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Edited by
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Multinationals, Institutions and the Construction of
Transnational Practices
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Multinationals, Institutions
and the Construction of
Transnational Practices
Convergence and Diversity in the Global
Economy
Edited by
Anthony Ferner,
Javier Quintanilla
and
Carlos Sánchez-Runde
© Selection and editorial matter © Anthony Ferner, Javier Quintanilla and
Carlos Sánchez-Runde 2006 Individual chapters © contributors 2006
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Multinationals, institutions and the construction of transnational practices :
convergence and diversity in the global economy / edited by Anthony
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Contents
v
vi Contents
Index 256
Preface and Acknowledgements
This volume presents a selection of papers originally given at a confer-
ence on Multinationals and the International Diffusion of Organizational
Forms and Practices: Convergence and Diversity within the Global Economy.
The conference was held at IESE Business School, Barcelona, in July
2004. It was a companion event to an earlier conference held at
Leicester Business School, De Montfort University in 2001.
The aim of the Barcelona gathering was to push forward the develop-
ment of the burgeoning field of research on the diffusion of practices
and policies within multinationals. The substantive focus was – pre-
dominantly but not exclusively – on the terrain of employment
relations and human resource management practices, policies and
processes. Conceptually the emphasis was on understanding the value
and limitations of a comparative institutionalist approach to the study
of cross-border transfer in multinationals.
Conference contributions explored the processes whereby organiza-
tional structures, policies and practices are diffused internationally in
the context of ‘capitalist variety’; the ways in which structures and
practices are adopted, adapted or hybridized in the host; the ‘politics’
of diffusion, manifested in the interplay of interests, power and negoti-
ation at different levels within the multinational and beyond it; the
way in which the multinational’s behaviour is both shaped by and
shapes institutional arrangements in the spheres in which it operates;
and the interactions between the institutional levels of the company
itself, the national business system, and the global economy. The
papers collected in this volume have been selected from the conference
contributions on these themes. They have been thoroughly revised and
developed by the authors for publication.
We are very grateful to the invited keynote speakers – Professors Ron
Dore, Richard Hyman, Wolfgang Streeck and Sully Taylor – whose pre-
sentations provided a stimulating and provocative framework for dis-
cussion at the conference. Two of their papers are included here. We
owe a considerable debt of gratitude to IESE whose generous support
for the event contributed greatly to its success; and to the administrative
staff of IESE who faultlessly organized the conference. In particular, we
would like to thank Christine Ecker for her dedicated and professional
efforts. Finally, we gratefully acknowledge the financial support
provided by the Departament d’Universitats, Recerca i Societat de la
Informació of the Generalitat de Catalunya, and by the Ministerio de
vii
viii Preface and Acknowledgements
Educación y Ciencia. The conference was held within the ambit of the
international cultural event Forum 2004 hosted by the city of Barcelona.
ix
x List of Contributors
Introduction
Over the last decade or two, scholars in the fields of international
employment relations and organizational behaviour have devoted
considerable energies to arguing that systematic differences in the
behaviour of multinational companies (MNCs) are significantly shaped
by their embeddedness in distinctive national-institutional complexes,
both of their country of origin and of the host business systems in
which their subsidiaries operate. More recent analyses have explored
MNCs’ behaviour as the complex outcome of the interaction between
influences from the parent national business system (NBS) and those
deriving from the host NBS. Such work has drawn heavily on the com-
parative institutionalist perspective whose variants include the ‘societal
effects’ school (e.g. Maurice and Sellier, 1986), national business
systems theory (e.g. Whitley, 1992), and the ‘varieties of capitalism’
approach (Hall and Soskice, 2001a).
This approach to MNCs may be seen as a necessary antidote to two
contrasting conceptual tendencies: on the one hand, more deterministic
strands of globalization theory, with their underlying assumption or
implication that a general cross-national convergence of management
styles and practices was in train; on the other, the simplistic analyses
of observable national differences in the behaviour of MNCs in terms
of cultural ‘values’. The comparative institutionalist approach was thus
fighting a war on two fronts, against a lack of attention to continuing
national diversity, and against the analytical impoverishment of existing
attempts to understand the sources of national variety.
