network. A true savings banks association did not re-emerge until two decades later, at the term of a process that saw the birth of an integrated banking group (see sections above). The Fédération Nationale des Caisses d’Épargne (national savings banks federation, or FNCE) was formally instituted by the 25 June 1999 law, and was created on 29 September 1999. It had a “law 1901 status” – that is, it has the legal status of an association – but its name, “Fédération”, reveals higher ambitions: its core mission was indeed, to federate the then 34 Caisses d’Épargne. Whereas deprived of real powers, especially when compared to the sectoral bank, the creation of the FNCE does represent an interesting twist in the organizational evolution of French savings banks because it reflects the legislator’s will to maintain and solidify the distinctiveness of savings banks as a sector – and therefore, as an organizational form.
Italy
The Italian situation again differs from the French one, under two aspects: first, the Italian savings banks’ sector association has historically been more powerful than its French counterpart; second, in the early 1980s savings banks belonged both to the category’s association and to the commercial banks’ association.
The Italian savings banks’ sector association was founded in 1911, at a moment when the Casse di Risparmio were facing strong competitive pressures from other groups of banks – when, that is, creating a unified body was felt necessary to lobby the government for protection. 13 The Associazione fra le Casse di Risparmio Italiane (Italian savings banks association, or ACRI) has operated continuously ever since 1911, except during the fascist period, when it was replaced by a “Fascist federation of savings banks”. 14 In the post-war period, ACRI asserted itself as a powerful banking lobby, linked with top officials at Banca d’Italia. 15 Associational links between savings banks were very strong until the mid-1980s, through ACRI, but also through national congresses organized every three years, and thematic meetings organized by single savings banks almost every year, without mentioning workshops and the annual celebration of the “world’s savings day”, which is still today organized by ACRI and where top officials from both the Central Bank and the government participate (in general, the governor and the Minister of the Treasury). As an observer noted in the early 1980s, the strong associational linkages between savings banks were all the more remarkable that they formed a very heterogeneous category, both in legal and dimensional terms (Pin, 1984). A former president of ACRI (and CEO of Cariplo) called the association a “sociality leitmotiv” (Ferrari, 1985). The same emphasized how the links and exchanges between savings banks top officials operated “as if we were a single, large firm” (Ferrari, 1985, p. 1038).
However, like in France, legislative changes fundamentally altered the sectoral association’s role and relevance in the savings banks’ movement. Unlike what happened in France, ACRI was downgraded by the 1990 Amato-Carli Law to a simple coordination mechanism and lobby, and its successive weakening over time mirrors the disaggregating process characterizing shifts in Italian savings banks’ organizational boundaries.
Changes in organizational diversity owe much to the use of institutional resources by savings banks actors and their legitimation through state institutions – two mechanisms which correspond to the latter two definitions of the state role given in the Theory section above. In France, senior savings banks executives took advantage of the unravelling of the state-centered credit system (the “Treasury circuit”) to attribute prerogatives previously exerted by the Treasury (and the CDC) to nascent sector organizations; in Italy, by contrast, the unravelling of the state-administered credit system, together with the steering role exerted by the Bank of Italy in guiding bank consolidation, reinforced the legitimacy of “localistic” tendencies played out through the consolidation process; and strengthened the hand of senior individual savings banks executives, while rendering sectoral organizations much less relevant. Here the two key differences identified above (in the patterns of state-society relations and in the relative degrees of autonomy enjoyed by savings banks in the 1980s) reinforced each other: the more autonomous Italian savings banks took advantage of new institutional resources and were steered into forming territorially-based groupings; the less autonomous French savings banks strengthened their position by reinforcing their collective identity through both aggregation and building stronger peak organizations.
Discussion
The analysis of the evolution of savings banks’ organizational form in France and Italy proposed above illustrates the co-evolutionary dynamics at play within organizational fields, already explored in the case of early 20th century United States (Haveman & Rao, 1997; Schneiberg, 2011). In the case of French and Italian savings banks, like in the case of US thrifts, shifts in organizational forms were generated by the agency of strategic actors using institutional resources to legitimate the new (or old) form. However, change in US thrifts’ organizational forms was primarily explained by diffuse or indirect institutional factors sustaining the emergence of new (diverse) organizational forms. In our case, by contrast, state actors and policy were directly involved in the re-design of organizational and sub-population boundaries. It is they which proved instrumental in sustaining savings banks as a distinct organizational form (France), or in letting savings banks go almost extinct (Italy).
As discussed in the first section of this article, when state variables are taken into account in the NOS literature, they are often viewed as non-central variables in the causal argument. Such is, for instance, the case with Haveman et al. (2007): the authors, focusing on thrifts in California, suggest that (a) social movements supply “interpretive schema” that (b) acquire “imperative standing” through authorization by the state (the “target” of social movements), which is not, however, sufficient to solidly establish new organizational forms, and therefore (c) need the intervention of other agents of change (intermediary institutions). Within this interpretation, laws provide only “partial codes” towards the full codification of organizational forms (Haveman et al., 2007). In addition, state variables are essentially analyzed as a(nother) source of legitimacy, what Haveman et al. call “sociopolitical legitimacy”. The latter is defined, building on Stinchcombe, as the ability to mobilize power resources, and is epitomized by state authorization. This article takes a different view, much closer to that offered by Simons and Ingram (2003): the state, consisting of actors AND resources, actively takes part, together with organizations, in the process of organizational change – in particular in the re-drawing of organizational boundaries at the meso-level, which allow distinct organizational forms to persist and co-exist. It is not, in other words, only a matter of legitimacy that organizations may obtain from (state) resources external to them.
