This paper poses the question of the existence and extent of
"European business". This notion can be characterized along
four dimensions. First, European business can be viewed as a homogeneous
business environment (specifically, a regulatory framework and
integrated consumer markets). Second, European business also corresponds
to a certain type of firms: firms with a regional scale of operations,
conducive to paneuropean standardization of corporate policies and
practices. Through a review of existing empirical data along these main
dimensions, our ultimate assessment is that "European
business" does exist but is not as widespread as held by popular
Keywords: European business; European integration; Europeanization;
1. INTRODUCTION: WHAT EUROPEAN BUSINESS AND EUROPEAN BUSINESS
With 495 million citizens in its 27 countries (EU27), a GDP of
$14.5tn (2006), a Single Market achieved as early as 1993, and a common
currency already used by 15 of its members, it seems that the European
Union has successfully achieved its economic integration. Furthermore,
with multinational enterprises such as Total, Allianz, Volkswagen,
Siemens, Axa or Carrefour headquartered in the region and whose
operations encompass most of the EU27 countries, it is not surprising
that the expression 'European business' has become familiar.
In fact, the notion has become so widespread that CNBC publishes a
monthly magazine with this title, and many universities offer
'European Business' courses, if not entire degrees, supported
by numerous specialized textbooks (Bennett, 1997; Harris, 1999; Johnson
and Turner, 2006; Mercado, Welford and Prescott, 2001).
It thus looks as if journalists, academia and the business
community take for granted that European business exists and is
significant. But is it really? When looking at the international
business literature, there is some misunderstanding in the definitions
of European business, as several authors confuse European business with
doing business in Europe. Besides, European business implies a
regionalization of the business environment and corporate operations in
Europe, relative to such alternatives as a local, national or global
scope. We can report a multitude of mixed results in this regard,
painting a much more complex picture that initially assumed. This is why
we feel the matter far from settled, and in need of a thorough
First, it must be noted that the expression itself remains unclear.
Harris (1999) and Mercado et al. (2001) simply define European business
as any firm doing business in Europe, ranging from a local bakery in
France to Microsoft having operations in Europe. We feel that this
definition is much too broad as it does not allow to distinguish between
firms whose scope of operations and markets are purely national (or even
sub-national, such as the French bakery) or global (such as IBM or
Microsoft) and firms whose focus is truly paneuropean. These authors
confuse firms doing business in Europe with firms truly engaged in
business on a regional scale, whose operations and customers are located
in multiple countries within Europe. In other words, what makes a
business European (rather than say, global or German) is that its market
scope and scale of operations extend beyond more than one European
nation, while remaining dominantly focused on European countries, rather
than spanning across other continents as well.
Going beyond this more precise definition of European business, the
notion can be characterized along four dimensions. First, European
business can correspond to a homogenous business environment, consisting
of a level playing field based on common rules and standards, as well as
homogeneous markets made of consumers with similar demand. Second,
European business should also refer to firms with a regional scale of
operations, leading to a high level of paneuropean standardization.
Thus, on one hand, European business can be viewed as a business
environment (market dimensions) or as a type of firm (firm dimensions).
On the other hand, European business can also be seen in terms of an end
result, namely, firms having internationalized to the point of
conducting business with a regional focus (activities occur at the
paneuropean level rather than at the national or global levels), as well
as in terms of an ongoing process of homogenization of markets and
business operations. These four dimensions can provide a comprehensive
picture of the notion. This view is captured in table 1.
Based on this characterization, it remains to be seen whether
European business is actually the exception or the norm in Europe. In
other words, has the business environment in Europe become integrated
enough, have European customer demands converged enough, do most
European firms operate on a paneuropean basis in a standardized manner,
in order to warrant the use of the expression European business? Or is
it an overstatement, an illusion which many have hastily adopted but
remains mostly void of any sense?
