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Wednesday, June 15, 2005

More on cross-border mergers

For the views of Italy's minister for European affairs on cross-border mergers, see Giorgio La Malfa, "Cross-border M&A does not suit most banks," Financial Times, 2 June 2005, 15.

Most interesting part: "Finally and crucially: the bigger, the less flexible. There are specific, lcoal circumstances even for banking. Italy's industrial production, and with it a large share of the country's wealth, is based on small and medium-sized enterprises, often clustered in lcoal districts. Most of these companies are too small to raise capital on the markets. Access to credit is their lifeline. And local banks have traditionally provided this credit. They have developed over the years a detailed knowledge of their clients' needs that is hard to replace. It is thus a legitimate concern that flexibility and specialisation could be lost in the process of banking consolidation."

There's now a large political-economy literature on flexible specialization as a mode of production in Italy (for an early example, see Charles Sabel and Michael Piore, The Second Industrial Divide).

Access to local knowledge and large-scale banking are not necessarily incompatible, however. Case in point: At the Business History Conference in Minneapolis last month, I heard a paper (by Fed Reserve scholars, if I remember right) on bank branching via merger in California. There the parent banks have tended to retain local executives and managers precisely because of their detailed knowledge of the local community.

1 comment:

mike said...

I enjoyed reading your site and was wondering your thoughts on which factors you would contend were the most crucial in the history of capitalism?