TheStructuralPowerofEnterprises:
BeyondtheNotionofMarketPower
MagdalenaSliwinska
PoznańUniversityofEconomics,Poland
m.sliwinska@ue.poznan.pl
Thepurposeofthispaperistheconceptualisationofthenotionofenter-
prises’structuralpower.Itallowstodrawtheattentiontotheprocessofdi-
versificationofenterprisesandbuildingofcomplexandmultidimensional
ownershipstructuresaspossiblesourcesoftheincreaseinthecompanies’
powerandthepossibilityofitsuseandabuseinordertolimitthecompe-
titionandperformbetteronthemarket.Theconceptofstructuralpower
isapartofthescientificdiscussiononthesourcesandpossibilitiesofus-
ingenterprises’marketpower,andfitsintothecurrentresearchononeof
thefundamentalproblemsofeconomictheory:howtoprotectcompeti-
tioninternationallyand,therefore,determinethelimitwhenthenatural
anddesirablebehaviourofenterprisesaimedatincreasingtheirinterna-
tionalcompetitivenessbeginstodistortcompetitionandadverselyaffect
economicdevelopment.Theanalysisshowsthatthepotentialinfluence
onothermarketparticipantsmayarisenotonlyfromthefirm’sposition
ontherelevantmarketandotherfactorsrelatedtoitsspecificity,butalso
fromthevarioustypesoflinkagesbetweenfirms.
Key Words:competition,strategiesofmnes,marketpower,structural
power,diversification
jel Classification: l40,l22,l19,l10
Introduction
Nowadays,nooneseemstodoubtthataproperlyfunctioningmecha-
nismofcompetitionisfundamentalforaneconomicdevelopment.Itisa
factormotivatingcompaniestowardsefficiency,innovationandgrowth.
Thereishoweveralsoabroadconsensusthatcompetitionmaybedis-
torted,amongothers,throughtheactionsoftheenterprisesthemselves,
andthatmanyindustriesarenotverycompetitive.Itwidensthescopefor
publicinterventionaimingatprotectionofcompetition.1Itishoweverof
greatimportancetounderstandwhatkindofregulationsareadequate
inimperfectlycompetitivemarkets,whatprovesthefactthattheNobel
Prizeineconomics2014isgrantedtoJeanTiroleforhisanalysisofmarket
powerandregulation.
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190 Magdalena Sliwinska
Theimportanceoftheissueofenterprises’powerresultsfromthe
factthatthewidelyunderstoodcompany’spowermayrestricttheproper
functioningofthemarketmechanismwhichisessentialforadynamic
andsustainableeconomicgrowth,thusalsotheenterprisesthemselves.
Ontheotherhand,thenaturaldesireoftheenterprisesisthedevelop-
mentofastrongcompetitivepositiontowinagainstcompetitorsinthe
market,andtheresultoftheseactivitiesmayultimatelybethegrowthof
theirmarketpowerandcompetitiondistortions.Moreover,theintensifi-
cationofeconomicglobalisationandinternationalcompetitioncauses
thatenterpriseshavetobeextremelycreativeinfindingnewwaysto
improvetheircompetitivenessandincreasetheirmarketandeconomic
powerinordertowinthecompetitivebattle.
Analysisoftheearlierachievementsoftheoreticalandempiricalre-
searchinthefieldofwidelyunderstoodcorporatepowerdrawsattention
tothefactthattheissueofeconomicpowerisstillnotfullyrecognised
byresearchesandtheareaofsomestrategicactionsofenterprises,which
maycontributetotheincreaseintheenterprises’powerisneglectedas
byeconomictheory,asbyantitrustauthorities.Therefore,thepurposeof
thispaperistheconceptualisationofthenotionoftheenterprises’struc-
turalpower,focusingattentionontheprocessofdiversificationofenter-
prisesanddevelopingcomplexandmultidimensionalownershipstruc-
turesasthepossiblesourcesoftheincreaseinthecompanies’powerand
thepossibilityofitsuseandabuseinordertolimitthecompetitionand
performbetteronthemarket.Theattemptatdefiningthenotionofstruc-
turalpowerisnotaboutreplacinganyofthepreviousdefinitionsofcor-
porate,inparticularmarketpowerbutitisrathertowidenthecurrent
conceptofthisphenomenonandjointhediscussiononitssourcesand
possibilitiesofabuse.Itisvitalnotonlyfortheeconomictheory,butalso
forthecompetitionpolicyandantitrustauthoritiesaimingatprotection
ofcompetition.Itisalsocrucialforenterprisesthemselves,becausethey
needtohaveclearguidelineswhichcompetitivestrategiesandbehaviours
aresafeforcompetitionmechanismandallowedbyantitrustauthorities
inordernottobepenalisedforbeingthebestonthemarket.
