Some institutions depend heavily on statutes and regulations issued by national

Some institutions depend heavily on statutes and

This preview shows page 9 - 10 out of 44 pages.

Some institutions depend heavily on statutes and regulations issued by national states iv) CMEs: invest in specific and co-specific assets (1) Cannot be turned to another purpose and whose returns depend heavily on the cooperation of other v) LMEs: invest in switchable assets (1) Assets whose value can be realized if diverted to other purposes f) Institutional Complementarities i) Complementary: increase in the price of one good depresses demand for other good (1) Similarly with institutions: presence or efficiency of one increases returns from or efficiency of the other ii) “Nations with a particular type of coordination in one sphere of the economy should tend to develop complementary practices in other spheres as well” (pg 18) iii) LMEs: rely on markets to coordinate both financial and industrial relations iv) CMEs: higher levels of non-market coordination in both sphere 3) Coordinated Market Economies: the German Case a) “Financial system or markets for corporate governance…provides companies with access to finance that is not entirely dependent on publicly available financial data or current returns.” i) Germany: information about a company available to investors through: (1) Close relationships between suppliers and clients (2) Extensive networks of cross-shareholding (3) Joint membership in industry associations b) Internal structure of firms reinforces systems of network monitoring i) Managers must secure agreement for major decisions from supervisory boards ii) Incentives for managers aligned with those of firms c) Require industrial relations institutions to solve problems such as: i) Labor force given autonomy, encouraged to share the information it acquires, companies are susceptible to hold-up by employees, poaching of employees by other companies ii) Example of a solution: wage setting at equivalent skill levels across an industry d) Rely on education and training systems due to high industry-specific or firm-specific skills required by many industries i) Publicly subsidized training system: monitor participation of major firms to minimize free-riding, negotiate industry-wide skill categories and training protocols e) Maintain inter-firm relations to facilitate technology transfer i) Through business associations, jointly financed research (often with quasi-public research institutes), open-ended clauses in inter-firm contracts 4) Liberal Market Economies: the American Case a) Financial system or market for corporate governance “encourage firms to be attentive to current earning and the price f their shares on equity markets.” i) Finances available to large firms heavily dependent on valuation in equity markets b) Industrial relations-firms rely heavily on relationship between individual worker and employer to organize relations i) Top management given substantial freedom to hire/fire ii) Depend on macroeconomic policy and market competition to control wages and inflation c)
Image of page 9
Image of page 10

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture