1. 2009 Whitley 11
U.S. Capitalism: A Tarnished Model?
by Richard Whitley
Executive Overview
The apparent success of the U.S. model of capitalism as it developed in the 1990s and early 21st century
encouraged many business and policy elites to regard it as an ideal form that should be adopted by other
countries and regions. The recent collapse of the U.S. financial system and the current recession are,
however, likely to limit the attractiveness of this U.S. model in both OECD1 countries and industrializing
economies. In this article, I review the key features and limitations of the postwar U.S. economic model
as well as the challenges to this model from the success of many Japanese firms doing business in the U.S.
market and the rapid rise of the Asian “tigers.” Given the current situation, it is likely that the influence
of the fully fledged market fundamentalist model, imposed on many Eastern European countries in the early
1990s, will be greatly diminished, and attention focused much more on alternative forms of capitalism.
Most of these involve the state taking a more proactive role in economic development and regulation,
albeit in “market friendly” ways.
T
he current financial crisis and economic reces- The idea that U.S. capitalism— or at least
sion have intensified debates about the viabil- some features of its productive system—represents
ity of the U.S. model of capitalism as it has the most modern and efficient form of market
developed in the 1990s and early 21st century, economy was prevalent among many business and
especially its reliance on the financial services political elites throughout much of the 20th cen-
industry as a key agent of economic growth, and tury, and indeed the “American system of manu-
the desirability of imitating its central features. factures” was the focus of a number of study tours
While it was not without its critics, the apparent in the 19th century (Hounshell, 1984; Zeitlin,
success of the “new” economy and the deregulated 2000a). However, attempts to export the Ameri-
financial sector in the United States provided can model, which were especially strong in the
ample support for model missionaries and model aftermath of World War II (Djelic, 1998), varied
mercenaries (Braithwaite & Drahos, 2000, pp. greatly in their impact and apparent success in
586 –587) proselytizing for the cause of liberalized differently organized market economies. It is
markets, strong antitrust legislation, and fluid worthwhile considering these differences if we are
markets for corporate control. High rates of pro- to understand the current situation and its likely
ductivity increases and continued economic effects on the diversity of capitalisms (Amable,
growth seemed to justify the belief in flexible labor 2003; Crouch, 2005; Whitley, 1999). In particu-
and capital markets and arm’s-length market con- lar, the postwar efforts to Americanize European
tracting as the primary means of economic coor- and Japanese economies highlight a number of
dination. The subsequent collapse of the dotcom important points about such export endeavors and
boom and freezing of many financial markets the limited convergence of different forms of cap-
have, however, greatly weakened the appeal of italism to a single U.S.-inspired version.
this model and are stimulating considerable inter- In brief, these points include the following:
est in both reregulating financial markets and First, there is no single U.S. model of business
constructing alternative models of capitalism. organization and market structure that could be
said to represent the dominant features of the U.S.
1
Organisation for Economic Co-operation and Development. market economy in all major industries and re-
Richard Whitley (r.whitley@mbs.ac.uk) is Professor of Organizational Sociology at Manchester Business School, University of Manchester.
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2. 12 Academy of Management Perspectives May
gions, whether in the 1950s or in the 1990s. limitations. Second, I briefly discuss the important
Second, the particular version of mass production challenges to this model arising from the success
and mass marketing companies that came to dom- of many Japanese firms in the U.S. market and the
inate many capital-intensive manufacturing sec- rapid rise of the Asian “tigers” that did not follow
tors in the U.S. in much of the 20th century the edicts of the IMF and the World Bank. Third,
developed interdependently with distinctive insti- the central features of the new model of U.S.
tutional features of the United States that were capitalism that became popular in the 1990s are
not, and are not currently, to be found in most considered, together with the relative failure of
other OECD member states (Hollingsworth, most attempts to imitate it in Europe and else-
1991; Hollingsworth & Boyer, 1997). Addition- where. Finally, I discuss the implications of the
ally, the relative success of large managerially in- current financial collapse and recession for the
tegrated firms in the United States can be seen as relevance of U.S. models in developing dominant
a response to the specific nature of “thin” markets forms of economic organization in the 21st
for capital-intensive goods there in the early 20th century.
century (Langlois, 2003).