Whether European business exists or not raises the central issue of
the extent of European integration, in this particular case in terms of
two economic aspects: European business integration (that is, the
internationalization of operations at the level of a paneuropean market)
as well as European corporate integration (at the level of the
individual firm, standardizing its operations and policies across
European countries). In the rest of the article, we will answer the
question of the existence and extent of European business by reviewing
the four aforementioned aspects of the concept, summarized in table 1
2. EUROPEAN BUSINESS AS A BUSINESS ENVIRONMENT
We start with the broader perspective of markets and whether they
have reached a substantial level of unification through the process of
European integration driven by the European Union. When it comes to a
market, one can look at it from a regulatory standpoint as the business
environment in which a firm is immersed, or as a venue for the
interaction between suppliers and customers. This is why we will first
discuss the development of the Single Market as an initiative aiming at
leveling the business environment of European firms, then address the
extent of convergence of national economies, their industries and
consumers across Europe, in order to decide whether integrated European
2.1 Leveling the Playing Field: A Review of the Single Market
While the goal of achieving the "four freedoms" (namely,
free movement of goods, services, capital and persons) was stated in the
Treaty of Rome as early as 1957, it has taken almost thirty years to
gain enough momentum to see significant progress. Under Jacques
Delors' presidencies (1985-1994), the veto power of individual
member states in this policy area was removed and the Single European
Act (effective in 1987) laid out a clear roadmap to achieve the Single
Market by 1993. The intent of the four freedoms was to go beyond free
trade, which typically involves only goods and services, in order to
include all production factors. The economic rationale was that this
policy would enable the most efficient allocation of resources across
countries, maximizing wealth creation. In terms of the Single Market
implementation, having already abolished tariff barriers by 1968, the
focus has been on eliminating non-tariff barriers to trade (such as
differing national product or safety standards), maintaining fair
competition (through market liberalization, deregulation, anti-trust
policies), as well as eliminating restrictions to cross-border
investments, citizen residency and work. Officially, the Single Market
was enacted on time, in 1993, and ten years later the European
Commission loudly trumpeted the reaped benefits: "The Commission
estimates that the Internal Market has delivered 2.5 million extra jobs
and nearly 900 billion [euro] in extra wealth" (European
Commission, 2003, p. 3). However, even fifteen years later, the European
Commission still has an ongoing Single Market agenda, as evidenced by
numerous new EU directives targeted at furthering the Internal Market
every year, as well as the need to have a long-term Internal Market
strategy (European Commission, 2003). The European Commission also
conducts regular surveys of the internal market implementation: the
annual "Internal Market Scoreboard" which monitors the speed
of national transposition of EU directives, and uses its coercion power
by sanctioning member states for incorrect transposition or incorrect
application of Internal Market rules (European Commission, 2007).
Overall, the picture presented by the European Commission is indeed a
positive one: the deficit in EU directive transposition has been
significantly reduced, showing that national governments have made
recent efforts to deflate the backlog. There are, however, a fairly high
number of infringement cases of EU regulations pursued every year by the
European Commission against country-members, ranging from Estonia (11
cases) to worst-offender Italy, with 161 cases in 2006 (opt. cit.).
All these transposition delays and infringement cases point out to
the fact that the process is rarely smooth, and that there has always
been a fair amount of foot-dragging on the part of member states. As a
careful review of each of the "four freedoms" will show, the
Single Market still faces some significant gaps today.
2.1.1 Free movement of goods in the EU. This is by far the area
where the most progress can be reported. As far as tariff-barriers to
trade are concerned, internal tariff have been fully abolished
throughout the European Economic Area, which currently includes thirty
countries, and for each product category a Common Customs Tariff is
applied on imports from the rest of the world. As far as non-tariff
barriers to trade are concerned, the picture is more mixed. On the plus
side, red tape has been significantly reduced: "Before the
frontiers came down, the tax system alone required 60 million customs
clearance documents annually: these are no longer needed" (European
Commission, 2002). However, we have experienced a long history of
differing national standards which have obstructed the trade of goods
within the EU. In the sixties, the initial approach to solving this
issue was to negotiate product by product (also known as "vertical
approach"), in order to harmonize each product standard. This was
achieved for products such as fruit juices, butter or jam. In the
seventies, however, the European Commission started to move away from
this vertical approach, as harmonization negotiations were taking too
long. The alternative solution to product standard harmonization has
been "mutual recognition", also referred to as "Cassis de
Dijon principle" due to the landmark decision by the European Court
of Justice in 1979, based upon articles 28 to 30 of the EC Treaty that
prohibit protectionist measures among member states. Mutual recognition
mandates that all member states (as well as EEA countries and Turkey)
recognize as acceptable imports products manufactured in another country
as long as these products are in compliance with the national standards
of the manufacturing country, even if those standards differ from those
of the destination country. This second solution has become the most
popular one as it has saved a lot of time in avoiding protracted
negotiations to harmonize standards. However, the end result is that,
while trade is greatly facilitated within the EEA, there is limited
harmonization of national standards. Rather than reducing national
differences, they simply have become officially tolerated (de Witte,
Hanf and Vos, 2001). This is hardly the same as fully integrated product
markets where single paneuropean product standards would be enforced. It
means that little convergence in national product policies can be
reported (Dimitrova and Steunenberg, 2000). Harmonization has been
limited to a small subset of goods, such as pharmaceutical or
construction products. Mostly obscure and highly technical, they were
usually picked because of their higher health and safety risks than the
non-harmonized ones. Other than this small minority of products, the
only areas were some policy convergence has really occurred include
safety, environmental and labeling standards (for examples, toy safety,
catalytic converters for car exhaust pipes, eco-labels, GMO labeling).