However, having at least partially achieved its purpose, and having
won some degree of acknowledgement of its underlying premises at
1
2 Multinationals, Institutions and the Construction of Transnational Practices
with other actors who may be competitors. Such forms have grown in
importance as a result of a number of economic and political factors,
including the opening up of new markets (notably central and eastern
Europe, and China) to which access may be easier through joint
ventures with local actors; and through the desire of MNCs to share
the investment costs of developing new technology-intensive products
in fast-evolving consumer markets, and/or the costs of penetrating new
geographical territories. Such cooperative relationships give rise to
sophisticated inter-organizational networks (which may extend to other
non-corporate actors such as universities) through which knowledge is
created and diffused (e.g. Tregaskis, 2003).
Finally, even within the boundaries of the MNC, increasing emphasis
is being placed, notably within the organizational learning literature,
on the fuzzy, non-hierarchical network-type linkages necessary for the
creation and dissemination of complex organization-specific forms of
knowledge capable of providing international competitive advantage
for the MNC (e.g. McKern, 2003). Taylor’s contribution to this book
argues for the increasing importance of such network structures in
the future organizational role of the international human resource
management function in MNCs, based more on the creation of ‘social
capital’ and trust relations between different organizational actors than
on hierarchical control systems.
system should and does operate. Nonetheless, MNCs face states and
other actors with countervailing power and hence must negotiate over
the terms of their relations within a multilevel and contested institu-
tional terrain characterized by competing and sometimes contradictory
logics. Of these, Bélanger and Edwards stress the tensions between
the logic of accumulation and competition – on an international or
global scale – and that of legitimation, the latter generating significant
constraints on MNCs’ freedom of action. The outcome is a complex
pattern of cooperation and rivalry between states and MNCs.
The case of Canada is used to exemplify these themes, and to show
how even a national state as highly integrated economically with its
dominant neighbour is able to generate its own distinct power
resources. The authors point to the active and independent role –
despite the country’s increasing economic integration with the US – of
the Canadian elite, with its dense social networks and strong interper-
sonal ties, in shaping and defining Canada’s place in the world
economy, hence the Canadian state’s room for manoeuvre vis-à-vis
powerful MNCs. Canadian MNCs are able to draw on this national
resource to create support structures as ‘national champions’ in order
to become global players within the international economic system.
The authors end with a plea to carry forward the agenda of a political
economy perspective on MNCs by incorporating more systematic com-
parative analysis of the processes and outcomes of politics not only at
the macro-level but within the MNC itself, including the micro-level of
the relationship between management and employees in the cross-
national ‘politics of production’.
Elger and Smith provide an ambitious synthesis of different levels of
analysis. They stress the importance of a range of influences on man-
agement ‘repertoires’ in MNCs, stemming from the institutional
arrangements of national business systems, the ‘system effects’ gener-
ated by the fundamental social relations underpinning a global system
of competing capitalisms, and the ‘dominance effects’ that express the
influence of practices emanating from dominant economies, sectors or
firms in the global system. The impact of the different types of influence
on work practices depends on micropolitical processes of negotiation
between groups and individuals at different organizational levels
within the MNC.
Elger and Smith deploy this framework of system, society, and domi-
nance effects to analyse the transfer of work and employment relations
practices in Japanese manufacturing MNCs in the UK, using detailed
longitudinal case studies. They show how the distinctive interests and
12 Multinationals, Institutions and the Construction of Transnational Practices
Conclusion
The papers in this volume are concerned with a set of overlapping
themes about how MNCs organize themselves across institutional
domains at different levels, and how they shape – and are shaped by –
these domains. One key thread running through the contributions is
that the nature of national business systems and of the institutional
arrangements that constitute them is more fluid than rigid stereotypical
portrayals would suggest, leaving space for actors – including MNCs –
to ‘inhabit’ and shape institutions in a wide variety of ways. A second
thread is the need for an understanding of power in relation to the
organization of activity across national borders, both within the MNC
as an organization comprising multiple actors and interests, and
between it and the actors with whom it comes in contact. As a whole,
the collection provides insights into the development of comparative
institutional analysis in relation to MNCs and their management of
employment relations.
