Competing capitalisms: capital investment in American, German, and Japanese firms

This study explains one way the home country institutional environment causes strategy differences across firms from different countries. It contrasts the investment conduct of American, German, and Japanese firms in the 10 largest manufacturing industries. We find profound national differences among these firms that are stable across industries. These differing conducts are tied to the institutional environments of the home market. The shareholder firms of the United States make investments primarily in response to expected investment returns, measured by Tobin's Q ratio. The coalitional firms of Germany and Japan make investments primarily in response to the availability of internal finance, measured by operating cash flow.