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BEYOND CONTINUITY
This page intentionally left blank
 Beyond Continuity
Institutional Change in Advanced
Political Economies

Edited by
WOLFGANG STREECK
and
KATHLEEN THELEN

1
 3
Great Clarendon Street, Oxford OX2 6DP
Oxford University Press is a department of the University of Oxford.
It furthers the University’s objective of excellence in research, scholarship,
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With offices in
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Singapore Switzerland Thailand Turkey Ukraine Vietnam
Oxford is a registered trade mark of Oxford University Press
in the UK and in certain other countries
Published in the United States
by Oxford University Press Inc., New York
© Oxford University Press, 2005
The moral rights of the author have been asserted
Database right Oxford University Press (maker)
First published 2005
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form or by any means,
without the prior permission in writing of Oxford University Press,
or as expressly permitted by law, or under terms agreed with the appropriate
reprographics rights organization. Enquiries concerning reproduction
outside the scope of the above should be sent to the Rights Department,
Oxford University Press, at the address above
You must not circulate this book in any other binding or cover
and you must impose this same condition on any acquirer
A catalogue record for this title is available from the British Library
Library of Congress Cataloging in Publication Data
Beyond continuity : institutional change in advanced political economies / edited by
Wolfgang Streeck and Kathleen Thelen.
p. cm.
ISBN 0–19–928045–2 (alk. paper) — ISBN 0–19–928046–0 (alk. paper) 1. Institutional
economics—Europe—Case studies. 2. Organizational change—Europe—Case studies. 3.
Capitalism—Europe—Case studies. 4. Institutional economics—United States—Case
studies. 5. Organizational change—United States—Case studies. 6. Capitalism—United
States—Case studies. I. Streeck, Wolfgang, 1946–II. Thelen, Kathleen Ann.
HB99. 5. B488 2005
338.5'01—dc22 2004025247
ISBN 0–19–928045–2 (hbk)
ISBN 0–19–928046–0 (pbk)
1 3 5 7 9 10 8 6 4 2
Typeset by Newgen Imaging Systems (P) Ltd., Chennai, India
Printed in Great Britain
on acid-free paper by
Biddles Ltd., King’s Lynn, Norfolk
K.T. to A.M.T.
This page intentionally left blank
 Preface
This volume grew out of a conference we convened in Cologne in December 2002.
The project was motivated by a sense of the limitations of existing approaches to
institutions, which emphasize continuity over change and which—to the extent
that they deal with change—tend to fall back on a strong punctuated equilibrium
model that distinguishes sharply between periods of institutional innovation and
institutional ‘stasis’. Our feeling was that the kind of abrupt, discontinuous change
captured in the traditional model does not come close to exhausting the ways in
which institutions change, and misses entirely some of the most important ways
in which institutions can evolve gradually over time. To move the debate forward,
we invited contributions that investigate in a theoretically self-conscious way
specific empirical cases of institutional change in the political economic or social
institutions of advanced industrial societies. We asked that contributions aim at
producing general insights into the character and mechanisms of institutional
change—insights grounded in the careful empirical research of contemporary
developments within and across individual countries. Taken together, the chapters
assembled here provide a powerful corrective to existing theoretical frameworks
by showing (as one reviewer has put it) how transformative changes can happen
one step at a time. Beyond critique, however, they also provide the basis for a
broader typology that goes beyond the traditional literature, drawing attention to
common modes of change that typically go unrecognized and enriching the con-
ceptual and theoretical tools we can bring to bear in understanding such change.
We would like to thank the participants in the Cologne workshop, including
and especially Peter Hall, Ellen Immergut, and Philip Manow, who provided
important insights and commentary. Since that meeting, we have also received
valuable input from Suzanne Berger and three anonymous reviewers for Oxford
University Press. We thank David Musson and Oxford University Press for
facilitating the timely publication of this book. Kathleen Thelen gratefully
acknowledges the support of the Max Planck Gesellschaft and of the Institute for
Policy Research at Northwestern University.
Cologne and Evanston, June 2004
Wolfgang Streeck and Kathleen Thelen
This page intentionally left blank
 Contents
List of Contributors xi
List of Figures xv
List of Tables xvi
Abbreviations xvii

