Geographies of the global economy
Institutional strength
& networks
Mar 23rd 2023
[email protected]
Attendance Code
288616
Overview
Introduction
Recap: economic development & institutions
Varieties of Capitalism (VoC) & National Business Systems (NBS)
Networks
Wrapping up & questions
Economic development
Acemoglu D, Gallego F A, Robinson J A, 2014, “Institutions, Human
Capital, and Development” Annual Review of Economics 6(1)
875–912
*Institutions – humanly devised constraints that structure political,
economic and social interaction (North, 1991)
Economic development
• Formal institutional strength
Basic conditions & authority
Worldwide Governance Indicators (WGI)
Kaufmann D, Kraay A, Mastruzzi M, 2009, “Governance
Matters VIII: Aggregate and Individual Governance Indicators”
Policy Research Working Paper 21 1–105

Overview
Introduction
Recap: economic development & institutions
Varieties of Capitalism (VoC) & National Business Systems (NBS)
Networks
Wrapping up & questions
Varieties of Capitalism (Voc) & National Business Systems (NBS)
Whitley R, 1994, “The internationalisation of firms and markets: its
significance and institutional structuring” Organization 1(1) 101–
124
• Do countries & their institutions still matter?
Globalization
TNCs / MNEs
Some TNCs employ millions of people
VoC & NBS
Whitley R, 1994, “The internationalisation of firms and markets: its
significance and institutional structuring” Organization 1(1) 101–
124
• Do countries & their institutions still matter?
Globalization
TNCs / MNEs
Some multinationals employ millions of people
VoC & NBS
Whitley R, 1994, “The internationalisation of firms and markets: its
significance and institutional structuring” Organization 1(1) 101–
124
• Do countries & their institutions still matter?
Globalization
TNCs / MNEs
Some multinationals employ millions of people
VoC & NBS
• “Globaloney” = global+baloney
• There are distinctive
forms of capitalism
• Different institutions
=>
Varying specializations;
Behaviors
VoC & NBS
Understanding institutional differences: the VoC approach
Hall P A, Soskice D, 2001 Varieties of Capitalism: The Institutional
Foundations of Comparative Advantage (Oxford University Press,
Oxford)
• Legal systems & informal rules, history, culture
Varieties of Capitalism (Voc) & National Business Systems (NBS)
VoC (Hall & Soskice, 2001)
Key arguments
• Different national economic
institutions provide
opportunities for firms
• Firms will adjust their
production to take advantage
of these opportunities
*Assumes that firms are central
actors whose behaviour

Halls & Soskice, 2001, pgs. 19&20
VoC & NBS
• Liberal market economies – coordinated market economies
USA, UK, Canada, etc. – Germany, Austria, Sweden, etc.

• Also hybrid economies (Mediterranean, e.g. Cyprus)
• Neo-liberal market capitalism: USA
and, to a large extent, the UK.
• Social market capitalism: Germany,
Scandinavia and many other
European countries.
• Developmental capitalism: Japan,
South Korea, Taiwan, Singapore
and most other East Asian countries
• Authoritarian capitalism: China and
Russia
Dicken, 2015, p.184
VoC & NBS
Informal Institutions
• Weber’s thesis on the importance of
cultural influences embedded in religion
as driving factors of capitalism
The Protestant Ethic and the Spirit of Capitalism (1905)
Varieties of capitalism (VoC)
Max Weber
VoC & NBS
• So what?
• How do different capitalisms vary globally….
• Wide-ranging repercussions:
Income distribution

VoC & NBS
• Wide-ranging repercussions:
Income distribution
Employment
Innovation
And more…
• But VoC doesn’t explain all variations
VoC & NBS
National Business Systems (NBS) (Whitley, 1999, 2000)
• A related approach; added granularity
• Business systems are dominant patterns of economic
organization & control
Ownership coordination
Non-ownership coordination
Employment Relations ( formal or paternalistic)
VoC & NBS
National Business Systems
• Societal institutions- interplay between society, economy and
politics
Role of the state
Type of financial system
Skill-development system
Trust & authority relations
VoC & NBS
National Business Systems
Hotho J J, 2014, “From Typology to Taxonomy: A Configurational
Analysis of National Business Systems and their Explanatory
Power” Organization Studies 35(5) 671–702

