Embedded flexibility strategies and diversity within national institutional frameworks: How many flexibility profiles are in the German model?

Abstract

The varieties of capitalism approach (VoC) and the related research assume that firms adopt an internal flexibility profile that corresponds with the national institutional framework. Recent empirical studies, however, have found substantial diversity in realized firm-level strategies. This article investigates the actual distribution of flexibility practices in establishments. Latent class analysis revealed four flexibility profiles, including a dual profile that combines internal and external flexibility as well as a low flexibility profile that is characterized by an overall low importance of flexibility practices. The distribution points to significant diversity of flexibility profiles within the economy and emphasizes the role of industry and firm size as crucial factors for the externalization of flexibility and a growing dualism within the economy.Key words: model, internal and external flexibility, temporary agency work, outsourcing; latent class analysis (JEL: C38 L60 L86 O15 P10)1. IntroductionUnder the label German characteristics of the economy have been in the focus of several researchers (cf. Albert, 1992; Esser, Fach, & Simonis, 1980; Jurgens, Krzywdzinski, & Teipen, 2006). According to the varieties of capitalism approach (VoC) and the related literature, firm strategies are embedded in the national institutional context and the respective socio-economic environment (Hall & Soskice, 2001). In this and related research approaches, firms are expected to pursue internal flexibility practices (Streeck, 1991; Tiiselmann, 1996; cf. Whitley, 2007; Jackson & Deeg, 2008). Yet, especially in the employment system, considerable changes towards external flexibility patterns have taken place. Examples for prominent practices of external flexibility are temporary agency work (TAW) and outsourcing. In the 1990s both practices were introduced by a considerable share of firms. One might expect that this development has led to a substantial diversity of flexibility patterns within the economy.This paper aims to uncover different flexibility patterns in firms. In addition, it accounts for a possible tendency to replace or combine traditional practices of internal flexibility with novel external practices such as TAW and outsourcing. Thus, this paper contributes to the growing literature on strategic diversity within market economies (Herrmann, 2008; Crouch, Schroder, & Voelzkow, 2009; Lange, 2009; Barry & Nienhueser, 2010). It also relates to research that has emphasized the externalization of flexibility in general (Kalleberg, 2001) and a recently growing dualism on the labour market in particular (Palier & Thelen, 2010; Hassel, 2012).The debate arguably suffers from two major shortcomings. Firstly, there is a need to address the underlying segments of diversity conceptually. A conceptual approach of multi-level embeddedness of firms in national economies is proposed here. This approach emphasizes the influence of industry and firm size on particular flexibility profiles. Secondly, there is an empirical gap concerning firm-level data and respective analysis. Both are needed to assess firm-level diversity within the model.The research approach was guided by three main questions: (1) Are there different profiles in Germany that combine flexibility practices? (2) What implications can be drawn for the idea of a particular model of flexibility? (3) What role do particular segments play in the distribution of flexibility profiles?The analysis is based on a telephone survey data set of establishments in highly innovative industries collected in the second half of 2010.The argument of the article is structured as follows:Section 2: The general theoretical approach of the VoC literature is introduced and discussed under the aspect of flexibility on the firm level. …