Chapter

The Legal Framework for Corporate Governance: The Influence of Contract Law on Company Strategies in Germany and the United States

Steven Casper

in Varieties of Capitalism

Published in print August 2001 | ISBN: 9780199247752
Published online November 2003 | e-ISBN: 9780191596346 | DOI: http://dx.doi.org/10.1093/0199247757.003.0012
 The Legal Framework for Corporate Governance: The Influence of Contract Law on Company Strategies in Germany and the United States

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The chapter examines the key role played by legal frameworks in the construction of the political economy and its relationship to corporate strategy. Germany and the US have different legal systems. Drawing on an analysis of legal challenges associated with supplier network modernization within the automobile industry, the chapter demonstrates how German patterns of non‐market business coordination and highly regulatory laws channel firms towards patterns of corporate strategy associated with incremental innovation, or ‘diversified quality production’, and constrain against more radical innovation strategies. In the US, a more classical legal system combined with predominantly market‐based inter‐firm relations conduces towards radically innovative corporate strategies, but impinge on the establishment of incremental innovation patterns associated with diversified quality production.

Keywords: corporate strategy; Germany; innovation; legal systems; supplier networks; United States

Chapter.  11268 words.  Illustrated.

Subjects: Economic Systems

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