Intercultural mergers and acquisitions as 'legitimacy crises' of models of capitalism: a UK-German case study.

TLDR: The authors examines media discourse surrounding two UK-German intercultural business controversies: the takeover of the German company Mannesmann by the British company Vodafone in 1999, and the disposal of its British subsidiary Rover by its German parent company BMW in 2000.

Abstract: This paper examines media discourse surrounding two UK— German intercultural business controversies: the takeover of the German company Mannesmann by the British company Vodafone in 1999, and the disposal of its British subsidiary Rover by its German parent company BMW in 2000. These controversies were framed in the media of both countries as part of a `clash of cultures of capitalism', with the `Anglo-Saxon model' on one side and the `German social model' on the other, and can be seen as `legitimacy crises' of the two models of capitalism involved. The paper examines how cultural, economic and political discourses relating to globalization were used strategically by actors to deal with these crises, in order to legitimize a neo-liberal transformation of the German model in the first case, and to legitimize a `rebranding' of the UK model in line with a move from a concentration on manufacturing to a service economy in the second.

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Table 2. Press Articles selected for detailed analysis

Table 1. Press Articles Case Study 1: Mannesmann/Vodafone

Full text

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‘legitimacy crises’ of models of capitalism: a UK-German case
study. In: Organization, 15 (6), pp. 787-809.
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1
Intercultural mergers and acquisitions as ‘legitimacy crises’ of models of
capitalism: a UK-German case study
Abstract
This article examines media discourse surrounding two UK-German intercultural
business controversies: the takeover of the German company Mannesmann by the
British company Vodafone in 1999, and the disposal of its British subsidiary Rover by
its German parent company BMW in 2000. These controversies were framed in the
media of both countries as part of a ‘clash of cultures of capitalism’, with the ‘Anglo-
Saxon model’ on one side and the ‘German social model’ on the other, and can be
seen as ‘legitimacy crises’ of the two models of capitalism involved. The article
examines how cultural, economic and political discourses relating to globalization
were used strategically by actors to deal with these crises, in order to legitimize a neo-
liberal transformation of the German model in the first case, and to legitimize a
‘rebranding’ of the UK model in line with a move from a concentration on
manufacturing to a service economy in the second.
Keywords: models of capitalism; globalization; discourse; intercultural mergers;
legitimacy crisis

2
Intercultural mergers and acquisitions as ‘legitimacy crises’ of models of
capitalism: a UK-German case study
Robert Halsall
Aberdeen Business School, The Robert Gordon University, Aberdeen, United
Kingdom.
Email: r.halsall@rgu.ac.uk
Abstract
This article examines media discourse surrounding two UK-German intercultural
business controversies: the takeover of the German company Mannesmann by the
British company Vodafone in 1999, and the disposal of its British subsidiary Rover by
its German parent company BMW in 2000. These controversies were framed in the
media of both countries as part of a ‘clash of cultures of capitalism’, with the ‘Anglo-
Saxon model’ on one side and the ‘German social model’ on the other, and can be
seen as ‘legitimacy crises’ of the two models of capitalism involved. The article
examines how cultural, economic and political discourses relating to globalization
were used strategically by actors to deal with these crises, in order to legitimize a neo-
liberal transformation of the German model in the first case, and to legitimize a
‘rebranding’ of the UK model in line with a move from a concentration on
manufacturing to a service economy in the second.
Keywords: models of capitalism; globalization; discourse; intercultural mergers;
legitimacy crisis

3
Introduction
The controversial takeover of the German company Mannesmann by the British
mobile phone company Vodafone in 2000 and the equally controversial disposal of its
British subsidiary Rover by the German automobile company BMW later in that year
were framed, both in the German and British press, not just as business disputes
involving companies from different nations, but as part of a wider conflict between
different models of capitalism of which the two countries involved were seen as
representatives. Particularly significant for the reactions on both sides was the fact
that the two disputes closely followed each other within a short time period, and that
the ‘winner’ and ‘loser’ roles were reversed: in the Vodafone takeover of
Mannesmann, Germany and the ‘German model’ was perceived as the ‘loser’ while in
the BMW disposal of Rover the ‘winner’ in the former dispute, the UK, became the
‘loser’.
In the first case, the takeover of a major German ‘national champion’ by a foreign
company provoked a political debate about the extent to which the German ‘social
model’ could or should be maintained in the face of global capitalism, and whether
convergence of the German model toward the ‘Anglo-Saxon’ was desirable or
inevitable. It was seen, in other words, as a legitimacy crisis in the German model of
capitalism. In the second dispute, the demise of a major flagship British car
manufacturer due to its disposal by a foreign owner provoked a similar crisis about
the legitimacy of the neo-liberal ‘Anglo-Saxon’ model, in particular whether it was
possible or desirable for the state to intervene to rescue such companies, and the
implications of the decline of British manufacturing industry for British national
identity.
Particularly because the two countries involved in the disputes were the UK and
Germany, media representation of the the controversies drew on and was embedded in
a long history of rivalry and mutual stereotyping outside the area of business
(Cullingford 1995, Kielinger 1996, Emig 2000, Ramsden 2006). The two disputes can,
then, be interpreted not just as intercultural business disputes, but as ‘legitimacy
crises’ in the two models of capitalism represented, in which cultural, economic, and
political discourses and issues related to the role of the nation states in the face of
globalization were of central importance.
Discourse as means of understanding intercultural mergers and acquisitions as
‘legitimacy’ crises of models of capitalism
Research in the field of intercultural mergers and acquisitions has in recent years
increasingly been concerned with the discursive representation of the cultural
identities, actions, and beliefs of actors in the merger and acquisition process
(Søderberg and Vaara 2003). Such studies of discourse surrounding intercultural
mergers have identified a conflict between the ‘rationalistic’ discourse of global
capitalism, which legitimizes mergers and acquisitions as a normal and indeed
inevitable fact of global capitalism, and nationalistic or cultural discourse, which
emphasizes, often in emotionally laden terms, particularly in the media of countries
perceived as ‘losers’ in such takeovers or mergers, the negative impact of mergers and
acquisitions (Gertsen et al. 1998; Tienari et al. 2003; Hellgren et al. 2002: Vaara
2002; Risberg et al. 2003).

