Business-Government Networks in Small States: The Emergence and Evolution of the Luxembourg Global Mutual Fund Industry, 1945–1988

Matteo Calabrese and Valeria Giacomin

Business History Review, 2025, vol. 99, issue 1, 39-66

Abstract: This research reconstructs the business dynamics behind the evolution of the European mutual fund industry, which led Luxembourg to become its main international gateway since the 1960s. We analyze this local industry to understand how political and financial élites influence the economic specialization of small states. We argue that a closely-knit community of local professionals and politicians, well-versed in corporate and European legislation, leveraged the Grand Duchy’s small state status within the nascent European Community to become a financial hub specializing in mutual funds within an emerging network of international financial centers. This position was achieved through bifurcation of sovereignty strategies on the basis of two main premises. First, on the systematic acceptance of conflicts of interest within local financial and political leadership, comprising overlapping roles, revolving-doors, and familial ties in business relationships. Second, on regulatory engineering practices, such as the dynamic interpretation of laws, and the strategic planning of directive assimilation to advance Luxembourg’s interests as opposed to its EU counterparts. The analysis uses archival material from nine archival collections and oral history interviews.

Date: 2025
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