Third, many of the key institutional features of
the neoliberal model that were urged on other The Postwar U.S. Model and Its International
market economies, especially the former state so- Hybridization
A
cialist societies of Eastern Europe in the 1990s s Zeitlin (2000a, p. 34) has emphasized:
(Amsden et al., 1994), did not apply to the U.S. “Americanisation was far from a new issue for
economy as a whole. In particular, the role of the (European and Japanese manufacturers) after
state was much more proactive and promotional 1945. Fordism, Taylorism and the ‘American Sys-
(Evans, 1995; Weiss, 2009) in some sectors than tem of Manufactures’ had already begun to attract
others. Fourth, no country that attempted to fol- widespread foreign interest before the First World
low the prescriptions of the postwar model mis- War.” In particular, scientific management as an
sionaries did so wholeheartedly; many such tech- idea and as a set of managerial practices had
nology and institutional transfers involved appealed to a wide range of business and political
considerable conflict, revision, and hybridization, elites, including Lenin and other Russian revolu-
as did similar imitations of the much misunder- tionary leaders, German engineers and industrial-
stood Japanese model of production in the 1980s ists, and some trade union leaders (Bendix, 1956,
(Boyer et al., 1998; Zeitlin & Herrigel, 2000). pp. 206 –207; Guillen, 1994, pp. 91–121).
´
Finally, some of these hybrid innovations in man- However, it was especially after the defeat of
agement, corporate structures, and rules of the Germany and Japan, and their occupation by U.S.
competitive game became key components of al- and other Allied forces, that the idea of reorga-
ternative forms of capitalism that provided quite nizing the economies of Europe and Japan along
different models of business organization. Some U.S. lines became generally established, both
elements of these alternatives in time provided among U.S. business and political elites and, to
the basis for revising aspects of the dominant U.S. varying extents, among domestic ones. A crucial
model (Liker et al., 1999). feature of this postwar Americanization was the
In this essay I shall elaborate these points in combination of a particular managerial and tech-
more detail to suggest how the current crisis is nological approach—loosely termed Fordism—
likely to affect perceptions of the U.S. model and with specific institutional innovations dealing
its impact on business systems and the institu- with market regulation, corporate governance,
tional arrangements governing them in both and competitive practices. Whereas much of the
OECD countries and industrializing economies. earlier foreign interest in U.S. business models
First, I summarize the key features of the dominant had focused on production rationalization and the
model of U.S. business as it was portrayed in many organization of large-scale manufacturing, the
accounts in the postwar period, and some of its postwar U.S. model was at least as much con-

3. 2009 Whitley 13
cerned with institutional reforms, partly driven by ordination above cooperation between companies
political efforts to prevent the return of authori- and between firms and state agencies, with exit
tarian regimes. nearly always preferred to voice (Hall & Soskice,
For many actors and observers in the 1950s and 2001; Hollingsworth, 1991).
1960s the American model of business organiza- Particularly important to the occupation au-
tion was exemplified by the large diversified thorities in Germany and Japan, and to advocates
company that integrated the mass production of of the U.S. economic model more generally, were
standardized goods with their distribution and mar- antitrust legislation, the separation of the banks
keting to mass, homogeneous markets through a from large industrial companies, and antimonop-
managerial hierarchy that specified and controlled oly competition rules (Kester, 1990, pp. 99 –111;
routinized tasks carried out by mostly semiskilled Quack & Djelic, 2005). Rules forbidding cartel-
workers. Such Fordist strategies focused on achieving ization, collective risk sharing between firms, and
high levels of labor productivity through the mech- joint investment in new technologies and markets
anization of many production processes and system- were coupled with an overwhelming belief in the
atic managerial coordination and control of all parts efficacy of free and fair competition to select effi-
of the development, production, and marketing pro- cient companies as central elements of the recipe
cess. Increasing productivity and a managerial focus imposed or advanced by U.S. elites in the postwar
on continuing cost reductions enabled these compa- period. As in much orthodox economic theory,
nies to compete primarily on price in large consumer strategically autonomous and authoritatively inte-
markets for standard goods. grated firms were seen as “islands of planned co-
This dedicated capital- and manager-intensive ordination in a sea of market relations,” as Rich-
machine required a relatively predictable pattern ardson (1972) put it, that were best relying on the
of large-scale demand to absorb the high levels of price mechanism to manage interfirm relation-
throughput it generated, and so has been typically ships in an essentially arm’s-length environment
associated with oligopolistic markets susceptible (Whitley, 2007, pp. 38 –50).
