Skip main navigation
Close Drawer MenuOpen Drawer Menu
Articles

Policy as Myth and Ceremony? The Global Spread of Stock Exchanges, 1980–2005

    Published Online:1 Dec 2009https://doi.org/10.5465/amj.2009.47085184

    Abstract

    We examine the antecedents and consequences in developing countries of creating a national stock exchange, a core technology of financial globalization. We study local conditions and global institutional pressures in the rapid spread of exchanges since the 1980s and examine how conditions at the point of adoption affected exchanges' subsequent vibrancy. Little prior research connects the process of diffusion with the operational performance of adopted policies. We find that international coercion was associated with more ceremonial adoption but that, contrary to expectations common in institutional research, contagion processes via peer groups and normative emulation of prestigious actors enhanced vibrancy.

    REFERENCES

    • Allison G. 1971. Essence of decision: Explaining the Cuban missile crisis. Boston: Little, Brown. Google Scholar
    • Anselin L. 2006. Spatial econometrics. In Mills T. C.Patterson K. (Eds.), Palgrave handbook of econometrics, volume 1—Econometric theory: 901–941. Basingstoke, U.K.: Palgrave Macmillan. Google Scholar
    • Armijo L. E. 1999. Introduction and overview. In Armijo L. E. (Ed.), Financial globalization and democracy in emerging markets: 10–14. New York: St. Martin's. Google Scholar
    • Bekaert G. , Harvey C. R. , Lundblad C. 2005. Does financial liberalization spur growth? Journal of Financial Economics, 77: 3–55. Google Scholar
    • Biggart N. W. , Guillén M. F. 1999. Developing difference: Social organization and the rise of the auto industries of South Korea, Taiwan, Spain, and Argentina. American Sociological Review, 64: 722–747. Google Scholar
    • Brune N. , Garrett G. , Kogut B. 2004. The international monetary fund and the global spread of privatization. IMF Staff Papers, 51(2): 195–219. Google Scholar
    • Burt R. S. 1987. Social contagion and innovation: Cohesion versus structural equivalence. American Journal of Sociology, 92: 1287–1335. Google Scholar
    • Chase-Dunn C. , Kawano Y. , Brewer B. D. 2000. Trade globalization since 1795: Waves of integration in the world system. American Sociological Review, 65: 77–95. Google Scholar
    • Clayton M. J. , Jorgenson B. N. , Kavajecz K. A. 2006. On the presence and market-structure of exchanges around the world. Journal of Financial Markets, 9: 27–48. Google Scholar
    • Cyert R. M. , March J. G. 1963. A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice-Hall. Google Scholar
    • Davis G. F. , Greve H. R. 1997. Corporate elite networks and governance changes in the 1980s. American Journal of Sociology, 103: 1–37. Google Scholar
    • DiMaggio P. J. , Powell W. W. 1983. The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48: 147–160. Google Scholar
    • Dobbin F. 1994. Forging industrial policy: The United States, Britain, and France in the railway age. London, U.K.: Cambridge University Press. Google Scholar
    • Edelman L. B. 1992. Legal ambiguity and symbolic structures: Organizational mediation of civil rights law. American Journal of Sociology, 97: 1531–1576. Google Scholar
    • Elkins Z. , Guzman A. T. , Simmons B. A. 2006. Competing for capital: The diffusion of bilateral investment treaties, 1960–2000. International Organization, 60: 811–846. Google Scholar
    • Filer R. K. , Hanousek J. , Campos N. F. 1999. Do stock markets promote economic growth? Working paper no. 268, William Davidson Institute, University of Michigan Business School. Google Scholar
    • Fourcade-Gourinchas M. 2001. Politics, institutional structures, and the rise of economics: A comparative study. Theory and Society, 30: 397–447. Google Scholar
    • Frank D. J. , Hironaka A. , Schofer E. 2000. The nation-state and the natural environment over the twentieth century. American Sociological Review, 65: 96–116. Google Scholar
    • Franzese R. J. , Hays J. C. 2007. Spatial econometric models of cross-sectional interdependence in political science panel and time-series-cross-section data. Political Analysis, 15(2): 140–164. Google Scholar
    • Franzese R. J. , Hays J. C. 2008. Interdependence in comparative politics: Substance, theory, empirics, substance. Comparative Political Studies, 41: 742–780. Google Scholar
    • Franzese R. J. , Hays J. C. , Kachi A. 2008. The m-star model as an approach to modeled, dynamic, endogenous interdependence in comparative & international political economy. Working paper, SSRN, June 13. Google Scholar
    • Goetzmann W. N. , Jorion P. 1999. Re-emerging markets. Journal of Financial and Quantitative Analysis, 34: 1–32. Google Scholar
