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This chapter explores the connection between institutional frameworks and variations in authority sharing and organizational careers, such that firms in contrasting institutional contexts are encouraged to develop different kinds of capabilities. These capabilities affect firms' competitive effectiveness in different sub-sectors, especially their ability to develop cumulative or radical innovations, such that economies with contrasting institutional arrangements develop relative strengths and weaknesses in different kinds of industries. In particular, employers' establishment of distinctive types of organizational careers in variously coordinated market economies influence employees' willingness to commit themselves to the continuous improvement of firms' knowledge and collective problem solving capacities, and hence enhance companies' learning capabilities.

This chapter extends and integrates the analysis of innovation systems presented in Chapter 3 and the account of how different firms develop different kinds of organizational capabilities outlined in Chapter 6 to explain how leading firms in differently organized market economies develop distinctive innovative competences and strategies. It argues that firms have several choices in developing innovative competences and selecting innovation strategies that are guided by dominant institutions. These institutions include those governing the development of skills and labour markets, capital markets, and inter-firm relationships as well as the organization and conduct of research in the public sciences. As a result, societies with distinctive institutional frameworks encourage the development of particular kinds of innovative capabilities, and so manifest contrasting types of technological development and sectoral specialization, as illustrated by the examples of late 20th-century Germany, Japan, and the USA.

This chapter discusses three issues — accounting frameworks, risk and uncertainty, and the political economy — that have been largely overlooked by the mainstream ‘conservative’ and ‘Keynesian’ perspectives. The first section examines accounting frameworks; this is the lens used to ascertain whether an economy is likely to overheat or slip into recession. We find that widely used accounting frameworks, such as accounting for GDP, often provide misleading information and bear some responsibility for poor economic advice and performance. The chapter next considers how the issues of risk, uncertainty, and information imperfections are at the center of macroeconomic analysis. Risk is always prevalent in an economy, and policies often have unintended consequences. As a result, economists and policy-makers must subject policy decisions to a risk assessment, and should also be responsive to new information. The final section of this chapter looks at the political economy and institutional frameworks within which policy decisions are made.

This introductory chapter begins with a discussion of the prohibition of alcohol, which was global in scope. Coinciding with the outbreak of World War I, prohibition was adopted in ten countries in addition to the United States, as well as countless colonial possessions, all with similar disastrous consequences, and in every case followed by repeal. It considers the basic histories of three vital countries in the global prohibition drama: the most famous (or infamous) prohibition in the United States; Russia as the world's first prohibition country; and Sweden as the source of numerous policy alternatives to prohibition. The chapter then discusses the notion of a “bad policy” and an institutional framework for analysis. An overview of the subsequent chapters is presented.

This chapter examines the nature and extent of business groups in Asian countries and changes to these groups since the crisis. It first sketches out how a comparative institutional framework is useful for understanding business groups. Since the Asian Crisis provides a unique opportunity to assess the institutional environments of East Asian countries, this framework illustrates the causes of the Asian Crisis and subsequent changes in institutional environments since that time. Finally, this summarizes the contributors’ chapters on business groups in eight East Asian countries. These chapters show in great detail how national differences can influence business groups’ responses to changing institutional environments.

This chapter analyses the growing significance of inter-firm networks and project-based firms in many industries, which some claim heralds major changes in dominant economic forms. Rather than assuming that all such enterprises are basically the same, the chapter distinguishes between four ideal types of project-based firms in terms of the singularity of their goals, on the one hand, and the separation and stability of the division of labour, on the other hand. These ideal types vary in their importance across subsectors with different output characteristics, such as appropriability, modularity, and technological cumulativeness, and processes, such as client involvement. They also are more or less likely to become prevalent in contrasting institutional environments, which means that the establishment of the Silicon Valley type of economic organization as the dominant form is improbable in many societies.