to mass marketing techniques and advertising This general model of firms and markets was
campaigns (Hirst & Zeitlin, 1991; Lazonick, 1991; contested by some business and political elites and
Piore & Sabel, 1984). Flexibility in responding to never fully accepted in Europe, even in occupied
fluctuations in demand was predominantly Germany where different U.S.-inspired reforms
achieved through hiring and firing easily substi- had a variety of outcomes, including complete
tutable semiskilled labor and exerting market rejection (Djelic & Quack, 2005). However,
power over suppliers who were usually dealt with at large-scale U.S. investment in western Europe and
arm’s length. Quality improvements were largely political pressures to construct Europe-wide mar-
secondary to cost reductions in this model (Boyer & kets and regulatory institutions in the developing
Durand, 1987). European Community encouraged the reduction
Successful Fordist firms were seen by many, of national barriers to mass EC-wide consumer
particularly U.S. model missionaries, as develop- markets and a widespread belief in the benefits of
ing interdependently with specific kinds of insti- Fordist-style mass production. For much of the
tutional arrangements governing capital, labor, trente glorieuses after 1945 many European business
and product markets, which needed to be estab- and political elites continued to view the U.S.
lished in societies whose elites wished to modern- model as the most modern and challenging
ize their economies in the American mode. Most (Ranieri, 2000; Zeitlin, 2000b). Indeed, U.S.
of these institutions were concerned with corpo- management consultants, business schools, and
rate governance, competition policy, and labor similar transfer agents of American “best practice”
relations. They constituted the central features of were often seen as important contributors to eco-
what has become popularized as the liberal market nomic growth and productivity in the 1960s and
economy. The key elements of this institutional 1970s (Kipping & Engwall, 2002; Locke, 1996;
order elevate market-based forms of economic co- Whitley et al., 1981).

4. 14 Academy of Management Perspectives May
In the case of Japan, though, the reforms to the the possible exception of Hong Kong, which was
political and economic system carried out during much more state coordinated than the official
the U.S. occupation between 1945 and 1952 were rhetoric claiming positive nonintervention poli-
more wide-ranging and far-reaching. Aimed at cies suggested (Castells et al., 1990; Fong, 1988;
destroying prewar coalitions between the landlord Schiffer, 1991), there could be little doubt that
class, the military, the bureaucratic elite, and big the state in these economies had played a major
business and deconcentrating economic power, role in their success (Fields, 1995), with the South
these reforms broke up the family holding compa- Korean one deliberately “getting relative prices
nies that dominated large areas of the economy ‘wrong’” (Amsden, 1989, pp. 141–147) in the eyes
(zaibatsu), tried to separate the banks from indus- of orthodox economists. Furthermore, family-con-
trial companies, established the Fair Trade Com- trolled firms dominated these economies, with
mission to restrict monopolies, and passed the capital markets playing a minor role in corporate
Anti-Monopoly law of 1947 (Johnson, 1982; governance and investment funding, and compe-
Kester, 1990). tition policy rarely followed U.S. dictates.