Thepaperistheoreticalinnatureandtheinferenceisbasedonthe
analysisofliterature,especiallyconcerningthedifferentconceptsofen-
terprises’powerandtheCompetitionpolicyoftheeu.Itconstitutesa
partofabiggerresearchprojectonnewcompetitivestrategiesofthe
mnesandglobalcompetitionrestrictions.
Thefirstpartofthepaperconstitutesatheoreticalbaseoftheanalysis
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TheStructuralPowerofEnterprises 191
andisdevotedtothedifferenttheoreticalapproachestothephenomenon
ofenterprises’power.Thesecondpartofthepaperaimsatconceptual-
isingtheenterprises’structuralpower,definingthenotionofstructural
powerandlookingcloserattheprocessofdiversificationoftheenter-
prises’activitiesanddevelopingmultidimensionalownershipstructures
andnetworksofcapitalrelationsassourcesoftheirpower.Inthispart
thereasonsfortheincreaseintheenterprises’structuralpowerandthe
risksofitsabusefromthepointofviewofcompetitionmechanismare
alsoanalysed.Thelastpartcontainsconclusionsanddiscussion.
TheoreticalApproachestothePhenomenonofEnterprises’
Power
Socialsciencesoftenviewtheconceptofpowerasanopportunitytoin-
fluenceothers.MaxWeberdescribeditastheabilityofindividualsor
groupstocontrolorinfluencethebehaviourofothers,eveninsituations
wherethereisanopposition(Thio1986).Manyauthorsagreewiththis
approach,pointingoutthattheenterprises’powerisafunctionofthesit-
uationandhasarelativenottheabsolutecharacter(Dahl1957;Etzioni
1968).MacMillanandJones(1986)alsodrawattentiontothefactthat
strengthisanability,whichmeansthatonedoesnotneedtouseit,to
holditandtheveryfactofitspossessioncanaffectthebehaviourofoth-
ers.
MarkGranovetterinvestigatingthephenomenonofdifferenttypesof
relationswithininterpersonalnetworksshedanewlightonthepercep-
tionofthenatureandstrengthof‘weakties’(Granovetter1973).Heelabo-
ratedtheconceptofstructuralandrelationalembeddednessofeconomic
behaviour(1985,481–2)andarguedthatthelevelofsocialembedded-
nessofeconomicbehaviourhasalwaysbeenandcontinuestobemore
substantialthanisallowedforbyformalistsandeconomists.Socialstruc-
turesandsocialnetworkscanaffectnotonlyeconomicoutcomeslikehir-
ing,price,productivityandinnovation,butalsosuchaschoiceofalliance
partners(GulatiandGargiulo1999),decisionstoacquireotherfirmsand
strategiesusedtodoso(Haunschild1994)orthepersistenceoflargefam-
ilyandethnicallyorientedbusinessgroupsinadvancedeconomies(Gra-
novetter2005).
Intheeconomicsciences,whichconstituteanessentialpartoftheso-
cialsciences,theconceptofpowerinrelationtocompaniesappearsin
variousforms,buttheneoclassicalviewconstitutesstillbasisforanal-
ysis. The most commonnotions areeconomic power, marketpower,
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192 Magdalena Sliwinska
monopolypower,financialorcorporatepower.Oftenaretheseterms
usedinterchangeably,oreventreatedassynonyms.Manyresearchers,
however,aretryingtoclearlydistinguishbetweenthemeaningofthe
abovementionedconcepts,whichcertainlyhelpstounderstandbetter
thiscomplexphenomenon,especiallybecauseveryfrequentlytheenter-
prise’spowerisdefinedbyitssourceoforigin,thepossibilityofitsuseor
byamethodofmeasurement.
Theleastdoubtarisesinthecaseofdefiningmonopolypowerbecause
itisautomaticallyassociatedwiththeclassicmonopoly,i.e.exertingcom-
pletecontroloverthesupplysideofthemarket,theimpactonpricesand
overthepotentialentryofothercompaniesintheindustry.Theconcepts
ofmarketpowerandeconomicpowerareoftenregardedassynonymous,
butmanyauthorsbelievethattheconceptofmarketpowerhasanarrower
scopethantheconceptofeconomicpower,wherethemarketpoweris
associatedwithastrongpositioninthemarket,whereastheeconomic
power–withastrongpositioninthesector,industryorinoverallecon-
omy.Marketpowerisusuallydefinedastheabilitytocontrolpricesand
eliminaterivals(Baldwin1987).
Generally,itisbelievedthattheconcepteconomicpowerisfarbroader
thanthosepreviouslymentioned,butitisnoteasytoclearlydefinewhat
kindofphenomenaitencompassesexactly(Greer1988).Attentionis
drawntothefactthattheeconomicpowerisnotnecessarilyassociated
withthemarketshare.Itmaybeaconsequenceoftheuniquebargaining
positionresultingfromtheproductcharacteristics,conditionsofsale,or
buyerpreferences,allowingimposingcertaintermsofthetransactionon
apartner(Peterson1988,21),independentofsupplyanddemandinthe
givenmarket(Dugger1988,83).
