The Varieties of Capitalism and Hybrid Success: Denmark in the Global Economy

TLDR: In this paper, the authors present an analysis of three cases: Danish labor markets, vocational training, and industrial policy, showing that the institutional complementarities associated with such hybridization are based on institutional heterogeneity rather than homogeneity.

Abstract: The varieties of capitalism literature maintains that advanced capitalist countries whose institutions best fit either the liberal or coordinated market economy types will perform better than countries whose institutions are mixed. This is because hybrids are less likely to yield functionally beneficial institutional complementarities. The authors challenge this assertion. Denmark has performed as well as many purer cases during the 1990s. And Denmark has recently developed a more hybrid form than is generally recognized by (a) increasing the exposure of actors to market forces and (b) decentralizing collective learning and decision making. The institutional complementarities associated with such hybridization have contributed to its success; however, these complementarities are based on institutional heterogeneity rather than homogeneity. This is demonstrated by analyses of three cases: Danish labor markets, vocational training, and industrial policy. The implication of the authors’ argument is that the ...

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The Varieties of Capitalism and Hybrid Success
Denmark in the Global Economy
Campbell, John L.; Pedersen, Ove K.
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Publication date:
2005
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Citation for published version (APA):
Campbell, J. L., & Pedersen, O. K. (2005). The Varieties of Capitalism and Hybrid Success: Denmark in the
Global Economy. Department of Business and Politics. Copenhagen Business School.
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THE VARIETIES OF CAPITALISM AND HYBRID SUCCESS:
DENMARK IN THE GLOBAL ECONOMY
International Center for Business and Politics
Working Paper No. 18.
John L. Campbell and Ove K. Pedersen

The Varieties of Capitalism and Hybrid Success: Denmark in the Global Economy
©John L. Campbell and Ove K. Pedersen
Working paper no 18, 2005
Editor: Lars Bo Kaspersen
International Center for Business and Politics
Copenhagen Business School
Steen Blichers Vej 22
DK-2000 Frederiksberg
Phone: +45 3815 3583
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cbp@cbp.cbs
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ISBN
87-91690-19-6

We thank Bruce Carruthers, John A. Hall, Lane Kenworthy, Edgar Kiser, and Marc Schneiberg for comments
on a previous draft. Peer Hull Kristensen provided especially helpful suggestions about the Danish
vocational training system. This research was funded in part by the Danish Funktionærernes og
Tjenestemændenes Fællesråd. Correspondence to John Campbell, 123 Silsby Hall, Department of
Sociology, Dartmouth College, Hanover, New Hampshire 03755 USA. Email:
John.L.Campbell@Dartmouth.Edu.
Abstract
THE VARIETIES OF CAPITALISM AND HYBRID SUCCESS:
DENMARK IN THE GLOBAL ECONOMY
Proponents of the varieties of capitalism literature maintain that capitalist countries whose institutions
best fit either the liberal market economy or coordinated market economy types will perform the best.
Countries whose institutions are more mixed will perform less well. This paper challenges that assertion by
focusing on Denmark—a country that has performed at least as well as many other advanced capitalist
countries during the 1990s, including those that fit much more closely either the pure CME or LME types.
Denmark has recently developed a more hybrid form than is generally recognized. The dynamic interaction
of elements found in both liberal and coordinated types of capitalism have contributed to its success. This is
demonstrated by analyses of the institutions that coordinate Danish labor markets, vocational training, and
industrial policy.

Many researchers have shown recently that there is more than one way to organize capitalism in
order to achieve socioeconomic success in today’s global economy (e.g., Biggart and Guillén 1999; Guillén
2001b; Hollingsworth and Boyer 1997; Hollingsworth and Streeck 1994). Notably, proponents of the well
known varieties of capitalism approach, best represented by Peter Hall, David Soskice, and their colleagues
(Hall and Soskice 2001a), argue that there are two basic types of capitalism and that each one can perform
successfully although for different reasons. Liberal market economies (LME), such as the United States,
coordinate economic activity through markets and corporate hierarchies and compete successfully on the
basis of low costs and major product and technological innovations. Coordinated market economies (CME),
such as Germany and Sweden, coordinate economic activity more through non-market mechanisms, such
as informal networks or corporatist bargaining, and compete on the basis of high quality products and
innovations in production processes (Hall and Soskice 2001b; Soskice 1999).
This is not to say that all advanced capitalist economies perform equally well and that institutional
differences in the organization of the political economy are irrelevant. To the contrary, the varieties of
capitalism literature predicts that socioeconomic performance is typically better in countries that best fit one
or the other of these two types. Countries that fall somewhere in between these poles and represent hybrids
will not perform as well (Hall and Soskice 2001b, p. 45; Hall and Gingerich 2004).
This paper challenges that assertion by focusing on the case of Denmark—a country that has
performed at least as well as many other advanced capitalist countries during the 1990s and early part of the
twenty-first century, including those that fit much more closely either the pure CME or LME types. Indeed,
Denmark’s socioeconomic performance was impressive during this period (Campbell and Hall 2006). Thus,
Denmark poses a paradox for the varieties of capitalism literature.
We argue that although Denmark is typically classified as a CME in much of this literature, it has
recently adopted some important aspects of the LME type and, therefore, has become more of a hybrid than
the varieties of capitalism literature has recognized. To be sure, Denmark still retains many features of the
CME type and if we were forced to put it in either the LME or CME category, we would have to choose CME.
But we are reluctant to make that choice because the LME characteristics that it has developed have been
important for its strong socioeconomic performance during this period. We will show that Denmark’s
impressive record stemmed in large part from the dynamic interaction of its market and non-market
coordination mechanisms.
Our argument is anticipated by other literatures not directly related to the varieties of capitalism
literature. For instance, much research on developing economies shows that either an excessive reliance on
either the market or non-market forms of economic coordination, notably state planning, will not ensure
satisfactory development and modernization for particular industries. Rather, something in between is
required where public and private sectors interact strategically—not to override market signals, but to identify
market externalities and ways to overcome them (e.g., Evans 1995; Rodrik 2004). Similarly, economic