    • Gowan P. 1999. The global gamble: Washington's Faustian bid for world dominance. New York: Verso. Google Scholar
    • Greve H. R. 1998. Managerial cognition and the mimetic adoption of market positions: What you see is what you do. Strategic Management Journal, 19: 967–988. Google Scholar
    • Guler I. , Guillén M. F. , Macpherson J. M. 2002. Global competition, institutions, and the diffusion of organizational practices: The international spread of ISO 9000 quality certificates. Administrative Science Quarterly, 47: 207–232. Google Scholar
    • Haas P. 1992. Epistemic communities and international policy coordination. International Organization, 46: 1–35. Google Scholar
    • Heckman J. J. 1979. Sample selection bias as a specification error. Econometrica, 47: 153–162. Google Scholar
    • Henderson R. M. , Cockburn I. 1996. Scale, scope, and spillovers: The determinants of research productivity in drug discovery. RAND Journal of Economics, 27: 32–59. Google Scholar
    • Henisz W. J. , Zelner B. A. , Guillén M. F. 2005. The worldwide diffusion of market-oriented infrastructure reform, 1977–1999. American Sociological Review, 70: 871–897. Google Scholar
    • International Monetary Fund. 1997. The role of the IMF in governance issues: Guidance note. Washington, DC: International Monetary Fund. Google Scholar
    • Kostova T. , Roth K. 2002. Adoption of an organizational practice by subsidiaries of multinational corporations: Institutional and relational effects. Academy of Management Journal, 45: 215–233.Link , Google Scholar
    • La Porta R. , Lopez-de-Silanes F. 1998. Capital markets and legal institutions. In Burki S. J.Perry G. (Eds.), Beyond the Washington consensus: Institutions matter: 73–92. Washington, DC: World Bank. Google Scholar
    • La Porta R. , Lopez-de-Silanes F. , Shleifer A. , Vishny R. 1998. Law and finance. Journal of Political Economy, 106: 1113–1155. Google Scholar
    • La Porta R. , Lopez-de-Silanes F. , Shleifer A. , Vishny R. 1999a. Investor protection and corporate evaluation. Working paper no. 7403, National Bureau of Economic Research. Google Scholar
    • La Porta R. , Lopez-de-Silanes F. , Shleifer A. , Vishny R. 1999b. The quality of government. Journal of Law, Economics, and Organization, 14: 222–282. Google Scholar
    • La Porta R. , Lopez-de-Silanes F. , Shleifer A. , Vishny R. 2000. Investor protection and corporate governance. Journal of Financial Economics, 58: 3–27. Google Scholar
    • Lee C. K. , Strang D. 2006. The international diffusion of public-sector downsizing: Network emulation and theory-driven learning. International Organization, 60: 883–909. Google Scholar
    • LeSage J. P. 1999. Spatial econometrics. http://rri.wvu.edu/WebBook/LeSage/spatial/spatial.html. Google Scholar
    • Levine R. 1998. The legal environment, banks, and economic growth. Journal of Money, Credit, and Banking, 30: 596–613. Google Scholar
    • Levine R. , Zervos S. 1998. Stock markets, banks, and economic growth. American Economic Review, 88: 537–554. Google Scholar
    • Levitt B. , March J. G. 1996. Organizational learning. In Hagan J.Cook K. (Eds.), Annual review of sociology, vol. 14: 319–340. Palo Alto, CA: Annual Reviews. Google Scholar
    • Levy J. S. 1994. Learning and foreign policy: Sweeping a conceptual minefield. International Organization, 48: 279–312. Google Scholar
    • Lindblom C. E. , Woodhouse E. J. 1993. Policy making process (3rd ed.). Englewood Cliffs, NJ: Prentice-Hall. Google Scholar
    • Lounsbury M. 2001. Institutional sources of practice variation. Administrative Science Quarterly, 46: 29–56. Google Scholar
    • Lounsbury M. , Ventresca M. J. 2002. Social structure and organizations revisited. In Lounsbury M.Ventresca M. J. (Eds.), Research in the sociology of organizations, vol. 19: 3–36. Greenwich, CT: JAI Press. Google Scholar
    • Manzocchi S. 1999. Capital flows to developing economies throughout the twentieth century. In Armijo L. E. (Ed.), Financial globalization and democracy in emerging markets: 51–73. New York: St. Martin's. Google Scholar
    • March J. G. , Simon H. A. 1958. Organizations. New York: Wiley. Google Scholar
    • McMichael P. 1996. Development and social change: A global perspective. Thousand Oaks, CA: Pine Forge Press. Google Scholar
    • Meyer J. W. , Rowan B. 1977. Institutional organizations: Formal structures as myth and ceremony. American Journal of Sociology, 83: 340–363. Google Scholar
    • Meyer J. W. , Boli J. , Thomas G. M. , Ramirez F. O. 1997. World society and the nation state. American Journal of Sociology, 103: 144–181. Google Scholar
    • Mizruchi M. S. 1993. Cohesion, equivalence, and similarity of behavior: A theoretical and empirical assessment. Social Networks, 15: 275–307. Google Scholar