Regardlessofthetermresearchersusewithreferencetothepowerheld
bythecompany,thepowerisusuallydefinedastheabilitytoaffectprices
acceptedbythemarket(Raperetal.2000;Wilson2000;Surratt1998;
Rogers2001;Overbye,Weber,andPatten2001;RollerandSickles2000;
Barla2000;CrespoandHerrera2002;Pereira2001),althoughdepend-
ingonthemarket’sspecificity,itmaybeanothervariable(Malik2002).
Thisaimofaffectingpricescanbeachievedbythecompanyindifferent
waysandcanconstituteameanstoachievesimilaryetdifferentpurposes.
Therefore,someauthorsemphasiseonlytheimpactonprices,andoth-
ersalsohighlightthedesiretocontrolthesizeofsupply,ortoeliminate
competitionfromthemarket,allofwhichshouldultimatelyleadtothe
increaseintheirprofitsandstrengtheningtheirmarketposition.
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TheStructuralPowerofEnterprises 193
Themostcommonintheliteratureistheviewthatenterprise’spoweris
closelylinkedwiththeconcentrationonthegivenmarket.Suchthinking
isbasedontheneoclassicalconceptofmonopolyandmonopolypower
(Begg,Fischer,andDornbusch2011).Mosteconomistsagree,however,
thatinfactanenterprisedoesnotneedtohaveamonopolypositionto
trytoinfluencethebehaviourofothermarketparticipants.Neverthe-
less,asignificantportionofthecurrentresearchontheenterprises’mar-
ketpowerassumesthatitresultsmainlyfromastrongmarketposition
oftheproduct(orservice),andfocusesonanidentificationoftheaddi-
tionalfactorsaffectingthestrengthofthecompanywithinagivenmarket
orindustry(e.g.entrybarriers,industry’sspecificity,sizeandnumberof
competitors,etc.).
Theobviousconsequenceofthewidevarietyofdefinitionsofenter-
prises’poweranddifferentviewsonitsoriginistheabsenceofoneuni-
versalwaytomeasureit.Sofar,themostwidelyusedmeasuresofenter-
prises’poweraretheindicatorsbasedontheneoclassicalmodelofthe
company,andseveralofthem,theLernerindex,Rothchildindexand
marginalindex‘price-cost’–pcm–price-costmargin(CollinsandPre-
ston1969)playedaspecialrole.Thefeaturewhichiscommontothemis
theassumptionofmaximisation.However,sincemaximisationisinfact
frequentlynotachieved,andquiteoftenitisnoteventheaimofcompa-
nies’activity,theeffectivenessoftheabovementionedindicesinmeasur-
ingtheenterprises’powerislimited.
Animportantroleinthedefinitionandunderstandingoftheconcept
ofthemarketandeconomicpowerplayconcentrationfactors,especially
thefour-firmratio(ff)andHerfindahlHirschman’sindex(hh).Their
advantageisthesimplicityandthepossibilityofarelativelyeasyand
quickapplication.
However,theyareoftensubjectedtocriticism,asalargeconcentration
ofthemarketmaynotnecessarilyresultinasituationinwhichthemarket
leadersareabletorestrictcompetition(ZarnikauandLam1998;Crespo
andHerrera2002;Berryetal.1999;Rogers2001).Themarketpoweris
determinedbymanyotherfactors,amongothers,itdependsonthere-
lationshipsinthenetwork(Overbye,Weber,andPatten2001),amarket
structureunderstoodasthenumberandsizeofeconomicentities(Barla
2000),theelasticityofdemandanditscharacteristics,andthepossibility
ofenteringtheindustry,itsgrowthrate,abrandstrength(Wood1999)or
thepowerofcontractors(Raperetal.2000).AccordingtoJ.Tirole(1988)
notthesizeofoligopolisticfirms,buttheirmarketbehaviourconstitute
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194 Magdalena Sliwinska
evidencewhethertheypossessandexercisetheirmonopolisticposition
onthemarket.
Focusingonconcentrationinthelocalandnationalmarketsalsocon-
stitutesaweaknessoftraditionalmethodssincetheglobalsizeofthecom-
panymaybealsocrucialforassessingitsmarketpower(Wood1999).
Itisalsonotedintheliteraturethatinsomeindustries,particularlyin
thosedominatedbyinnovationsandnewtechnologies,marketsharescan
changeveryrapidlyandthereisahighprobabilityofoverestimationof
thecompanies’powerbecauseofthetoonarrowdefinitionoftherele-
vantmarkets,whichdoesnottakeintoconsiderationthesubstitutesof
theproductsandservices(PleatsikasandTeece2001).This,amongoth-
ers,isduetoanapplicationofastaticanalysistophenomenawhichare
extremelydynamic.Qualitativeresearchmethodscanthereforehelpin
findinganswerstothequestionsofwherethepowerisrootedintheeco-
nomicprocessandhowtheuseofthispoweraffectsthemembersofso-
cietyandtheeconomicdevelopment.
