Varieties of Capitalism and Institutional Comparative Advantage: A Test and Reinterpretation

Abstract

How do national-level institutions relate to national comparative advantages? To shed light on this question, which has important implications for our understanding of location-specific advantages in international business, we explore two different sets of hypotheses based on the comparative capitalisms literature. Applying fuzzy-set qualitative comparative analysis (fsQCA) to data from 14 industries in 22 countries across 9 years, we find that comparative advantages in industries with radical innovation emerge in specific configurations mixing coordinated and liberal institutional features. Institutional comparative advantage in industries with radical innovation may thus be based on the “beneficial constraints” (Streeck, 1997) of opposing institutional logics rather than on the self-reinforcing institutional coherence envisioned in much of the Varieties of Capitalism literature. We further find that coordinated market economies may have comparative advantages in industries with incremental innovation.