However, by relying on the unpurged parts of Even if liberal markets and a small state ap-
the central bureaucracy to implement these and peared to work in the U.S., which may be the case
other reforms, the Americans enabled the Minis- only for some industries in some historical periods
try of Finance and the Ministry of Commerce and (Weiss, 2009), it became clear to many observers
Industry, later the Ministry of International Trade that more coordinated economies in which the
and Industry, to play a leading role in managing state was actively involved in economic develop-
Japan’s economic reconstruction and in construct- ment could be at least equally competitive, if not
ing the emerging bureaucratic-political coalition indeed superior in industries such as cars and
that has governed Japan for much of the postwar consumer electronics (Evans, 1995; Streeck,
period (Pempel, 1998, pp. 84 –91; Whitley, 1992a, 1992). The rise of the East Asian NICs, the re-
pp. 124 –127). This coalition was able to organize surgence of Italian industrial districts in some sec-
recession cartels in many industries, restrict direct tors, and the export success of firms in many
foreign investment in Japanese firms, control ac- continental European economies in what became
cess to foreign technology, and, in effect, con- termed diversified quality production together dem-
struct a highly coordinated business system that onstrated that there were a number of viable al-
bore little resemblance to the U.S. model (Kester, ternatives to the postwar U.S. model, particularly
1990; Whitley, 1999). Together with the eco- in medium-technology sectors (Amable, 2003;
nomic boost provided by the Korean War and Crouch, 2005; Whitley, 1999).
continuing U.S. aid in the 1950s, as well as access Furthermore, as European and Asian managers,
to the U.S. market, this system became so success- politicians, and advisers became more familiar
ful that it has provided an influential alternative with the United States over the postwar decades,
to the U.S. model, not only in Asia but also one they learned that the U.S. model being advocated
that has inspired considerable discussion, not to by many missionaries did not accurately reflect the
say paranoia, among some in the U.S. itself, espe- nature of the U.S. economy and its dominant
cially in the 1980s. institutions. In particular, there was much more
The questioning of the efficacy of the U.S. variety between sectors and regions in prevalent
model, particularly its emphasis on the priority of patterns of economic coordination and control, as
free markets and the residual, passive role of the reflected for instance in the IT industry in the
state in guiding economic development, was fur- Northeast and California (Saxenian, 1994), and
ther reinforced by the even more rapid rise of the corporate governance rules in particular states
four East Asian tigers, or newly industrialized have often prevented an active market for corpo-
countries (NICs): South Korea, Taiwan, Hong rate control from developing. Many of the largest
Kong, and Singapore in the 1970s and 1980s U.S. corporations are headquartered in Delaware
(Amsden, 1989; Vogel, 1991; Wade, 1990). With as a result of its favorable treatment of incumbent

5. 2009 Whitley 15
managements (Franks et al., 2007; Roy, 1997; aspects of the earlier one, such as low levels of
Tylecote & Visintin, 2008, pp. 92–96). Addition- employment protection, there were a number of
ally, the vigor with which the federal government significant differences in both the business strate-
has pursued antitrust cases has varied between gies pursued and the institutional context govern-
political regimes and also reflects perceptions of ing economic activities. The major shift in the
national security interests (Davis et al., 1994). In prevalent competition model concerned the flex-
the past half-century the central U.S. state has ibility of firms and their ability to reconfigure the
also been extensively involved in supporting the nature and organization of core activities and
development of particular industries, especially skills to respond to rapid and radical changes in
those with military connections (Weiss, 2009). markets and technologies. From focusing on coor-
Thus, key elements of the U.S. model, or per- dinating and controlling operations to the distri-
haps the version of it that has been seen as iconic bution of standardized products at low prices, firms
and most desirable by model mercenaries and mis- in this new competition model concentrated on
sionaries, did not appear to be so necessary for commercializing radically new products and ser-
U.S. economic success. This was especially the vices as rapidly as possible, even if these might
case in the industries where the Fordist model had cannibalize existing markets and threaten to de-
been dominant, as many U.S. companies became stroy current organizational capabilities.