In some respects, the contributions also underscore the gaps that
remain. For instance, the increasingly ‘heterarchical’ model of MNCs,
in which key subsidiaries acquire strategic responsibilities and powers
on behalf of the global company, raises questions about the scope for
(and limits of) subsidiary action, and the relationship between net-
works of subsidiaries independent of hierarchical coordination. Such
Anthony Ferner, Javier Quintanilla and Carlos Sánchez-Runde 21
Notes
1 A similar problem is evident in another strand of institutionalist analysis,
that associated with the ‘new institutionalism’ of writers such as DiMaggio
and Powell (1983) and Scott (1995) that emphasizes the ‘normative’ and
‘cognitive’ components of institutions, as much as the regulative ones. In
recent years, this approach has increasingly rivalled the previously dominant
Hofstedian cultural values approach in the international comparative man-
agement literature. Kostova (1999; also Rosenzweig and Nohria, 1994), for
example, uses the notion of ‘institutional distance’, based on a comparison
of ‘country institutional profiles’, to understand the degree of cross-national
transfer and adoption of practices within MNCs.
2 This point draws on Streeck’s remarks in a keynote address to the con-
ference on Multinationals from which the contributions to this volume are
drawn.
References
Amoore, L. (2000) ‘International Political Economy and the “Contested Firm”’,
New Political Economy, 5, 2: 183–204.
22 Multinationals, Institutions and the Construction of Transnational Practices
Introduction
Transnational corporations (TNCs), like all large and complex formal
organizations, have two core features. First, they produce goods and
services that satisfy consumer needs, and in the course of doing so
provide income and employment to large numbers of people. Second,
they are political actors, using power to shape the conditions under
which they conduct their productive activities and as a result pro-
foundly influence the lives of employees, customers and local commu-
nities. Something of these two aspects was captured by The Economist
(27 March 1993) when it called them ‘everybody’s favourite monster’.
The purpose of this chapter is to contribute theoretically to the second
‘political’ view but without losing sight of the first.
Our purpose may be illustrated by two points. First, recent popular
books essentially provide a critique of a political view and a reassertion
of what we will call the revisionist position. Legrain (2002: 137) disputes
the views of those who see TNCs as increasingly large, powerful, and
outside democratic control: they are ‘not the demons they are made
out to be’ and they ‘bring us many bounties’. For Micklethwait and
Wooldridge (2003: 161), though multinational corporations have
‘always aroused suspicion’, they should not be seen as all-powerful and
mighty forces. Critics of globalization, says Wolf (2005: 247), need to
accept that ‘corporations are not more powerful than countries and do
not dominate the world through their brands’. These authors reasonably
underline exaggerated views of TNCs’ power and influence, but they
put little in their place. It is thus an appropriate point at which to offer
a more developed political analysis that is analytically robust and that
is capable of addressing the revisionist position.
24
Jacques Bélanger and Paul Edwards 25
Second, the need for a political view has been stated in several different
contexts, in which different meanings are given to the word ‘political’.
By developing a political economy framework, we thus aim to show
how such views might be integrated. In this chapter, this framework is
applied to the level of macro politics, taking the Canadian case as an
example. The country is highly economically integrated with the
United States; yet the TNCs operating in it are not mere ciphers of
American capital. The country has a well-organized and influential cor-
porate elite. It neatly illustrates the ways in which TNCs negotiate
global projects on the basis of their embeddedness in national contexts.
