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

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International management: An institutional perspective

A deeper look at the varieties of capitalism approach

Our brief introduction to the varieties of capitalism approach set out the three core ideas. We have summarised in a fairly simple way some quite complex issues. In writing this summary we have drawn heavily on a book by Peter Hall and David Soskice ‘Varieties of capitalism: the institutional foundations of comparative advantage’ (2001).

The table below sets out the principle differences Soskice and Hall describe between liberal market and coordinated market economies.

Table 1 The characteristics of different market economies

Liberal market economyCoordinated market economy
Firms coordinate mostly through marketsIndustry associations and cross-ownership are influential
Employment relationship mostly mediated through marketsEmployment security and conditions highly regulated
Individual/workplace level pay negotiationSector level pay bargaining
Strong emphasis on rights of shareholdersEmphasis on rights of multiple stakeholders
Finance mostly raised through marketsFinance less dependent on markets
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