vulnerable to firms from very different kinds of The archetypical “high-flex” SV firm as por-
market economies that focused more on quality trayed by Teece (2000, pp. 57–59) combines shal-
and flexible responses to demand changes (Boyer low hierarchies, extensive external linkages, lim-
& Durand, 1987). ited diversification, and a strong “change culture”
to adapt quickly to unpredictable events, and so is
quite different from the multiproduct, hierarchi-
The Rise of Silicon Valley and the cal, integrated companies that were emblematic of
New U.S. Model the postwar model. In some perceptions, the core
T
hese doubts about the coherence and general competence of the emerging 21st-century firm is
effectiveness of the institutions and business considered to be based on knowledge production
system characteristics of liberal market econo- and improvement involving the mobilization of a
mies as summarized in the U.S. model were coun- wide range of business partners to win high-speed
tered to some extent by the collapse of the Soviet learning races (Powell, 2001). Such project-based
Union and the Japanese bubble. Together with network firms depend much more on the active
the rapid U.S. recovery from the recession of the participation in, and commitment to, complex
early 1990s, the subsequent boom in the ICT problem solving and successful project completion
sector, and the Asian financial crisis of 1997, on the part of skilled employees than was charac-
these events seemed to revitalize many model teristic of Fordist firms, but are rarely able to offer
missionaries who urged market fundamentalist credible commitments to stable and long-term
recipes on the emergent market economies of employment in the pervasive environment of
Eastern Europe and Russia, often with unfortunate technical and market uncertainty (Whitley,
results (Amsden et al., 1994; King, 2007). How- 2006). Managerial prerogatives over hiring and
ever, the model that most appealed to foreign firing are thus preserved in this new U.S. model,
business and political elites, especially in Europe, but now extend from the majority semiskilled
was not so much the postwar Fordist one, but the manual workforce to the technical and managerial
relatively novel Silicon Valley (henceforth SV) ranks whose contributions are crucial to firms’
pattern of economic organization that seemed to success, but whose knowledge and skills are vul-
be successful in generating the growth industries nerable to environmental changes.
of the future. While fluid external labor markets continue to
While this revised U.S. model included some constitute a key feature of this U.S. model, there

6. 16 Academy of Management Perspectives May
are major differences in how they support Fordist term. The ability to trade ownership stakes easily
and project-based firms. As Casper (2007) empha- with relatively low transaction costs is therefore a
sized, in the competence-destructive environment significant component of the business environ-
of SV-type technological clusters, it is crucial for ment for venture capitalists in the SV model.
managers to have access to a pool of technological As Tylecote and Visintin (2008) emphasized,
experts with known reputations in specific areas VCs also need to be knowledgeable about the
who can be recruited quickly to work on rapidly technologies and markets involved if they are to
changing projects. Such pools of mobile labor be able to select promising projects, actively sup-
power facilitate the fast diffusion of new knowl- port them as members of company boards, and
edge and skills among firms in ways that are much establish meaningful milestones for judging
more difficult to achieve where careers are more progress. Such well-informed and committed ven-
organizationally specific (Bahrami & Evans, 1995; ture capitalists in the United States and to a lesser
Saxenian, 1994). extent elsewhere have been able to construct port-
From the viewpoint of individual engineers and folios of projects in which the success of a limited
scientists, the clustering of such companies in number that can be traded on liquid capital mar-
particular regional innovation systems reduces kets or sold to larger competitors has more than
some of the risks of joining new firms in rapidly outweighed the failure of others. While such re-
changing environments by facilitating the con- alization of profits and their recycling to new
struction of social networks of scientists, engi- projects can be achieved through private place-
neers, and managers that provide fast information ments, these transactions can be conducted on a
about new opportunities and reduce search costs much larger scale with easier diversification op-
for both employers and employees. The agglomer- portunities when publicly regulated exchanges are
ation of firms reliant on highly skilled staff that available.
