BOOK REVIEWS

Publication Date01 Sep 2006
DOIhttp://doi.org/10.1111/j.1467-8543.2006.00513.x
British Journal of Industrial Relations
44:3 September 2006 0007– 1080 pp. 569– 595
© Blackwell Publishing Ltd/London School of Economics 2006. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Blackwell Publishing Ltd.Oxford, UKBJIRBritish Journal of Industrial Relations0007-1080Blackwell Publishing Ltd/London School of Economics 2006September 2006443569595Book
Reviews
Book ReviewsBritish Journal of Industrial Relations
BOOK REVIEWS
Comparing Capitalism: Recent Debates
Capitalist Diversity and Change: Recombinant Governance and Institutional
Entrepreneurs
by Colin Crouch. Oxford University Press, Oxford, 2005, 184 pp.,
ISBN 0 19 928647 7, £50.00.
Varieties of Capitalism, Varieties of Approaches
edited by David Coates. Palgrave
Macmillan, Basingstoke, UK, 2005, xi
+
300 pp., ISBN 1 4039 1886 4, £60.00.
Introduction
In recent years, much of the comparative political economy literature has become
channeled into a debate centred on national varieties of capitalism or what might be
called comparative capitalisms (CC). Unlike in neoclassical economics, this literature
draws on institutional economics and economic sociology to understand efficiency in
terms of social embeddedness and the strategic complementarities among institutional
elements, which led to the argument that successful capitalism came in more than one
variety (Aoki 1984; Milgrom and Roberts 1994; Sorge and Warner 1986). This liter-
ature shares common concerns regarding the nature and extent of diverse forms of
capitalism, their relative economic strengths and weaknesses, and the future of insti-
tutional diversity under conditions of growing global economic integration. Best
known among them today is arguably the
varieties of capitalism
framework of Hall
and Soskice (2001), which takes a firm-centred approach to characterizing institutions
in terms of incentives for non-market based forms of co-ordination. However, the
literature is large and diverse, involving several alternative frameworks such as the
social systems of production literature (Hollingsworth and Boyer 1997), various ver-
sions of regulation theory (Amable 2003) and the national business systems approach
(Whitley 1999).
The CC literature has made several notable and interrelated contributions (see
review in Jackson and Deeg 2006):
Typologies
. A number of typologies have been developed to compare and con-
trast political economic institutions and how these shape the behaviour of eco-
nomic actors. At the parsimonious end, some typologies rely on bipolar ideal
types such as liberal market economies (LME) versus co-ordinated market econ-
omies (CME) (Hall and Soskice 2001). Other typologies offer up to six distinct
570
British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2006.
configurations (Whitley 1999), or view each national capitalism as unique, but
comparable, in terms of generic modes of governance (Hollingsworth and Boyer
1997).
Comparative institutional advantage
. Different types of institutions are argued to
endow national economies with distinctive logics of economic action and sup-
port particular patterns of relations among economic actors and production
strategies by firms. In short, comparative institutional advantages exist for differ-
ent types of economic activity, which may explain aggregate national economic
outcomes (e.g. growth, inequality) or more specific performance outcomes (e.g.
patterns of technical innovation) (Aoki 2001; Hall and Soskice 2001; Whitley
1999).
Complementarities
. In linking institutional typologies to comparative advantage,
the overall configurations of institutions are viewed as being interdependent. Cer-
tain combinations of institutions ‘work better’ than others — an idea formalized
in the concept of complementarity. Complementarity may be defined as situations
where the difference in utility between two alternative institutions
U
(
x
)
U
(
x
)
increases for all actors in the domain X, when
z
rather than
z
prevails in domain
Z, and vice versa. If conditions known as ‘super-modularity’ exist, then
x
and
z
(as well as
x
and
z
) complement each other and constitute alternative equilibrium
combinations (Aoki 2001; Milgrom and Roberts 1990).
Path dependence
. Finally, this literature provides a framework for predicting and
explaining how nations respond to economic shocks and exogenous forces such as
globalization or European integration. Theories of path dependence have been
used to hypothesize how institutional change may be constrained by the comple-
mentarities between institutions (e.g. Vogel 2003).
Despite the rapid development of CC literature, a growing dissatisfaction has been
expressed with regard to some of its basic tenets. Much dissatisfaction has been
expressed with regard to the use of bipolar typologies such as the LME versus CME
distinction. The category of co-ordinated market economies, in particular, is viewed
to mask important differences in the ways in which different economies are co-
ordinated, such as between Germany and Japan. It also makes strong claims that only
two types of capitalism display systematic institutional complementarities, thus plac-
ing a large number of countries, such as France, as incoherent ‘mixed cases’ with
consequent inefficiencies.
A further and increasingly recognized deficiency of this literature is its relatively
static analysis. Most literature has focused on explicating particular institutional
configurations in order to generate a basis for cross-national comparison. But in the
last decade the institutional foundations of national economies have begun to shift in
many ways that are still not fully understood. The early CC literature was not well
suited to explain institutional change. The emphasis was largely on comparative
statistics and understanding how institutions acted as constraints on economic agents,
rather than the origins or evolution of distinct national models. The exploration of
complementarities within different national models often relied on rather stylized
description of those models, where each element of the model seemed to reinforce all
the other elements. The concept of complementarities suggested powerful arguments
against international convergence, as existing institutions reinforced one another and
piecemeal borrowing of ‘best practices’ is likely to decrease efficiency. On the whole,
it seems this literature largely portrayed institutional change to be modest evolution-
ary change that leaves national distinctiveness intact.

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