Automobile Supplier Network Organisation in East Germany: A Challenge to the German Model of Industrial Organisation

Abstract

Lufthansa's system of corporate governance, based on consensus decision-making and company guidance at the Vorstand(Executive Board) level, was institutionally adapted to the airline industry environment as long as technological change was essentially continuous, but placed Lufthansa at a comparative disadvantage in the 1980s when regulatory and technical changes in the industry required more radical shifts in the strategy and organisation of the company. After a failed attempt to develop the aviation equivalent of ‘diversified quality production’ à la BMW, Lufthansa's survival in the 1990s seemingly hinged on its ability to find alternative routes to Vorstand-level control of its operations. These developments are analysed using a theory of ‘comparative institutional advantage’.