are able to offer potentially very high rewards in It is important to note, though, that large and
such clusters affords technologists some reassur- liquid capital markets on their own are not suffi-
ance that alternative posts are likely to be avail- cient conditions for the establishment of success-
able in the event of redundancy or firm failure. ful technology clusters, as the examples of the
A key part of the incentive structure for skilled United Kingdom and other anglophone econo-
technologists to join these risky project-based mies indicate. Much of the venture capital and
firms is, of course, equity ownership, either di- private equity activity stimulated by such markets
rectly or in the form of share options. Especially in in these societies has failed to support new firms in
winner-takes-all markets, such stakes can generate risky high-technology sectors, preferring to engage
enormous rewards for staff of successful compa- more in short-term financial engineering (Tyle-
nies, but even in different cases they can lead to cote & Visintin, 2008, pp. 96 –101). Indeed, many
considerable payoffs through trade sales or public regions in the U.S. that have tried to establish
offerings on capital markets. In the SV model such such clusters have not succeeded to the same
high-powered incentives are linked to another extent as Silicon Valley (Casper, 2007). In par-
important feature of the business environment: ticular, the existence of capital market-based fi-
informed venture capital (Kenney & Florida, nancial systems does not guarantee the creation of
2000). a community of knowledgeable and well-informed
Given the high levels of uncertainty and risks venture capitalists and providers of related special-
of failure in such high-technology clusters, inves- ist business services who are willing and able to
tors are more likely to gamble on the potential commit substantial resources to new ventures
success of one project if they can (a) diversify their rather than focus on transaction-based fee income
risks across a number of different ones in a port- (Suchman, 1995, 2000). The SV model is not,
folio of investments and (b) realize the gains from then, wholly dependent on liquid capital markets
success by selling their interest in the medium per se, but rather more on the existence of such a

7. 2009 Whitley 17
community that can draw on human and material in risky projects (Leslie, 2000; Mowery & Nelson,
resources to make significant commitments and is 1999; Saxenian, 1994). Indeed, Sturgeon (2000)
able to monitor the progress of projects effectively suggested that it was during the early 20th cen-
(Kenney, 2000). tury that the foundations of the SV model were
A further feature of the SV model that distin- laid, including the important role of military
guishes it strongly from the postwar U.S. model, contracts and advanced technological training
and one that has attracted the attention of many of key inventors.
policy makers in Europe and elsewhere, is the The widespread belief in the key contribution
close involvement of public research and educa- of academic research to the SV model, especially
tion organizations with emerging industries. during the 1990s dotcom boom and popularization
While much of the enthusiasm for university-led of the “knowledge economy,” encouraged many
local innovation systems built around academic states that had invested considerable resources in
science parks has been shown to be misplaced, at the expansion of higher education and academic
least for the establishment of major technology research in the 1960s and 1970s to develop knowl-
clusters (Mowery & Sampat, 2005), academic re- edge transfer policies and involve universities and
search and training do seem to be more closely public research institutes more directly in eco-
connected to new firm formation and the growth nomic development. Thus, patent laws were
of new industries in such clusters than was the changed in many countries to imitate what was
case for Fordist sectors dominated by isolated hi- incorrectly seen to be the success of the Bayh-
erarchies (Whitley, 2007, pp. 70 –78). This has Dole Act of 1980 in stimulating research-based
especially been the case for the biotechnology economic growth (Mowery et al., 2004), and
industry, which has depended much more directly many national and local governments attempted
on publicly financed university research than has to coordinate the use of academic research in
the IT sector (Prevezer, 1998). Although some technological development.
observers suggested that “the presence of leading Unlike the earlier U.S. model that largely re-
research universities . . . was by no means suffi- stricted the explicit role of the state to a classic
cient to create Silicon Valley during the 1950s night watchman regulatory function (Evans,
and 1960s” (Mowery & Sampat, 2005, p. 227), 1995; Johnson, 1982), the new SV model was also
many attempts to replicate the success of this seen by many policy makers and advisers as justi-
high-technology cluster have involved the active fying a coordinating and steering role for state
participation of such universities. agencies, particularly with regard to the develop-
This important role of publicly supported sci- ment and use of public scientific knowledge. As a
entific and technological research, and universi- result, there was considerable interest in develop-
ties more generally, in stimulating new technolo- ing regional innovation systems around leading
gies and industries constitutes part of a broader universities, creating internationally excellent re-
shift in perceptions of U.S. models of economic search institutions, and facilitating technical
success: the significance of state funding and risk transfer activities in many OECD countries
sharing for technological research and develop- (Asheim & Gertler, 2005; Kruecken & Meier,
ment. Whereas much product development and 2006; Weingart & Maasen, 2007). Much state
innovation in the postwar model had limited and restructuring of academic systems in Europe and
tenuous connections to current academic re- Asia has been legitimated by the belief that the
search, and was mostly conducted within large SV model showed how state-supported research
private companies, the SV model clearly de- could, and should, contribute directly to eco-
pended on massive federal support for university- nomic growth and that universities should play a
based research and training combined with large- much more entrepreneurial role in the develop-
scale military support for new technologies and ment of new knowledge-based industries (Clark,
procurement policies that encouraged investment 1998; Engwall & Weaire, 2008).

