Business Groups in 20th‐Century Swedish Political Economy: A Sociological Perspective

I Introduction OBSERVERS RECENTLY HAVE BEGUN to recognize both the existence of many economies in which business groups assume highly influential positions and that business groups do not represent trivial matters but are in fact salient features of modern capitalism (e.g., Granovetter 1995, 2005; Orru, Biggart, and Hamilton 1997; Shimotani and Shiba 1997). (1) This article deals with business groups in Sweden, which has an economy resembling the well-known cases of Japan, South Korea, and Taiwan, with a stable and dominating set of business groups (e.g., Goto 1982; Granovetter 1995, 2005; Reiter 2003). For the last 80 years or so, the Swedish economy has been dominated by a few business groups that have directly or indirectly controlled practically all Swedish industry of any importance. They constitute a distinctive institutional feature of the Swedish economy and accordingly have exerted considerable influence over the structural development of the Swedish economy. Despite this, explicit endeavors to accomplish a sustained analysis of business groups in Sweden are largely absent. As I will discuss in greater detail below, the literature that does exist on Swedish business groups is flawed. This article articulates a sociologically informed argument about business groups in Sweden, especially their existence and lasting dominance. I identify and explain the forces that moved the Swedish economy in certain structural directions and address the following questions: What brought about the emergence and consolidation of business groups in Sweden in the aftermath of World War I and the Great Depression in the early 1930s? How was the institutionalization of the groups in the postwar period possible, and how and why did governmental financial and industrial policies promote this process of institutionalization? And, finally, how have these policies and other factors affected the groups' long-term survival and ability to retain their dominant position within Swedish business? The outline of the article is as follows. In the following section, I scrutinize the most sustained attempt to account for business groups in Sweden. I demonstrate that this attempt is untenable and suggest an alternative approach that treats economic institutions as social constructions. Next, I analyze the birth of Swedish business groups, paying special attention to the role played by the economic crises in the 1920s and 1930s. Thereafter follows an analysis of the institutionalization of the business groups as the result of a process of social exchange in the Swedish political economy in the decades after World War II. The article concludes with a discussion addressing how the business groups have been able to retain their positions in spite of the significant changes in the national and international environment in recent decades. II Previous Account of Swedish Business Groups THE ONLY ATTEMPT TO GIVE an explicit and sustained account of business groups in Sweden to date has been made by Sven-Olof Collin (1993, 1997, 1998). Collin adopts the theoretical framework of transaction-cost economics, and he explains the existence and long-term dominance of business groups in Sweden by asserting that the groups are an efficient solution to certain economic problems. More specifically, Collin argues that the business groups are the solution to the problems of credit supply and managerial labor: "BGs [business groups] can be explained in terms of their mastering of problems connected with credit and with managerial labor" (Collin 1998: 732). In summary, Collin asserts that "groups appear to exist due largely to a scarcity of credit and of managerial labor supply in an economy [i.e., the Swedish economy] in which the capital markets and the markets for managerial markets are small" (Collin 1998: 737). Thus, the organizational form of business groups is in Collin's account an economically efficient consequence of the effort to minimize transaction costs connected with securing the resources of capital and management labor. …