Coordinated Market Economies Research Articles

Collaboration in Military Technology Innovation: An Empirical Test of Varieties of Capitalism

What causes organizations to collaborate in the development of military technologies? In this article, we evaluate the response to this question offered by Hall and Soskice’s (2001) Varieties of Capitalism (VoC). VoC contends that the institutional configurations of modern capitalist economies push organizations towards country-specific behavioral patterns in terms of collaboration frequency and collaborative network characteristics. We extract these claims and apply them to the empirical setting of military technology patents. Towards this end, we construct an original dataset of military technology innovation and employ novel metrics of historical collaboration stickiness and collaborative network breadth. We find that VoC’s predictions regarding organization-level patterns of collaboration are largely unsupported by the data. However, the VoC prediction that organizations within coordinated-market economies will form collaborative relationships characterized by greater historical persistence than those formed within liberal-market economies holds up to empirical scrutiny.

Engaging firms: The global organisational field for corporate social responsibility and national varieties of capitalism

This article examines the relationship between national varieties of capitalism and firm engagement with the norms and best practices promoted within the global organisational field for corporate social responsibility (CSR). Using a content analysis of the CSR reports of US and European firms, we show that firms from the coordinated market economies (CME) of Europe engage more substantively with labour and human rights than their US counterparts that operate in a liberal market economy (LME). The environmental commitments of firms in both regions, however, are more developed than practices related to these social issues. These findings support the view that CSR is more developed in CMEs than LMEs, but limit this support to social CSR issues. We posit that firms’ higher levels of engagement with environmental CSR likely reflect the extent to which environmental norms have become embedded in global markets rather than how CSR is promoted by national capitalist systems.

Liberalization by Exhaustion: Transformative Change in the German Welfare State and Vocational Training System*

Abstract This article argues that two core domains of the German coordinated market economy have undergone transformative institutional change: the welfare stale and the vocational training system. We argue that this process is best described as a process of liberalization resulting from the exhaustion of traditional institutions. Exhaustion describes a mechanism of institutional change in which endogenous negative feedback effects, caused by the over extension of resources, lead to a transformation of the formerly symmetrical and consensual relationship between the state, employers and unions into an asymmetrical and conflictual one. The article contributes to the analysis of institutional change and applies the comparative method of the “parallel demonstration of theory”.

Similarity or Variation? Employee Representation and Consultation Approaches amongst Liberal Market Economy Multinationals

This paper engages with the varieties of capitalism literature to investigate the employee representation and consultation approaches of liberal market economy multinational companies (MNCs), specifically Australian, British and US MNCs operating in Australia. While the literature would suggest commonality amongst these MNCs, the paper considers whether the evidence points to similarity or variation amongst liberal market headquartered MNCs. The findings contribute to filling a recognized empirical gap on MNC employment relations practice in Australia and to a better understanding of within category varieties of capitalism similarity and variation. Drawing on survey data from MNCs operating in Australia, the results demonstrated that UK-owned MNCs were the least likely to report collective structures of employee representation. Moreover, it was found that Australian MNCs were the most likely to engage in collective forms of employee representation and made less use of direct consultative mechanisms relative to their British and US counterparts. In spite of the concerted individualization of the employment relations domain over previous decades, Australian MNCs appear to have upheld more long-standing national institutional arrangements with respect to engaging with employees on a collective basis. This varies from British and US MNC approaches which denotes that our results display within category deviation in the variety of capitalism liberal market economy typology. Just as Hall and Soskice described their seminal work on liberal market economy (LME) and coordinated market economy (CME) categories as a “work-in-progress” (2001: 2), we too suggest that Australia’s evolution in the LME category, and more specifically its industrial relations system development, and the consequences for employment relations practices of its domestic MNCs, may be a work-in-progress.

Sustainable Varieties of Capitalism? The Greening of Steel Work in Brazil and Germany

