The Insitutions of German Retailing within the German Variety of Capitalism

Friday, June 24, 2016: 10:45 AM-12:15 PM
233 Dwinelle (Dwinelle Hall)
Michael Wortmann, Berlin School of Economics and Law, Belin, Germany
The institutions that shape the retail sector in Germany frequently vary from those shaping its core industries, like car manufacturing or mechanical engineering. Comparative capitalism analyses have focussed on these core industries, describing them as a coherent and complementary set of institutions making Germany a template coordinated market economy.

The paper will give an overview of the historical and functional (O’Sullivan 2005; Streeck 2005) linkages and relationships of the institutions within the German grocery retail sector was well as with those of German core sectors. It will consider six institutional domains: the four domains used by Hall and Soskice (2001) plus two others: Town planning regulations, that also function as a substitute for sector-specific industrial policy, and the welfare state that shapes the supply of labour.

In the sphere of corporate governance, the frequently obscure retail sector institutions have developed independently from those of the core industries. Cooperatives are supplemented by GmbH & Co. KGs (a hybrid limited partnership with a limited liability company as general partner) and increasingly with various forms of Stiftung (foundation or trust). German institutions in the sphere of industrial relations formally are identical in all sectors, but in practice they are not appropriate to support workers in retailing as they do in core sectors. The conservative German welfare state and the male-breadwinner model, finally, support the supply of relatively cheap and docile female part-time labour.

Together with town planning regulations (BauNVO § 11 Abs. 3) that have, since the late 1960s, hampered the expansion of hypermarkets these institutions have complemented each other in supporting two types of retailers – former independent Mittelstandretailers’ cooperatives (Edeka and Rewe) and hard discount chains (Aldi and Lidl) – that both operate relatively small stores and are highly focused on low prices. These characteristics are linked to relatively uncoordinated supplier relations – quite different from those in core industries (the food industry clearly is not a German core sector).

These complementarities on the firm level are supplemented by other institutional complementarities that are important for the functioning of the “German Model”: The institutions that foster low consumer prices indirectly contribute to the global competitiveness of German core industries allowing them to pay relatively high (real) wages.

In addition, social stabilisation is enhanced by the conservative German welfare state and the male-breadwinner family structures it supports make marginal employment for many women acceptable. Finally, a high rate of vocational training, though frequently in the form of two-year courses and here mostly of symbolic value, formally give 80% of retail employees the esteemed status of Facharbeiter integrating them into German society.

By rejecting the assumption of national institutional homogeneity that sees non-core sectors as being regulated by only slightly modified and weaker versions of the institutions of core sectors and by analysing the specific characteristics of retail institutions the paper will make a contribution towards a better understanding of the institutional system of the German economy.