Developing Institutions — ‘Crony Capitalism’ and National Capabilities: a European Perspective

The comparative institutionalist approach to differences in national business systems necessarily highlights variations in the workings of contemporary capitalism. Less emphasis is given to similarities in historical events leading to the institutionalization of eventual forms of governance. These must include a common underlying ideational orientation of political elites to develop an industrial base from which to expand GDP. This urge to industrialize has led to a second common phenomenon — the importance of the family- or personally controlled business group (FBG). The alliance between political state and family business group is evidently a long-standing feature of national business systems. This paper suggests that such relational capitalism might also be seen as dangerously dependent on national communities that are homogenous in respect to ethnic identity. In South-East Asia, relations between the state and FBG can exacerbate inequities among multi-ethnic communities and provide institutionalized blockage to technological innovation. However, a different element of this process between ASEAN and earlier industrializers is the presence of foreign MNEs, which intrude upon state–FBG coupling and provide new options in the formation of local markets for labour and capital.