Alternative pathways to competitiveness within developed capitalism : a comparative study of the pharmaceutical sector in Germany, Italy and the UK

Abstract

The present research project questions the central argument of the literature on competitiveness: that firms in the same economy specialise in the same competitive strategy (Heckscher 1919; Ohlin 1933; Sinn 2005; Lundvall 1992; Nelson 1993; Porter 1990; Hall and Soskice 2001). Given that national institutions provide one set of input factors, as required for one specific competitive strategy, this body of literature expects firms to exploit such institutional advantages by pursuing the institutionally favoured strategy. Contrary to these expectations, my analysis of the pharmaceutical sector shows that firms in Germany, Italy and the UK pursue (1) a radical-innovation-, (2) a high-quality-, and (3) a low-cost- strategy to the same extent. Aiming at understanding how firms can pursue different strategies within the same institutional environment, my research project explores the link between (national) institutions, input factors and competitive strategies. In so doing, I first test whether the competitiveness literature rightly suggests that each competitive strategy requires a specific set of input factors. Finding this hypothesis to hold true, I then analyse how firms secure required factors in diverse institutional environments. Exploring different institutional pathways to firm competitiveness, I show that the competitiveness literature falls short in its overly narrow focus on national institutions: The literature simply ignores the fact that firms secure input factors not only through national institutions, but also through 'improvisation* on a contractual basis, and through *importation ' by drawing on international institutions. This finding has two implications. Firstly, given the variety of institutions on which firm competitiveness is based, national institutions do not assume their shape with the aim of supporting one specific production regime. Hence, I retain a historical account more useful to explain institutional development than the functionalist explanations proposed in the competitiveness literature. Secondly, the inventiveness of entrepreneurs in securing required input factors indicates that they are Schumpeterian innovators rather than institutionally constrained actors. Accordingly, a Schumpeterian perception of entrepreneurs is more instructive for understanding how firms gain international competitiveness than the approach of the competitiveness literature, which perceives entrepreneurs as mere institution-takers. These insights lead me to conclude that the increasing internationalisation of economic affairs entails divergence in the shape of institutions, and convergence in entrepreneurial practices.