17th Congress of the European Business History Association 2013
“Innovation and Growth”
University of Uppsala, 22-24 August 2013
FROM HILFERDING TO HILFERDING?
FINANCE-CAPITAL IN ITALIAN
CAPITALISM, 1913-2001
Alberto Rinaldi
(Department of Economics - University of Modena and Reggio Emilia and RECent)
Michelangelo Vasta
(Department of Economics and Statistics - University of Siena)
Broad framework
2


In the framework of Hall and Soskice (2001) Italy does not fit
well with either the “Liberal Market Economy” or the
“Coordinated Market Economy” model;
For most of the 20th century Italy is characterised by:



“Law and finance” (La Porta et al., 1999; 2008) and “Political
economy” approaches (Aganin and Volpin, 2003): low legal
protection of investors curbed the development of financial
markets in Italy. This involved:




An extensive presence of state-owned enterprises (SOEs);
A wide diffusion of family ownership;
High ownership concentration (no public companies in Italy);
The emergence of pyramidal groups to allow for the separation of ownership
and control;
Mixed banks (until 1933) and the state (from 1930s to 1990s) acted as a
substitute for financial markets;
Pagano and Trento’s (2003) evolutionary approach:



Complementarity between technology and institutional setting;
The passage from one technological trajectory to another can foster either
homogenization or new viable diversification of organizational forms;
Corporate governance structure can in turn affect how technology evolves.
Two major institutional break-ups
3

The 1936 Banking Law puts an end to the mixed
banks:




Banks can provide only short term credit to the industrial
sector;
Long and medium term credit can be provided only by special
state-owned agencies;
Banks are prohibited to own shares of industrial companies;
The 1990s:


The 1993 Banking Law allows banks to acquire share in non
financial firms → possible return to the mixed banks;
Massive privatizations of state-owned enterprises: both banks
and non financial companies.
Banks and industry in the early
period of Italian economic growth
4

Gerschenkron (1962): Central role of the mixed banks:



Mixed banks provided credit, share capital and managerial advise to
companies in capital intensive industries;
Confalonieri (1974-76, 1982, 1992, 1997): Mixed banks
reconsidered:



Mixed banks were the “substitution factor” that spurred the Italy’s big spurt
in the 20 years prior to WW1 (enabled Italy to catch up the Second
Industrial Revolution);
Mixed banks did not draft an overall industrial strategy;
Mixed banks (at least until WW1) avoided permanent ownership of
industrial companies;
Fohlin (1998, 1999):


Mixed banks supported large established companies (irrespective of their
sector);
Mixed banks did not support promising risky ventures.
Main aim of the paper
5


The analysis of the structure of the Italian corporate
network from 1913 to 2010, with special regard to the
banks’ role;
Eight benchmark years: 1913, 1927, 1936, 1960, 1972,
1983, 2001, 2010;

We use the interlocking directorates (ID) technique

Our analysis regards in particular:


A descriptive statistics of the network;
Networks analysis:



Density and cohesiveness of the network;
The central companies;
The directors → the big linkers (BL): the individuals who held the
largest number of directorships.
What is an interlock?
6
The are different forms of interlocks:
1)
2)
Firm X
Board of Directors:
linker A
President: A
Directors: B, C, D
Firm W
Board of Directors:
President: H
Directors: I, J, K
Firm Y
Board of Directors:
President: A
Directors: E, F, G
linker H
Firm Z
Board of Directors:
President: L
Directors: H, M N, O
The source
7

1913-1983:Imita.db (http://imita.db.unisi.it):



A large dataset on Italian joint-stock companies (1900-1983)
→ It contains data on:

More than 38,000 companies for nine benchmark years (1911, 1913,
1921, 1927, 1936, 1952, 1960, 1972, 1983);

Almost 300,000 directors of Italian joint-stock companies for the same
benchmark years;

More than 100,000 balance sheets (time series from foundation up to
1983) for all industrial companies contained in the source;
2001:
R&S-Mediobanca
for
companies
and
Infocamere, a large dataset of Unioncamere (the
association of the Italian chambers of commerce), for
directors;
2010: R&S-Mediobanca for companies and Aida, a
large dataset of Bureau Van Dijck, for directors.
The sample for this paper
8


For this paper we have selected (according to the
guidelines of an international comparative project
directed by David & Westerhuis) Italy’s top 250
companies by total assets for eight benchmark years:
1913, 1927, 1936, 1960, 1972, 1983, 2001 and 2010;
The top 250 companies have been selected according to
the following criteria:


The top 200 non financials;
The top 50 financials (banks, insurances, finance companies).
Descriptive statistics of the network
9
A: Number of non-financial firms
Total number of seats
Average size of the board
Total number of directors
1913
200
1,781
8.9
1,166
1927
200
2,236
11.2
1,356
1936
200
1,841
9.2
1,371
1960
200
2,150
10.8
1,457
1972
200
2,106
10.5
1,641
1983
200
1,813
9.1
1,456
2001
200
1,536
7.7
1,307
2010
200
1,676
8.4
1,528
B: Number of financial firms
Total number of seats
Average size of the board
Total number of directors
50
611
12.2
554
50
788
15.8
668
50
705
14.1
592
50
783
15.7
653
50
909
18.2
761
50
865
17.3
752
50
727
14.5
602
50
751
15.0
685
A+B : Total number of firms
Total number of seats
Average size of the board
Total number of directors
CR: Cumulation Ratio
250
2,392
9.6
1,571
1.52
250
3,024
12.1
1,827
1.66
250
2,546
10.2
1,618
1.57
250
2,933
11.7
1,932
1.52
250
3,015
12.1
2,230
1.35
250
2,678
10.7
2,108
1.27
250
2,263
9.1
1,850
1.22
250
2,427
9.7
2,155
1.13
Firms by sector
10
1913
1927
1936
1960
1972
1983
2001
2010
Total
250
o
250
250
250
250
250
250
250
1
50
50
50
50
50
50
50
50
3
8
10
5
4
5
15
10
16
4
37
62
66
46
5
7
41
42
5
4
8
4
6
5
9
11
13
6
101
85
98
118
148
142
111
87
7
9
10
7
9
6
2
1
1
8
-
9
8
13
2
8
10
8
2
2
10
21
6
9
2
3
3
11
7
3
3
2
1
1
-
12
4
3
4
3
7
11
12
13
2
5
17
9
9
13
Legend: 1: Financials; 3: Service industry; 4: Electric utility. Water, Telephone,
and Gas; 5: Trade companies; 6: Manufacturing companies; 7: Mining industry;
8: Oil companies; 9: Shipping industry; 10: Railway companies; 11: Tramway
companies; 12: Building companies; 13: Transport, Warehousing, and Communication.
Network statistics
11
Size and structure
1913 1927 1936 1960 1972 1983 2001 2010
Number of firms
250
250
250
250
250
250
250
250
Number of marginal firms (M)*
27
32
29
21
45
63
70
85
M as % of total number of firms
10.8 12.8
11.6
8.4
18.0 25.2 28.0 34.0
Isolated firms (I)
21
15
19
17
24
33
71
94
I as % of total number of firms
8.4
6.0
7.6
6.8
9.6
13.2 28.4 37.6
I + M as % of total number of firms 19.2 18.8
19.2 15.2 27.6 38.4 56.4 71.6
Number of firms in main component 229
234
223
229
222
209
153
121
% of firms in main component
91.6 93.6
89.2 91.6 88.8 83.6 61.2 48.4
Number of components**
0
2
4
2
2
4
11
15
* M: Firms with degree 1 or 2; ** Main component and isolated firms are not included.
Network statistics: ties
12
Ties
1913 1927 1936 1960 1972 1983 2001 2010
Total number of lines
1,484 2,680 1,693 1,768 1,270 657
420
245
Number of multiple lines
304
736
463
545
291
182
143
65
Number of firms in 2m-cores 216
223
215
216
197
182
130
103
Density (x 100)
4.77 8.61 5.44 5.68 4.08 2.05 1.35 0.79
D = L(r)/L(p)
where:
L(r) is the number of real connections
L(p), defined as n(n-1)/2, indicates the number of all possible connections
Density and isolated & marginal firms
13
10
80
9
70
8
71,6
8,61
60
7
56,4
6
Density (left axis)
5
4
5,44
5,68
4,08
4,77
3
2
50
40
38,4
30
27,6
19,2
18,8
19,2
2,05
15,2
1
20
10
1,35
0
1913
1927
1936
1960
1972
1983
2001
0,79
2010
0
% Isolated an marginal
firms (right axis)
Density (%): France, Germany,
UK, USA (and Italy)
14
Top 10 companies according to
degree centrality
15
Sector of activity
Manufacturing
Electrical power
Energy
Constructions
Railway
Transport
Telecommunications
Banking
Finance
Insurance
Services
Total
1913
2
3
1
4
10
1927
1
6
2
1
10
1936
4
2
2
2
10
1960
2
4
3
1
10
1972
5
1
1
2
1
10
1983
7
1
3
2
13
2001
1
1
3
3
1
2
11
2010
3
1
1
1
3
4
2
15
Conclusions (tentative)
1/2
16


Some distinct phases in the long term evolution
of the Italian corporate network;
These phases are due to both institutional and
technological shocks:

In the 20th century there are some major institutional break-ups:




Collapse of the mixed banks in the 1930s;
Nationalisation of the electricity industry in 1962;
Privatisations of SOEs in the 1990s;
For what concerns technology, Italy experimented:


From the onset of the 20th century to the 1970s: rise and consolidation
of the technologies of the Second Industrial Revolution and large
diffusion of the fordist paradigm;
From the 1970s: emergence of the new technological trajectory of the
Third Industrial Revolution.
Conclusions (tentative)
2/2
17
17





The Italian corporate network was very cohesive up to the 1960;
The connectivity indexes reached their highest values in the late 1920s
with the maximum influence of the mixed banks → heyday of finance
capital (Hilferding 1910);
A sharp decrease in the cohesion of the network from 1972 onwards,
with the transition from the technological trajectory of the second to
that of the third industrial revolution;
Italy experienced an earlier and more pronounced decline of its
corporate network than other advanced economies (US, UK, D, F and
also NL - CH), where it started after 1980;
The privatizations of the 1990s:



Were intended to prompt the rise of North American-style public companies;
But produced a return of banks in a central position in the now weaker network from
which they had disappeared in the 1930s → finance capital (Hilferding) is back?
In the other advanced nations:


Decline of corporate networks since the 1980s due to the disengagement of banks from
industrial companies;
Banks are in a more marginal position (Davis and Mizruchi 1999; David, Schnyder and
Mach 2010).