    • Murillo M. V. 2002. Political bias in policy convergence: Privatization choices in Latin America. World Politics, 54: 462–493. Google Scholar
    • North D. C. 1990. Institutions, institutional change and economic performance. Cambridge, U.K.: Cambridge University Press. Google Scholar
    • Phillips D. , Zuckerman E. W. 2001. Middle-status conformity: Theoretical restatements and empirical demonstration in two markets. American Journal of Sociology, 107: 379–429. Google Scholar
    • Polillo S. , Guillén M. F. 2005. Globalization pressures and the state: The worldwide spread of central bank independence. American Journal of Sociology, 110: 1764–1802. Google Scholar
    • Simmons B. A. , Elkins Z. 2004. The globalization of liberalization: Policy diffusion in the international political economy. American Political Science Review, 98: 171–189. Google Scholar
    • Simmons B. A. , Dobbin F. , Garrett G. 2006. Introduction: The international diffusion of liberalism. International Organization, 60: 781–810. Google Scholar
    • Spicer A. 2002. Revolutionary change and organizational form: The politics of investment fund organization in Russia, 1992–1997. In Lounsbury M.Ventresca M. J. (Eds.), Research in the sociology of organizations, vol. 19: 91–124. Greenwich, CT: JAI Press. Google Scholar
    • Stinchcombe A. L. 1965. Social structure and organizations. In March J. G. (Ed.), Handbook of organizations: 142–193. Chicago: Rand McNally. Google Scholar
    • Strang D. 1990. From dependency to sovereignty: An event history analysis of decolonization 1870–1987. American Sociological Review, 55: 846–860. Google Scholar
    • Strang D. , Tuma N. B. 1993. Spatial and temporal heterogeneity in diffusion. American Journal of Sociology, 99: 614–639. Google Scholar
    • Sutton R. I. , Dobbin F. 1996. The two faces of governance: Responses to legal uncertainty in U.S. firms, 1995–1985. American Sociological Review, 61: 794–811. Google Scholar
    • Tolbert P. S. , Zucker L. G. 1983. Institutional sources of change in the formal structure of organizations: The diffusion of civil service reform, 1880–1935. Administrative Science Quarterly, 28: 22–39. Google Scholar
    • Useem M. 1996. Investor capitalism: How money managers are changing the face of corporate america. New York: Basic Books. Google Scholar
    • Van Agtmael A. W. 1984. Emerging securities markets: Investment banking opportunities in the developing world. London: Euromoney Publications. Google Scholar
    • van Rossem R. 1996. The world system paradigm as general theory of development: A cross-national test. American Sociological Review, 61: 508–527. Google Scholar
    • Vreeland J. R. 2003. The IMF and economic development. Cambridge, U.K.: Cambridge University Press. Google Scholar
    • Waters M. 1995. Globalization. New York: Routledge. Google Scholar
    • Weber M. 1904/1958. The Protestant work ethic and the spirit of capitalism [T. Parsons, trans.]. New York: Scribner's. Google Scholar
    • Wejnert B. 2005. Diffusion, development and democracy. American Sociological Review, 70: 53–81. Google Scholar
    • Westphal J. D. , Gulati R. , Shortell S. M. 1997. Customization or conformity? An institutional and network perspective on the content and consequences of TQM adoption. Administrative Science Quarterly, 42: 366–394. Google Scholar
    • Westphal J. D. , Zajac E. J. 1998. The symbolic management of stockholders: Corporate governance reforms and shareholder reactions. Administrative Science Quarterly, 43: 127–153. Google Scholar
    • Westphal J. D. , Zajac E. J. 2001. Explaining institutional decoupling: The case of stock repurchase programs. Administrative Science Quarterly, 46: 202–228. Google Scholar
    • Williamson O. E. 1975. Markets and hierarchies: Analysis and antitrust implications. New York: Free Press. Google Scholar
    • Woods N. 2006. The globalizers: The IMF, the World Bank, and their borrowers. Ithaca, NY: Cornell University Press. Google Scholar
    • World Bank. 1997. Private capital flows to developing countries: The road to financial integration. Oxford, U.K.: Oxford University Press. Google Scholar
    • Zbaracki M. J. 1998. The rhetoric and reality of total quality management. Administrative Science Quarterly, 43: 602–636. Google Scholar
    • Zeger S. L. , Liang K.-Y. 1986. Longitudinal data analysis for discrete and continuous outcomes. Biometrics, 42: 121–130. Google Scholar
    • Zelner B. A. , Henisz W. J. , Holburn G. L. F. 2009. Contentious implementation and retrenchment in neoliberal policy reform: The global electric power industry, 1989–2001. Administrative Science Quarterly, 54: 379–412. Google Scholar