Spain has made a number of experiments with democracy, but only since the mid‐1970s has this been successful. At that time, strenuous efforts were made to ensure that political parties would come forward, and as a result the new democracy had two key aspects: the creation of synthetic parties (in the sense that they are supported more from above than below), and the building of a parties state. The introductory part of the chapter discusses these changes and also has a section looking at the institutional framework that had such a shaping effect on party politics; this discusses the electoral system, and the rules governing parliamentary group organization and party finance. The next three sections cover the same topics as those in the other country case studies in the book, and examine party legitimacy (party membership, electoral turnout and volatility, popular assessments, party–voter ties, and evaluating party legitimacy), party organizational strength (parliamentary party organization, mass party organization, party finance, ‘goods in kind’ received by parties, and evaluating party organizational strength), and the systemic functionality of parties (governance, political recruitment and patronage, interest articulation and aggregation, political participation, political communication and education, and evaluating the systemic functionality of parties). The concluding section assesses the viability of Spain's parties state and gives a comparative analysis of its experience of democracy.

This concluding chapter assesses the ways in which this study's pragmatist account might answer the practical question about the acceptance of democratic politics. Unlike most normative arguments, this study's pragmatist account directly incorporates the inevitability of disagreement and conflict. In doing so, it provides an argument for the central role of ongoing political debate in establishing and maintaining the bases of legitimacy and obligation. And, through an analysis of the effects of democratic decision making on the collective outcomes that it produces, the study makes a case for the superiority of a democratic institutional framework as the forum for undertaking such debates. It argues that when there is persistent conflict and disagreement, making collective decisions democratically is the best means of creating an institutional environmental in which both individual and collective life plans can be effectively pursued.

This chapter discusses the new substantive principles of international development law with specific reference to: (1) parties (and the rights and privileges of different parties to the development process); (2) fundamental law principles of mutuality, the duty to cooperate, equitable participation in development, and transparency; (3) establishing legal norms (contextual and absolute); (4) a taxonomy of international development law (absolute norms, globalized laws, and relative norms); and (5) the institutional framework for international development is discussed in terms of enforcing legal norms. The chapter provides a new, researched template of analysis in which to structure the legal study of international development It sets forth the merits of establishing a World Bank Capital Transfer Appellate Board. The chapter proposes that capital transfers (as part of the development process) be subject to an adjudicatory process of review, thereby creating a new substantive body of public international law.

The book provides plenty of evidence that many of the problems in implementing effective post-conflict economic reconstruction have to do with poor institutional arrangements and weak institutions. Policymakers cannot be effective without an appropriate institutional framework to support their policies and programs. Designing and staffing the appropriate institutions is particularly difficult in the post-conflict context where governments have to carry out ‘extra activities’, in the presence of a larger and more diverse group of actors. This chapter discusses the basic institutions and the coordination mechanisms that are essential for effective reconstruction. Some countries will need to build institutions from scratch but most will need to modernize and adapt existing ones. Many countries coming out of statist policies and over-regulated systems may want to move towards ‘market-based policymaking’ and will need institutions to support this change. Heavy doses of training and capacity building will be necessary to provide the institutions with capable professionals.

Workforce diversity is a defining issue of international HR policy transfer in US multinationals. Demographic characteristics, socio-political developments, and the evolution of the legal framework have created a distinctive constellation of diversity agendas in the US. This chapter explores the way in which these agendas were transferred by US companies to their subsidiaries, in host business systems with varying demographic patterns and legal traditions that were not necessarily consonant with American diversity practice. The case studies reveal that there was a frequent lack of fit between the diversity agendas of US multinationals and host-country institutional frameworks, provoking considerable resistance from subsidiaries. However, there was considerable variation in subsidiary responses to diversity, partly explained by structural factors, such as the degree of international integration of operations, and partly by the more contingent strategic and political choices of actors at different levels of the multinational.

This chapter describes the recent changes in Japanese keiretsu. Japan’s home-grown banking crisis began in the early 1990s, even before the Asian Crisis, when the stock market and real estate markets declined dramatically after the burst of the asset bubble in the late 1980s. Several banks went bankrupt and some high-profile inter-group bank mergers occurred. The tightening of requirements for consolidated accounting also made it harder for firms to manage their earnings by allocating gains and losses among group firms. Moreover, increased foreign ownership helped loosen inter-firm ties between keiretsu firms. This chapter examines the ownership and director ties of keiretsu firms to find out whether the keiretsu form was disrupted due to this series of events. The conclusion is that, although some peripheral relationships have been disrupted, the relationships among core firms have remained robust despite these changes.

