Institutional Change in the Era of Globalization: A Comparison of Corporate Pension Policies in Japan and the U.S.

Abstract

The relationship between globalization and institutional change is an issue frequently debated in economic geography and the social sciences. Some see firms, whatever their national culture or heritage, as facing common market forces that undermine self-determination and predict convergence towards a set of global best practice. Others are sceptical, arguing that different country-specific 'varieties of capitalism' have market distorting effects due to long-established differences in domestic institutions, resulting in path dependence that limits the strength of global incentives to converge at the firm-level. Others still are unconvinced by both these arguments. As such, this paper seeks to advance our understanding of globalization's impact on institutional change by adopting a firm-based perspective that tests whether the Japanese corporate pension experience parallels US corporate pension experiences. This allows for certain path dependence axioms to be tested. This paper finds that American and Japanese pension sponsors, despite clear manifestations of societal differences, have had similar private pension experiences. So, some of the predictions held by path dependence and the varieties of capitalism are not confirmed in this case. However, convergence towards a 'best practice' pension solution is also rejected. As such, the paper concludes that emerging concepts from the geography of finance may provide useful insights.