Dependingontheappliedmethodofmeasurementtheconclusions
concerningthegrowingenterprises’strengthmaybedifferent(Tullberg
2004)andthefailuretoconstructmethodswhichwouldbeuniversal
doesnotmeanthatthisphenomenondoesnotexist,althoughthemyth
aboutthenonexistenceoftheenterprises’powerintheeconomicreality
isdeeplyrooted(Peterson1988,19).Numerousstudiesprovide,however,
solidscientificandempiricalevidencethattheenterprises’forcedefined
andmeasuredinthevarious,listedaboveways,notonlyexists,buthas
beenincreasingoverthelastfewdecades.
Significantplaceinthesearchonabovementionedissueshasthe2014
NobelPrizewinnerineconomics,JeanTirole.Hisworkhasclearlyshown
thatthecomplexityofthemarketpowerrelatedphenomenacausedthat
theiranalysisandunderstandingrequirecombiningdifferenttheoretical
approaches(Tirole1988).Heanalysedthebehaviourandfirms’interac-
tionsinimperfectlycompetitivemarketsandemphasisedthefactthat
everyindustryandeverycaserequiresdistinctanalysisandintheendall
regulationmustbeindustry-specific(LaffontandTirole2000).
Thereremain,however,stillmanyquestionsandunresolvedproblems
relatedwiththesourcesandconsequencesofmarketpower.Therefore
itisveryimportanttocontinuetheresearchlookingfornewfactorsaf-
fectingtheincreaseorabuseofenterprises’powerandthepossibilities
ofcompaniestolimitcompetition.Theconceptualisationoftheenter-
prises’structuralpowerconstitutesanattempttotakeupthischallenge
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TheStructuralPowerofEnterprises 195
andwidensthecurrentnotionsofthedominantposition(antitrustpol-
icy)andmarketpower(theory).
TheConceptualisationoftheEnterprises’StructuralPower
thenotionoftheenterprises’structuralpower
Theconceptofthestructuralpower,likeotherdefinitionsoftheenter-
prises’power,isrelatedtoapossibilityofanimpactonthebehaviour
ofothermarketparticipants,sothepossibilityoftheinfluenceonthe
widelyunderstoodcompetitiveconditionsanditsconceptualisationdoes
notintendtoreplaceanyofthepreviousdefinitionsofeconomicormar-
ketstrength,butrathertodrawattentiontothesourcesoftheeconomic
powerofcompanies,whichtendtobeunderestimatedintheliterature
andinconsequence,inthecompetitionpolicy.Thesesourcesofeco-
nomicpowerarethediversificationoftheactivitiesandthedevelopment
ofcomplexandmultidimensionalstructuresofownershipbythemulti-
nationalcorporations.Thesearetwodifferentprocesses,butthefactthat,
inpracticetheyoccurveryoftensimultaneouslyandcansignificantly
complementtheconstructionandthesubsequentuseoftheenterprises’
power,andbothinsomewayaffectthestructureofthesamecompanies
andtheirmarkets,causedthatthepowerofcompaniesresultingfrom
thesebothprocesseswascalledthestructuralpower.
Thesubjectofstructuralpoweriscomplexanditiscomprisedofa
groupofcompanies,understoodhowevermorebroadlythanaccounted
forinthedefinitionsmostcommonlycitedintheliterature,whichem-
phasise the necessity for majority or controlling stakes of one enter-
priseinanother,andarealinfluenceontheirfunctioning(seee.g.Ro-
manowska2011).Thesubjectofthestructuralpowerconstitutesinfacta
vastanddiversenetworkofdirectandindirectcapitalrelationsandthe
associatedpersonalcontacts,whichisderivedfromthefactthatboth
oftheaboveprocessesconsistoftheacquisitionofmajorityorminority
capitalstakesinothercompanies,whichresultsinanemergenceofthe
enterprises’groupsrelatedwitheachotherindifferentways.
diversificationofenterprises’activities
inthecontextofstructuralpower
Regardlessofthedifferingviewsofscientistsontheeffectivenessofthe
differenttypesofdiversificationstrategies,thefactthatcompaniesfol-
lowthestrategyofrelatedbutalsounrelateddiversification(Humes1993;
NiyajimaandInaqaki2003;Dugger1988)indicatesthatitmustcreate
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196 Magdalena Sliwinska
enoughinterestingopportunitiestobeartheriskoffailure.Diversifica-
tionofactivitiesnotrelatedtothecorebusinessmakesitessentialthata
groupofcompaniesreducesitsdependenceontheindividualmarkets
andindustries,andincreasestherangeofpossibleactions,thuscon-
tributestotheincreaseinitspower(Dugger1988,90–4).Itallowsthe
companiestowaitoutandsurviveacrisisinparticularindustriesand
theeconomicdeclinesintheindividualeconomies,facilitateschangesin
customersandsuppliers.Italsofacilitatestheuseofvariousformsoffi-
nancing,movingoperationsfromonecountrytoanother,andthechoice
oflocationwiththelowesttaxesandprovidesversatileinformationon
manymarkets.