We first present very briefly some key points about TNCs’ operations.
We focus throughout on the very large firms, such as those identified
in lists of the largest 100 TNCs (UNCTAD, 2004), as opposed to the
very large number of companies – 65,000 on Micklethwait and
Wooldridge’s figures – having some kind of multinational operations.
It is the large TNCs that have attracted most admiration and suspicion.
We take it as read that only a very small proportion of the 65,000
multinationals have anything like the global power sometimes equated
with the word ‘multinational’.
The second section outlines a political view and indicates three
domains of politics, the macro, meso and micro. We lack the space to
discuss them all in detail. The second and third domains are covered in
several other chapters of this book, and we thus focus mainly on the
first. Sections three to five give illustrations of macro politics. Finally,
we offer pointers as to how a political view can be developed.
with like. Sales are compared with GDP. But GDP is a measure of value
added, not sales. Using a measure for value added for companies, only
37 multinationals appeared in the 100 biggest economies in the world
in 2000; and only two of them scraped into the top 50 (Wal-Mart in
forty-fourth place, and Exxon in forty-eighth) (Micklethwait and
Wooldridge, 2003: 176). Crucially, companies lack the coercive powers
of states (Wolf, 2005: 225).
Second, many of the largest TNCs still have a high proportion of
their assets, revenues and employees in their home country. The
United Nations publish annually such data on the 100 largest transna-
tional corporations worldwide, comparing them on the basis of the
transnationality index (TNI), which is ‘calculated as the average of the
following three ratios: foreign assets to total assets, foreign sales to
total sales and foreign employment to total employment’ (UNCTAD,
2004: 278). Clear patterns are apparent if we compare the data from
1998 to 2002. Hence, General Electric, still the largest corporation in
terms of foreign assets in 2002, ranked eighty-fourth on the TNI index
(UNCTAD, 2004: 276). For 2002, the ten largest TNCs in terms of
foreign assets originate from only four countries, namely the USA (with
four), the UK (with three), France (with two), and Japan with one,
Toyota. But most of these ten firms score rather low on the transna-
tionality index. In contrast, for 2002, nine of the ten most transna-
tional firms (out of this series of the 100 largest TNCs) originate from
small countries (such as Switzerland, with three firms including ABB,
Canada with Thomson Corporation, and the Netherlands with Philips
Electronic), a point also stressed by Dicken (2003: 221–4). The lower
size of their home market obviously means that such firms have to
develop a more global reach in order to sustain growth, but more
complex issues of strategy and institutional support may also be at play
here, a matter we will consider below.
Third, some sectors are less dominated by a few global oligopolists
than was the case in the past. In the highly globalized aluminium
industry, for example, the share of the world market for the top six
producers of primary aluminium fell from 77 per cent in 1969 to
45 per cent in 1989 (Bélanger et al., 1999b: 58). Despite a series of
mergers and take-overs (Alcoa has acquired Reynolds [number three
in 1989] and Alcan has acquired Alusuisse [number six] and Pechiney
[number four]), their share has continued to fall (in the case of Alcan,
from 20 per cent in 1969 to 13 per cent now). The major producers
no longer control prices and production in the quasi-cartel system of
the past. Ownership and production have become much more global,
Jacques Bélanger and Paul Edwards 27
as new countries enter the market: China is now the largest world
producer (with around 18 per cent of market share) while the coun-
tries of the former Soviet Union have 16 per cent of the market. As
Wolf (2005: 225) puts it, markets dominate companies rather than
the reverse.
Fourth, TNCs are subject to countervailing power. Legrain (2002:
141–2) notes that a firm such as General Motors is larger than it was
40 years but that it had more power in the past to ‘produce over-
priced, shoddy cars’. The reasons for its relative weakness include
intensified competition from other firms and the fact that global
brands can be highly vulnerable to pressures from campaign groups
and consumers, as the experiences of firms including Nestlé and Nike
have shown.
