The Elgar Companion to Social Economics
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The Elgar Companion to Social Economics

Edited by John B. Davis and Wilfred Dolfsma

As this comprehensive Companion demonstrates, social economics is a dynamic and growing field that emphasizes the key role that values play in the economy and in economic life. Social economics treats the economy and economics as being embedded in the larger web of social and ethical relationships. It also regards economics and ethics as essentially connected, and adds values such as justice, fairness, dignity, well-being, freedom and equality to the standard emphasis on efficiency. The Elgar Companion to Social Economics brings together the leading contributors in the field to elucidate a wide range of recent developments across different subject areas and topics. In so doing the contributors also map the likely trends and directions of future research. This Companion will undoubtedly become a leading reference source and guide to social economics for many years to come.
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Chapter 20: Firms, Managers and Restructuring: Implications of a Social Economics View

Hans Schenk


Hans Schenk Introduction Since the early 1900s there have been five merger waves – three of which occurred after World War II – while at the time of writing Western economies are experiencing their sixth. The fifth, which had its rising tide from 1995 to 2000, required worldwide investments of no less than about US$12 000 billion. With about US$9000 billion, US and West European firms took the lion’s share (for more details, see Schenk, 2006). At the time, by way of comparison, acquisition expenditures by US and European firms were about seven times larger than the UK’s annual gross domestic product. On average, they amounted annually to about one-fifth of US GDP. Put differently, US and West European investments in mergers and acquisitions were equal to approximately 60 per cent of their gross investments in machinery and equipment (gross fixed capital formation) and they easily outpaced those in research and development (R&D). Business enterprise investments in acquisitions were no less than about eight times higher than business enterprise expenditures on R&D. The sixth wave, while aspiring to similar numbers as the fifth, has different characteristics, however. Similar to the fourth wave (taking place during the 1980s), a disproportionately large number of its acquisitions are leveraged buy-outs (LBOs), or in more modern parlance, private equity leveraged buy-outs (PELBOs). Many, if not most, of such buy-outs do – or are supposed to – create value from demerging previously formed concentrations, indicating a sort of continuous stop–go process,...

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