1 Introduction: Institutional Change in Advanced

Political Economies 1
Wolfgang Streeck and Kathleen Thelen

2 Policy Drift: The Hidden Politics of US Welfare State

Retrenchment 40
Jacob S. Hacker

3 Changing Dominant Practice: Making use of Institutional

Diversity in Hungary and the United Kingdom 83
Colin Crouch and Maarten Keune

4 Redeploying the State: Liberalization and Social

Policy in France 103
Jonah D. Levy

5 Ambiguous Agreement, Cumulative Change: French

Social Policy in the 1990s 127
Bruno Palier

6 Routine Adjustment and Bounded Innovation: The

Changing Political Economy of Japan 145
Steven K. Vogel

7 Change from Within: German and Italian Finance in the 1990s 169
Richard Deeg

8 Institutional Resettlement: The Case of Early Retirement

in Germany 203
Christine Trampusch
x Contents
9 Contested Boundaries: Ambiguity and Creativity in the
Evolution of German Codetermination 229
Gregory Jackson

10 Adaptation, Recombination, and Reinforcement: The

Story of Antitrust and Competition Law in
Germany and Europe 255
Sigrid Quack and Marie-Laure Djelic

Index 282
 List of Contributors
Colin Crouch is currently head of the Department of Social and Political Sciences
and Professor of Sociology at the European University Institute, Florence. He is
also the External Scientific Member of the Max Planck Institute for the Study of
Societies in Cologne. He previously taught sociology at the London School of
Economics (LSE), and was fellow and tutor in politics at Trinity College, Oxford,
and Professor of Sociology at the University of Oxford. He is currently the
President of the Society for the Advancement of Socio-Economics (SASE) and has
published within the fields of comparative European sociology and industrial
relations, on economic sociology, and on contemporary issues in British and
European politics. His most recent books include: Political Economy of Modern
Capitalism: Mapping Convergence and Diversity (with Wolfgang Streeck 1997);
Are Skills the Answer? (with David Finegold and Mari Sako 1999); Social Change
in Western Europe (1999); Local Production Systems in Europe: Rise or Demise
(with others 2001); Postdemocrazia (2003); and Changing Governance of Local
Economies: Response of European Local Production Systems (with others 2004).
Richard Deeg (Ph.D., MIT) is Associate Professor of Political Science at Temple
University. During 1995 he was a Postdoctoral Fellow at the Max Planck Institute
for the Study of Societies in Cologne, Germany, where he was also a visiting
scholar in 2001. His publications include Finance Capitalism Unveiled: Banks and
the German Political Economy (1999). He has also published numerous articles on
the German and European political economy, as well as on German federalism,
in journals including Comparative Political Studies, West European Politics,
Governance, Small Business Economics, and Publius.
Marie-Laure Djelic (Ph.D., Harvard) is Professor at ESSEC Business School, Paris,
where she teaches Organization Theory, Business History, and Comparative
Capitalism. In 2002–3 she held the Kerstin Hesselgren Professorship at Uppsala
University, and in 2000 she was Visiting Professor in the Sociology Department
at Stanford University. She is the author of Exporting the American Model (1998)
which obtained the 2000 Max Weber Award for the Best Book in Organizational
Sociology from the American Sociological Association. Together with Sigrid
Quack she has edited Globalization and Institutions (2003). Currently she is work-
ing on a new edited volume, Transnational Regulation in the Making (together with
Kerstin Sahlin-Andersson; forthcoming in 2005).
Jacob S. Hacker (Ph.D., Yale) is Peter Strauss Family Assistant Professor of Political
Science at Yale University. He was previously a Junior Fellow of the Harvard Society
of Fellows and a Guest Scholar and Research Fellow at the Brookings Institution.
His articles have appeared in the American Political Science Review, the British
Journal of Political Science, Politics and Society, Studies in American Political
xii List of Contributors
Development; the Journal of Health Politics, Policy and Law, and the Journal of Policy
History. He is also the author of two books: The Divided Welfare State: The Battle
over Public and Private Social Benefits in the United States (2002), and The Road to
Nowhere: The Genesis of President Clinton’s Plan for Health Security (1997), which
received the 1997 Louis Brownlow Book Award of the National Academy of Public
Administration. He is currently chairing a working group of the American Political
Science Association’s Task Force on Inequality and Democracy.
Gregory Jackson (Ph.D., Columbia) joined Kings College, London, as Senior
Lecturer in Management in September 2004. He was previously a Fellow at the
Research Institute of Economy, Trade and Industry in Tokyo (2002–4) and
researcher at the Max Planck Institute for the Study of Societies in Cologne,
Germany (1996–2002). He has written widely on historical and comparative
aspects of corporate governance, particularly in Germany and Japan, including
‘The Cross-National Diversity of Corporate Governance’ (with Ruth Aguilera) in