The aim of this article is to investigate the sustainability agenda and its implications for employment and managerial practices within different institutional contexts. The article uses the comparative capitalisms literature and, in particular, the Varieties of Capitalism framework to examine how multinational corporations (MNCs) can exploit different institutional contexts to achieve competitive advantages. We explore one multinational steel company’s i.e. SteelCo.AG varied responses to the emerging constraints of the sustainability agenda in Germany, as an example of a Coordinated Market Economy, and Brazil, as an example of a Hierarchical Market Economy. In particular, we focus on evidence concerning training, environmental practices and policies in the different company sites. We demonstrate how different institutional contexts favour different corporate strategies from an approach that exploits negative institutional complementarities, such as the “low-skill/low-cost trap,” to one that benefits from strong institutional coherence facilitating skills formation and innovation in response to environ-mental legislation. Our analysis argues for the importance of incorporating the green agenda as a marker of difference into the existing VoC framework. This allows for nuanced readings of unstable institutional complementarities in terms of operational, managerial and social innovation in different institutional contexts – with such analyses essential for understanding workers’ experiences of employment and work. Our contribution to the extant literature on the employment relationship, within the context of VoC analysis, therefore offers empirical material on understandings of employment relations within the HME category, as a new type within the VoC framework, through our discussion of a multinational’s activities in Brazil. This also allows us to focus on the way companies and other actors’ impact upon institutional frameworks and the distribution of power between different actors within particular contexts, thereby addressing recent discussions of the stability and homogeneity of institutional arrangements.

Employee Priorities in Insolvency Proceedings and Wage Guarantees: A Critical Assessment

In many countries, insolvency regimes alter the distribution of debtors’ assets among creditors, by way of creditor priorities, rules on claw-back actions and on set-off rights. This distributive function of insolvency rules is particularly clear having regard creditor priorities. Many jurisdictions, indeed, in order to protect specific classes of creditors, curb pre-insolvency entitlements deriving from private bargains between a debtor and her creditors. The political decision on whether prioritising certain claims or fully respecting pre-insolvency entitlements reflects the hierarchy of interests that has prevailed in a specific country and the regulatory strategies adopted by policy-makers. Employee priorities are telling examples of these distributive rules. Many jurisdictions, indeed, prioritise employees’ claims for unpaid wages and security payments over claims of other creditors. Employees, however, could also be protected by way of security mechanisms, with the consequence that the impact of employee priorities depends on their interplay with such social security schemes. Employee priorities, in particular, could either equilibrating weaknesses of social security schemes or reinforcing their impact. This work will assess this interplay in a sample of three E.U. Member States: France, U.K. and Germany. These States, according to the traditional ‘varieties of capitalism’ approach, are classified as either ‘liberal market economies’ (U.K.) or ‘coordinated market economies’ (Germany and France). Along this distinction, we expect that the U.K. does not accept insolvency priorities and that Germany and France are open to adopt rules that curb free market entitlements. The current institutional settings ant their historical development only partially reflect this expectation.

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

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.

Financialisation of wages and works councils’ policy: Profit sharing in the German metalworking and electrical engineering industries

IntroductionFinancialisation is a big challenge for German works councils. The growing importance of the markets and the reorientation of corporate governance by serving shareholder interests, introducing short-term profit targets and focusing on a profitable core business can hardly be reconciled with long-term growth strategies and high employment stability that have been identified as main features of the German coordinated market economy and that have traditionally been supported by works councils on plant level (Hall & Soskice, 2001). The financial concept of control (Fligstein, 1990) affects works councils' policy by putting pressure on employment and labour standards (Dorre, 2009; Sauer, 2013). In a financialised environment the works councils have to fight actively for the safeguarding of jobs and the preservation of labour standards in the firms. This is one of the main reasons for the spread of local alliances of work during the last decade (Rehder, 2006).Profit sharing is an important aspect of financialisation (Breisig, 2009). For some years now, press and television reports in Germany on high profit-sharing bonuses for employees covered by collective agreements have been a regular feature of the spring months. Besides large companies in the chemical industry and banking, these reports tend to focus particularly on the large German car manufacturers. According to Bispinck (2011), the bonuses paid in 2010 and 2011 are the main reasons why the reduction in the wage drift (i.e. the difference between the wages actually paid and the collectively agreed rates), which had begun as long ago as the 1990s, has now come to an end and actual pay in Germany has for the first time risen more sharply than collectively agreed rates. At the same time, profit sharing is one of the main issues of works councils' wage policy in the German system of labour relations, based on the legal right of codetermination in case the company wants to change given standards of fringe benefits and wages paid by the companies above the level of the collective bargaining agreements. In most of the industries, among them the metalworking and electrical engineering industry, profit sharing is paid on top of agreed wages in collective bargaining.Given the problems of financialisation and the central role of works councils in plant level regulation of profit sharing, this paper aims to analyse policy and practice of the works councils in implementing and regulating profit sharing in the companies. There are four questions that will be tackled: First, how do the main patterns of regulation of profit sharing in the plants look like? Second, in how far is profit sharing coupled with the broader trend of financialisation of corporate governance in the companies, and what are the rationales used to legitimise profit sharing in the plants? Third, what are the positions and strategies developed by works councils with respect to profit sharing? And fourth, what are the effects of profit sharing both on the development of wages and on the position of works councils in plant-level labour relations?The analysis is based on the results of a research project financed by the HansBockler-Foundation in the years 2012 and 2013 in the course of which we made use of three methods. First, we evaluated various sources of data on profit sharing like the Socio-economic Panel (SOEP) and the IAB Company Panel in order to get an im- pression of the spread and dynamics of profit sharing. Second, we surveyed and analysed the agreements on profit sharing in the forty largest firms of the metalworking industry as far as they exist. In this way, we could identify patterns of plant level regulation of profit sharing with respect to the definition of profits, the entitlements of employees or procedures of codetermination. In addition, third, nine case studies in large companies of the metalworking industry were undertaken. The cases have been selected in accordance with the metalworkers' union IG Metall and were to represent practices of profit sharing, mainly along the value chains of the automotive industry where profit sharing is most widespread. …

