Reform strategies that ignore such institutional complementarities risk doing more harm than good.
This challenge may explain, for example, why European imitation of policies aimed at stimulating venture capital has been unsuccessful (e.g., European Commission 2013).[i] Institutions are complementary if the presence or efficiency of one institution increases the returns from or efficiency of the other.
It may, for example, be reasonable to use the United States as a reference point when formulating reform strategies for Ireland and the UK, but the reforms for the countries of the other groupings must be based on strategies that are tailored to them.
Member countries in different clusters must instead follow various reform strategies on how best to promote entrepreneurship and economic growth.
Institutional complementarities imply that viable policy changes must be compatible with the existing institutional composition.