This volume of ten essays with an introduction is the second product of a collaborative project examining the origins and development of the two major national variants of nonliberal capitalism in the twentieth century. It focuses on the consequences of increasing economic internationalization and recent technological transformations for the major institutions governing economic activities in Germany and Japan, and considers whether these developments are likely to lead to institutional convergence with liberal market economies. Five main subject areas are analyzed in the ten substantive chapters: International relations (Erica Gould and Stephen Krasner, Peter Katzenstein), innovation and technological change (Kozo Yamamura, Robert Boyer), labor relations and production regimes (Kathleen Thelen and Ikuo Kume, Ulrich Jurgens), financial and corporate governance regimes (Sigurt Vitols, Gregory Jackson), and political and party organization (Steven Vogel, Herbert Kitschelt).

Adopting a broadly institutionalist approach to economic governance and organization, the contributors seem agreed that, whilst some features of the political economies of Germany and Japan have changed significantly in the 1990s, particularly in the areas of corporate law, accounting standards and relationship banking, others have altered much less, notably those governing labor relations and levels of employer-employee commitment. On both empirical and theoretical grounds, most authors consider the dominant pattern of change in these kinds of cooperative or organized market economies to be one of hybridization and differentiation between sectors and firm type rather than radical transformation of their national institutional frameworks towards Anglo-Saxon patterns. This is partly because the distinctive, path-dependent institutional regimes governing capital and labor markets in these countries, as well as different political structures and cultures, lead key collective actors such as investors, managers, and employees to understand their interests and appropriate ways of dealing with internal and external pressures differently to those prevalent in liberal market economies. As a result, how they seek to reduce costs, innovate, and find new markets continues to diverge from the low commitment societies of the United Kingdom and the United States.

Such conclusions are not perhaps very surprising or controversial, except for market fundamentalists, but the value of this volume, as with its companion one published in 2001, lies in its detailed working through of the processes by which particular institutional frameworks led various collective actors in Germany and Japan to understand and manage economic and technical changes in specific ways. By showing how the national constellations of historically developed institutions are resulting in distinctive macro and micro adjustment processes, the authors make a significant contribution to our understanding of how differently organized political economies continue to generate contrasting forms of economic organization and economic outcomes. Combining detailed analyses of changes in two national governance regimes with their international integration and patterns of technical innovation highlights the connections between these phenomena and suggests a number of avenues for further work.

However, the book also draws attention to three major concerns about such broad comparative political economy approaches to the study of economic organization and development. First, the appropriateness of the assumptions implicit in the framing of the central question may be doubted. This is expressed by the editors as: “whether Germany and Japan, confronted with the political and economic exigencies of technological revolution and economic internationalisation, must thrust aside their distinctive institutions and the competitive advantages they have yielded in the past, or whether they will be able to adapt and retain such institutions and preserve the social cohesion and economic competitiveness of their societies” (p. 4). In particular, whether internationalization of competition and coordination inevitably leads to institutional convergence.

Accepting for the moment that growing international integration and the development of new information and communication technologies are the key factors impinging upon national variations in institutional frameworks and economic outcomes, which is certainly contestable, it is not at all obvious that these automatically generate strong pressures towards institutional convergence. As a number of the contributors to this volume have suggested elsewhere, they might equally encourage specialization and variation in prevailing governance systems, as differently organized and directed firms seek to develop distinctive capabilities and competitive competences that differ from those characteristic of firms in liberal market economies.

Furthermore, it remains unclear exactly which aspects of internationalization and technical change can be expected to affect which features of dominant institutions and firm behavior, and how, and it is a pity that none of these papers systematically considers these processes. By accepting this phrasing of the core issue to be considered, the editors and contributors seem to have tacitly accepted the view that cross national competition, imitation and digitalization are likely to encourage convergence to the norms of the dominant liberal market economy.

Second, in common with most work in the political economy tradition, it is assumed that the nation state is the inevitable and appropriate unit of analysis for considering economic development and change. There are, of course, some good reasons for focusing on national democracies as key political and economic entities in the late twentieth and early twenty-first centuries, but it would have been useful to have some discussion of why this is so, and under what circumstances it might change. At the very least, an indication of when we would expect national institutions to be so complementary and mutually reinforcing in their implications for economic organization and behavior that they would result in distinctive and homogenous outcomes would have been helpful. Presumably, not all states have such complementary arrangements, and indeed a number of contributors indicate that earlier complementarities of institutions governing financial and labor markets are breaking down, so a synthesizing account of the circumstances in which various kinds of complementaries should, and should not, occur at different territorial and political levels, with their likely consequences, would have added greatly to this volume.

Similarly, a systematic analysis of how much change in one arena, such as capital markets, would be required for the basic nature of the institutional framework of a country to be judged to have qualitatively shifted would have been welcome, as remarked by the editors. The contributors might additionally have considered how and why some continental European countries, such as Denmark and the Netherlands, seem to have managed to develop more flexible external labor markets without fundamentally altering their largely coordinated nature, as mentioned in passing by Kitschelt. Such examples further emphasize the contingent and variable nature of national institutional cohesion and complementarities.

Third, the dominant focus on national institutions and actors, characteristic of much work in the political economy tradition, downplays, if not completely ignores, the role of firms in constructing economic outcomes. Although a number of contributors do draw attention to important differences between large and small companies, and between firms in different sectors with varying exposure to international markets, in explaining both macro and micro adjustment patterns, relatively little attention is paid to specifying how different groups and firms deal with international competition and technical change. If these pressures are regarded as the key factors inducing institutional change in Germany and Japan, then presumably certain kinds of firms and groups dominating them are the major mediating actors that are likely to encourage, or inhibit, modification of current arrangements. A more systematic account of how particular kinds of firms, investors, managers and employee groups are functioning in this role would, then, have been especially useful.

These points apply to much recent work in the comparative capitalisms literature, and are by no means only relevant to this book. However, the interesting analyses presented here do highlight these major issues for the institutional analysis of economic development and change and emphasize the need for them to be carefully considered in future work.