8. 18 Academy of Management Perspectives May
The Impact of the Financial Crisis on the and Europe in complex and highly risky deriva-
Relevance of the U.S. Model tives markets. It remains to be seen, though,
G
iven these differences in prevalent models of whether academic research in financial economics
U.S. capitalism and their varying influence on changes its presumptions and model-building
business models and institutional arrange- techniques significantly in the light of the present
ments in different market economies since the crisis in financial markets. Previous responses by
end of World War II, what are likely to be the orthodox economists to major recessions would
effects of the current financial crisis and world- suggest that any such revisions are likely to be
wide economic recession, widely seen as originat- limited, although some financial journalists do
ing in the United States, on the influence of the seem ready to jettison the whole apparatus.
U.S. model on forms of economic organization Second, the expansion of such transaction-
elsewhere in the world? At least five general based banking business models and rapid exits
points can be made. from financial commitments seem likely to rein-
First, there seems little doubt that the greatly force more general doubts about the viability of
expanded role of the financial services sector in ultraliberal market economies in which ownership
the United States and United Kingdom since the rights can be traded very easily with few con-
straints on short-term economic opportunism. Re-
deregulation of many financial markets in the
liance on arm’s-length forms of economic coordi-
1980s and 1990s will decline, and few policy mak-
nation in contrast to more collaborative and
ers will be willing to rely on financial innovations
socially organized means of integrating economic
as the key to economic growth. The increased
activities is becoming less attractive to many busi-
flexibility and ease of trading financial instru-
ness and policy elites, particularly in societies that
ments between firms, both on formal exchanges
developed more coordinated market economies,
and directly between banks and other organiza-
such as in continental Europe and East Asia. Rigid
tions, which has become such a feature of dereg- enforcement of antitrust rules prohibiting inter-
ulated financial markets, encouraged banks and firm cooperation in developing new technologies
other providers of loans to slice them into differ- and markets seems likely to weaken in many so-
ent tranches of variously risky investments and cieties, as firms explore a variety of cooperative
sell them on to other financial and nonfinancial and competitive relationships with business part-
companies. The institutionalization of this “orig- ners in different countries (Herrigel & Zeitlin,
inate-and-distribute” business model is widely 2009).
seen as having enabled many lenders to avoid Third, together with the relative decline of
responsibility for their decisions and exit quickly Fordism and the significant differences between
from commitments, at least as long as the markets the postwar U.S. mode of business organization
for these products remained liquid. These kinds of and the SV model, the growing interest in differ-
markets have been partly legitimated, if not in- ent business systems highlights the variety of ef-
deed directly facilitated, by developments in fi- fective forms of economic organization to be
nancial economics that assumed they are efficient found in the U.S. and other capitalist societies. It
and provided techniques for pricing options and also emphasizes the inadequacy of the belief that
other derivatives (MacKenzie, 2005). there is a single business model that is the most
Such low-commitment relationships between efficient for all sectors and countries. Not only is
actors in financial markets are unlikely to be sus- there not an all-encompassing and highly coher-
tained in the short to medium term, whether in ent U.S. model of capitalism that is more effective
the United States or elsewhere, even if a return to than other forms in all industries and markets, but
the Glass-Steagall Act separation of commercial the relative success of particular U.S. models, such
banking from investment banking will be difficult as the SV one, is quite specific to certain sectors
to implement and is improbable given the exten- and dependent on particular kinds of supporting
sive involvement of commercial banks in the U.S. institutional arrangements and services (Casper,

9. 2009 Whitley 19
2007; Kenney, 2000). The current failure of ultra- environments, such as the provision of collective
flexible financial markets may well encourage competition goods and constraints on economic
more sophisticated analyses of different competi- opportunism, for effective development of partic-
tion models, the conditions in which they become ular competition models and interconnections be-
successful in different markets and industries, and tween firms’ capabilities, success in different kinds
how contrasting institutional frameworks encour- of markets and technologies, and dominant insti-
age them to become established. tutions governing access to capital, labor, and
However, fourth, despite the reaction against product markets (Whitley, 2007, pp. 88 –110).