Theproperaggregationofpossessedinformationgivesuniquemarket
knowledgeandtheabilitytouseemergingopportunitiesandtotakeap-
propriatedecisionswhenitcomestoinvestinginnewareas.Thisgives
asubstantialadvantageoversmallercompanies,orthosenothavingthe
possibilitytoachievesynergy,allowingthemtocreatecompletelynew
productsandservices,resultingfrombeingpresentinmanysectorsof
theeconomy.Atthesametimeincreasingtheshareintheglobalecon-
omyduetoactivitiesinthedifferenteconomicsectorsgrantsthepower
resultingfromthesizeandscaleofoperationsandtheimpressionof
beingpresenteverywhere,whichcanhavesignificanteffectsonthebe-
haviourofothermarketparticipants.Unrelateddiversificationalsoal-
lowsforreinvestmentofprofitsinthebusinessandcontinuationofthe
buildingtheeconomicstrengthoftheentirecorporationinasituation
wherethedevelopmentofactivitiesinthemainareawouldmeananin-
fringementofcompetitionlaw.
multidimensionalownershipstructuresand
networksofcapitalrelationsinthecontext
oftheenterprises’power
Buildingmoreandmorecomplexandmultidimensionalstructuresof
ownership and legal-organisational form by multinational companies
mayalsocontributetotheincreaseintheireconomicpower.Capitalnet-
workswithinandbetweenlargemultinationalcompaniesbecomediffi-
culttodecipher,amongothers,duetotheirlargenumber,lengthofchain
linksandthefactthattheycantakevariousforms,possessingaminor-
ity,themajorityorhundredpercentofsharesinothercompanies.The
overlapoftheselinksfurtherblurstheimageoftheexistingrelationships,
causingincreasingdifficultiesinidentifyingspecificownersofindividual
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TheStructuralPowerofEnterprises 197
companies,henceestablishingwhichofthecompetingcompaniesonthe
marketarelinkedfinancially.
Meanwhile,businessesinmanywaysrelatedthroughthecapitallinks
arelesslikelytoworkagainstthemselves,anditwillbeintheirmutual
intereststopromoteandsafeguardthecommoninterests,strengthenthe
competitivepositionoftheirmarketsandcreatingastronggroupofcom-
panies,whichwillbediscussedfurtherinthispaper.
thereasonsfortheincreaseintheenterprises’
structuralpower
Theincreaseintheabove-definedenterprises’structuralpowercanre-
sultfromanumberoffactors,andsomeofthemseemtobeparticularly
vital.Firstly,anaturalgoalofenterprisesistostriveforabusinessde-
velopment,strengtheningtheirpositionagainstcompetitorsandgener-
atingeverlargerprofits.Thesharpeningofcompetitionconditionsdue
totheglobalisationofeconomymakesfirmswhichwanttosurviveon
themarketforcedtointensifytheiractionsandinnovationprocessesin
theexplorationofwaystoincreasetheircompetitivenessandeconomic
strength,neededtowinthecompetitivebattle.Boththeprocessofdiver-
sification,aswellasbuildingthecomplexandmultidimensionalown-
ershipstructuresthereforeconstituteinasense,abusinesspracticere-
sponsetochangingeconomicconditions.
Secondly,thefactorinfluencingthegrowthofthestructuralpowerof
enterprises,whichbecomesespeciallyimportantinviewoftheabove
conclusions,isthecurrentshapeofthecompetitionlawoftheeuand
otherdevelopedcountries,andinparticulartheirtwoaspects(Śliwińska
2007,150–1):
• theemphasisontheanalysisofindividualmarketsandthemarket
sharesofcompaniesoperatingonthosemarkets,and
• definingthegroupofenterprisesascompaniescloselyrelatedwith
thebunchofcontrolshares,orcertaincontractsthatallowaneffec-
tivecontroloveranothercompany.
Buildingthestructuralpowermayrepresenttheresponseofpractice
fortheactualshapeofantitrustlegislationintheeuandinthemost
highlydevelopedcountries.
Itshouldbenotedthatstructuralpowerhasnotbeendefinedyetasa
threattotheproperfunctioningofthemechanismofcompetition.Both
themarketparticipantsandthesupervisinginstitutionscanbeoftenun-
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198 Magdalena Sliwinska
awareofthestructurallinksconnectingtheentiregroupsofcompanies,
whichcanprovidethemwithmultipleopportunitiesforanunderesti-
matedimpactonthecompetitiveprocess.Thefactthatstructuralpower
ofcompaniesisasifinvisibleandintangibleiscertainlyalsoinfluenced
bythefactthatinternationallawdoesnotcreateanappropriatecontrol
basisofoperationsforthelargeinternationalcorporations(Saari1999),
andduetothelegalandtaxhavenstheenterprisescanobtainaninterna-
tionallegalanonymity,safeguardingofassetsandsecretoperations(Saari
1999,163–4;Lipowski2002).
thepossibilitiesofabuseoftheente rprises’
structuralpower
Therearemanyreasonstoclaimthatthepossessionofstructuralpower
byenterprisescanofferopportunitiestoreduceexistingcompetition.
