Are Large, Globally Operating MNCs Undermining the Distinctiveness of Coordinated Market Economies? the Cases of Germany and Japan.

The Varieties of Capitalism (VoC) thesis holds that the way firms coordinate their relations with other economic actors is strongly shaped by the social institutional environment in which they are embedded and that this, in turn, moulds their comparative advantage. Furthermore, the various institutions are interdependent and complementary, in that institutions in one functional domain  influence outcomes in another.  Common problems thus are solved in institutionally distinctive ways by companies from different national origins.

Given institutional embeddedness and complementarity, national models then develop in path-dependent ways and are not vulnerable to far-reaching transformation due to either external and internal impacts. Hall and Soskice (2001) explicitly rule out that globalization would change modes of coordination and undermine distinctive models. To the contrary, adaptation to global influences would occur in path-dependent ways, and specialization in particular patterns of coordination and performance would even become more, rather than less pronounced. Institutional factors, lending competitive advantage, would be protected by firms and states. It follows from this view that multinational companies remain domestically embedded and do not become placelesss transnational companies, nor are they likely to fundamentally change their internal distribution of value and power.

The number of varieties of capitalisms identified varies between authors. However, the parsimonious dichotomous typology of Hall and Soskice (2001) - they distinguish between the types of Coordinated Market Economy (CME) and Liberal Market Economy (LME) – suffices as a starting position for this paper.

This paper argues that the main agents and drivers of economic and financial globalization, large MNCs, are beginning to undermine the distinctiveness particularly of coordinated market economies, by facilitating various processes of disembedding. Coordinated Market Economies (CMEs) differ from Liberal Market Economies (LMEs) in that they coordinate their activities strategically within networks, rather than via the market.