Varieties of capitalism and strategic management: Managing performance in multinationals after the global financial crisis

Barry J. Witcher, Vinh Sum Chau

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35 Citations (Scopus)


The 2008 global financial crash and the following economic uncertainty have led some leading strategists to argue that firms should review their strategies (notably, Rumelt, 2008), and to advocate changes that favour a form of responsible capitalism which jettisons a short-term orientation in favour of a longer-term focus that serves all of a firm's stakeholders rather than just shareholders (Barton, 2011). Capitalism is the prevailing economic system in which firms must operate, and it is characterized by the investment of private capital for profit and the accumulation of wealth. Its nature varies between national economies for numerous reasons, but especially because of a country's national policies, infrastructure, social and institutional systems. The terms ‘strategy’ and ‘strategic management’ are often used interchangeably to mean the field or the domain of study. In this paper, we take strategic management and define it as the management of a firm's overall purpose, so that the firm is able to balance and sustain its present and future needs. This view incorporates the management of competitive strategy, including its formation, choice, planning, implementation, review and follow-up action. The last twenty years or so have seen an unprecedented expansion of world trade, with the emergence of stronger economies in countries with large populations, such as China and India. During this time, a massive growth has taken place in financial services and banking, with the introduction of new national policies to deregulate business and international trade. The world has seen the development of new ground-breaking technologies, including biotechnology, microprocessing, computer-based information and telecommunications, and the Internet. These trends and changes have been collectively understood as globalization. The concept is controversial. We define globalization as a phenomenon of changing commonalities and differences between countries, which is associated with a worldwide perception that the world is becoming smaller and more interconnected. A number of authors have argued that it has brought about a new competitive equality, or a level playing field, for international firms, whatever their country of origin (e.g. Friedman, 2005). However, it is likely that the extent to which globalization has homogenizing effects must depend upon how national and regional economies respond and are reshaped. There is a growing body of theory and research to suggest that international firms compete differently, since they are likely to practise management in ways that are isomorphic to their countries of origin. In other words, the nature of a firm's strategic management is influenced by the type of capitalism in the country in which its headquarters is based (Albert, 1993; Ferner, 1997; Ferner, Quintanilla and Varul, 2001; Hall and Soskice, 2001; Whitley, 1999, 2007). While it is clear that some multinationals develop their domestic working practices as shared values among their overseas' subsidiaries (Magee, 2007; Nohria and Ghoshal, 1994), it is less certain how the strategic management of a multinational is influenced by the national economy of its country of origin. The aim of this paper is to examine the varieties of capitalism thesis for its implications for strategic management, in particular, to consider the grounds for a more holistic approach to strategic management. We think that it is possible that a more comprehensive style of executive management is likely to make firms, especially multinationals, less susceptible to sudden economic change in global markets. The paper is structured into four parts. In the first, the nature of the varieties of capitalism thesis and its implications are explained. In the second part, two distinct strands of theory and research in strategic management are considered for how these might condition thinking about strategy, management and organizational learning. The third part explores convergence in strategic management, and explicates a model from our research on Nissan that could potentially bring a welcome holistic approach to the strategic management of the large multinational firm. We conclude with a critical assessment of the varieties of capitalism thesis and the likelihood of a convergent strategic management after the global financial crisis.
Original languageEnglish
Pages (from-to)S58-S73
Number of pages16
JournalBritish Journal of Management
Issue numberS1
Publication statusPublished - 1 Mar 2012

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