Fifth, studies of TNC behaviour within a large number of host coun-
tries have repeatedly shown that employment arrangements are rarely
transferred unaltered from TNCs’ home countries. All kinds of hybrid
arrangements have been observed, reflecting differences of national
regulatory regime, particular labour market circumstances, and different
degrees to which TNC head offices wish to impose standard models
(see Ferner and Quintanilla, 2002). The power to transfer practices is
thus highly contingent.
Finally, Ramsay (2000), from a point of view very different from the
revisionists’, argues that critics of TNCs, particularly those in the
labour movement, have tended to fall into the trap of investing TNCs
with far more power and foresight than they in fact possess. Manage-
ments often misread the environment and have to be sensitive to the
image and reputation of their firms. TNCs are in principle open to
challenge.
The picture of the TNC is thus a much more nuanced one than that
of the all-powerful juggernaut. TNCs have to negotiate their way
through a complex world. And
senses of power, and a level that many accounts of TNCs neglect. Yet
such firms must not only bargain with states and with their own man-
agers but also secure a degree of consent from their employees. This
process, as discussed elsewhere (Edwards, 1986), has its own dynamics
entailing a continuing bargain around control and consent. Whatever
the state of politics in the other two aspects, without a degree of work-
place consent, TNCs will find it hard to function. They face issues
distinct from firms in general. On the one hand, they have resources,
such as threats to shift production and the fact that labour, tradition-
ally organized at national level, has found it hard to establish a direct
voice at global level (Cooke, 2003). Silver (2003: 4) cites a range of
studies that argue that ‘labor’s bargaining power has been weakened’ as
a result of capital mobility. Yet they also have to deal with employees
with their own material and cultural resources, and these resources can
be deployed in distinct ways, as when British workers studied by
Collinson (1992) expressed distrust of American (‘Yankee’) managers.
Sharpe’s (2001) analysis of the transfer of work practices by a Japanese
firm to its UK operations revealed different shopfloor traditions (such
as unionization) and labour market conditions between the two sites
that influenced the extent of transfer.
Forms of power
Debates on power have often become entangled in attempts to identify
distinct forms or bases of power (for a critique, see Thompson and
McHugh, 2002: 17–21). Yet, as Runciman (1999) argues, the many
‘bases’, such as expert knowledge, hierarchical position, and personal
authority, can in fact be reduced to three forms. Runciman terms these
the economic, the political, and the ideological. Economic power
pertains to control of resources; expert knowledge might fall under this
head to the extent that the relevant knowledge allows its holder to
claim or control resources. Political power rests ultimately on physical
force – for example the right of the owner of property to exclude other
people from it; but more normally it embraces the rights of authority
that go with ownership, for example, the right of the owner of a firm
or his agents to direct the firm’s activities. Ideological power relates to
ideas, meaning systems, and symbols.
Ideology is a more precise concept than that of culture. Particular prob-
lems with the latter notion are that ‘culture’ can mean merely a set of
mental states which may be shifting and variable and that it can be, and
often has been, used as a catch-all for national or other traditions. To
explain a phenomenon by the alleged culture of the people concerned is
32 Multinationals, Institutions and the Construction of Transnational Practices
Contradictions of power
We have proceeded thus far by presenting power as an attribute or
property of a social actor such as a TNC. We now qualify this approach
in three key respects.
First, and most obviously, other social actors have countervailing
power. The economic and political aspects are fairly evident, for
example the powers of nation states to enact laws. One familiar line of
argument states that such powers are being weakened through the
growth of global competition. Yet the extent to which the political
powers of various actors are growing or declining is an empirical ques-
tion. Unless it is asserted that the powers of nation states are zero or
negligible, the fact of countervailing power has analytical force.
Empirically, we observe (as economists often loftily remark) all kinds of
actions by nation states to which TNCs object, regulations on pollu-
tion being one example. Ideological powers of other actors are less
obvious, but increasingly apparent, as in campaigns by pressure groups
on such issues as child labour.
