Abstract
Within the broad body of literature on comparative capitalism, business systems theory has certain strengths when compared to the somewhat more influential ‘varieties of capitalism’ approach. These would include a recognition that more than two types of capitalism might be associated with advanced and interlocking complementarities, and owing to the greater attention accorded to in-firm practices, most notably work and employment relations. Again, in contrast to the generally benign neglect of this topic by the traditional varieties of capitalism literature, business systems theory takes specific account of the role of the MNC, and the competing institutional ties that partially domicile it. However, a historic weakness of business systems theory has, arguably, been a lack of attention to systemic evolution and change, and the nature of systemic crises. This collection, edited by two of the major proponents of business systems theory, Glenn Morgan and Richard Whitley, looks at issues and trends in present-day, crisis-ridden capitalism from a perspective that examines both national and supranational dynamics and goes some way to redressing this imbalance, albeit that many contributors come from a starting point in other strands of the literature on comparative capitalism. Many of the contributions in this volume focus on pressures towards liberalization, and the extent to which this generates not so much uniform but diverse and volatile outcomes.
The opening chapter by Glenn Morgan and Peer Hull Kristensen argues that comparative institutional analysis initially concerned itself with the identification of national archetypes. Later, concerns moved on to supranational issues, agency and change. This was followed by a third, present phase, which takes more explicit account of structural changes in the global capitalist ecosystem. This would include the rise of key emerging markets, most notably the BRICS countries. Also of current concern are structural changes in the global economy and patterns of trade, most notably encompassing the decline of manufacturing – and stagnant and declining wages for all but the very rich – in liberal market economies, and the rise of Chinese manufacturing. Again, production chains and networks have become more complicated, while the rise of financial intermediaries has been a process characterized by great volatility. The following chapter, by Francesco Duina, compares and contrasts differing trading blocs. Trading blocs may encourage protection on regionalism or continental lines; however, they remain a diverse grouping, with considerable variation in legitimacy, capabilities and powers.
In Chapter 3, Ben Clift and Cornelia Wall explore the rise of what they call ‘economic patriotism’, which is more than simply protectionism. National self-interest may in some cases encourage the promotion of liberalization, most notably within national trade blocs, while economic patriotism does not simply represent a response to crisis. Inherent in liberal capitalism is a tension between national political organization and global markets. Finally, public backlashes have forced politicians in some contexts to be more assertive in seeking to impact on economic activities within and between states.
Colin Crouch revisits the categorization of national economies, according primary attention to the labour market policy regime. This includes bargaining coverage and coordination, dominant employment forms, regulation of employment conditions and social protection. A limitation of this chapter is its reliance on official statistics. Variations in state capabilities and informal regulation (other than family networks) are relatively neglected, as are issues such as the quality of job creation. This does not mean that the chapter does not bring to bear many pithy insights, which is a characteristic of Crouch’s work. I did particularly like his reiteration that some national institutional frameworks remain persistently less complementary to capitalist economic activity than others, and his reinjection of the work of Wallerstein on systemic interconnectedness into the literature on comparative capitalism.
In Chapter 5, Glenn Morgan and Michel Goyer explore the extent to which there is a global financial system; while the answer is an obvious ‘yes’, they argue that it is tempered by the interaction of different types of national capitalisms. Although politicians in some of the worst affected countries were quick to blame external markets, the very great diversity in outcomes would highlight the extent to which many of the problems stemmed from earlier policy (mis)choices. Financial globalization reproduces and may remould national capitalist archetypes, but in unpredictable ways. In the following chapter, Volkmar Gessner looks at the role of the law and relations in enabling global business transactions. Gessner argues that institutional support for the global economy is uneven and contingent. He suggests that businesses may increasingly prefer flexible to normative and institutional approaches in governing their affairs, but is ambivalent on what the consequences of this might be.