The Impact of Corporate Sustainability Performance on Information Asymmetry in European Capital Markets

This paper empirically investigates whether corporate sustainability performance (CSP) affects information asymmetry (IA) for European firms listed in the STOXX Europe 600 from 2002 to 2013. We find a significantly negative effect of CSP on IA. By exploiting institutional differences between the European countries, we determine that the negative effect of CSP on IA is more pronounced in liberal market economies compared to coordinated market economies, thus pointing to a substitutive effect of CSP and economic coordination. Further, the impact is greater in countries with stricter disclosure requirements. In such countries, there is generally greater appetite for company-specific information. Disclosure requirements fulfil this need only partially, though, since they concentrate on the corporate governance dimension of corporate sustainability. Hence, especially information on the social pillar matters to investors in a complementary manner and drives the overall effect. Our study contributes to the literature on the positive capital market effects of CSP in showing the proposed effect in European capital markets and the institutional determinants of its strength.

Expressive Shareholder Democracy: A Multilevel Study of Shareholder Dissent in 15 Western European Countries

AbstractThis study develops an expressive understanding of shareholder dissent. In this view, shareholder dissent is not only about the voting outcomes of proposals put to the vote, but also expresses an evaluation of the firm's corporate governance set‐up. We hypothesize that shareholder dissent expresses an agency theoretical evaluation of corporate governance, but that the degree to which the capitalist system of a country is a coordinated market economy (CME) leads shareholders to evaluate corporate governance more in team production terms. We test our theoretical model using multilevel techniques on a sample of 12,513 proposals voted on in 717 firms listed in 15 Western European countries and find support for our predictions. Our study not only contributes to a better understanding of the corporate governance role of shareholder dissent, but also shows that what shareholders express through dissent differs across national contexts.

Trade union density and social expenditure: a longitudinal analysis of policy feedback effects in OECD countries, 1980–2010

ABSTRACTTwo causal mechanisms have been invoked to explain the positive correlation between union membership and social expenditure. Unions try to influence policy, but they are also more successful in mobilizing members in economic systems in which actors engage in co-ordinated strategic interaction. Applying insights from the policy feedback and comparative capitalism literatures, our analysis indicates that union density is a determinant of social expenditure. A strong policy feedback effect is also present whereby social expenditure has a positive effect on union density. We find a positive effect of union density on social expenditure in co-ordinated market economies, but not in liberal market economies. We discuss the implications of these findings for citizens’ capacity to influence policy in varied contexts and for the ‘varieties of capitalism’ literature, and we close with some speculation about the implications of these findings in the current economic downturn.

The hidden cost of consensus: How coordinated market economies insulate politics

Previous research has argued that while elections motivate parties to respond to public sentiment, global economic ties reduce this responsiveness by redirecting elites from their electorates and toward market actors. In this study, we extend this work to examine the influence of globalization on party responsiveness across different forms of production-welfare regimes. Coordinated market economies (CMEs) accommodate economic interdependence by striking corporatist bargains between political elites, trade union representatives, and organized business. Although these consensual relations facilitate economic stability, they also insulate policymakers from voters. Analyses that pair public opinion and party positions across 18 advanced capitalist democracies from 1977 to 2009 show that while CMEs permit political elites a wide room to maneuver under economic globalization, political parties competing in these organized market economies do not respond to public opinion. This is the case regardless of level of exposure to world markets. In CMEs, party position-taking is uninfluenced by external factors (economic globalization) and domestic factors (public opinion) alike. By examining the consequences for party behavior, our results raise questions about the virtues of coordinated market capitalism for the health of representative democracy.

