Abstract
AbstractThe chapter examines the key role played by legal frameworks in the construction of the political economy and its relationship to corporate strategy. Germany and the US have different legal systems. Drawing on an analysis of legal challenges associated with supplier network modernization within the automobile industry, the chapter demonstrates how German patterns of non‐market business coordination and highly regulatory laws channel firms towards patterns of corporate strategy associated with incremental innovation, or ‘diversified quality production’, and constrain against more radical innovation strategies. In the US, a more classical legal system combined with predominantly market‐based inter‐firm relations conduces towards radically innovative corporate strategies, but impinge on the establishment of incremental innovation patterns associated with diversified quality production.
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