2.1.2 Free movement of services in the EU. Although the
liberalization of service markets is included in the EC treaty (articles
59 to 66), and came into effect as early as 1970, national obstacles
have remained substantial until 2006. In this regard, the European
Commission's own assessment was sobering: "There is no genuine
Internal Market for services yet" (European Commission, 2004a, p.
10). Although the services directive was a key Internal Market strategy
priority of the European Commission for 2003, it took many more years to
enact it, due to strong resistance from public opinion and governments
in some of the former EU15 countries. One of the most controversial and
publicized provisions covered the wage and working conditions of
temporary service workers posted in another EU country by their employer
(Menz, 2005). For example, could Portuguese or Polish construction
workers be employed in Germany and be paid well below the German minimum
wage because they signed their labor contract in their country of
origin? The final compromise adopted in 2006 (directive 2006/123/EC) is
less ambitious than what the European Commission envisioned initially.
In particular, it decided to uphold the "country of
destination" principle established by the Posting-of-Workers
Directive (Directive 96/71/EC), rather than introducing a highly
contested "country of origin" principle in employment
conditions of posted workers (Minder and Parker, 2005).
Additionally, market liberalization has been very selective in
services (Smith, 2001), as specific areas such as financial services,
network-based services remain an eyesore. We now address briefly these
The pace of integration has been slower for financial services
(including banking, insurance and securities): "Financial markets
in the EU could and should be more integrated" (European
Commission, 2004a, p. 11). In particular, some protectionist measures
still restrict the freedom of provision for financial services. The
European Commission also issues an annual "Financial Integration
Monitor" (FIM) report to assess progress. So far, the conclusion
has been that financial services are less integrated than most other
markets, and European banks remain domestically focused (this point is
also confirmed by Centeno and Mello, 1999; as well as Dahl et al., In
Press). Network-based services include energy, transport,
telecommunications and postal services. In all these sectors, the
transition from state monopolies and a highly regulated and constrained
business environment to privatization and deregulation has been very
slow, due in no small part to an intense lobbying of change resistance
from the former national monopoly firms (see Schumann and Widmaier,
2004, for a lobbying example in the electricity sector). The British
Department of Trade and Industry recently commissioned an economic study
of European network industries. The study calculated Market Opening
Indexes as of 2006, showing that while market opening was 84% achieved
in the air transport industry, electricity and telecoms were in the
mid-seventies and postal services were only 57% open to competition
(Copenhagen Economics, 2007). One of the conclusions was that full
opening of the six markets included in the study could lead to up to
350,000 job creations across Europe and an EU GDP increase of 1.7% (opt.
