Capitalism in Comparative Perspective

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Capitalism in Comparative Perspective

• Professor Stephen Blank
• HEC Summer 1999
• Session 1a
• Friday, May 7
• 600-845pm

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The Structure of our Course

• A Rushed Course
• A Reading Seminar
• Responsibilities
• Keep up with reading
• Engage in vigorous discussion
• Prepare two take-home essays
• Keep up with outside reading

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Comparing Business Systems Where to begin?

• 1. Cold War dualism Capitalism vs Communism (
  socialism)
• 2. Post Cold War Competition among Capitalist
  Economies
• Neo-classic realism There is no difference
• Convergence There will be no difference

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Pluralism Structural Differences

• 3. Differences among business systems do exit
• Differences are based on difference in structures
• Key questions
• How do structural factors influence business
  systems and individual firms?
• Which factors are most influential?

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Capitalism in comparative perspective
particularly important today

• Asian Meltdown
• Crisis of German model
• Collapse of Japanese industrial system
• Convergence toward U.S. model? (American
  Triumphalism)
• The future of capitalism Can this course help us
  understand whats coming next?

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Competitiveness is a key issue

• Competitiveness as micro/firm quality
• Standard MBA approach focus on managerial
  decision-making
• Competitiveness as macro/system quality
• Political scientists/political economists focus
  on public policy
• Can we link macro and micro? Managers and System?

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Course Objectives Approaches

• Explore relationship between national business
  systems and corporate strategies
• Key Questions
• How do managers in different business system view
  their strategic options?
• What factors shape managers perceptions of
  strategic options?

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A Comparative Perspective

• Three business systems
• Anglo-American
• Rhine
• Japanese
• Others?

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How Do We Explain Differences Among Business
Systems?

• Neo-Classic Voluntarism Systemic decisions
  marginal differences in performance based on
  managerial skills.
• Wholly (or almost) Voluntaristic
• Other explanatory variables History Defining
  Events, Institutions, Culture
• Danger of determinism
• Managers have limited range for independent
  action (models dont do well with change)

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A Simple (but elegant) ModelValues
Institutions over Time

• More dynamic approach that helps account for
  differences but builds in capacity for change
• Variables Values and Institutions

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SYSTEMIC DIFFERENCES

• In Time and In Space

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1880s-90s The Rise of a New Historical Era

• 1840s-90s The first global economy
• peace, gold standard, free trade, mobility of
  factors of production
• personal-entrepreneurial, owner-manager
  capitalism
• 1880s-90s Emergence of new system
• continued until 1980s
• 2 key elements industrial captialism modern
  nation state

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What drove this transformation?

• Politics heightened competition, nationalism
  (democracy), militarism
• 1870 German unification
• Meiji Restoration in Japan
• Economics world depression 1873-1896
• falling prices
• agricultural revolution
• Technology transportation, communication, energy

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The Modern Industrial Firm

• Rise of industrial capitalism at end of 19th
  century in each country
• The impact of scientific technological
  advances Scope, scale and speed of change
• Comparative advantage economies of scale
• Based on throughput

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What factors led to differences in the
structure and operation of the modern
industrial firm in the three countries?

• Concept of Corporate Governance

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The Concept of Corporate Governance

• Definition The nature of the relationships that
  exist among key elements in the firm Managers,
  owners, employees, financial agents, customers,
  governments and other stakeholders.
• These relationships differ in the three systems

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Some Areas of Difference

• Corporate Structure
• Ownership
• Finance
• Fluid-Mobile capital (Porter)
• Employment
• lifetime jobs - workers as marginal costs
• Executive Compensation
• Governance

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Corporate ownership organization

• Who are the shareholders?
• What is the relationship between owners and
  managers?
• How are firms organized?
• How are firms financed?
• What is the role of financial institutions?

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Structure of the firm Employees

• Employees as
• marginal costs
• stakeholders
• core capital
• Training and HR policy

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Structure of the firmRelations with government

• Government-business relationships in different
  environments
• Why do they differThe impact of historical
  environments

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The Anglo-American model

• Investors-owners
• Boards managers
• What is dynamic of system?
• Was US system always like this?
• When, why did it change?
• What alternatives are available to this system?
• What are key defects in this system?