Week 1
Article 1: Varieties of capitalism and institutional comparative
advantage: a test and reinterpretation
Abstract
- Their aim was to looking into two different sets of hypotheses based on the varieties
of capitalism and other branches of comparative capitalisms literature
- They find that comparative advantages industries with radical innovation emerge in
specific configuration mixing coordinated and liberal institutional features.
- Contrasting this they find that coordinated market economies may have comparative
advantages in industries with incremental innovation as envisioned in the varieties of
capitalism literature
Introduction
- Traditional economics explanations, including Ricardo’s and the later Heckscher-
Ohlin model of trade, have emphases the importance of inherited natural
endowments with production factors such as labor and land.
1. The empirical performance of these models however is weak
- Comparative studies have argued that different types of institutions constrain and
enable different forms of economic activity.
- The common objective of this comparative capitalism’s literature has been to shed
light on how the institutional diversity of advanced capitalist economies shapes
economic and business outcomes
- A core argument of this literature
1. Institutions may generate distinct profiles of institutional comparative
advantage in productions, which manifest themselves in nationally distinct
patterns of economic performance and specialize across different industrial
sectors
- Strong evidence in support of institutional comparative advantage would have
important implication for government policy as well as the location choice of
multinational enterprises seeking to avoid home country disadvantages, project
competitive advantages related to their home country, or exploit complementary
resources and knowledge
- They looking into the question: institutional comparative advantage in relation to two
arguments stemming from different branches of the comparative capitalism’s
literature
, 1. They test the liberal market economies have an institutional comparative
advantage in industries featuring radial innovation, whereas coordinated
market economies have an institutional comparative advantage in industries
with incremental innovation.
2. They hypothesise that certain combinations of liberal market and coordinated
logics across two or more institutional domains may enable institutional
comparative advantage by compensating for institutional comparative
advantage by compensation for institutional weaknesses inherent in “pure”
configurations
- This article explores this by comparing the trade patterns of countries during the
period of 1995-2003
- They use fuzzy-set qualitative comparative analysis
1. This was to test different configurations of intuitions are sufficient for high
performance in different sectors
- The results suggest that institutional comparative advantage involves very specific
combinations of both liberal and coordinated types of institutions, which is in line with
our own hypotheses.
- They analysis shows that a number of countries have over time diverged from the
commonly help notions about their institutional make-up.
1. For example, Germany has evolved away from the pure-type coordinated
market economy that it is commonly believed to represent
Conclusions
- Their main findings are that radical innovation consistently leads to high comparative
advantage in countries with institutions that combine specific liberal and coordinated
elements
- Radical innovation leads to comparative advantage in economies with predominantly
liberal institutions but coordinated employment relations and conversely in
economies with predominantly coordinated institutions but liberal corporate
governance.
- Their results are broadly consistent with other earlier studies linking performance in
certain sectors with institutional configurations that go beyond the LME and CME
dichotomy
- In highly coordinated economies, liberal corporate governance may act as an
external monitor that contains the behavior of company stakeholders, but in ways
that also enable more rapid and successful adaption to radical innovation
1. In their research it shows clearly that not all hybrid combinations of markets
and coordination achieve these sorts of beneficial constraints.
- The study shows the potential benefits of using fsQCA to elucidate the conjunctional
effects of different combinations of institutional indicators.
Limitations
, - The study is based on only a small 9-year timeline because data was not very easily
available
- There were concerns the construct validity of the coordination and radicality
measures
1. However, they felt that their variables maximised construct validity to the
extent possible, better measures may soon become available.
Article 2: Varieties of institutional systems: a contextual taxonomy
of understudied countries
Abstract
- They have advanced a new framework to capture the diverse and unique institutional
context of the understudied economies
- It encompasses the configurational context encapsulated by state, financial markets,
human capital, social capital and corporate governance institution operating in these
regions
- It uses qualitative data
- Made from experts
- It offers a more up to data taxonomy of the national institutional context operating
throughout the global economy
- Varieties of institutional systems
Introduction
- National institutions have long been a central part of the international business theory
- They have witnessed the emergence of a more holistic theoretical foundations for
understanding the impact of institution diversity
- This literature straddles two primary frameworks
- Varieties of capitalism
§ This has been criticized for its lack of attention to the developing world
- National business systems
§ Is not well suited to depict many economic systems around the world
where different types of state and family capitalisms have recently
emerged.
