Isabelle Huault

Market Shaping as an Answer to Ambiguities: The Case of Credit Derivatives

Building on Smith (1989), we describe the social processes surrounding a new financial OTC derivatives market,3 the market for credit derivatives. We show that in contradiction to more traditional derivatives, credit derivatives generate ambiguities of a cognitive and political nature. By conducting an in-depth longitudinal qualitative study from 1996 to 2004, we document the efforts made by the promoters of the market to alleviate these ambiguities and show how the size of resources needed results in the leadership of the most powerful. We thus provide a socially based explanation for the concentration and lack of transparency of the market. Our research exemplifies the contradictions between the rhetorical justification of financial innovations provided by financial theory and the empirical realities of a modern derivative market. It suggests that the actual structure of the market might best be understood by paying attention to the way different cognitive and political communities react to these contradictions.

A Market for Weather Risk? Conflicting Metrics, Attempts at Compromise, and Limits to Commensuration

In this paper, we examine the process of risk commodification involved in the creation of a market for weather derivatives in Europe. We approach this issue through an in-depth qualitative study in which we focus on the commensuration process by which promoters try to draw weather risk into the financial world. By offering a concrete description of a derivatives market as a meeting place between different metrics, our results highlight the failure of a process of commensuration – a phenomenon rarely studied empirically in the literature – and its unexpected results. Compared to existing research, we use the theoretical framework provided by Boltanski and Thévenot (2006) to enrich the literature on commensuration specifically as regards the different forms of agreement to which commensuration attempts can lead. Our results highlight the crucial role of a common interest for commensuration to succeed, and the conditions necessary for this common interest to occur. We conclude that there are limits to the thesis of financial theory, according to which all kinds of risk can be transformed into financial risk, and exchanged on financial markets.

From practice-based knowledge to the practice of research : Revisiting constructivist research works on Knowledge

Research studies within organizational knowledge are good examples for both analyzing and illustrating the debate regarding a paradigm shift in management. Most articles in the field focus on knowledge complexity and its socially constructed side. Researchers have noted a great deal of similarity between this socially constructed nature and the shaping elements of constructivism. They argue for a paradigm shift, rejecting positivism. To more fully understand this paradigm shift, and to address the number of methodological questions it raises, we carried out a content analysis on a sample of the main articles dealing with organizational knowledge. Our research points out that the principles of constructivism are difficult to adhere to within research design. It underlines the lack of specific methodological devices and lack of adaptation with the epistemological system of reference. This study highlights the methodological perspectives that underpin constructivist research in organizational knowledge.

Beyond macro- and micro- emancipation: Rethinking emancipation in organization studies

Organizational life is replete with claims for emancipation. Existing approaches understand these claims either through theories of macro-emancipation (which focus on larger social structural challenges) or micro-emancipation (which focus on everyday challenges). However, these theories fundamentally misrecognize many emancipatory challenges in organizations. Drawing on the work of Jacques Rancière, we argue that this philosophy is fertile for shifting or unframing traditional approaches of emancipation in organization studies. Emancipation is triggered by the assertion of equality in the face of institutionalized patterns of inequality, it works through a process of articulating dissensus, and it creates a redistribution of what is considered to be sensible. By focusing on these three aspects, we argue that a whole range of emancipatory struggles which had previously been disregarded by studies of macro-emancipation and micro-emancipation come back into view. This significantly extends how we conceptualize emancipation in organizations and allows us to address some of the shortcomings of existing theories.

Changing nature and sustainability of the industrial district model : the case of Technic Valley in France

This paper examines the impact of contemporary pressures on industrial districts and analyses the changes that are taking place in an industrial district confronted with disembedding and globalization. We discuss the following questions: what are the processes and consequences of disembedding for the changing shape and form of inter-firm trust, contract and network forms? Is there an evolution in subcontracting and trade interdependency? What is the role of institutional infrastructures? We performed a longitudinal qualitative study using a number of different data sources to analyse the evolution of one French industrial district, particularly how new pressures of internationalization and disembedding work to reconfigure inter-firm relations in this district. While the recent literature is dominated by notions about industrial districts that concern only the trend towards increased competition or disembeddedness, this article shows that there is no unilinear trend. In contrast with the findings of certain recent studies, we argue that economic logic does not fully account for recent developments since the adjustment that are being made by the district are characterized rather by re-embeddedness, increased cooperation and institutionalization.

French multinational companies’ strategies and co-ordination mechanisms: the role of human resource management in Europe and Nigeria

The everchanging European context may well lead to the evolution of MNCs’ strategies in Europe and to the evolution of the control mechanisms within their subsidiaries. The author analyses the issue from the angle of human resources management, considered as an informal control tool that is widely recognized by both scholars and managers. This research therefore aims at analysing whether or not and how HRM systems embody a possible integration process in the European economic space. The methodology is based on a case study from a French multinational company belonging to the automobile industry while the investigation, a comparative analysis of the headquarters-subsidiaries relationships in England, Spain and Nigeria, points out the specificity of the European context regarding corporate strategy orientations, subsidiary roles and personnel transfer policies. The major conclusions from such an analysis suggest a framework that gives prominence to the differentiation of the management process between Europ...

Business as Usual in Financial Markets? The creation of incommensurables as institutional maintenance work:

This paper aims to contribute to the literature on ‘institutional maintenance work’. Focusing on the institutional disruption resulting from a regulatory project of market rationalization, it enriches the description and analysis of the specific institutional maintenance work performed by powerful actors who engage in resistance against what they perceive as a threat to their discretion. Built on an in-depth qualitative study, our case concerns an attempt to change the form of over-the-counter markets as part of a recent financial reform. The paper contributes to the expanding literature on the maintenance of institutions by suggesting, in particular, that the creation of incommensurables should be added to the list of strategies available to powerful incumbents seeking to resist institutional change. Bridging the gap between the literatures on institutional maintenance and commensuration, it also demonstrates that specific institutional changes can usefully be understood as changes in commensuration systems. This innovatively suggests the existence of degrees of commensuration and calls for a finer-grained understanding of the institutional work required to maintain institutions in a context where the degree of commensuration experienced by a field or a market threatens to increase under coercive pressure.

Introduction: The Discreet Regulator

The global financial crisis that began in the summer of 2007, and was accelerated in September 2008 by the collapse of Lehman Brothers, has made financial actors generally – and large investment banks more specifically – the centre of attention. Some commentators condemn their ability to circulate vast amounts of capital with no geographical limits, and thus to create damaging competition (Arnoldi, 2004; Bryan and Rafferty, 2006; LiPuma and Lee, 2004, 2005; Pryke and Allen, 2000). The legitimate question of stronger regulation and supervision that would limit their freedom of action arises acutely in this context (Davis, 2009).

Constructing the Market for Credit Derivatives: How Major Investment Banks Handle Ambiguities

What relationship is there between the highly modern financial market for credit derivatives and the auction sale of a prized Kansas dairy cow? Although both involve some form of economic behaviour, the old-fashioned, if not exotic, ritual of auctions seems to be at odds with the style of transactions on one of the most modern and sophisticated derivatives markets. However, appearances can sometimes be deceptive.