Marie Laure Djelic and Sigrid Quack look at the role of standards as a form of transnational governance generated and supported by the “structuration of transnational communities”. They examine the cases of the International Competition Network and the Creative Commons, the former a top-down intervention from elite public agencies, and the latter comprising grassroots action. Both these communities soon evolved, the former to become more open, and the latter towards more generic approaches. Hence, the differences in underlying philosophy of the two cases gradually decreased. Andrew Tylecote looks at the impact of technological change. He argues that the exhaustion of the previous Fordist technological paradigm, and the lack of establishment of a viable successor, makes for risk aversion in the financing of innovation. He points out that currently there has been a preference for the alternative of ‘going south’, shifting activities to lower-wage emerging markets. Only through state mediation is it likely that this pattern will be reversed.
In Chapter 9, Whitley argues that the opening of product markets to increased overseas competition, international business regulation that reduces the power of states to intervene in support of domestic firms, and capital market liberalization have all made for greater international integration of economic activities and resources. MNCs face a tension between the centralization of control and the need to access specific local capabilities. At the same time, transnational contracting remains reliant on uneven and patchy legal supports, discouraging deep mutual commitments outside well-developed trading blocs. If MNCs benefit from having strategic assets in a particular locale, they become more strongly subject to its own regulatory regime; however, they may offset such risks (particularly if national institutions are idiosyncratic) by hedging their bets through moving complementary assets in other countries.
Steven Casper looks at varieties of research systems, according particular attention to the differences between the United States and Germany. While the latter is changing, the role of the professor and an ecosystem of dependents remain very distinct from the US model centring on the external labour market and funding. However, the former has proven in the past capable of great technological innovations, even if the latter is commonly cast as the most innovative. In Chapter 11, Jennifer Bair and Matthew Mahutga look at different types of outsourcing. Most importantly, they highlight a trend in which the automotive majors in both the US and Germany concentrate on core competencies, relying on suppliers in different parts of the world through a process of ‘contingent collaboration’. In contrast, Japanese car firms historically relied on a great deal of domestic outsourcing that has persisted. In all instances, however, the automotive industry remains regionally clustered. In contrast, the garment industry is very much more spatially fragmented, although German (CME) firms maintain closer ties with offshore subsidiaries, while UK (LME) firms prefer more abstract contracts with independent suppliers.
In Chapter 12, Graeme Thompson compares and contrasts the relative fortunes of firms in the financial and non-financial sectors. While he correctly concludes that the former have quickly lapsed back to a business-as-usual model in the aftermath of the financial crisis, the latter have come under increasing strain. Although he is correct that the latter are vulnerable from hostile takeovers from short-termist investors, his assumption that the situation is worsened by accelerating technological change is somewhat more contestable (compare this with the arguments in the Tylecote chapter). Even more controversial is his suggestion that corporations be accorded the rights of full citizens, which would entail greater responsibilities: the recent US Supreme Court ruling on campaign funding highlights the extent to which such arguments can go seriously awry. These caveats notwithstanding, the chapter does have much value in providing a broad historical account on the changing fortunes of firms.
Ruth Aguilera and colleagues examine corporate governance in emerging markets. In contrast to the developed world, key emerging markets are characterized by differing reforms to orthodox marketization, with the aim of promoting growth in contexts where there is much information asymmetry between majority and minority shareholders. Differences in institutional arrangements do not simply reflect legal origin or ownership concentration, but a broad range of institutional features, informal conventions and choices by key actors. In the final chapter, Barbara Krug looks at the Chinese context. China is horizontally diverse in terms of organizations and markets, characterized by high levels of local autonomy for firms, and regional and local government agencies, as well as on account of the distinct role played by informal institutions.
In addition to the strengths of the individual chapters, a further advantage of this volume is that, in encompassing work beyond the narrow confines of business systems theory, it represents an important step towards a new theoretical synthesis, that would build on the emerging common ground between the different strands of the literature on comparative capitalism.