International management: An institutional perspective
International management: An institutional perspective

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International management: An institutional perspective

Comparative advantage of nations

Proponents of the varieties of capitalism approach argue that different configurations of institutions at the national level lead to different kinds of comparative advantage relative to other countries and that this in turn will tend to lead to specialisation in different kinds of economic activities, products and services.

For example, national systems which support long-term employment, high training (and hence skill levels) in firms and a long-term investor orientation, may be more supportive of the kind of incremental innovation approaches required to maintain competitiveness in the production of capital goods such as machine tools, factory equipment and consumer durables. National systems based on shareholder capitalism, with efficient employment markets and high labour mobility, and a focus on current profitability, may be more supportive of radical innovation. This in turn may bestow advantages in fast-moving technology sectors.

Hall and Soskice (2001) distinguish between liberal market and coordinated market approaches to economic organisation. In the former, coordination between firms is primarily managed between markets: employment markets, capital markets and markets for goods and services. In the latter, formal arrangements for coordination between firms (and other stakeholders) at the sectoral and national levels (underpinned by regulation) reduce the dependence on markets to coordinate firms’ activities.

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