Jacques Bélanger and Paul Edwards 33
Now, it might be argued that this kind of power is ‘in the last
instance’ an economic or political power. Thus, campaigns on child
labour obtain some of their force from the fact that consumers may
cease to buy the products of firms accused of bad practice. Yet a self-
interested consumer will be interested in cheap goods, unless we
assume also an interest in treating children better rather than worse
(which is what economics typically has to do, since it deals with fixed
utility functions). The point of ideological power is that it helps to
shape and define preferences, and we can thus explain developments
otherwise treated as exogenous. Campaigns against TNCs are a clear
example.
Second, powers are often ambiguous in their effects, and subject to
the actions of other groups. We asserted above that managers come to
adopt certain world views. In a conventional top-down view of the
TNC, it is taken for granted that ‘top’ managers define the goals of the
firm. This may be qualified by arguments about the power of subsidiaries
to negotiate about their mandates, using such resources as their local
market knowledge and the particular tacit competencies that they have
developed. But this still takes the view that there are objective
resources that are simply mobilized as need arises. Yet, subsidiary
managers may be unaware of a resource, particularly when it is a tacit
competence that is by definition hard to capture. They may also lack
the skills or experience of deploying resources in a bargaining context.
Resources are to a degree constituted through their use. Defining objec-
tives is a process of negotiation, rather than a game with pre-defined
resources.
Third, TNCs have contradictory goals, and deploying power in
relation to one goal may interfere with the pursuit of others. Goals
may not appear to be contradictory, and are often stated in such terms
as maximizing shareholder value. But there are many ways in which
such an overarching goal might be defined, for example whether it is
immediate or more long term. And specific strategies to pursue it will
have contradictory aspects. Thus it will be necessary to bargain at
the macro level with various other bodies, while also maintaining
meso-level consent. Making concessions to campaign groups, for
example, could be seen by local managers as weakness or as failing to
appreciate the realities under which they work. Those realities, more-
over, include the TNC’s own demands to meet performance targets, so
that local managers may experience a classic problem of mixed mes-
sages: meet the targets, or pursue a social responsibility agenda, or find
some way of balancing these demands.
34 Multinationals, Institutions and the Construction of Transnational Practices
how this corporate class has all the means and social organization to
play a leading role on the ‘hegemonic terrain’, elaborating the neo-liberal
discourse in all spheres of society, not least universities, and advocating
‘national corporate interests’ through policy groups and linkages with
political parties and various levels of government (on the pre-eminence
of corporations in broader society, see also Bakan, 2004).
The Canadian case thus illustrates two key themes. First, although
corporate governance in Canada can only be understood by taking
economic integration into account, the Canadian corporate elite
deploys considerable resources in shaping policies regarding the
insertion of the national economy into the global economic system.
Second, a national corporate elite has shaped strategies towards, and also
ideological images of, international competition. We now address how
these strategies have played out, and in particular how TNCs can gain
support from states in their global ambitions as national champions.
deal with financial and consumer markets while within its own opera-
tions individual managers have to play political games with the report-
ing of information. It would be ‘foolish for managers to respect the
reports of others … or to report honestly about their own activities and
performance’ (p. 249).
In taking forward a political approach, two issues are crucial. The
first is comparative analysis. The dominant approach to politics has
been the demonstration of their existence and the exploration of
subtle mechanisms of influence. This has been of huge value in
demonstrating the contested and uncertain nature of TNC strategies
and in questioning rationalistic and deterministic models. Yet it has
tended to rely on specific cases. It is not accidental that two of the key
studies of the details of meso and micro level processes are of single
firms (Bélanger et al., 1999a; Kristensen and Zeitlin, 2005), for issues of
access and of the time to collect data are very substantial. None the
less, certain universal themes, such as the centrality of political
processes, are well-established. It is now important to show how such
processes work in different contexts.
