The performance of economic institutions in a dynamic environment: air transport and telecommunications in Germany and Britain

Mark Lehrer and Owen Darbishire

No FS I 97-301, Discussion Papers, Research Unit: Economic Change and Employment from WZB Berlin Social Science Center

Abstract: Detailed case study material illustrates why the performance of two British national champions (British Airways and British Telecom respectively) was superior to that of their German counterparts (Lufthansa and Deutsche Telekom): beyond just the effects of privatisation, both the airline and telecommunications industries have been characterised by substantial technological and market change which has altered the parameters of competitive strategy. Under these new dynamic environmental conditions, the British institutional structure has out-performed the "denser" network of relationships within Germany. This paper seeks to develop a theory of Anglo-Saxon competitive advantage that is not predicated only on the allocative efficiency of free markets, but precisely on the notions of adaptive efficiency or dynamic efficiency of non-market organisational activities. In other words, the hypothesis is that under specified types of industry conditions, the adaptive or dynamic efficiency of Anglo-Saxon firms may be superior to that of firms in Northern Europe's industry-coordination economies.

Date: 1997
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