ultraliberal market contracting, the SV model will Finally, the highly active roles of national gov-
probably continue to be attractive to many policy ernments in all sorts of capitalist societies in deal-
makers, both in the United States and in other ing with the current crisis, together with the im-
OECD countries, as it offers the hope of economic portance of state support for the success of many
growth through new industries and does not de- U.S. companies, have rendered prohibitions on
pend on the sorts of financial innovations and state steering of economic development uncon-
trading that developed in the 2000s. Indeed, while vincing. This is especially so in many innovative
venture capitalists investing in new firms and sectors where state procurement policies, risk
projects in Silicon Valley often expect to realize sharing, and public funding of higher education
their profits through selling ownership stakes in and scientific research have helped the growth of
the medium term, they are much more committed new industries. While being more important in
to the active management of their investments defense and health-related industries in the post-
than the originate-and-distribute banking model war United States than in other sectors, state
implies, and are concerned to build on and en- coordination of investments, provision of collec-
hance their knowledge of particular technologies, tive competition goods (Crouch et al., 2001,
markets, and people to do so effectively. Reregu- 2004), and regulation of markets to encourage
lating capital markets and limiting transaction- innovation has been more significant in the de-
based banking need not, then, result in the col- velopment of many industries there than is often
lapse of Silicon Valley or inhibit the development acknowledged (Breznitz, 2007; Dobbin, 1994;
of similar high-technology clusters. Roy, 1997; Weiss, 2009). Adopting a U.S. model,
Equally, given the limited role of equity mar- then, need by no means imply the relegation of
kets in supporting Fordist strategies in the 20th- the state to a passive bystander role.
century United States, it seems unlikely that in- Consequently, it seems highly likely that (a)
troducing some constraints on financial flexibility the attractiveness of fully fledged market funda-
in the banking systems would prevent large firms mentalism of the kind imposed on many countries
from successfully implementing mass production/ in Eastern Europe in the early 1990s will be greatly
mass marketing business models. While the diminished by the current crisis, and (b) state
present crisis may greatly reduce the size and dom- steering of economic development, regulation of
inant role of the U.S. financial services industry in markets, and support for particular firms and in-
its recent form, this need not necessarily lead to dustries will be widely viewed as legitimate and
the rejection of either the postwar U.S. model or desirable, albeit in “market friendly” ways. From
the SV variant. this point of view, then, the collapse of hyperflex-
If network-based firms are indeed key to eco- ible financial markets in the United States and
nomic growth in the 21st century (Powell, 2001), elsewhere will reinforce existing tendencies in
they seem to be quite specific to particular sectors many industrializing countries for the state to play
and environments. A U.S. model based on SV a leading role in coordinating and supporting eco-
will apply only to certain kinds of industries and nomic development, as it did in many East Asian
be restricted to quite local contexts. Insofar as economies in the postwar decades. It is, though,
these limitations are recognized, they demonstrate worth pointing out that the geopolitical environ-
the importance of key features of the business ment in which the U.S. opened its markets to

10. 20 Academy of Management Perspectives May
Japan and the NICs during the Cold War has path of institutional change in postwar Germany. In G.
changed considerably, so that purely export-ori- Morgan, R. Whitley, & E. Moen (Eds.), Changing capi-
talisms? Oxford, England: Oxford University Press.
ented industrialization is no longer likely to lead Dobbin, F. (1994). Forging industrial policy: The United
to similar rates of rapid growth. States, Britain, and France in the railway age. Cambridge,
England: Cambridge University Press.
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