Notes
1 Burawoy explicitly based his analysis on Gramsci’s discussion of ideology
and hegemony. Useful studies in this vein on TNCs and global political
projects include Sklair (2001) and Levy and Egan (2003). For application
more generally, see Edwards and Wajcman (2005).
2 This section draws on Edwards and Wajcman (2005: 240–5, 251–3).
3 Statistics Canada, International Merchandise Trade: Annual Review, Catalogue
no. 65-208-XIE, 2004, pp. 7–8. Calculations based on a balance of payment
basis.
4 This analysis is not shared or acknowledged by all policy-makers and
researchers in Canada. A research paper by Statistics Canada economists,
based on measures of number of head offices and their employment for the
period 1999–2002, does not confirm such a ‘hollowing out’ tendency
(Baldwin, Beckstead and Brown, 2003).
5 This research is being conducted by a team, from Montreal and Laval
Universities and HEC Montreal, at the Centre de recherche interuniversitaire
sur la mondialisation et le travail (CRIMT).
6 Press release of the Government of Canada, dated 13 May 2005, from the
web site of Industry Canada. Another press release from the Canadian
Jacques Bélanger and Paul Edwards 49
Acknowledgements
Funding from the Social Sciences and Humanities Research Council
of Canada and the (UK) Economic and Social Research Council,
through the Advanced Institute of Management Research, is
gratefully acknowledged.
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50 Multinationals, Institutions and the Construction of Transnational Practices
53
54 Multinationals, Institutions and the Construction of Transnational Practices
The hybrid: home and host societal effects with contradictory impli-
cations for dominance
The second image, developed from the late 1990s onwards, is that of
the hybrid factory. This emphasizes the mixing of home and host
58 Multinationals, Institutions and the Construction of Transnational Practices
Ownership Japanese (initial Japanese Japanese (parent Japanese/US joint Failing UK specialist
involvement of specialist in high venture (trading firm bought by major
European company value products) company and Japanese firm
as joint venture) sleeping partner
respectively)
Establishment 1990, continuing 1983, model Opened 1987, 1989, fluctuating Bought 1990,
and current expansion changes but closed 1999 production closed 1999
status relative stability
Number of 1996: 720 1996: 550 1996: 92 1996: 180 1996: 475 on two
employees 2003: 1400 2003: 650 2003: 370 main sites
Products Complex Office equipment Printed circuit Plastic parts/ Computer and server
sub-assemblies for and consumables boards assemblies design, development
cars and manufacture
Role of site in Powerful first tier Specialist Supplier to several Supplier of parts to World product
commodity chains supplier to several producer supplying final assemblers, shifting range of final division, providing
car manufacturers marketing division competing with assemblers, with capability where
across Europe, sister plants in initial advantage of parent company had
operating in highly East Asia, pushed patented mechanism failed
competitive sector towards smaller
batch runs
65
66
Table 3.1 Resume of case-study findings – continued
Major areas of Moulding and Plastic moulding Automated Plastic moulding and a) design and
task activity machining of shop, process insertion, manual routine assembly, development of
components, production and flow line insertion small ‘amateur’ computers, servers
complex assembly packing of and rectification development effort and IT services;
on flow lines consumable, bench b) automated and
dedicated to assembly of simple manual
specific customers components, flow manufacture of
line assembly of PCBs; assembly bay
complex machinery, and flow line
manufacture of manufacture of
complex component, computers and
minor D&D role servers
Relations between Japanese Collaborative Suspicion and Japanese top manager UK management
Japanese and local management cadre relationship between conflict between liases with parents dominant in R&D
management substantial and Japanese and local small Japanese and customers but with supportive
dominant, drawing management; tensions management cadre management of sites Japanese cadre;
lessons from US about quality crosscut and local managers; delegated to local plant and personnel
subsidiary; groups; key Japanese failure to management management local;
personnel role in liaison with HQ become profitable, Japanese managers
management local and production intra-management active in process
responsibility but management; local conflict and squeeze innovation (but
with limited personnel from competing draw on sector
autonomy; debate management Asian factories recipes); long-term