• Different business systems; different characteristics
• Complementarities & interrelatedness
VoC & NBS
National Business Systems
• Six types of business systems
Compartmentalized
Collaborative
State-organized
Coordinated industrial districts
Highly coordinated
Fragmented
• Do these really exist? A cluster analysis…
VoC & NBS

Nordic:
Hybrid / open
National Business Systems
• Real-world impact: patent specialization in high-tech
VoC & NBS

• Biotech
• Nanotech
• ICT/Robotics

Compartmentalized Nordic
Networks?
Low regulation < reflected systems

Overview
Introduction
Recap: economic development & institutions
Varieties of Capitalism (Voc) & National Business Systems (NBS)
Networks
Wrapping up & questions
• ‘Competitiveness’ from firm-internal resources:
VRIO
Networks
Barney, J.B. (1991). “Firm resources and sustained competitive advantage.”
Journal of Management, 19, pp. 99–120.

• ‘Competitiveness’ from firm-internal resources:
VRIO
• External resources:
Geography, networks, institutions
• Their intersection
Networks

Huggins R, Thompson P, 2014, “A network-based view of regional
growth” Journal of Economic Geography 14(3) 511–545
• Two basic forms of inter-organizational networks
1. Contact – Source knowledge
2. Alliance – Collaborate (e.g. innovating in joint
ventures)
Networks
Huggins R, Thompson P, 2014, “A network-based view of regional
growth” Journal of Economic Geography 14(3) 511–545
• Two basic forms of networks

Networks
• Why are these networks formed?
Economic vs. normative
Associative vs. communal
Different goals; knowledge
• Weber’s thesis on the importance of
cultural influences embedded in religion
as driving factors of capitalism
The Protestant Ethic and the Spirit of Capitalism (1905)
Networks
Max Weber
• Nature & value of network capital…
Huggins R, Thompson P, 2014, “A network-based view of regional growth” Journal of
Economic Geography 14(3) 511–545
…the value of network is determined not only by the superiority or excludability of the
knowledge they are able to access through their inter-organizational networks, but also
its miscibility, i.e. the capability for this knowledge to mixed/combined with different
types of knowledge from different sources (Huggins, 2014, p.522)
Innovation is facilitated by the pursuit of knowledge and its application, which is itself
conditioned by the capability to ‘learn-by-interacting’ (Cooke, 2004).
Networks
• Nature & value of network capital
Superiority
Knowledge requires intentional and
complex efforts to assess and assimilate
– Combinatorial knowledge underlies the complexity of economic
systems
Networks
• Nature & value of network capital
Excludability
Networks require diversity
Leaky versus sticky knowledge
Networks
• Nature & value of network capital
Miscibility
Innovation results from the carrying out of new combinations
-Schumpeter, 1934
Networks
• Nature & value of network capital
Superiority, excludability, miscibility
(Re)combination
Tacit/codified, embodied, etc.
Proximity vs. distance
Governance
Networks
• Nature & value of network capital
Superiority, excludability, miscibility
Recombination
Tacit/codified, embodied, etc.
Proximity vs. distance
Governance
Networks
Joseph Schumpeter
innovation as creative destruction
• An asset for firms, but also regions
TIM literature (Moulaert & Sekia, 2003):
regions as organizational forms
• Geography & networks
Localization; urbanization
Regions, too, are not islands
Networks

Networks
Gatekeepers
Graf H, 2011, “Gatekeepers in regional networks of innovators”
Cambridge Journal of Economics 35(1) 173–198
• Who are these gatekeepers?
TNCs/MNEs
Strong local players
Public research organizations
Networks
Graf H, 2011, “Gatekeepers in regional networks of innovators”
Cambridge Journal of Economics 35(1) 173–198
• Who are these gatekeepers?
TNCs/MNEs
Knowledge leakage?
Strong local players
Public research organizations
Networks
Institutional voids (Doh J, Rodrigues S,
Saka-Helmhout A, Makhija M, 2017,
“International business responses to
institutional voids” Journal of International
Business Studies 48(3) 293–307)
• Internalization
Substitution
Institutional borrowing
Signaling
Networks
• Interconnectedness locality-region-world, firm-state;
world not fully ‘flat’
• Economic activity; spatial order
History; economic path (recall ‘industry evolution lecture’)
Role of the state & institutions
Innovation, human capital, entrepeneurship, networks,
geography, etc.
• Competitiveness, QoL, FDI, trade, growth / development,
industrial emergence / renewal, role of the state, institutions, etc.
Wrapping up
Questions?
Etieno Enang
[email protected]