2.1.3 Free movement of capital. As discussed in the case of goods,
removal of barriers to circulation does not imply necessarily
convergence of national markets. This has been observed regarding
financial markets by Guiso et al.: "While free capital mobility has
been a reality in the EU since the late 1980s, financial market
segmentation has persisted, due to exchange rate risk until EMU in 1999
and even after that date due to different regulations and institutions
across the EU." (2004, p. 526). In fact, these authors report huge
differences in terms of financial market characteristics across Europe,
as described by indicators such as the level of stock market
capitalization or the extent of lending (measured by the claims to GDP
ratio). Notwithstanding these enduring national differences, with the
creation of the European Central Bank and the historical introduction of
the Euro, at least bond markets became fully integrated at the end of
the nineties. Furthermore, European stock markets have also become much
more integrated, through EU initiatives as well as private initiatives
such as the mergers of the Paris, Brussels, Amsterdam stock markets
(Euronext), and the development of paneuropean financial products (such
as the EURO STOXX index). This has led Hardouvelis et al. to conclude:
"We find that, in the second half of the 1990s, ... individual
Eurozone country stock markets appear to be fully integrated into the EU
market" (2006, p. 367). This process is however limited to Eurozone
countries. These authors did not find stock market integration as far
the United Kingdom is concerned.
2.1.4 Free movement of people. While the free movement of EU
citizens is fully achieved, and restrictions to residency in another EU
country are very limited, the free movement of workers is still a sore
point. Even between EU15 countries, numerous cases of discriminatory
regulations against workers or businesses trying to establish an
operation in another member state had to be investigated by the European
Commission and brought before the European Court of Justice in the
eighties and nineties. Most often, member states were accused of
preventing the establishment of service businesses (such as audit or
healthcare) or the movement of foreign workers by not recognizing their
diplomas, professional qualifications or licenses. Significant progress
has been made toward mutual recognition of professional qualifications
in most occupations (e.g, accounting, architecture, medicine, nursing,
pharmacy). After a "vertical approach" (that is, occupation by
occupation) in the seventies and eighties, the European Commission
switched to a horizontal approach with the landmark 89/48/EC directive
in 1989, creating a "general system" which requires that
qualifications from other states must be recognized, as long as common
minimal requirements are met by these member states. All regulations
adopted in the last forty years in this regard were recently
consolidated into a directive (2005/36/EC) which came into effect on 20
October 2007. Another contributing factor to free movement of workers is
the recent harmonization of higher education degrees toward a common
model of Bachelor's degree in three years after high school,
Master's degree in five years, and Doctorate in eight years. This
initiative was launched with the Sorbonne declaration in 1998 and
pursued through the Bologna process (1999 to 2010).
However, the free mobility of workers is limited to the EU15
countries so far, as the citizens from the twelve countries that joined
since 2004, plus two in 2007, do not currently enjoy the privilege of
free movement. This temporary restriction is meant as a transitory
measure until May 1, 2011 in order to avoid massive immigration from
poorer state members to richer ones (Euractiv, 2007). In conclusion to
this section, our review of the evidence points to the fact that if
achievements have been significant in the late eighties and early
nineties, the pace of progress has decreased as the European Union
stumbled upon the hardest pockets of resistance (Nienhaus and Busche,
2003). As put by the British Department of Trade and Industry,
"twenty years after the initial launch of the Single Market,
progress is slowing" (DTI, 2007).
To be fair, even if the pace of integration is much slower than
between 1987 and 1993, some longstanding issues have been recently
resolved, such as the adoption of a Services Directive, the creation of
a European Company statute (effective in 2004) or the gradual
liberalization of network industries. It must also be noted that a goal
of 100% completion of the Single Market will never be achieved even if
all member states were willing to always comply immediately with all EU
decisions. This is due to the emergence of new industries in need of
regulation, the constant evolution of technologies, the changing social
and environmental expectations of EU citizens and politicians. EU
Internal Market policies will therefore be constantly in need of updates
(European Commission, 2002; Heinemann, 2003).
This assessment leaves the impression of a half-full / half-empty
glass. To put these achievements in perspective, one has to remember
that there are two possible processes of legal integration at the
EU-level, namely "positive" and "negative
integrations" (Scharpf, 1998). Negative integration means that the
aim of the EU law is to eliminate cross-country discriminations. The
mutual recognition principle would be an example of negative
integration. Positive integration refers to the development of common
rules (either through harmonization of existing national provisions, or
creation of common rules from scratch). As far as the four freedoms are
concerned, negative integration has been the norm, and positive
integration the exception (Majone, 2005). This means that what has been
achieved is mainly an elimination of most discriminatory measures which
were preventing intra-EU trade, rather than a real convergence toward
Regardless of the kind of legal integration achieved, has this
process resulted in the convergence of national economies and
integration of European markets? We will address this question in the
2.2 The Extent of Economic Convergence and Market Integration
We will discuss this issue by looking at convergence at the
macroeconomic level, then integration at the market level, and last, we
will ask whether firms in Europe face a "European customer".