Largenetworksofownership,createdbytheabovementionedprocesses,
renderpossibilitiesofinfluencingothermarketparticipantsandcreating
entrybarriersfornewcompetitors.Ararebunchofresearchdealingwith
thistopicuntilnowadaysseemstoconfirmthisviewtoagreatextent.
Accordingtooecd(2008)minorityshareholdingsandinterlocking
directoratescanhavenegativeeffectsoncompetition,eitherbyreducing
theminorityshareholder’sincentivestocompete–unilateraleffects,orby
facilitatingcollusion–coordinatedeffects.Competitionmaybelimited
bytheselectionofthesuppliersandcustomerswithinthegroupofcom-
paniesorbytheapplicationofdissimilarconditionstoacorporatetrans-
actionwith‘stranger’and‘friendly’enterprises.Whenthisphenomenon
concernstheentiregroupofrelatedcompanies,formingaclosedcircle
withsignificantjointmarketshares,itcangraduallyrise,inanimpercep-
tibleway,aninvisibleatfirstglancerestrictionofcompetition.Inaddi-
tion,therecanalsobeaproblemthatduetothemultidimensionalown-
ershipstructuresandthefunctioningofthelegalandtaxhavens,theap-
parentcompetitorsmaybestronglytiedbyequity,whichmaycausethat
insteadofengaginginastrongcompetitivefight,whichwillnotbein
theirinterests,theywill,inamoreorlesshiddenway,co-operate.Inthis
context,animportantviewgivesthemoreandmoredevelopedtheoryof
multimarketcompetitionandtheconceptofmutualforbearance,which
drawattentiontothefact,thatthemoremarketsonwhichtwocompa-
niescompete,thelowertheintensityofthecompetitionbetweenthem
(StephanandPeters2013).
Studiesontheinfluenceoncompetitionofpartial,notrelatedtothe
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TheStructuralPowerofEnterprises 199
acquisitionofcontrol,sharesinanotherenterprisehasshownthatthe
increaseinthelevelofownershiplinkagesbetweencompetingfirmsre-
ducesthesizeoftheirproductionandcanfacilitatetacitoropencar-
telbetweenrelatedbyownershipenterprises(ReynoldsandSnapp1986).
AccordingtoReitman(1994)thenegativeinfluenceoncompetitionre-
sultingfromthepossessionandacquisitionoftheminoritystakesmaybe
evenlargerthanunderfullmergerofthetypicalfusionandmayleadto
aloweroverallwelfare,especiallywhentheowneroftheminorityshares
isalargeenterpriseandiftheacquiringcompanyrevealsanevenlowde-
greeofmarketpower.Agoodexamplecouldconstitutethecrossshare-
holdingsinJapanesekeiretsu,wheretheminoritysharesofrelativelylarge
companiesleadtothecreationofsubstantialstructuralpowerandlimit
toacertaindegreethecompetition.
Researchonthemotivesofcompanies’possessingtheminoritystakes,
inturn,haveshownthatmanytimestheyconstituteasubstituteforanti-
competitiveagreements,illegalaccordingtotheantitrustlaw(Mead-
owcroftandThompson1986;MilanesiandWinterstein2001).Studies
ontheeffectsofthemutualminorityshareholdingsinthehorizontal
arrangements revealed (Reynolds and Snapp 1986; Meadowcroft and
Thompson1986)thatthistypeofcross-shareholdingsontheconcen-
tratedmarketswithhighentrybarriersmayhaveanimpactonreduc-
ingthetemptationofcheatingapartnerinthecartel.Meadowcroftand
Thompsonmovedastepfurtherbyexaminingtheminoritysharehold-
ingsintheverticalarrangementsandshowedthattheverticalintegration
withthedealermaybeasuitablemeanstoinducetherecipienttoexclu-
sivetradingwithproducts,whichareassociatedwithminoritysharesof
suppliers.Notallresearchersagreeonthispointbystatingthat,inasitua-
tionofoligopoly,possessingtheminoritysharesinadistributorcompany
canprovideanincentivetoincreasetheproduction(Flath1989).There
arealsoargumentsthatsucharestrictionofcompetitionmayoccur,
butmostlyincasewhentherecipientalsohasaminoritysharesofthe
vendor(Struilaart2002,181).However,researchersagreethatintegration
marchingintheoppositedirection,e.g.theacquisitionofminorityshares
ofamanufacturerbythedistributor,canadverselyaffecttheconditions
ofcompetitionandleadtoincreasedpricesandreducedchoiceforcon-
sumers,duetothefactthatthedistributorwillinsuchasituationachieve
measurablegainsfromreducingcompetition(MeadowcroftandThomp-
son1986;Flath1989).AnotherviewonverticalrelationshipsgivesTirole
(2014).Accordingtohisanalysisverticalrelationshipsonlyrequireregu-
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200 Magdalena Sliwinska
lationiftheyimposecostsonoutsidersthataregreaterthanthebenefits
toinsiders.Thus,avitalelementoftheanalysisisapreciseunderstanding
ofmutuallybeneficialcontractsbetweensellersandbuyersinavertical
chain.
