Journal Article

Rethinking the link between labour market flexibility and corporate competitiveness: a critique of the institutionalist literature

Andrea M. Herrmann

in Socio-Economic Review

Published on behalf of Society for the Advancement of Socio-Economics

Volume 6, issue 4, pages 637-669
Published in print October 2008 | ISSN: 1475-1461
Published online June 2008 | e-ISSN: 1475-147X | DOI: http://dx.doi.org/10.1093/ser/mwn013
Rethinking the link between labour market flexibility and corporate competitiveness: a critique of the institutionalist literature

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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.

Keywords: corporate strategy; institutional political economy; skills; P16 political economy; L21 business objectives of the firm; L65 industry studies: chemicals; rubber; drugs; biotechnology

Journal Article.  12917 words. 

Subjects: Moral Philosophy ; Corporate Social Responsibility ; Welfare Economics ; Political Economy ; Economic Sociology

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