If convergence has occurred it should be demonstrated by key
characteristics at the national level becoming more similar. At the
macroeconomic level, this could mean more similar rates of economic
growth, inflation and interest rates, income growth, etc. At the
industry level, this could be seen with convergence in prices and
product ranges. At the consumer level, this would imply more similarity
in tastes, needs, purchasing and consuming behaviors. Is this the case?
2.2.1 Economic convergence of national economies in Europe. At the
macroeconomic level, whether national economies across the EU are
converging is the subject of much economic debate. Nobody disputes the
"nominal convergence" imposed by the Maastricht criteria for
joining the Eurozone: they have imposed a monetary and budgetary
discipline which have had lasting effects on public deficits, interest
rates and ultimately inflation as well as growth rates. There may also
be a "real convergence" of European economies, that is, an
increased synchronization in business cycles across European countries.
Artis and Zhang (1999) found convergence toward the German business
cycle in ERM countries (i.e., countries that were preparing to adopt the
Euro as their currency). Ormerod and Mounfield (2002), Bergman (2004) as
well as Artis et al. (2004) confirmed the higher synchronization of
economic cycles, including for the time period after the introduction of
the Euro (it is worth noting that in these studies the United Kingdom
were found to be outside this convergence pattern). However, these
results are strongly challenged by Camacho et al. (2006) who found no
basis for the "European business cycle" hypothesis, and thus
no evidence of convergence of national economies. Furthermore, at a more
systemic level, authors of the "varieties of capitalism"
(Cernat, 2006; Hall and Soskice, 2001) and national "business
systems" (Whitley, 1992 and 1999) approaches stress the resilience
of national differences in socio-economic systems. Because of diverse
resource endowments, historical legacies such as past policy decisions,
and stable cultural differences, each country has developed different
governance and regulation mechanisms which are unlikely to change
quickly and converge. In this view, even if the economic outlook may
become more similar across European countries, the fundamental
macroeconomic (as well as social and political) characteristics of each
country should remain highly disparate.
2.2.2 The European integration of national industries. One clear
common effect of the Single Market has been to open national markets to
more competition, forcing each industry to improve its efficiency.
Ultimately, this contributed to significant economic gains in each
member state, particularly in the smaller states where competition was
more limited prior to the Single Market (Allen et al., 1998). How much
industry convergence can be reported? If national markets across Europe
were integrating into Single markets, several researchers have argued
that this should be noticeable in price convergence for each industry.
The reasoning is that in a unified market where national barriers are
put down, free trade should drive prices closer, particularly if a
common currency is used. In this regard, the European Commission reports
little further price convergence since 1996 overall: "price
convergence in the EU has stalled" (European Commission, 2004a, p.
6). Engel and Rogers (2004) confirmed this pattern of initial price
convergence in the early nineties, and no further price convergence
since the introduction of the Euro in Eurozone countries. At the
industry level, the European Commission noted that prices are
particularly inflexible in services (European Commission, 2006c). Thus,
market integration as measured by price convergence is not a clear
trend. It depends greatly on the industry and has not necessarily
increased in recent years.
2.2.3 Is there a convergence in demand? The elusive "European
customer". Free movement of EU citizens as well as access to goods
and services from the rest of the EU could be expected to contribute to
convergence in national cultures and customer behavior. Whether the
expectation has been fulfilled remains unsettled. Leeflang and van Raaij
(2000) conducted a meta-analysis of existing empirical studies and
concluded that there has been some convergence in consumer behavior
across Europe, toward characteristics such as environmental and health
concerns, a greying population as well as smaller household sizes.
