A lecture delivered on Febrary 26, 2013, at Indiana University in Bloomington, Indiana.

1. Varieties of Capitalism,
Competitiveness, and Labor
Jeffrey Hart
February 26, 2013

2. Books on Varieties of
Capitalism
 Andrew Shonfeld, Modern Capitalism (1966)
 John Zysman, Government, Markets and Growth (1978)
 Peter Katzenstein, ed., Between Power and Plenty
(1978)
 Peter Gourevitch, Politics in Hard Times (1986)
 Herbert Kitschelt, Continuity and Change in
Contemporary Capitalism (1999)
 Peter Hall and David Soskice, eds., Varieties of
Capitalism (2001)
 Kathleen Thelen, How Institutions Evolve (2004)

3. My books on this topic:
 Rival Capitalists (1992)
 Managing New Industry Creation (2002)
 Technology, Television, and Competition (2004)

4. Key Questions in Varieties of
Capitalism Literature
 Identifying variance in the organization of
capitalist systems
 Explaining the variance
 Demonstrating the impact of variance on
important outcomes (such as international
competitiveness)

5. Examples of Types of Variance
 Strong vs. weak states
 Countries with centralized governments and relatively weak
business and labor are called “strong states” (e.g. Japan and
France)
 Coordinated vs. liberal market economies
 coordinated market economies may also be called “corporatist”
or “neo-corporatist”
 coordination is sometimes called concertation or tripartite
(government, business, and labor) concertation
 Germany and the Scandinavian countries are in this group
 In my work, I use the concept of “state-societal
arrangements”

6. State-Societal Arrangements

7. Typical Causal Model
External shocks
Variance in
types of capitalism
Variance in
Outcomes

8. Key questions in the study of
international competiveness:
 What is the role of varieties of capitalism relative to
other factors in industrial growth and international
competitiveness?
 Is it possible for governments to promote the growth
and development of high-tech industries?
 If so, when and where, and under what conditions?

9. Link between varieties of
capitalism and industrial policies
 The types of industrial policies available to the
government of a given country depend strongly on the
variety of capitalism
 In general, liberal market economies tend to avoid
industrial policies other than those associated with
macroeconomic policies (spending, taxation, and
subsidization of infrastructures and R&D)
 Coordinated market economies and strong states
have a wider array of options for industrial policies

10. Industrial Policies
 Includes a wide variety of policy
instruments that are intended to advance
the international competitiveness of
“national champion” firms, such as:
 Investment subsidies
 Public R&D expenditures
 Science parks and free trade zones
 Export incentives

11. Causal Argument of Rival
Capitalists
Possible
Feedback
Loop

12. What is an industry?
 A set of firms that compete in the same market
for goods and/or services
 May or may not include upstream/downstream
activities
 Boundaries with other industries may be fuzzy
and may change over time
 Often self-identified via lobbying efforts and the
formation of industry associations

13. Sectors vs. Industries
 Sectors are at a higher level of aggregation
 In economics, primary=extractive,
secondary=manufacturing, tertiary=services
 capital-intensive vs. labor-intensive
 import competing vs. noncompeting
 Industry studies provide more information
about differences within “sectors” or
similarities across “sectors”

14. Key industry variables:
 Size, growth rate, market share, no.
employed, exports, imports, etc.
 Concentration of ownership/control
 Regulated vs. self-regulated vs. unregulated
 High-tech vs. low-tech
 Kitschelt: loosely vs. tightly coupled; simple
vs. complex; specific vs. general assets
 Extent or type of globalization

15. Methods
 Collection of empirical and especially
quantitative data on key variables
 Elite interviews with managers and public
policy officials
 Site visits to major facilities
 Archival research

16. Global
Market
Share Data

17. Figure 4. Production Shares of TFT LCDs by Location,
1993-2005, in percentages
Source: Thomas Murtha, Stefanie Lenway and Jeffrey Hart, Managing New
Industry Creation (Stanford, Calif.: Stanford University Press, 2001) updated.

18. Generations 1-7 of Glass Substrates
Source: Samsung Corning Precision,
http://www.scp.samsung.com/content/en/product/generation.asp.

19. Generation 7-8 TFT LCD Plant
in Paju, S. Korea (LG)

20. Tianma LCD Factory in
Shanghai (formerly SVA-NEC)

21. Theoretical approaches:
 Neoclassical (industrial policy is bad and
counterproductive)
 Regulatory State (regulation necessary for
markets to work properly, but industrial
policy is still bad)
 Developmental State (industrial policy is
useful for catching up)
 Competition State (industrial policy has to
take globalization into account)

22. The Developmental State vs. the
Regulatory State
Developmental Regulatory
Type of Elite, Insulated Transparent,
Bureaucracy Accountable
Support for New Extensive Limited
Industries
Use of State- Extensive Limited
Controlled Banks
Stance w/regard Tutellary Regulatory
to Private Firms

23. The Impact of Globalization on
National Economic Strategies
 Greater volatility in global financial markets
requires changes in financial market regulations
in all countries
 To remain internationally competitive, firms have
adopted global production strategies
 Even regulatory states have to compete for
inflows of foreign direct investment
 Developmental states cannot succeed with pure
national champion strategies

24. Example of GM in China
 2010 sales of 2.3 million vehicles in China
 World-class production facilities (joint
venture with SAIC)
 Modified Buick as a chauffeur-driven
luxury car
 Not competing with low-end national
champions like Geely

25. Example of LG LCD Production
 Joint venture with Philips
 Only major competitors
globally are Samsung and
Sharp
 Production facilities use best
materials and tools from global
suppliers (e.g. Corning and
Canon)
 Have to worry about China

26. Important findings:
 Major impact of globalization of the world
economy on manufacturing location decision in
high-tech industries
 Changing view on what needs to be studied: e.g.
industries vs. “value chains”
 Role of government policy varies over time and
across industries as technologies change
 Creation and diffusion of technology is a key
variable in determining shifts in international
competitiveness

27. Problems:
 Research is costly and difficult
 Difficulty of aggregating across industries
 Possible selection biases in industries
studied
 Confusing/complex nature of the role of
the state