Financial discipline through inter-sectoral mergers and acquisitions: Exploring the convergence of Global Production Networks and the Global Financial Network

Abstract

Financial discipline and financialization are transforming Global Production Networks through growing pressures related to shareholder value, short-termism and new financial products and services. However, little focus has been devoted to exploring whether these processes are accelerating rates of sectoral convergence. As financialization creates new challenges and opportunities for non-financial firms, are we seeing greater levels of convergence between the financial and other sectors? If so, which sectors, in which countries and why? We explore these questions by analysing the structure and geographies of inter-sectoral mergers and acquisitions in and out of the financial sector. Drawing from a sample of 25,079 deals between 2001 and 2020, we reveal which sectors are buying and being bought by financial firms, the geographies of this process, trends over time and the key factors driving inter-sectoral activity. Analysed through the Global Production Networks 2.0 framework, and contributing to debates around financial discipline, our findings uncover the growing convergence of finance with other sectors through an increasing share of inward (non-financial firms acquiring financial firms) and outward (financial firms acquiring non-financial firms) merger and acquisition deals. However, far from homogenous, this process of convergence is shown to be temporally, sectorally and spatially uneven. This allows us to make two novel contributions. First, we provide fresh insights into the role of financial discipline in reconfiguring Global Production Networks at country-level. Second, we advance contemporary debates on convergence by revealing how, where and why the boundaries between the financial and other sectors are becoming increasingly blurred.