Ganesh (1998) also found consumer segments with similar behaviors across
European countries, enabling certain firms to target homogeneous
segments by using a standardized marketing approach. This led both
Ganesh (1998) as well as Leeflang and van Raaij (2000) to boldly state
that standardized Euromarketing was the name of the game. On the other
hand, while De Mooij (2003) as well as De Mooij and Hofstede (2002) do
not dispute that there may be convergence in certain consumer
characteristics (such as technology access, median age, income),
however, these authors challenge the fact that they lead to more similar
consumer behaviors. In fact, De Mooij's study of European consumers
concluded that divergence, not convergence, of consumer behavior was
prevalent (2003, p. 184). According to De Mooij as well as De Mooij and
Hofstede (2002), the main reason for this divergence is that national
value systems do not converge over time and greatly influence consumer
behaviors. In other words, the stability of national cultures is the
main determinant of consumer behaviors. Boddewyn and Grosse (1995), as
well as Diamantopoulos et al. (1995) also expressed strong doubts over
the convergence of consumer behaviors in Europe.
In conclusion to this section about the level of completion of the
Single Market and its impact in terms of economic integration of EU
state members, it seems that the reality is more complex than the
'European business' gospel would have us believe. Being the
largest free-trade zone in the world, with free mobility of production
factors and a single currency is only part of the story. The Single
Market is far from being complete, and the Euro is only used by a small
majority of EU state members so far. Besides, even if the business
playing field was perfectly level, there is no guarantee that it would
translate into economic convergence. Each member state possess resilient
characteristics leading to fairly stable and diverse national business
systems as well as customer behaviors. Having discussed European
business as a legal and economic environment for conducting business, we
now turn to European business as a type of firms in order to assess
their existence and extent.
3. EUROPEAN BUSINESS AS A TYPE OF FIRMS
At the firm level, the question becomes whether firms located in
Europe increasingly operate with a paneuropean scale, and if so, whether
they have integrated their operations and business policies in a
standardized manner across Europe. If this is the dominant pattern,
these firms form a 'European business' community, that is, a
category of firms regionally focused on Europe.
3.1 The Scale of Operations of European Firms
The first part of the question fits into the debate over the scale
of Multinational Enterprises and their businesses. Ohmae (1985, 1995)
makes a case for the rising relevance of the regional level as trading
blocks strengthen across the world, becoming the point of reference for
many multinationals. This is confirmed by Rugman (2003, 2005) who uses
an in-depth study of the top 500 multinationals worldwide to show that
most (84%) multinationals are "home-region oriented", that is,
the majority of their sales are intra-regional in the same region as
their headquarters, while only a small percentage of the top
multinationals is bi-regional (6.6%) or truly global (2.4%). Davies et
al. (2001) confirm and complement Rugman's findings regarding large
multinationals. These authors showed that "intra-EU
multinationality" (that is, cross-border production within the EU)
had increased between 1987 and 1993. In other words, the scale of
production of the largest manufacturing companies in Europe has extended
beyond national borders within Europe. While the argument is compelling,
both these surveys focus on a few hundred largest firms, which is hardly
the whole corporate picture within Europe. Whitley and Kristensen (1995)
argue that most European firms remain nationally embedded, and that
firms with a paneuropean scope are the exception, not the rule.
Additional evidence that European firms have seized the opportunity of
the Single Market to expand the scale of their operations beyond their
domestic market into the rest of Europe can be found partly in the
number of cross-border M&As in Europe. Indeed, increasingly more
cross-country merger cases have been notified by the European
Commission's DG Competition in the period 1993 to 2007 (from one
case to 389 cases, respectively). In his study, Bjorvatn observed an
"increase in cross-border mergers in a world of more integrated
economies" (2003, p. 1211). More precisely, according to Martynova
and Renneboog (2006), 87,804 M&A deals were recorded for Europe
during 1993-2001, compared to only 9,958 such transactions during the
previous major M&A wave (1983-89 period). In monetary terms, the
total value added up to US$ 5.6 trillion for the most recent period,
more than eight times the combined total of the previous period.
There is thus ground to say that a significant number of European
firms have expanded the scale of their operations across borders and
within Europe, taking advantage of the Single Market. However, we cannot
say with certainty whether only the largest multinationals have
developed a regional scale, nor to which extent European
multinationals' scale of operations have become truly paneuropean
or merely 'multi-national' (i.e, a few countries in Europe
rather than the entire region). Having established that the scale of
operations has expanded across Europe at least for some firms, it
remains to be seen whether these firms also reorganized their operations
and business policies in a more standardized manner.
