ADITIVOS PARA LOS CEMENTOS

Economic policies in LMEs are aimed at increasing market competition, while policy-making in CMEs focuses more on increasing the capacities of actors for non-market coordination (Hall &

Soskice, 2001:46). Therefore, economic policies will be effective only if they are incentive

compatible with the existing coordinating capacities (Mitchell, Agle, & Wood, 2018). Given P2B lending is a substitute for bank lending, its development requires policy initiatives that challenge the incumbent system. Mini-bonds are a complement to bank lending and do not require initiatives to stimulate market competition. This suggests that there is likely to be higher institutional support for P2B lending in the UK than in Germany.

5.3 Institutional Change

The analysis indicates that the institutional change taking place in the practices of lending to SMEs is at an early stage of development in both Germany and the UK. VoC envisions institutional change in an economy occurring as a result of external shocks, which force firms to modify their practices as they seek to retain their comparative advantages, which can lead to changes to the institutions with which they interact. In that context, the financial crisis was a shock that affected the bank lending practices in both countries. However, it is unclear whether the alternatives that emerged following the crisis would be catalysts for processes producing permanent change preventing institutional practices reverting to the status quo that existed before the crisis. Streeck and Thelen’s (2005) categorisation of change processes assumes a more gradual process of change and thereby provides a useful template for analysing institutional change produced by mini-bond and P2B lending.

In Germany, it does not appear that either mini-bond nor P2B lending has yet been a catalyst for changing the behaviour of banks lenders. In the case of P2B lending, the launch of the Main

Funders lending platform by Commerzbank is indicative of a layering process which could

ultimately crowd out the legacy lending practices over time. The likelihood of change actually occurring is highly questionable given the low level of P2B lending volume and the institutional support. Commerzbank appears to be approaching the Main Funders initiative as a complement to its existing activities, suggesting that as the host institution it is not playing the role of an institutional entrepreneur seeking to ‘implement changes that diverge from existing institutions’ (Battilana, Leca, & Boxenbaum, 2009:70). The financial exchanges were another candidate for the role of institutional entrepreneur with the introduction of a listed mini-bond segment on the regional financial exchanges in Germany. This was a potentially more potent

catalyst for institutional change through displacement of bank lending via another financial

institution. However, the high default rate of listed mini-bonds and the subsequent closure of these specialised segments has made it highly unlikely that incumbent bank lending practices will be displaced by financial exchanges in Germany. Notwithstanding the high level of defaults, it is difficult to envision a scenario in which the regional exchange operators seriously challenge the incumbent lending practices of the banks given both the exchanges and the local and regional banks are owned by the same regional governments. In the case of Germany, both

the incumbent banks and the regional exchanges embody the paradox of embeddedness,

which reflects the constraining influence of the structure in which an institutional entrepreneur is embedded in trying to bring about change from within incumbent institutions (Battilana, 2006).

In the UK, the limited growth of the mini-bond issuance volume has been inconsequential to incumbent institutional practices and has not instigated any institutional change. In contrast to Germany, the collaboration by incumbent bank lenders with P2B lending platforms for serving

distinct segments of SME borrowers suggests that institutional change through layering is a possibility. There are two other possibilities for P2B lending instigating institutional change over time through a process of displacement. First, institutional change in lending practices could come about as a result of P2B platforms obtain banking licences and thereby competing

directly with banks on their own terms with their ‘platform’ lending model87_{. Second, P2B}

lenders with more ‘asset management’ business models could produce a similar effect in asset management if they were to become more sophisticated in their intermediation services for

investors and become fully regulated as asset managers88_{. In any case, given the early stage}

of development of P2B lending it is likely there will be more than one form of institutional change process underway in the UK at different points in time. There is a strong case for the UK P2B platform operators playing the role of institutional entrepreneurs. These entrepreneurs have emerged from outside of the institutional practices they seek to disrupt and thus are unaffected by the influences constraining actors embedded in the incumbent system seeking to bring about change.

In the VoC approach, the capacity for change in the financial system is related to the level of institutional complementarity in the economy. A high level of complementarity will cause change to ‘either ripple throughout the system, or will be rather marginal because the competitive advantages of being rooted in the existing system lead actors to resist more radical change’ (Deeg, 2010:324). Actors in CME financial systems are presumed to be resistant to adopting change increasing non-bank funding because non-market coordination supports their competitive advantage, although this resistance has been starting to erode as it applies to large firms ((Deeg, 2010:324; Thomson, 2018). VoC scholars argue that Germany has been reluctant to accept deregulation of financial services proposed by the European Union because of its desire to retain the profitability of incumbent actors and preserve the ‘capacities for network monitoring that sustain the terms on which domestic capital is available to firms’ (Hall & Soskice, 2001:53).

Despite being in a nascent stage of development, the relative level of institutional change observed in Germany and the UK appear to be consistent with predictions of change based on the propositions of the VoC framework, despite these propositions not specifying the type of change likely to take place nor addressing the role played by institutional entrepreneurs in enacting change. The VoC approach indicates there will be stronger institutional support for P2B lending in the UK compared with Germany, and this should produce a more rapid pace of adoption and development of P2B lending in the former. It should also produce more change

87 _{In 2017, the largest P2P consumer lending platform in the UK, Zopa, announced that it intended to apply for a}

full banking licence.

88 _{In 2015, the largest P2B platfrom in the UK, Funding Circle, launched a fund for investment in P2B loans}

originated on its platform. In early 2018, Funding Circle also announced its intention to undertake an Initial Public Offering of its shares (IPO) expected to value the company at more than £1.5 billion.

to legacy lending practices within the incumbent UK banking system because P2B lending is a direct substitute for bank lending. The VoC analysis indicates there will be more institutional support for mini-bond lending in Germany than the UK, which should result in greater adoption in the former than the latter. In contrast to the substitutive nature of P2B lending, the complementarity of mini-bond lending to bank lending means its adoption is less likely to lead to change in the incumbent bank lending practices in Germany.