Institutional Variation and Coordination Patterns in CMEs: Swiss and German Corporate Governance in Comparison

Abstract

AbstractThis chapter explores differences in the coordination mechanisms of coordinated market economies (CMEs). The VoCs perspective argues that national institutions, which are linked through complementarities, shape company strategies and the resulting economic specialisations of countries. To examine these links, this chapter compares the two CMEs with the most similar product market specializations: Germany, the prototypical CME, and Switzerland. Both countries have comparative advantages in industries characterised by incremental innovation patterns and diversified quality production (DQP). The comparison shows that Germany and Switzerland have significantly different corporate governance frameworks. In several subsystems, Swiss corporate governance is much closer to patterns found in liberal market economies. The chapter argues that Swiss firms can pursue DQP strategies nonetheless thanks to two enabling conditions. First, the structure of the training system — based on the coordination capacities of employers — supports the development of firm- and industry-specific skills, and creates a qualified and specialised workforce for Swiss firms. Second, management enjoys protection from capital market pressures due to concentrated ownership patterns and the absence of a market for corporate control, which enables coordination for firms that wish to pursue DQP strategies. These features mean that despite differences between the Swiss and German institutional frameworks, Swiss firms can create the institutional conditions for DQP production at the industry and company levels. Coordination is more informal and voluntary in nature, making the corporate governance system more differentiated than its German counterpart. This implies that different institutional paths can be taken to achieve the same results. Hence, institutions can be coupled more loosely than the VoC perspective would expect.