Varieties of capitalism and firm performance in emerging markets : an examination of the typological trajectories of India and Brazil

• Main Author: Sibal, Rajeev
• Published: London School of Economics and Political Science (University of London) 2014
• Subjects: 327.54081; JZ International relations
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.644388

The thesis extends VoC theory to both emerging markets (EMs) and firm-level corporate governance by explaining how market structures direct firm level competitiveness. The most competitive firms are those that follow the contours of capitalism in the domestic political economy. The thesis uses a Varieties of Capitalism (VoC) framework, though institutional differences between developed and developing economies require adaptation of VoC theory in an EM context. The thesis identifies a VoC pattern of complement formation based on the typological trajectory of the EM. A typological trajectory is defined as the complement structure negotiated by economic stakeholders as developmental state controls are withdrawn. The thesis will argue that countries follow different paths of capitalist development, which may not converge to a liberal market economy. Empirically, the thesis uses a multi-level comparative case study of India and Brazil to test hypotheses about capitalist formation and firm competitiveness. India and Brazil share many similarities in their econoimic structures and liberalisation patterns yet have different leading seactors. In the first level of the case study, complement structures and stakeholder bargaining preferences are analysed within a comparative framework. In the second level, within country case studies of firm level corporate governance patterns test the link between market structuring and firm level incentives. The firms selected for the case study are from leading sectors in India (IT) and Brazil (banking). The firm level focus on a single sector makes it possible to control for a wide range of variables while analysing comparative differences in corporate governance across three case firms that exhibit varying levels competitiveness. The thesis finds that EMs espouse typological trajectories, or developmental paths, that conform to either a Liberal Market Economy (LME), Mixed Market Economy (MME), or Coordinated Market Economy (CME) equilibrium. Indian complement structures exhibit a LME typological trajectory. In the Indian IT sector, firms converged to liberal corporate governance norms. And amongst the software firms, those with the most liberal corporate governance models performed best. Brazilian complements, in contrast, moved towards a MME structure after liberalisation. The strong influence of banking and its role as a leading sector are tied to the privileged and powerful position of capital in the domestic market. The differentiation between India and Brazil demonstrate the importance of market structures in understanding development trajectories as well as drivers of firm competitiveness.