DOMINANT FORMS OF ECONOMIC-ORGANIZATION IN MARKET ECONOMIES

The identification of distinctive and effective forms of economic organization in East Asia has emphasized the close connections between dominant social institutions and ways of co-ordinating economic activities as well as the interrelations between firm and market characteristics in separate business systems. Differences in major institutions thus generate significant variations in how firms and markets are structured and operate. These variations suggest that an important element in the analysis of market economies is the comparison of firm-market relations across institutional contexts. This requires their key characteristics to be identified. These can be summarized under three main headings which constitute the components of business systems: the nature of firms as economic actors, the nature of inter-firm relations in markets and the nature of authoritative co-ordination and control systems within firms. Thirteen major characteristics form the basic dimensions of business systems, which vary as the result of differences in state structures, financial systems, cultural conventions and other key institutional features. Interdependences between these characteristics restrict the variety of business systems that become established in market economies and suggest that five major kinds can be identified on the basis of institutionalized patterns of risk-sharing and firm self-sufficiency: centrifugal, partitioned, collaborative, co-ordinated and state-dependent. These types of business system highlight the different patterns of economic organization, and some of their institutional connections, which have developed in Europe and other industrialized societies.