Socio-Economic Review Advance Access published online on June 19, 2008
Socio-Economic Review, doi:10.1093/ser/mwn013
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Rethinking the link between labour market flexibility and corporate competitiveness: a critique of the institutionalist literature
Max Planck Institute for the Study of Societies, Cologne, Germany
Correspondence: herrmann{at}mpifg.de
Firms in the same political economy specialize in the pursuit of the same competitive strategy—so the argument of the competitiveness literature. The reason is that national institutions provide specific input factors which, in turn, are required for that strategy. To test this chain of reasoning, I identify the strategy of pharmaceutical firms in Germany, Italy, and the UK. Contrary to the expectations of the literature, I find that the firms in each economy pursue the same strategy variety. Seeking to understand how deviant firms can compete despite comparative institutional disadvantages, I analyse the importance of diverse labour-market institutions for the provision of particular skill types which, in turn, are needed for these strategies. These analyses show that firms succeed in circumventing institutional constraints at the national level by relying on two functionally equivalent institutions: open international labour markets and atypical contracts.
Key Words: corporate strategy • institutional political economy • skills