This chapter focuses on the Varieties of Capitalism (Hall and Soskice 2001: Hancke et al. 2007; Hancke 2009) approach to employment relationships. As Wood and Allen make clear in their chapter, the Varieties of Capitalism (hereafter VoC) approach is one amongst a number of theoretical frameworks that examines how the institutional context impacts on firms’ strategies and structures. However, the VoC approach remains probably the best known and most impactful of these different approaches. In this chapter, we seek to explain what VoC brings to theoretical discussions of the employment relationship that makes it so influential. Key to the success of the VoC approach has been that the original model was parsimonious, distinguishing just two varieties of capitalism (liberal market economies – LMEs - and coordinated market economies - CMEs) on the basis of the incentives which their institutions gave to firms to develop particular sorts of business strategy, Key institutions were the financial system and corporate governance, the state and its mode of regulation of markets, the structuring of inter-firm relations and most directly relevant to this chapter the institutions which produced and regulated labour. The role of labour in firms is absolutely central in the VoC approach. Labour is not an abstract category but is ‘institutionally’ produced through education, training and skills systems, through labour market organization and bargaining, through the organization of the firm and how tasks are organized and authority is delegated