Thecapitaltiesarecloselylinkedwiththeissueofvarioustypesofper-
sonalrelationships,includingthesystemofsocalledinterlockingdirec-
tors(Murray2000;MintzandSchwartz1985).Forexample,companies
linkedbycapitalandpersonaltiesmayevenknowthesecretsofeach
other’sbusinessandplansforthefutureandrendertoeachotherdifferent
typesofanticompetitivefavours.Itisdifficulttoassumethatthistypeof
relationshipbetweencompanieswouldfavourmutualintensificationof
competition,especiallyinthefaceofbetterandbetterrecognisedbythe
researchersphenomenonofthegrowinginfluenceofmanagers,which
exceedsfarbeyondtheareaconnectedwiththemanagementofthecom-
pany(RodriguesandAntónio2011)andmoreandmorerecognisedphe-
nomenonofinfluencesofenterprises’networksongovernments,thanks
totheconceptofthepowerbloc(Hayden,Wood,andKaya2002).
Itmaybeofhighinterestforpotentialcontractorstohavegoodrela-
tionswiththecompanybelongingtoagroupofenterprisespossessinga
structuralpower.Becauseoffearofapossibleeliminationfromthemar-
ket,theywillbewillingtoagreetothetermsofcooperationthatthey
wouldneveragreetoundermorecompetitiveconditions.Inthisway,the
structuralpowercannegativelyaffecttheconditionsofcompetition,even
withoutitsdirectabusebyenterprisespossessingthispower,whichdi-
rectlyreferstowhatMacMillanandJones(1986)said–thatonedoesnot
needtousethepowertoholditandtheveryfactofitspossessioncan
affectthebehaviourofothers.
ConclusionsandDiscussion
Studiesonthestructureandpossibilitiesofabuseofenterprises’power
belongtothedifficultfieldofresearch,bothfromthetheoreticaland
practicalpointofview.Ontheonehand,theydealwithoneofthefun-
damentaleconomicproblems–interferenceintothemarketmechanism,
whichiscertainlynecessary,butasrecenthistoryofeconomyhastaught
–verydangerous.Ontheotherhand,theydealwiththeverycomplexis-
suesofeconomicglobalisationanddevelopmentalstrategiesofmultina-
tionalcorporations,wherewinningthenecessarysensitivedataforanal-
ysisisdifficultandinmanycasesimpossible.However,duetotheaware-
nessofthehighimportanceoftheproblemfortheprotectionofcompe-
ManagingGlobalTransitions

TheStructuralPowerofEnterprises 201
tition,theresearchonthewidelyunderstoodenterprises’powerandits
economicimplicationsisevolvingwithindifferenteconomictheories.
Anoverwhelmingpartofresearchdonesofarassociatesenterprises’
powerwiththeconcentrationonthemarketandthemarketshareofen-
terprisesand,lookingfromthispointofview,itanalysesadditionalfac-
torsinfluencingthemarketpowerlikeentrybarriers,thesizeandnumber
ofcompetitorsortechnologicalchangesintheindustry.Theconceptual-
isationofstructuralpowergoesbeyondtheanalysisoftheconcentra-
tionontherelevantmarketandaimsatdrawingtheattentiontothefact
thatboth,theunrelateddiversificationandtheminorityshareholdings,
canconstituteimportantsourcesofenterprises’powerandcontributeto
therestrictionsofcompetitionalsointheinternationaldimension.The
conceptofstructuralpowerextendsthesubjectofeconomicpowerto
thegroupoftiedcompanieswithunrelateddiversificationandthemi-
norityshareholdings.Itallowstodrawtheattentiontothefactthatthe
potentialinfluenceontheothermarketparticipantsmayarisenotonly
fromthefirm’spositionontherelevantmarketandthefactorsrelatedto
itsspecificity,butalsofromthevarioustypesoflinkagesbetweenfirms.
Thereappearstheneedforabroaderapproach,goingbeyondtheanaly-
sisofnarrowlydefinedrelevantgeographicorproductmarket,inorder
tohaveacloserlookattheissueofrestrictingthecompetitiveprocessin
theglobalisedeconomy.
