Reversing competition: the case of corporate governance

Abstract

This chapter tries to identify the conditions under which a fourth party can tame competition in order to achieve cooperation. It relies on an in-depth case study of a multinational corporation acquired by a private equity firm through leveraged buy-out during the 2000s. It is shown that the private equity firm wanted to foster collaboration among competing operating units to increase firm performance but that it failed, despite the interest of many middle managers. The main reason was that top managers of these operating units, facing the great recession, strategically impeded cooperation because they thought that the private equity firm could break up the corporation in the near future, a belief inscribed in the ‘moral economy’ of managerialism. It is concluded that competition may be more easily reversed in firms with different types of owners or in other sectors where self-interested behaviour is less institutionalized.