Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

flexible labour regulation than countries like Finland or Germany, where
the value of capitalisation is less and information networks between banks
and firms’ management are more dense. 8
Different institutional complementarities, however, do not imply a
different capacity to cope with globalisation pressures. On the contrary,
different economies will develop responses depending on their countryspecific
comparative advantage. In other words, the VoC predicts
that countries will react differently to similar pressures, meaning that
globalisation is unlikely to result in convergence towards a single economic
model. 9 Another important result of the VoC is that there appears to be no
systematic difference between LMEs and CMEs in terms of overall income
levels and growth rates. However, LMEs tend to have higher participation
rates in the labour market and a more unequal income distribution,
compared to CMEs. Additionally, the two ideal-types of capitalist
economies will tend to specialise in different patterns of innovation and
competition and therefore in different industrial sectors.
In LMEs, the higher degree of flexibility and mobility with market-based
modes of firm relations incentivises radical forms of innovation, and
strategies based on price competition. In CMEs, in contrast, cooperation
between capital and labour lends itself to incremental forms of process
and product innovation, as well as quality-based competition strategies.
These diametrically opposed incentives result in different comparative
advantages so that, in the traded sector, CMES and LMEs tend to specialise
in different industries and to develop patents on different categories of
goods.
Under this framework, policymakers must pay due regard to the
implications of economic reform for different spheres of the political
economy. To put it simply, the interplay between institutions implies that
a limited number of combinations are both feasible and optimal.
Lisbon through the looking glass
The VoC approach, it is important to recognise, would be ambivalent about
the very idea of the Lisbon Strategy. According to this school of political
economy, the competitive advantage of economies blossoms from the
bottom up rather than thriving from the top down, leaving little room for
government intervention. As such, attempts by EU policymakers to “build
a knowledge-based economy” and, latterly, to foster “growth and jobs”
would smack of government overreach for proponents of VoC. Similarly,
the focus on national economies as a key unit of analysis means that
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After the crisis: A new socio-economic settlement for the EU