Globalization is placing European societies under pressure to change. In the 1990s, researchers identified particular national models of capitalism. These were argued to consist of integrated and reinforcing institutions that created specific rules of the game for economic actors. These rules favoured the development of globally competitive firms in particular sectors where the institutional characteristics of the home society facilitated the building of distinctive types of capabilities. In this view, a global division of labour was developing based on institutional differences. Thus, national policy makers needed to reinforce institutional advantage and institutional specialisation by incremental adaptations to globalization. Reforms needed to be consistent with the underlying model of capitalism. This paper challenges such a view. It argues that firms are highly innovative and use institutions not as constraints but as resources that enable them to build new capabilities. It further argues that institutions are more diverse, malleable and multi-levelled than the national models perspective recognizes. Thus, options for change are much broader than predicted by the path-dependent national models framework. Indeed, the main issue for European societies in response to globalization is to ensure diversity and experimentation rather than simply seeking to reproduce a dominant logic.