February 22 2005 COHERENCE DIVERSITY AND EVOLUTION OF CAPITALISMS The Institutional Complementarity Hypothesis Robert BOYER CEPREMAP CNRS EHESS UMR 8545 PSE Paris Jourdan Science Economique CEPREMAP ENS 48 Boulevard Jourdan 75014 PARIS France Phone 33 0 1 43 13 63 56 Fax 33 0 1 43 13 63 59 e mail robert boyer ens fr Web site http www cepremap ens fr boyer Abstract What are the forces that make relatively and transitorily coherent the institutional configurations of capitalism In response to the literature on the variety of capitalisms the article investigates the relative explanatory power of various hypotheses institutional complementarity institutional hierarchy coevolution simple compatibility or isomorphism Compatibility is too often confused with complementarity and complementarity is frequently an ex post recognition rarely an ex ante design Both hybridization and endometabolism are the driving forces in the transformation of institutional configurations Uncertainty and the existence of some slack in the coupling of various institutions are key features that call for the mixing of various methodologies in order to detect complementarities This framework is then used in order to analyse the degree of transformation of German industrial relations under the pressure of shareholder value A second case study shows that three distinct institutional complementarities are at the origin of the more successful national economies since the 90s Thus institutional diversity is being recreated and the existence of complementarities play a role in this process 1 1 INSTITUTIONAL ECONOMICS AND VARIETY OF CAPITALISMS AN EMERGING ISSUE The concern for institutional analysis has been renewed during the 90s in response to both theoretical anomalies and puzzles on one side new empirical issues on the other Actually modern neoclassical microeconomic theory has recognised that market mechanisms cannot cope with public goods externalities innovations and social justice concerns Ingrao Israel 1990 and these market failures call for alternative coordinating mechanisms Boyer 1997 Simultaneously economists have rediscovered with Ronald Coase 1937 that firms do play a major role in the allocation of resources and might be more efficient that markets when transaction costs are introduced on top of production costs The collapse of Soviet Union has triggered a series of researches about previously neglected issues how to build a market economy Is there a single brand of capitalism or can a significant variety of capitalisms coexist even in the long run These two agenda tend to converge towards two quite central but difficult questions First what are the forces and mechanisms that coalesce a series of economic institutions into a viable system Second how do capitalisms change and evolve in the long run The answers drastically differ from one research programme to another Standard neoclassical theory considers that economic calculus in terms of costs and benefits can be applied to the choice among alternative institutional forms Basically they emerge out of the interaction of individual agents and this process is assumed to deliver a smooth evolution and a continuous adjustment to external shocks that are translated into relative price movements If some inertia or irrationality prevails public authorities should use benchmarking in order to convince individuals to adopt superior economic institutions Transaction costs theory assumes that organisational forms should be selected in order to minimize these costs This framework has mainly be applied to industrial organisation in order to distinguish between subcontracting vertical integration franchising and so on Some authors such as Williamson 1985 have proposed to extend transaction costs to the analysis of capitalism systems Given the sunk costs associated to any investment into a given organisation and institution these systems should display inertia path dependency and in some cases sub optimality but in the long run institutions should evolve according to the factors that govern transaction costs Evolutionary theory is built upon the hypothesis that heterogeneous organisations and institutions are selected by the equivalent of a fitness criteria and or they can also evolve via a process of trials and errors and learning A general feature of these models is to exhibit non ergodicity path dependency possible irreversibility and ex post sub optimality Therefore the results that have been obtained for technologies exhibiting increasing returns to scales Arthur 1989 can be extended to institutions scientific paradigms conventions Consequently the very process of evolution is able to deliver contrasted industrial technological and economic structures even when national economies are open to trade Dosi Fabiani Freeman Aversi 1993 Capitalist economies are seen as systems of coevolving technologies organisations institutions and conventions A branch of the new institutional economics stresses that the constitutional and legal processes are crucial in the definition of economic rights among them property rights and consequently various national economies differ due to their constitutional order North 1990 Paradoxically this vision is not faraway from the older conception that considers that economic transactions are embedded into a dense web of social relations Polanyi 1944 Granovetter 1985 1992 Therefore the institutions of capitalism are not necessarily selected according to their economic efficiency since their role is to define the rules of the game to deal collectively with uncertainty and to help solving the conflicts disequilibria and crises that are typical of any market economy 2 2 WHY AND HOW INVESTIGATE INSTITUTTIONAL COMPLEMENTARITY Each of these hypotheses captures a part of the stylised facts concerning the evolution of contemporary capitalisms The present article proposes another and more recent approach in terms of institutional complementarity This hypothesis originates from scholars that try to comprehend the persisting institutional diversity between the US and Japan and still more between economies in transition Aoki 1994 2000 2001 or between the US and Germany and other continental European countries Amable 2000 2003 Hall and Soskice 2001 Boyer 2001 A variant of this hypothesis considers that some complementarities derive from the impact of one institution over another and that this feature i e institutional hierarchy may have been a major
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