3.2 The Extent of Corporate European Integration
The process of standardization of business operations and policies
across countries is called "corporate integration" by Dunning
and Robson, and defined as "the international integration of
activities by and within multinational enterprises" (1987, p. 103).
The rationale is that by standardizing operations, several benefits can
be expected: redundant expenses can be eliminated, scale economies can
be increased, consistent policies can be maintained and best practices
can be transferred across countries. All these gains should lead to
significant cost savings.
Various authors have considered the potential for European
corporate integration of different functional activities. Cantwell
(1987) illustrated in the pharmaceutical and car engine industries how
location choices for R&D activities could be rationalized within a
free-trade zone (the Single Market was not achieved yet). Millington and
Bayliss (1996) looked at production integration at the European level.
They stressed that firms had an incentive to integrate production only
in industries characterized by high scale economies, low transportation
costs as well as low national barriers to entry. If these conditions are
not met, cross-border production integration is unlikely. This implies
that not all industries should be expected to become highly integrated
in this regard, even if the Single Market framework were fully achieved.
As far as human resource management and labor relations are
concerned, authors appear extremely dubious of the possibility of a
standardized paneuropean approach. Four years after the start of the
Single Market, Sparrow and Hiltrop could not find a single European
pattern of HRM (1997, p. 201). Likewise, Claus (2003) found more
differences than similarities in HRM practices across European
countries, and Brewster et al. (2004) found very mixed results, pointing
to a limited convergence between 1990 and 1998, and forecasting
divergence beyond 2000. Segalla et al. concluded that "integrating
systems of employee management in Europe will be difficult but not
impossible" (2000, p. 38), the difficulties being due to cultural
differences according to these authors.
In advertising, Harris (1994) reported an increasing pressure to
standardize across Europe, but also few firms having achieved full
standardization. Okazaki et al. (2007) found that firms which perceive a
convergence in their European business environment are more likely to
integrate their advertising activities, as they seek to build a
paneuropean brand identity. An example of this strategy would be
Unilever. They note however that this is far from being a universal
If a process of European corporate integration is at play, the next
question is whether this process is leading ultimately to a convergence
of operations and business practices in Europe toward what could be a
common European corporate model. Djelic (2001) as well as Geppert et al.
(2002) strongly dispute this notion. In line with the "varieties of
capitalism" (Cernat, 2006; Hall and Soskice, 2001) and national
"business systems" (Whitley, 1992 and 1999) approaches, these
authors stress the historical legacies, national cultural differences
leading to diverse national trajectories. They argue that even if all
European countries and firms have been exposed to the influence of the
American corporate model (and to cross-border influence within Europe,
according to Geppert et al. (2002), the national-level response has been
quite different in each country because of the specific national
contexts. This point is also stressed by Whitley and Kristensen (1995),
as well as Brewster, Mayrhofer and Morley (2004, p. 421), who
distinguish between "directional convergence" (where countries
head in the same direction, regardless of whether the starting and final
points are different) and "final convergence" (where countries
ultimately reach a closer position regarding a variable). This
distinction is important because due to national boundedness and
specific national trajectories, "final" business convergence
is less likely than "directional" business convergence. The
respective extent of final and directional convergences remains
to be discussed, as the majority opinion of limited final convergence
across Europe has been challenged by recent empirical surveys such as
Albert-Roulhac and Breen (2005) who found a clear greater (final)
convergence among European firms' corporate governance practices
since the start of their annual survey in 2001.
4. CONCLUSION: EUROPEAN BUSINESS INTEGRATION OR BUSINESS
In conclusion to this review of existing research and data on
European business integration, we can report mixed results. While
significant legal integration has been achieved, it has mostly been of
the "negative" kind (that is, elimination of national
discriminations) rather than "positive" (harmonization of
policies). This implies limited policy convergence across Europe.
Furthermore, the Single Market is far from being completed yet.