A re-assessment of the role of the state in organizational change, through the shaping of organizational and sub-population boundaries, is thus the first contribution made by this study to the new organizational synthesis.
Our second major finding concerns the relevance of meso-level institutional change in the co-evolutionary processes producing organizational change. In a highly institutionalized field such as late 20th century banking, indeed, the demographic dynamics of a population of organizations (such as savings banks) are to a large extent the outcome of collective action within sub-population or population boundaries. Population-level organizational change, thus, depends much less on the emergence of new organizational forms and much more on direct coordination and shared beliefs (or interpretive schemas) between organizational and state actors. Furthermore, the degree of organizational diversity reflects the effectiveness of institutional and organizational actors to erect, maintain or suppress thick sub-population (or sectoral) boundaries.
Both the importance of state factors and the relevance of meso-level dynamics should make us further reflect on the historical validity of theoretical frameworks elaborated around specific empirical cases. The varying relevance of state variables, observed when comparing studies on the US thrift industry in the early 20th century and the analysis of French and Italian savings banks in the late 20th century might be due to, beyond the specificities of the cases and/or the theoretical approach chosen, a variation in the nature of the organizational fields considered here (banking, not-for-profit banking) resulting from history. There might be, as Tolbert and Zucker argued in the case of local government, a shift in evolutionary mechanisms as the field grows older (Tolbert & Zucker, 1983). Fields are exposed to evolutionary dynamics that affect the evolutionary dynamics of organizational forms within them (Beckert, 2010). The salience of social movements, placed at the center of the new organizational synthesis (strictly defined), might be evident in “young” fields when new forms were created; but in mature fields or populations, other factors might be more relevant, such as the behaviour of well-established actors within the industry itself and state actors willing to leverage these peculiar organizational forms to re-shape the banking industry through consolidation and rationalization.
The third contribution this article makes to the literature on organizational and institutional change, therefore, is to suggest that a firmer anchoring of the theory in our understanding of the evolution of institutional fields (rather than populations) might help buffer its universalizing claims. For instance, it is possible to argue that mature fields, since they are more highly institutionalized, offer more possibilities for effective collective action involving direct institutional factors. Furthermore, the evolution of banking in France and Italy shows that the “patchiness” of institutional fields, which leaves room for heterogenous organizational forms (Quirke, 2013), varies across countries and periods. Thus Reay and Hinings’ (2009) argument that competing institutional logics can be sustained for a while in an organizational field should be, in turn, rooted in an understanding of what macro-institutional factors influence this key characteristic of organizational fields.
Finally, within the comparative analysis provided here, the state has been re-conceptualized (with respect to existing NOS studies) so as to fit the practice of comparative political studies, where states operate as both the structure of policy-making and the cognitive framework of state and non-state actors. This has allowed us to compare the macro-structural roots of cross-country difference in the organizational distinctiveness of French and Italian savings banks. What matters is not only the specific guise (specific laws, state agencies, etc.) through which state variables appear to organizational actors; it is, rather, the macro-structural characteristics of these variables when compared across countries. In other words, what the analysis above has tried to establish is that a key causal factor in determining the outcome of population-level organizational change might lie, precisely, both in the patterns of state-society relations that characterize the structure of national policy-making, and the cognitive framework of state agents involved in that process. This is the third contribution this article claims to make to the theory of population-level organizational change.
In particular, our findings show that macro-institutional factors have a bearing on both the degree and the nature of organizational diversity. First, centralized policy-making combined with effective neo-corporatism have proven better able to preserve organizational diversity in a context of strong homogenizing pressures. This is shown by the persistence of savings banks in France as opposed to their near extinction in Italy. In general, the degree to which not-for-profit financial institutions have resisted homologation (i.e. the degree to which not-for-profit organizational forms continue to exist in banking) has varied enormously from one country to the other; a continuum that could stretch from the United Kingdom (where the previously sizeable and powerful building societies movements shrunk down to the margins of the British financial system during the 1990s: see Butzbach, 2014) at one extreme to Germany (where cooperative and savings banks have remained powerful “pillars” of the banking system: see Schmidt et al., 2014) at the other. Multi-country comparative studies might thus helpfully use the macro-institutional variables explored here to explain this varying diversity
The nature of organizational diversity is also affected by macro-structural variables. The fragmented, decentralized patterns of state-society relations that characterize Italy have led to a geographic fragmentation of the Italian banking system: even as Italian savings banks have disappeared as distinct organizations, organizational boundaries have been re-designed, in the Italian case, along territorial lines. Investigating the varying nature of organizational diversity across (country) cases might be yet another useful avenue for research at the cross-roads between population ecology and neo-institutional organizational analysis.
Footnotes
Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.