Varieties of Capitalism and Fiscal Stimulus, 2008–2010

Abstract This paper tests the Varieties of Capitalism (VoC) framework to explain variation in fiscal stimulus measures across OECD countries in response to the 2008-2010 economic crisis. Following Soskice (2007), I argue that coordinated market economies are less flexible with fiscal policy than liberal market economies. Multivariate analysis across 23 OECD countries demonstrates that VoC is more powerful than three competing theories: fiscal institutions, which hypothesizes more stimulus in countries with less restrictive budgetary rules; debt credibility, which hypothesizes more stimulus in less indebted countries; and political partisanship, which hypothesizes more stimulus in countries governed by the left.

Institutions and diversification: Related versus unrelated diversification in a varieties of capitalism framework

The varieties of capitalism literature has drawn little attention to industrial renewal and diversification, while the related diversification literature has neglected the institutional dimension of industrial change. Bringing together both literatures, the paper proposes that institutions have an impact on the direction of the diversification process, in particular on whether countries gain a comparative advantage in new sectors that are close or far from what is already part of their existing industrial structure. We investigate the diversification process in 23 developed countries by means of detailed product trade data in the period 1995–2010. Our results show that relatedness is a stronger driver of diversification into new products in coordinated market economies, while liberal market economies show a higher probability to move in more unrelated industries: their overarching institutional framework gives countries more freedom to make a jump in their industrial evolution. In particular, we found that the role of relatedness as driver of diversification into new sectors is stronger in the presence of institutions that focus more on ‘non-market’ coordination in the domains of labor relations, corporate governance relations, product market relations, and inter-firm relations.

Servants for the Knowledge-Based Economy? The Political Economy of Domestic Services in Europe

Over the past two decades, many countries across Europe have set up schemes to subsidize the demand for domestic services. This article suggests that these policy developments reflect a new economic strategy linked to the development of the service-based economy in coordinated market economies, as well as a new ideological orientation regarding the public sector and the role of the State in providing welfare. Specifically, the article aims to contribute to the analysis of the transformations of the role of the State, of its modes and aims of intervention, and of the social consequences of these transformations in two fields: on labor markets on the one hand, and on welfare policy on the other. In doing so, this article highlights the ways in which state policies, rather than simple market forces, are structuring new inequalities and new dualisms, and addresses the issue of the fate of the low skilled in today’s knowledge-based economy.

In Search of the Latin American Variety of Capitalism

In Search of the Latin American Variety of Capitalism* (SCHNEIDER, Ben Ross. Hierarchical Capitalism in Latin America: Business, Labor, and the Challenges of Equitable Development. Cambridge: Cambridge University Press, 2013)The classical endeavor of comparing national models of capitalism has fortunately returned to the center of political science. Its resurgence can be attributed to the publication of Varieties of Capitalism (HALL and SOSKICE, 2001) and the multiple debates triggered by this book. Almost a decade later, Ben Ross Schneider has published Hierarchical Capitalism in Latin America, the first comprehensive and systematic effort to apply the framework of V°C to Latin America. This inspiring book feeds the growing community of scholars who are calling for a renovation of the traditionally vibrant but recently stagnant field of Latin American political economy (LUNA, MURILLO, and SCHRANK, 2014). The book presents new arguments and empirical evidence to support the critical diagnosis that if we do not strengthen the study of business actors and how politics and markets are mutually shaped, we will continue to miss extremely important political processes and outcomes in this region.Schneider's book utilizes institutional complementarities-V°C's core and most elegant analytical device-to build the novel concept of hierarchical market economy (HME), which, he argues, defines the distinctive nature of capitalism in Latin America. Four elements characterize HMEs: diversified business groups, multinational corporations (MNCs), segmented labor markets, and low levels of education and vocational skills. The book dedicates one chapter to each of the four dimensions of HMEs. These mutually reinforcing attributes result in a tight equilibrium that has proved resilient over time, even through the regional transition from a state-led import substitution industrialization model to a post-neoliberal setting.Among many institutional complementarities, the continued prominence of MNCs in Latin America-and their practice of importing the innovation they generate in their home countries-increases incentives for domestically-owned diversified business groups to specialize in lower-technology sectors, which in turn reduces these grupos' demand for skilled labor. The low level of skills in these economies further strengthens the disincentives of both domestic business groups and MNCs to conduct higher-technology investment. As a result, Latin America's comparative institutional advantage lies in simple manufacturing and commodities, which contrasts with both the radical and incremental types of innovation enabled by the institutions of Liberal Market Economies (LME) and Coordinated Market Economies (CME), respectively.In its extension of the V°C framework to the developing world, Hierarchical Capitalism in Latin America begins to address, within the limits of this region, the shortcomings that characterize the original framework, i.e., its sidelining of the state's role in contrasting types of capitalism, its apolitical character, and its inattention to history. By reflecting on how these three dimensions play out in defining HMEs, Schneider's book has the additional benefit of suggesting to scholars studying industrialized nations how to overcome V°C's limitations in understanding the origins and changes of LMEs and CMEs over time.Probably only those who face the rather lonely challenge of conducting research on the interaction of business and politics in Latin America-within an academic community where other interest groups such as social movements and labor receive significantly higher levels of attention-will be able to fully appreciate the achievements of this book. The breadth of case knowledge shown in a work that presents original research covering six countries (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) is impressive. It is these very same scholars who will need to conduct more fine-tuned readings of Schneider's book in progressing to the next stages of research that this work may motivate. …