Theattempttodefinestructuralpowerofcompanieshadanaimto
jointhediscussioninthisfieldandtopresenttheproblemfromadif-
ferentperspective.Theintentionwasnottoreplaceanyoftheprevious
definitionsofenterprises’power,butrathertocomplementtheexisting
ones,inordertodrawattentiontobothabovementionedprocessesasthe
possiblesourcesofthepowerofinternationalbusiness.Itconstitutesalso
aresponsetoalreadynoticedbytheliteratureproblem(McNutt2001)
that,incontrasttothewidelydiscussedconceptandmanyattemptsto
formulateaprecisedefinitionofthe‘relevantmarket,’relativelylittleat-
tentionisattachedtothetermof‘relevantfirm,’whereasfurtherinference
aboutthepositionoccupiedbycompaniesonthemarketorintheindus-
tryandthepossibilitiesoflimitingcompetitiondependsonthedefinition
oftheenterprise.Theconceptualisationofenterprises’structuralpower
andbasingitssourcesontheunrelateddiversificationandtheminority
equityrelationscouldthereforebeapartofthediscussiononthecon-
temporarydefinitionofthecompany(seee.g.Cyfert2012)andthegroup
ofcompanies(seee.g.Romanowska2011).
Volume13·Number2·Summer2015

202 Magdalena Sliwinska
Fornalczyk(2007)identifiesmanyareaswherebusinessandstrategic
andoperationalmanagementencountercompetitionlawandexplains
whichstrategicbehavioursofenterprisesareforbiddenbyantitrustreg-
ulations,presentingeconomicargumentation.Theconceptofstructural
powertakesonestepbackandjoinsthediscussionononeofthefunda-
mentalproblemsofeconomictheoryand–asaconsequence–compe-
titionpolicy,whichreliesonthedifficultyindefiningthelimittowhich
pointthenaturalanddesiredincreaseinenterprise’spowercontributes
totheincreaseinitscompetitivenessandeconomicdevelopment,and
whenitbeginstojeopardisetheproperfunctioningofthecompetitive
processintheinternationaldimensionandconsequently,dynamicand
sustainableeconomicdevelopment.
Presentstudies’resultsconfirmthepossibilityoflimitingcompetition
throughthedevelopingthestructuralpower,andtheyconstituteasuf-
ficientargumentthattheincreaseinthestructuralpowerofenterprises
shouldbethesubjectofthoroughinterestofantitrustauthoritiespursu-
ingthepolicyofcompetitionprotection.Meanwhile,structuralpowerof
enterprisescanbebuiltinaccordancewiththeeucompetitionlaw,al-
thoughsomeelementsaffectingitsgrowtharetakenundercontrol.This
situationhasthreepossiblecauses.Thefirstoneislinkingtheconceptof
dominanceandpowerofcompanieswithsocalledrelevantmarketand
notwiththepresenceinmanysectorsoftheeconomy.Thesecondreason
constitutestheappliedbyantitrustauthoritiesdefinitionofthegroupof
companies,wherethemaincriterionisthedifferentlyunderstoodcontrol
ofanothercompany,whichexcludesqualifyingtoonegroupthecom-
paniesrelatedonlywithminorityshareholdings.Thethirdreasonisthe
non-recognitioninmanycasesbyeucompetitionlawofthevertically
relateddiversification,andthemoreunrelated,ashavinginfluenceon
thegrowthofpossibilitiesforreducingcompetitionbyenterprisesim-
plementingsuchstrategies.ItisvitalinthiscontextthatEuropeanCom-
mission,inNovember2011,announceditsintentiontoconductastudy
ontheeconomicimportanceofminorityshareholdingsintheececon-
omyandontheneedfortheCommissiontohavethepowertoreviewthe
purchaseofminorityshareholdings(IgnjatovicandRidyard2012).
Fortheabovementionedreasons,thereisaneedforfurtherresearch
ontheproblemofgrowthofthestructuralpower,andonthepossibilities
itprovidestoreducecompetition.Inparticular,themultiplecasestudy
shouldbeappliedinordertogetabetterinsightintothemechanismof
developingandusingstructuralpowerbyinternationaloperatingenter-
ManagingGlobalTransitions

TheStructuralPowerofEnterprises 203
prises.Italsoseemstobeimportanttodeveloptheconceptof‘relevant
firm’tryingtodeterminethetypeofrelationsbetweenenterprises,con-
tributingtothegrowthoftheirpotentialtorestrictcompetition.Offun-
damentalimportanceisthetheoreticalandempiricalresearcharoundthe
questionofdeterminingthelimittowhichpointthenaturalanddesired
increaseintheenterprise’spowercontributestotheincreaseinitscom-
petitivenessandeconomicdevelopment,andfromwhichpointitbegins
tojeopardisetheproperfunctioningofthecompetitiveprocessandthe
economicdevelopment.Thisincludese.g.findinganswerstotheques-
tiontowhatdegreethenegativeeffectsoflimitingcompetition(cartel,
strategicalliance)arelesserthanthepositiveeffectsoftechnologicalor
economicprogressobtainedasaresultoftheserestrictions.
Notes
1 Withintheconfinesofthecompetitionpolicy/antitrustpolicythephe-
nomenonof‘marketpower’isknownasaproblemofdominationordom-
inantposition.
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