Comparative Capitalism

After the fall of communism in the nineties a new comparative economics have emerged. The book An Introduction to Varieties of Capitalism was first detailed elaboration of this new framework by Peter A. Hall and David Soskice. Their aim is to provide different perspectives on a wide range of topics and “an effort to go beyond three perspectives on institutional variation that have dominated the study of comparative capitalism in the preceding thirty years”. It is a firm-centred analysis that focuses on the links (bridges) between individual entities of political economy. By this, the authors put “microeconomics into an analysis of the macroeconomy”. Furthermore, their approach has partly prescriptive and predictable value, in which they depart

Also, Hall and Soskice state that culture, institutions and organizations help to build relationship which firms need to resolve coordination problems. As already mentioned, firms are in the centre of the analysis and they have to deal with five spheres on which their success depends on. These spheres are namely: industrial relations; vocational training and education; corporate governance; inter-firm relations and relations with their own employees. Furthermore, depending on how firms deal with issues they face in these five spheres,they can be then distinguished into two ideal types of political economies: Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs).

In LMEs is coordination between various actors through hierarchies and competitive market arrangements based on prices, supply and demand for goods/services. Moreover, LMEs are characterized by highly formal contractual relationships and are very effective in coordinating the economic actors and establishing economic balance. LMEs are flexible and easily able to respond to changes in the economic environment. Furthermore, in LMEs firms rely on hierarchies and

“network monitoring based on the exchange of private information inside networks”). Relations between individual actors of the economy in CMEs are therefore closer which makes it more difficult to enforce fundamental changes, and the economic balance is here established through the process of strategic interaction between companies and other economic actors. In addition, firms in CMEs use other institutions as a support to coordinate their effort. Although the actors use the dichotomous division into LMEs and CMEs, they stress that firms can use other modifications of these two institutional forms. As the most important implication of the analysis, Hall and Soskice state that their approach implies the possibility to predict “systematic differences in corporate strategy across nations, and differences that parallel the overarching institutional structures of the political economy”. According to them the economic actors are coordinated by institutions (firm strategy follows institutional