Reporting on sustainability and HRM: a comparative study of sustainability reporting practices by the world's largest companies

As a response to the growing public awareness on the importance of organisational contributions to sustainable development, there is an increased incentive for corporations to report on their sustainability activities. In parallel with this has been the development of ‘Sustainable HRM’ which embraces a growing body of practitioner and academic literature connecting the notions of corporate sustainability to HRM. The aim of this article is to analyse corporate sustainability reporting amongst the world's largest companies and to assess the HRM aspects of sustainability within these reports in comparison to environmental aspects of sustainable management and whether organisational attributes – principally country-of-origin – influences the reporting of such practices. A focus in this article is the extent to which the reporting of various aspects of sustainability may reflect dominant models of corporate governance in the country in which a company is headquartered. The findings suggest, first and against expectations, that the overall disclosure on HRM-related performance is not lower than that on environmental performance. Second, companies report more on their internal workforce compared to their external workforce. Finally, international differences, in particular those between companies headquartered in liberal market economies and coordinated market economies, are not as apparent as expected.

Small States, Nationalism and Institutional Capacities: An Explanation of the Difference in Response of Ireland and Denmark to the Financial Crisis

AbstractThis paper uses theories of small states (e.g. Katzenstein) and nationalism (e.g. Gellner) to explain why Denmark and Ireland responded to the 2008 financial crisis in different ways. In Denmark, a coordinated market economy with considerable corporatism and state intervention, the private sector shouldered much of the financial burden for rescuing the banking sector. In Ireland, a liberal market economy without much corporatism or state intervention, the state shouldered the burden. The difference stems in large part from the fact that Denmark had comparatively thick institutions and a strong sense of nationalism whereas Ireland did not. Lessons for the theories of small states and nationalism are explored.

Formal independence of regulatory agencies andVarieties ofCapitalism: A case of institutional complementarity?

AbstractTheVarieties ofCapitalism literature posits that national economic institutions reflect the mode of coordination of a country's market actors. Despite the importance of this claim and a rich literature on the emergence of regulatory capitalism, few studies test such prediction forIndependentRegulatoryAgencies (IRAs). This article connects the two fields of research by analysing the impact of economic coordination on the formal independence ofIRAs. The results show that, beyond issues of credible commitment and policy stability, the collective action capacity of market actors matters. In particular, regulators in Coordinated Market Economies enjoy less independence than in Liberal Market Economies, while intermediate regimes grantIRAsthe least autonomy. The policy implications are nontrivial. Similar to other macroeconomic institutions, inappropriate combinations of economic coordination andIRAindependence may engenderPareto‐suboptimal regulatory solutions. In such cases, policymakers should reconsider the rules governing national regulators.

The Privatization and Marketization of Pensions in Europe: A Double Transformation Facing the Crisis

In response to the demographic challenges and fiscal constraints, many European welfare states have moved toward the privatization and marketization of pensions in order to improve their financial sustainability. The privatization of retirement income responsibility has led to a shift from dominantly public pensions to a multi‐pillar architecture with growing private pillars composed of personal, firm‐based, or collectively negotiated pension arrangements. At the same time, marketization has led to the introduction and expansion of prefunded pension savings based on financial investments as well as stronger reliance of market‐logic principles in the remaining public pay‐as‐you‐go (PAYG) pensions. However, there are also important cross‐national variations in the speed, scope, and structural outcome of the privatization and marketization of European pension systems. Liberal market economies, but also some coordinated market economies (the Netherlands and Switzerland) as well as the Nordic countries have embraced multi‐pillar strategies earlier and more widely, while the Bismarckian pensions systems and the post‐socialist transition countries of Eastern Europe have been belated converts. The recent financial market and economic crisis, however, indicates that the double transformation may entail short‐term problems and long‐term uncertainties about the social and political sustainability of these privatized and marketized multi‐pillar strategies.