Abstract
We examine how institutional configurations, not single institutions, provide companies with institutional capital. Building on the varieties-of-capitalism approach, it is argued that competitive advantage in high-tech industries with radical innovation may be supported by combinations of certain institutional conditions: lax employment protection, weak collective bargaining coverage, extensive university training, little occupational training, and a large stock market. Furthermore, multinational enterprises engage in “institutional arbitrage”: they allocate their activities so as to benefit from available institutional capital. These hypotheses are tested on country-level data for 19 OECD economies in the period 1990 to 2003. A fuzzy-set qualitative comparative analysis yields several interesting findings. A high share of university graduates and a large stock market are complementary institutions leading to strong export performance in high-tech. Employment protection is neither conducive nor harmful to export performance in high-tech. A high volume of cross-border mergers and acquisitions, as a form of institutional arbitrage leading to knowledge flows, acts as a functional equivalent to institutions that support knowledge production in the home economy. Implications of these findings for theory, policy, and the analysis of firm-level behavior are developed.
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Notes
We do not include particular measures of inter-firm relations, another institutional sphere discussed by Hall and Soskice, for lack of appropriate data. This omission is not important when explaining export performance in the high-tech sector. Hall and Soskice (2001) discuss close, informal cooperation between firms as explaining the comparative advantage of CMEs in the medium high-tech industries. For high-tech success, this cooperation is irrelevant. Rather, the provision of venture capital and the opportunity for company takeovers are mentioned as important conditions for high-tech success. This aspect of inter-firm relations is captured by the stock market size, our indicator for the financial system.
Let Y denote the outcome, and I the number of cases. Then Ragin (2006) defines the consistency score of a causal condition X, or of a combination of conditions, as
Let Y denote the outcome, and I the number of cases. Then the coverage rate of a necessary causal condition X, or of a combination of conditions, is defined as
Let Y denote the outcome, and I the number of cases. Then the consistency score of a causal condition X, or of a combination of conditions, is defined as
As a first rule of thumb, Ragin suggests a consistency of at least 0.85. A second rule of thumb is derived from the gap in consistency scores. If causal combinations are ordered by the value of their consistency score, as in our truth table, then a substantial gap between neighboring causal combinations may help to differentiate consistent causal combinations from inconsistent ones (Ragin & Pennings, 2005). In Table 4, such a gap lies between the rows 15 and 16. Drawing the line between these rows implies a cut-off value of 0.87 for the inconsistency score, which also satisfies Ragin's first rule of thumb.
The intermediate solution is a compromise between complexity and parsimony of the solution. For the complex solution, only the empirically observed combinations of causal conditions are incorporated into the reduction process; those configurations lacking empirical instances (i.e., the remainders) are excluded. For the parsimonious solution, any remainder combination of causal conditions is incorporated into the reduction process. For the intermediate solution, the counterfactuals that are incorporated in the reduction process need to be specified. We do not incorporate into the reduction process so-called “difficult counterfactuals”. Here, difficult counterfactuals are those that would lead to the elimination of LME-like institutional conditions from the solution. Hence it is assumed that the presence of a large stock market and extensive university training, as well as the absence of high collective bargaining coverage, of strong employment protection, and of extensive occupational training, are linked to strong export performance. This is line with the theory, because the varieties-of-capitalism approach posits that LME-like institutional conditions are conducive to a positive outcome. For cross-border mergers and acquisition, both the presence and the absence are assumed to be linked to strong export performance.
Let Y denote the outcome, and I the number of cases. Then the coverage rate of a sufficient causal condition X, or of a combination of conditions, is defined as
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We wish to thank the editor, Witold Henisz, three anonymous reviewers, Peer Fiss, and Anja Iseke for their helpful comments on earlier drafts of the paper.
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Accepted by Witold Henisz, Area Editor, 26 February 2009. This paper has been with the authors for two revisions.
APPENDIX
APPENDIX
See Table A1.
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Schneider, M., Schulze-Bentrop, C. & Paunescu, M. Mapping the institutional capital of high-tech firms: A fuzzy-set analysis of capitalist variety and export performance. J Int Bus Stud 41, 246–266 (2010). https://doi.org/10.1057/jibs.2009.36
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DOI: https://doi.org/10.1057/jibs.2009.36