Frequently asked questions

Q1. What are the contributions in this paper?

This article examines media discourse surrounding two UK-German intercultural business controversies: the takeover of the German company Mannesmann by the British company Vodafone in 1999, and the disposal of its British subsidiary Rover by its German parent company BMW in 2000. The article examines how cultural, economic and political discourses relating to globalization were used strategically by actors to deal with these crises, in order to legitimize a neoliberal transformation of the German model in the first case, and to legitimize a ‘ rebranding ’ of the UK model in line with a move from a concentration on manufacturing to a service economy in the second. 

Q2. What are the main categories of discourses used in the analysis of the merger?

Societal discourses, relating to matters such as employment, ownership and competition and their consequences for the wider social and economic environment in which the merger takes place. 

Q3. What is the main question to be addressed in relation to major crises?

In relation to major legitimacy crises such as the takeover or disposal of a flagship company, the central question is how political discourse can successfully mediate between the instinctive ‘nationalist’ desire of the public to protect the company by means of state intervention, and the ‘rationalist’ dictates of neo-liberalism, according to which such state intervention is neither desirable nor possible. 

Q4. What are examples of texts which leave traces on national institutions?

The texts surrounding major intercultural mergers, acquisitions, and disposals, particularly those involving flagship companies which are deeply associated with national consciousness, are examples of those which ‘leave traces’ on national institutions. 

Q5. What was the purpose of the accusation of ‘nationalism’?

The accusation of ‘nationalism’ then, was ‘useful’ rhetorically to enable the construction of a discourse in which political intervention in business was seen as unacceptable (Hay and Rosamond 2002). 

Q6. What is the significance of the two case studies?

The two case studies have demonstrated the importance of discourse in legitimizing and transforming the self representation of nations as ‘models of capitalism’ in reaction to ‘legitimacy crises’ surrounding major takeovers or disposals of flagship companies. 

Q7. What is the symptom of the ‘German character’ in the Frankfurter Allgemeine?

The desire of German politicians to intervene in business matters is seen by the Frankfurter Allgemeine as retrogressive, a symptom of the ‘German character’, here the auto-stereotype echoing the stereotypical characterization of Germany in the British press by means of hetero-stereotypes: 

Q8. What is the central question to be addressed?

The central question to be addressed is which texts are more likely to be viewed as legitimate within such crises, and which actors will be able to mobilize discourse strategically to bring about change in institutions, or which text producers are more likely to be recognized as ‘consensually validated’ (Hardy et al. 2000; Phillips et al. 2004: 643). 

Q9. What is the key factor in the political discourse surrounding the BMW crisis?

The key factor in the political discourse surrounding the BMW crisis was the desire or ability of British politicians to intervene in the dispute, or at least to express concern for the job loss. 

Q10. What was the first stage of analysis of the case studies?

The first stage of analysis of the case studies consisted of collection of articles from a representative sample of the British and German press during the periods in which the two controversies were ‘current’. 

Q11. What is the full nature of the dialectical relationship between the two case studies examined?

In the two case studies examined here, the full nature of this dialectical relationship becomes fully apparent: in the first, concerns in Germany about globalization and the effect of the takeover on jobs were dismissed as ‘nationalism’ by both the UK press and those sections of the German press who favoured a neo-liberal model in Germany. 

Q12. What is the significance of the episode in preparing the way for a wider acceptance of practices?

Commentators on German political economy have noted the significance of this episode in preparing the way for a wider acceptance of practices of ‘Anglo-American’ capitalism in Germany, which, although not completely replacing the ‘German model’ may have created a ‘hybrid’ model containing features of both models (Höpner and Jackson 2001; Lane 2005; Jackson 2005; Deeg 2005).