- The first framework divides some advanced economies into liberal and coordinated
market economies
- They are based on the allocative mechanism of resources
§ Profits
§ Risk
- The second focuses on
Article 1: Varieties of capitalism and institutional comparative
advantage: a test and reinterpretation
Abstract
- Their aim was to looking into two different sets of hypotheses based on the varieties
of capitalism and other branches of comparative capitalisms literature
- They find that comparative advantages industries with radical innovation emerge in
specific configuration mixing coordinated and liberal institutional features.
- Contrasting this they find that coordinated market economies may have comparative
advantages in industries with incremental innovation as envisioned in the varieties of
capitalism literature
Introduction
- Traditional economics explanations, including Ricardo’s and the later Heckscher-
Ohlin model of trade, have emphases the importance of inherited natural
endowments with production factors such as labor and land.
1. The empirical performance of these models however is weak
- Comparative studies have argued that different types of institutions constrain and
enable different forms of economic activity.
- The common objective of this comparative capitalism’s literature has been to shed
light on how the institutional diversity of advanced capitalist economies shapes
economic and business outcomes
- A core argument of this literature
1. Institutions may generate distinct profiles of institutional comparative
advantage in productions, which manifest themselves in nationally distinct
patterns of economic performance and specialize across different industrial
sectors
- Strong evidence in support of institutional comparative advantage would have
important implication for government policy as well as the location choice of
multinational enterprises seeking to avoid home country disadvantages, project
competitive advantages related to their home country, or exploit complementary
resources and knowledge
- They looking into the question: institutional comparative advantage in relation to two
arguments stemming from different branches of the comparative capitalism’s
literature
, 1. They test the liberal market economies have an institutional comparative
advantage in industries featuring radial innovation, whereas coordinated
market economies have an institutional comparative advantage in industries
with incremental innovation.
2. They hypothesise that certain combinations of liberal market and coordinated
logics across two or more institutional domains may enable institutional
comparative advantage by compensating for institutional comparative
advantage by compensation for institutional weaknesses inherent in “pure”
configurations
- This article explores this by comparing the trade patterns of countries during the
period of 1995-2003
- They use fuzzy-set qualitative comparative analysis
1. This was to test different configurations of intuitions are sufficient for high
performance in different sectors
- The results suggest that institutional comparative advantage involves very specific
combinations of both liberal and coordinated types of institutions, which is in line with
our own hypotheses.
- They analysis shows that a number of countries have over time diverged from the
commonly help notions about their institutional make-up.
1. For example, Germany has evolved away from the pure-type coordinated
market economy that it is commonly believed to represent
Conclusions
- Their main findings are that radical innovation consistently leads to high comparative
advantage in countries with institutions that combine specific liberal and coordinated
elements
- Radical innovation leads to comparative advantage in economies with predominantly
liberal institutions but coordinated employment relations and conversely in
economies with predominantly coordinated institutions but liberal corporate
governance.
- Their results are broadly consistent with other earlier studies linking performance in
certain sectors with institutional configurations that go beyond the LME and CME
dichotomy
- In highly coordinated economies, liberal corporate governance may act as an
external monitor that contains the behavior of company stakeholders, but in ways
that also enable more rapid and successful adaption to radical innovation
1. In their research it shows clearly that not all hybrid combinations of markets
and coordination achieve these sorts of beneficial constraints.
- The study shows the potential benefits of using fsQCA to elucidate the conjunctional
effects of different combinations of institutional indicators.
Limitations
, - The study is based on only a small 9-year timeline because data was not very easily
available
- There were concerns the construct validity of the coordination and radicality
measures
1. However, they felt that their variables maximised construct validity to the
extent possible, better measures may soon become available.
Article 2: Varieties of institutional systems: a contextual taxonomy
of understudied countries
Abstract
- They have advanced a new framework to capture the diverse and unique institutional
context of the understudied economies
- It encompasses the configurational context encapsulated by state, financial markets,
human capital, social capital and corporate governance institution operating in these
regions
- It uses qualitative data
- Made from experts
- It offers a more up to data taxonomy of the national institutional context operating
throughout the global economy
- Varieties of institutional systems
Introduction
- National institutions have long been a central part of the international business theory
- They have witnessed the emergence of a more holistic theoretical foundations for
understanding the impact of institution diversity
- This literature straddles two primary frameworks
- Varieties of capitalism
§ This has been criticized for its lack of attention to the developing world
- National business systems
§ Is not well suited to depict many economic systems around the world
where different types of state and family capitalisms have recently
emerged.
- The first framework divides some advanced economies into liberal and coordinated
market economies
- They are based on the allocative mechanism of resources
§ Profits
§ Risk
- The second focuses on
