Discussion Paper Series 2016 #04 : “Toward a Conceptual Framework for Understanding Institutional Change in Japanese Capitalism: Structural Transformations and Organizational Diversity”
The literature on comparative capitalism sees institutions largely as a set of incentives and constraints on rational behavior of business enterprises. Institutions constrain economic action, but also create new opportunities for economic action. For example, any market order needs the support of basic property rights and the rule of law (Khanna & Palepu, 2006), which both constrain certain uses of property and thereby enable other ones. Institutions may also solve certain collective action problems through different modes of governance over transactions – such as markets, hierarchies, networks, associations, state regulation and so on (Hollingsworth & Boyer, 1997). Consequently, many scholars have argued that different countries may have comparative advantages for different kinds of economic activity based on the diversity of their institutional frameworks (Amable, 2003, Hall & Soskice, 2001, Whitley, 1999).
In understanding institutions as both constraining and enabling particular business strategies, a large literature has sought to classify capitalism into various national typologies—most famously between liberal and coordinated market economies, but also using more elaborate classifications based on the Nordic, Germanic, Anglo-Saxon, Mediterranean, or Asian models. The framework has also been applied extensively to emerging and transitional countries in Asia, as well as Japan as a leading exemplar of the coordinated market economy (Mizobata, 2012). However, these typologies tend to neglect the dynamics of institutional change (for an overview, see Deeg & Jackson, 2007). By stressing their assumed economic advantages and strong internal coherence, these institutional typologies have faced criticism on several counts: too much stress on the coherence of institutional arrangements, confusing of ideal-types and real world cases, a static view of institutional systems being in equilibrium, etc (among many early critiques, see Allen, 2004, Blyth, 2003, Deeg & Jackson, 2007, Howell, 2003).