A firm-centered perspective
Hall and Soskice (2001) placed the firm at the center and asked how firms solve coordination problems in industrial relations, vocational training, corporate governance and inter-firm relations. In liberal market economies coordination runs mainly through market competition and contracts; in coordinated market economies it runs through non-market institutions such as business associations and unions.
Complementarities and comparative advantage
Institutions in one sphere work better when they fit those in another, a property called institutional complementarity. Coordinated economies, with patient capital and cooperative labor relations, were said to excel at incremental innovation, while liberal economies, with flexible labor markets and equity-based finance, excel at radical innovation. Iversen and Soskice (2001) argued that workers with specific skills favor social insurance to protect them, and Hall and Gingerich (2009) linked complementarities to growth.
Critiques and change
Critics charged that the approach is static and too dichotomous. Amable (2003) proposed five models of capitalism, and Streeck and Thelen (2005) stressed gradual institutional change. Thelen (2012) mapped divergent trajectories of liberalization, and Korpi (2006) challenged employer-centered accounts from the standpoint of power resources theory.
FAQ
- What is varieties of capitalism in simple terms?
- Capitalist countries differ: some, like the US, rely on markets, while others, like Germany, rely on cooperation among firms, unions and associations, and each is good at different things.
- What are institutional complementarities?
- The idea that institutions such as training, labor relations and finance work better together when they fit one another.
Sources reviewed: 2026-10-26
References
- Hall, P. A., & Soskice, D. (Eds.). (2001). Varieties of capitalism: The institutional foundations of comparative advantage. Oxford University Press. The founding volume.
- Iversen, T., & Soskice, D. (2001). An asset theory of social policy preferences. American Political Science Review, 95(4), 875–893. Specific skills and social policy preferences.
- Hall, P. A., & Gingerich, D. W. (2009). Varieties of capitalism and institutional complementarities in the political economy: An empirical analysis. British Journal of Political Science, 39(3), 449–482. Empirical test of institutional complementarities.
- Thelen, K. (2012). Varieties of capitalism: Trajectories of liberalization and the new politics of social solidarity. Annual Review of Political Science, 15, 137–159. Review of liberalization trajectories.
- Streeck, W., & Thelen, K. (Eds.). (2005). Beyond continuity: Institutional change in advanced political economies. Oxford University Press. Gradual institutional change.
- Amable, B. (2003). The diversity of modern capitalism. Oxford University Press. Five models of capitalism.
- Korpi, W. (2006). Power resources and employer-centered approaches in explanations of welfare states and varieties of capitalism: Protagonists, consenters, and antagonists. World Politics, 58(2), 167–206. Critique from power resources theory.