This concept is frequently used to explain the degree of institutional diversity that can be observed across and within socio-economic systems, and its consequences on economic performance.
This approach has found applications across a wide range of institutional spheres, going from firm governance and industrial relations to varieties of capitalism and political reforms.
The canonical model of institutional complementarity is due to Masahiko Aoki[3] and relies on the theory of supermodular games developed by Paul Milgrom and John Roberts.
In these cases history is the main force determining which type of institutional arrangements is likely to emerge, with the consequence that suboptimal outcomes are possible.
Agents exhibit conflicting interests in the two equilibria and the emergence of one institutional arrangement as opposed to the other may depend on the distribution of decisional power.
If for some reasons agents choosing in domain A have the power to select and enforce their preferred rule, arrangement (A2; B2) is the most likely outcome.
The complementarities existing in the different organizational equilibria integrate both directions of causation in a single analytical framework.
Hall and David Soskice[12] develop a broad theoretical framework to study the institutional complementarities that characterize different Varieties of Capitalism.
To give some examples, Robert Franzese[13] and Martin Höpner[14] investigate the implications for industrial relations; Margarita Estevez-Abe, Torben Iversen and David Soskice[15] use the approach to analyze social protection; Orfeo Fioretos [16] considers political relationships, international negotiations and national interests; Peter A.
Hall and Daniel W. Gingerich [17] study the relationship among labor relations, corporate governance and rates of growth; Bruno Amable [18] analyzes the implications of institutional complementarity for social systems of innovation and production.
[22] Alongside contributions on the distinct models of capitalism, the concept institutional complementarity has found application also in other domain of analysis.
Masahiko Aoki,[23] for instance, studies the role of institutional complementarity in contingent governance models of teams.
Mathias Siems and Simon Deakin [24] rely on an institutional complementarity approach to investigate differences in the business laws governing in various countries.
Andrea Bonaccorsi and Grid Thoma,[26] finally, uses the idea of institutional complementarity to investigate inventive performance in nano science and technology.