Varieties of Capitalism and institutional comparative advantage: A test and reinterpretation

Abstract

How do national-level institutions relate to national comparative advantages? We seek to shed light on this question by exploring two different sets of hypotheses based on the Varieties of Capitalism and other branches of comparative capitalisms literature. Applying fuzzy-set qualitative comparative analysis to data from 14 industries in 22 countries across 9 years, we find that comparative advantages in industries with radical innovation emerge in specific configurations mixing coordinated and liberal institutional features. Institutional comparative advantage in industries with radical innovation may thus be based on the ''beneficial constraints'' of opposing institutional logics rather than on the self-reinforcing institutional coherence envisioned in much of the Varieties of Capitalism literature. By contrast, we find that coordinated market economies may have comparative advantages in industries with incremental innovation, as envisioned in the Varieties of Capitalism literature. Our article contributes to our understanding of the ''so what?'' related to capitalist diversity and its implications for location decisions of multinational enterprises. We further present a coordination index going beyond Hall and Gingerich (Br J Polit Sci 39:449-482, 2009) with annual values for 22 OECD

Mapping the business systems of 61 major economies: a taxonomy and implications for varieties of capitalism and business systems research

“…Empirical results of these efforts have generally produced mixed results. More recently, Witt and Jackson (2016) have suggested that complementarities may reside not in coherence, but instead in incoherent institutions forming what Streeck (1997) termed 'beneficial constraints'. While they applied this argument to the question of how radical and incremental innovation translate into comparative advantages, their overall point may generalize to other forms of institutional complementarities and attendant outcomes.…”

“…In terms of evolution over time, research has explored the question of convergence (Djelic, 1998;Whitley, 1999;Deakin et al, 2016), but also an apparent trend towards liberalization (Thelen, 2014;Van der Zwan, 2014) and institutional adaptability more generally (Streeck and Thelen, 2005;Vogel, 2006;Witt, 2006;Hall and Thelen, 2009;Jackson and Deeg, 2012). And with regard to outcomes, the literature has examined the linkages between varieties of capitalism and results such as comparative advantages (Hall and Soskice, 2001;Whitley, 2007;Schneider and Paunescu, 2012;Witt and Jackson, 2016), innovative capabilities (Boyer, 2004;Akkermans et al, 2009;Allen, 2013;Keller and Block, 2013;Boschma and Capone, 2015), CSR (Matten and Moon, 2008;Gjølberg, 2009;Jackson and Apostolakou, 2010;Brammer et al, 2012;Kang and Moon, 2012) and inequality (Rueda and Pontusson, 2000;Schneider and Makszin, 2014;Thelen, 2014). This list is far from exhaustive, and a comprehensive review of these efforts is beyond the possibilities even of dedicated review papers (Wood et al, 2014), leave alone research papers such as this one.…”

“…For instance, Witt and Jackson (2016) examined 22 OECD countries, including those Hall and Soskice (2001) had originally classified as CMEs and LMEs. They found coherently complementary institutions across the five spheres of the political economy posited by Hall and Soskice only in six cases: five LMEs-Australia, Canada, Ireland, the UK and the USA-and one CME, Austria.…”

“…In particular, Varieties of Capitalism does not provide a theoretical foundation for the existence of MMEs, nor a basis for distinguishing possible types within this category. Part of the issue is the restrictive conceptualization of complementarities as residing in coherence, which allows only for two fully complementary configurations (Kristensen, 2005;Morgan, 2005;Witt and Jackson, 2016).…”

Comparative political economy and international migration

“…In Figure 1, we plot this variation (measured as the number of incoming migrants per year divided by the population) against the index of coordination devised by Witt and Jackson (2016), which captures the degree of market embeddedness we mentioned above. On average, more liberal political economies tend to receive more migrants than coordinated economies, even if the correlation between coordination and immigration levels is not very strong (r = -0.34).…”