On the plus side, we have witnessed some convergence of national
economies, in terms of the synchronization of business cycles. However,
price convergence has been limited, and national consumer demands have
not converged much. Thus at the macro-level, while significant
integration has occurred, viewing European economies and markets as
fully integrated would be oversimplified. At the firm level, through the
expansion of intra-EU trade and cross-border Foreign Direct Investment
(including Mergers and Acquisitions), there is a trend of European
corporate integration. However, this trend is highly industry dependent,
and even large European multinationals remain embedded in their national
context, leading to the fact that wide differences in management styles,
business policies and organization of operations still exist.
These points lead us to conclude that European business as a
specific business environment is not a reality for all firms in Europe.
It very much depends on the industry (see the variety of integration
levels reported by numerous empirical studies: Dahl et al., In Press;
Matraves, 2002; Smith and Mitry, 2007, Timur et al., 2007), and factors
such as the extent of scale economies, convergence in customer demand,
transportation costs. Furthermore, European business as a type of firms
is clearly a small subset of firms doing business in Europe. Mistaking
one for the other (as Harris, 1999, as well as Mercado et al., 2001,
did) would a gross oversimplification. Thus, our assessment is that
"European business" does exist but is not as widespread as
held by popular belief.
A first practical implication of this article is that non-European
managers who tend to view the European region as a whole would be
well-advised to reconsider, as significant differences persist, both at
the national and at the industry levels.
A second practical implication pertains to European integration as
a roadmap for economic integration, since many observers and other
economic groupings (e.g., ASEAN) view the Single Market as an
inspirational success story. Our review draws a sobering and more
realistic picture which can serve both as a word of caution as well as
to foresee some potential stumbling-blocks for countries attempting to
further economic integration.
A theoretical implication of our discussion of the notion of
European business could be the introduction of a new concept. As we
reported mixed results both at the macro- and industry- levels, it
appears that the national context has a critical moderating effect on
the European integration trend. As national responses to this push are
different, domestic environments, markets and consumers across Europe do
not necessarily converge. This notion has been recently stressed by
research in political science as far as public policy convergence across
Europe is concerned. These authors stressed that EU policies did not
always lead to national convergence because of different national-level
responses, such as resistance, accommodation, compliance (Featherstone
and Radaelli, 2003; Howell, 2004; Ladrech, 1994). This process has been
coined "Europeanization" by Ladrech (1994), in order to
distinguish it from the traditional European integration concept. As far
as business and corporate integrations are concerned, this approach
could be quite relevant: rather than limiting the discussion to whether
European business integration and European corporate integration exist,
we should also concern ourselves with their effect, as they may differ
country by country. Therefore, just as political scientists distinguish
European political integration (an EU level process) from (policy)
Europeanization (a national level process), international business
scholars would do well to distinguish European business and corporate
integrations on one hand, from "business Europeanization" on
the other hand. This new concept would enable us to move beyond the myth
of integrated European markets necessarily leading to the convergence of
national economies, markets and firm operations. It would help us to
understand why business integration does not always lead to business
In closing, based on this review, areas for future research are
clear: we need to move beyond anecdotic evidence (such as empirical
studies of single industries) and surveys of limited scope (such as the
top 300 multinationals in Europe) in order to get a broader picture of
the extent of European business integration. An assessment of the
relative achievement of negative versus positive integration as well as
directional versus final convergence would also be useful. We also need
further exploration of corporate-level integration: which activities
have been standardized? Why these activities and not others? How has the
integration process been managed? Last, we should not limit our
investigations to the paneuropean level of economic integration. We
should also look at its various effects at the national levels, in order
to explore the notion of "business Europeanization", that is,
national-level responses to economic integration. Thus there is much we
still do not know about European business.
The authors would like to gratefully acknowledge the financial
support of an Anisfield Research Fellowship grant, from the Anisfield
School of Business, Ramapo College of NJ.
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TABLE 1: THE FOUR DIMENSIONS OF THE 'EUROPEAN BUSINESS' CONCEPT
European Business as a Level playing field (including
business environment common standards,
(market dimensions [right arrow]) regulation) at the regional
European Business as a type Paneuropean scale of
of firm operations
(firm dimensions [right arrow])
European Business as a Convergence of demand and
business environment consumer behaviors,
(market dimensions [right arrow]) integration of national
European Business as a type Standardization of corporate
of firm policies and operations
(firm dimensions [right arrow])