By Crouch Colin Le Gal??s Patrick Trigilia Carlo Voelzkow Helmut

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European Machinery Industry 19 These overall national records are consistent with the hypothesis that local production systems bring competitive advantages, and are not consistent with that which would expect lock-in effects of such systems to weaken international performance. The Italian and German industries performed well; the least locally embedded case, the French one, had the worst performance. It is important to bear in mind the major exogenous shocks which affected the four countries asymmetrically during the 1990s.

In contrast to Germany, where macroeconomic policy and heavy regulation lead to high predictability in economic life (Streeck 1996; Cooke and Morgan 1998), Italian state regulation imposes a heavy burden on economic actors without any guarantee that rules will be applied consistently. Neither state bodies nor courts are perceived as impartial or efficient. More recently, the Italian state has been affected by Europeanization, which binds the government, making it a more credible actor, and has transferred many regulatory functions upwards, in a ‘hardening’ and ‘hollowing out’ of the state (della Sala 1997).

Others again have been dominated by large firms, although here too small firm systems are beginning to play a significant role. The weakness of the state not only creates regional variety but affects the form that local economic organization takes. The state can act to affect the provision of LCCGs in three important ways. First, it may use its Weberian monopoly on legitimate violence to regulate, mandating rules that actors on its territory must obey. This may involve ‘beneficial constraints’ (Streeck 1997), which force actors to contribute to LCCGs.

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