Overseas State Investors in Domestic Markets: France and German Policies Towards Equity Investment By Sovereign Wealth Funds

The paper will examine how European states respond to non-Western foreign state purchasers of their ‘domestic’ firms. In particular, it looks at how governments respond when those purchasers are non-Western Sovereign Wealth Funds (SWFs). It analyses whether they restrict entry or welcome these overseas investors. Empirically, the paper examines France and Germany - two non-liberal market economies which many comparative political economy literatures (e.g. varieties of capitalism) would expect to restrict entry to foreign investors since these entrants would undermine their insider model of corporate governance and long-standing relationships between firms and banks and the state.

However, we observe that both countries have been fairly open to SWFs. While new legislation has been introduced, it was not targeted at SWFs specifically, and was rarely – if ever – used. However, the role of the state, the debates and the extent of hostility varied. Building on the new statist literature, we explore why openness has occurred as well as cross-national differences by examining the concentration and location of power within the state. Specifically, we study the powers and preferences of legislatures and executives, examining their interests, abilities to ‘frame’ the issue of SWF investment and capacities to maintain SWF investments as part of ‘quiet politics’. We show that in both countries the state has actively sought SWF investments, suggesting that state activism does not necessarily lead to less economic openness. Our general argument therefore questions assumptions about how coordinated and ‘statist’ polities respond to outside investment when made by foreign states.

In addition to the paper presenters, Prof Andreas Nölke of Frankfurt University has agreed to be chair and discussant