Varieties of Capitalism, Varieties of Innovation? A Comparison of Old and New EU Member States

Abstract

This article seeks, firstly, to shed light on the main claim of the Varieties of Capitalism (VoC) framework that socio-economic institutions can help to shape comparative advantage, and, secondly, to complement existing assessments that have relied predominantly on qualitative data and that have tended to focus on a few economic sectors. It examines the distribution of export success in a number of economic sectors, in which competitiveness is said to be characterised by either radical or incremental innovation, as well as exports in knowledge-intensive service sectors. Unlike previous studies it applies the framework to some of the new member states of the European Union in Central and Eastern Europe. This is an important area to examine the contentions of the VoC framework, because, if those arguments are correct, they should be applicable to the new member states. Moreover, it draws on the latest available data; for indicators measuring export success this is done at the lowest level of aggregation. In contrast to previous studies, a more appropriate measure of trade specialisation, revealed symmetric comparative advantage, is used. Whilst some of the evidence supports the VoC framework, much of it does not. This raises important conceptual and methodological issues that should be addressed by future research.