Academy of Management Review, July 2003. He is editor of Corporate Governance
in Japan: Institutional Change and Organizational Diversity (with Masahiko Aoki
and Hideaki Miyajima 2004).
Maarten Keune is Research Associate at the European University Institute
in Florence. He has published on institutional change, labor markets, and local
development in central and eastern Europe. He is editor of Local Development,
Institutions and Conflicts in Post-Socialist Hungary (with József Nemes Nagy 2001)
and Regional Development and Employment Promotion: Lessons from Central and
Eastern Europe (1998).
Jonah D. Levy (Ph.D., MIT) is Associate Professor of Political Science at the
University of California, Berkeley. He works on economic and social policy
among the affluent democracies, particularly France. Levy’s publications include:
Tocqueville’s Revenge: State, Society, and Economy in Contemporary France (1999);
‘Vice into Virtue? Progressive Politics and Welfare Reform in Continental Europe’,
Politics and Society (1999); and ‘Activation through Thick and Thin: Progressive
Approaches to Labor Market Reform’, in Martin Levin and Martin Shapiro
(eds.), Transatlantic Policy-Making: Policy Drift and Innovation in the Age of
Austerity, Georgetown University Press, forthcoming 2004. Levy is currently
completing an edited volume, The State after Statism: New State Activities in the
Age of Globalization and Liberalization.
Bruno Palier is CNRS researcher in the Centre d’études de la vie politique
française (CEVIPOF) in Paris. He works on welfare state reforms, from both a
French and a comparative perspective. Palier is a member of the Management
Committee of Cost A15, ‘Reforming the Welfare Systems in Europe’. He is author
of ‘Facing pension crisis in France’. In: Noel Whiteside and Gordon Clarke (eds.),
Pension Security in the 21st Century: Redrawing the Public-Private Divide (2003),
Gouverner la Sécurité sociale (2002), and ‘ “Defrosting” the French Welfare State’,
 List of Contributors xiii
West European Politics (2000). He has coedited Globalization and European Welfare
States: Challenges and Changes (with Rob S. Sykes and P. Prior 2001).
Sigrid Quack (Ph.D., Free University of Berlin) is a Research Fellow at the Social
Science Research Center (WZB) in Berlin, Germany. She lectured at the
Department of Sociology of the Free University of Berlin from 1990 to 1992. Her
books include Dynamik der Teilzeitarbeit (1993), National Capitalisms, Global
Competition and Economic Performance (2000), which she edited together with
Glenn Morgan and Richard Whitley, and Globalization and Institutions: Redefining
the Rules of the Economic Game (2003), edited with Marie–Laure Djelic. Ms. Quack
has been a member of the Board of the European Group of Organization Studies
(EGOS) since 2002.
Wolfgang Streeck (Ph.D., Frankfurt am Main) is Director at the Max Planck
Institute for the Study of Societies in Cologne, Germany. From 1988 to 1995 he
was Professor of Sociology and Industrial Relations at the University of
Wisconsin, Madison. He is author of Social Institutions and Economic Performance
(1992) and editor of Germany: Beyond the Stable State (with Herbert Kitschelt
2003); The End of Diversity: Prospects for German and Japanese Capitalism (with
Kozo Yamamura 2003); The Origins of Nonliberal Capitalism: Germany and Japan
(with Kozo Yamamura 2001); and Political Economy of Modern Capitalism:
Mapping Convergence and Diversity (with Colin Crouch 1997). He was the
president of the Society for the Advancement of Socio-economics in 1998/9.
Kathleen Thelen (Ph.D., Berkeley) is Professor of Political Science at
Northwestern University. She is author of Union of Parts: Labor Politics in Postwar
Germany (1991) and How Institutions Evolve: The Political Economy of Skills in
Germany, Britain, the United States and Japan (2004), and coeditor of Structuring
Politics: Historical Institutionalism in Comparative Analysis (1992). Her work on
labor politics and on historical institutionalism has appeared in, among others,
World Politics, Comparative Political Studies, The Annual Review of Political Science,
Politics and Society, and Comparative Politics.
Christine Trampusch (Ph.D., Göttingen) is Researcher at the Max Planck
Institute for the Study of Societies in Cologne, Germany. From 1997 to 2000 she
was a Ph.D. student at the Graduate Program ‘Die Zukunft des Europäischen
Sozialmodells’ at the Center for Studies of Europe and North America, University
of Göttingen. Her doctoral thesis on ‘Labor Market Policy, Trade Unions and
Employers’ Associations: A Comparison of the Formation and Transformation of
Public Employment Services in Germany, Great Britain and the Netherlands
between 1909 and 1999’ (in German) was published in 2001. She has also pub-
lished articles and papers on German and Dutch labor market and social policy.
Steven K. Vogel (Ph.D., Berkeley) is Associate Professor of Political Science
at the University of California, Berkeley. He specializes in the political economy
of advanced industrialized nations, especially Japan. He has recently completed
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