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Indirect Compellence and Institutional Change: U.S. Extraterritorial Law Enforcement and the Erosion of Swiss Banking Secrecy

Überbacher, Florian; Scherer, Andreas Georg (2020). Indirect Compellence and Institutional Change: U.S. Extraterritorial Law Enforcement and the Erosion of Swiss Banking Secrecy. Administrative Science Quarterly, 65(3):565-605.

Abstract

Based on an in-depth, qualitative case study about a conflict between governmental authorities from the United States and Switzerland over the regulation of Swiss banks, we introduce indirect compellence as a novel triadic and indirect mechanism through which coercion leads to institutional change. Hostage-taking being a prototypical example, indirect compellence is typified by a coercive actor who takes a third party hostage to gain influence over a targeted actor. In our case, it meant that U.S. authorities (coercers) compelled Swiss policy makers (targets) to erode the famed Swiss banking secrecy rules by threatening the targets to otherwise enforce U.S. law extraterritorially against Swiss banks and bankers (hostages). Our constructivist and target-centered perspective explains this type of coercive pressure in detail, and it also suggests that targeted policy makers judge and respond to it contingent on their political ideologies. Our study contributes to research on power and influence in institutional environments and to research on global business regulation and transnational governance. Most generally, it also expands scholarly understanding of triadic relationships. In contrast to Simmelian perspectives’ focus on triads in which the third party is in a powerful brokerage position and frequently benefits as a tertius gaudens, our study suggests that the third party can also become a rather powerless tertius miserabilis who suffers rather than benefits from others’ conflict.

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Arts and Humanities (miscellaneous)
Social Sciences & Humanities > Sociology and Political Science
Social Sciences & Humanities > Public Administration
Scope:Discipline-based scholarship (basic research)
Language:English
Date:1 September 2020
Deposited On:12 Sep 2019 08:18
Last Modified:22 Oct 2024 01:35
Publisher:Cornell University, Johnson Graduate School of Management
ISSN:0001-8392
OA Status:Hybrid
Publisher DOI:https://doi.org/10.1177/0001839219855033
Other Identification Number:merlin-id:18161
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