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Licensed Unlicensed Requires Authentication Published by De Gruyter December 6, 2013

Austria Inc. Forever? On the Stability of a Coordinated Corporate Network in Times of Privatization and Internationalization

Philipp Korom
From the journal World Political Science

Abstract

One of the features of organized Austrian capitalism is a tightly-knit corporate network (Austria Inc.) that facilitates control and coordination between companies. In the 1980s the subsidiaries of the Austrian industry-holding stock company (ÖIAG) and the largest banks were the central hubs of this network. Now, 30 years later, ÖIAG has privatized nearly all its companies and banks have not only merged and sold their equity interests, but also partly joined international business groups. Nevertheless, Austria Inc. has not eroded. By analyzing a network of personal connections between 1976 and 2000, I investigate in this article how the network has reconfigured to allow Austria Inc. to perpetuate. The analysis suggests three explanations: Despite extensive privatization of the economy, Austrian ownership continues to prevail within the network; the banking group Raiffeisen filled the gap that was opened by the withdrawal of the state from the economic sphere; members of the Austrian elite still use board meetings for social networking.


Corresponding author: Philipp Korom, Department of Sociology, University Graz, Austria, e-mail:

  1. 1

    Collier and Collier (1991: p. 27) define a critical juncture as “a period of significant change, which typically occurs in distinct ways in different countries (or in other untis of analysis), and which is hypothesized to produce distinct legacies.”

  2. 2

    Bruno Kreisky served as a chancellor from 1970 to 1983. He is commonly referred to as one of the country’s greatest statesmen of the postwar period.

  3. 3

    In all privatization laws a clause was included that asked the ÖIAG to “maintain decision-making headquarters of the company to be privatized in Austria if possible through the creation of Austrian core shareholder structures.”

  4. 4

    Network density is defined as the ratio between the number of links between pairs of units and the number of possible connections. Density scores may vary between 0 and 1, with higher scores reflecting networks of higher density.

  5. 5

    “A component is a […] subgroup having the property that its members are pairwise connected to each other, either directly or indirectly via any number (!) of intermediate steps” (Hummel and Sodeur 2010: p. 594, trans. by PhK). The main component retains all the nodes and relations among nodes that are part of the largest component of a graph.

  6. 6

    The fragmentation index (Borgatti et al. 2002) measures to what extent a network is disconnected. This index ranges from zero to one; a low value indicates that the network is highly connected, and a high value means that the network is very fragmented.

  7. 7

    In respect to centrality in social networks, several perspectives are possible, each relevant in its own way (Trappmann et al. 2005: pp. 25–70). Degree centrality is the simplest and most intuitive. It measures a node’s centrality according to the number of connections to others, i.e., degree in undirected graphs and indegree/outdegree in directed graphs. Betweeness centrality measures the extent to which a particular point lies between the various other points in a graph. Closeness centraliy is a more global measure that brings into play the closeness to all network members, not just connections to immediate neighbors.

  8. 8

    In the sample for the benchmark year, 1976 Rolf Ziegler had included 26 (instead of 50) financial corporations only.

  9. 9

    For a comprehensive quantitative analysis of patronage appointments in Austrian state-owned enterprises see Ennser-Jedenastik (2013).

  10. 10

    (Christian) Konrad epitomized Raiffeisen and was a representative of Austria’s rural catholic heritage. Konrad was a prominent promoter of pilgrimages and church restorations. The gable cross (Giebelkreuz) is the symbol of Raiffeisen representing two crossed, stylized horse heads attached to a house gable. The Freedom Party (FPÖ) mainly attacks Raiffeisen because of its close ties to Austrian People’s party (ÖVP). It’s many crossholding are portrayed as the tentacles of an octopus (Krake).

  11. 11

    The example of the cigarette manufacturer Austria Tabak clearly demonstrated the possible harmful consequences of foreign ownership. After the state-owned company had been sold to the Gallagher Group (UK), production sites in Hainburg and Vienna were closed down and 320 employers dismissed.

  12. 12

    That personal acquaintances play a major role in the recruitment of supervisory directors in state-close corporations is suggested by a recent survey conducted by the Vienna University of Economics and Business (Hoffmann et al. 2011).

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Published Online: 2013-12-6

©2013 by Walter de Gruyter Berlin/Boston

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