This chapter on Taiwanese business groups offers an interesting contrast to the Japanese and Korean cases. Taiwanese groups are loosely coupled networks of firms, positioned in between chaebols and keiretsu in terms of hierarchical control. Because the Taiwanese government uses tax incentives to favor new establishments, Taiwanese groups are more numerous and smaller than Korean chaebols. These groups have grown consistently, particularly since the country liberalized its economy in the 1980s. This liberalization opened key industries previously monopolized by state enterprises, such as banking, telecommunications, and electricity to the private sector, creating opportunities for business groups to expand. The Asian Crisis did not deter the growth of Taiwanese business groups. This chapter suggests that, at least in the short run, these groups will grow further and diversify more to exploit new business opportunities in the Taiwanese economy.

This chapter examines some of the other outstanding debates on capital market liberalization (CML). In particular, it focuses on when a country is sufficiently developed to risk capital market liberalization, whether all countries should make liberalization their long-term goal, and whether capital market liberalization is reversible; even if it was a mistake in the first place, should countries that have already liberalized now stick with it? For example, proponents of liberalization often argue that the issue is not whether countries should liberalize their capital markets, but rather that liberalization should occur within the ‘proper’ sequence of reforms. Critics, however, argue that CML should not necessarily be the long run goal of all countries and that there are better ways for developing countries to integrate into the global economy. The chapter also contains a section that examines the appropriateness of different techniques of capital market liberalization for countries in various stages of development.

This chapter discusses the institutional learning model. The chapter examines how restraint, self-reliance, and corresponding ideals are developed together, and why a country's institutional framework is important in providing the people with opportunities to develop these cititizenship-qualities. The chapter suggests two criteria for examining when the effect of institutional learning may be offset by the diffusion of values, across systemic boundaries, at the level of mass public and political elite. It also establishes the relationship between ideological values, citizens's performance evaluations of existing institutions, and their support for these institutions. The chapter concludes that the institutional learning perspective bridges the gaps in the democratic transition literature.

This chapter on Indonesian business groups illustrates that the formation and fate of business groups were closely related to political connections. The Suharto government provided favors to close friends and families, who became owners of major business groups in the country. Other business groups run by ethnic Chinese also grew through close alliances with highly ranked government officials. Banks owned by business groups typically acted as ‘cashiers’ that provided credit to companies within the group. The financial crisis devastated the Indonesian economy. The restructuring of business groups deprived several founding families of their ownership in these groups. This chapter demonstrates that business groups that maintained close connections with the political regime that took power after Suharto survived and prospered. Others that lacked these generally failed.

This chapter summarizes major findings from each individual chapter and draws conclusions about the future of business groups in East Asia. First, despite the hardship accompanied with the crisis, business groups in East Asia remained quite intact, showing amazing robustness against external shocks from financial crises. Second, business groups in each country took a very divergent development path in response to the common shock of the Asian Crisis. Third, several countries undertook some changes in their institutional environments following the crisis such as enhancing corporate governance systems and tightening capital market supervision, which would have a much longer-term influence on the business groups in this region. This chapter argues that business groups in East Asia should reconfigure their business structures and adjust their corporate governance systems to regain momentum for further growth.

Proper legislations, regulations, and agreements are necessary when an information society promotes wide participation and the utilization of communication and information technologies. The institutional framework is composed not only of the regulations, legislations, and agreements, but also the policy-making bodies concerned with establishing the laws and regulations, as well as the various social and industrial associations that determine the underlying agreements for the construction of organizations and markets. In this chapter, we look into how the components of the institutional framework are able to affect certain issues concerned with technical standards, universal access, and the governance attributed to market liberalization. Our analysis is focused on the extent of (mis)alignment of institutional arrangements.