about breaking from initiatives prompts closure investment strategy
local pay norms
Table 3.1 Resume of case-study findings – continued
67
68
Table 3.1 Resume of case-study findings – continued
Personnel Union avoidance; Active union avoidance; Non-union; low wages; Non-union; Non-union;
policies and tightly regulated no formal consultation personalized relations; modest wages limited
strategies worker consultation arrangements; modest dramatization of involving payment consultation
process excluding key pay; move from youth competition from by results and through heavily
issues; payment of recruitment to older Chinese factories; use attendance bonus; managed ‘one
local rate but more workers; cultivation of of agency temps to personalized HR goal committee’;
stringent work pace loyalty through ‘caring cover fluctuations and efforts to cool out a) semblance of
and compulsory attitude’ and internal facilitate recruitment problems; use of strong culture;
overtime; cursory promotion (compromised NVQs to document significant
selection process and by external recruitment training; branch training
use of agency labour of new team leaders); factory to escape opportunities,
influenced by commitment to constraints of but terms and
recruitment and employment security, local labour conditions below
retention problems but use of temporary market average for sector;
agency workers b) minimization
of personnel
function through
agency
recruitment and
training; use of
current panaceas,
from agency
temps to zero
hours contracts
Table 3.1 Resume of case-study findings – continued
Dominant Widespread shopfloor Management see labour Tensions over work Informal fiddles a) young ‘techies’
features of criticism of turnover as problem; pressure; informal around payment join to gain
employment unfavourable effort process workers critical resistance; significant by results; experience, but
relations and bargain; sceptical of erosion of relative turnover of established significant labour tendency to lose
foci of instrumentalism; indulgency pattern; and newer workers turnover experienced staff
tension informal operator elsewhere tensions b) critical view of
efforts to moderate around quality and management
impact of management productivity and fuelled by
control systems; team criticisms of restructuring increased work
leaders under pressure; of supervision and pressure and
substantial turnover favouritism treatment of
temps
69
70 Multinationals, Institutions and the Construction of Transnational Practices
Transplants
In some of our case studies, certainly, established repertoires of produc-
tion organization, often drawn from influential home country models,
represented central resources and reference points for key actors. In
conditions where leading enterprises in the home economy were
regarded as successful exponents of contemporary ‘best practice’, while
host country practices were viewed as backward and unsuccessful, such
dominant models influenced not only headquarters and expatriate
managers but also locally recruited managers and to some extent
shopfloor workers.
Our research, however, underlines the contingent and contested
impact of such established corporate repertoires. Firstly, our case-study
firms differed markedly in the degree to which existing Japanese
production or design operations were seen as models for the subsidiary.
In this regard they could be ordered on a spectrum, from Part-co,
where parent practices were most closely emulated, through PCB-co
and Copy-co where their appropriateness was more debated and
negotiated, to Assembly-co and finally to Computer-co, where Anglo-
American models were more dominant reference points. These differ-
ences in the salience of parent company recipes can be explained
partly in terms of the role of the subsidiary in wider corporate strate-
gies. For example, among the larger parent firms Electrical-co clearly
sought to acquire key design and development competencies from
Computer-co, its British subsidiary, and this reduced the relevance of
its existing expertise for the British operation. Part-co sought to
provide European-based motor manufacturers with an equivalent
service to that provided to major customers in Japan, making its home
model more directly relevant. Amongst the smaller companies, the
Tony Elger and Chris Smith 73
Hybrids
Our analysis has important affinities with the image of hybridization,
because it problematizes transplantation and does not treat host
country conditions merely as obstacles to the adoption of home
country practices. However, we have seen that the notion of hybridiza-
tion remains rather ambiguous. At one extreme it simply signifies the
incomplete and diluted character of transplantation, but at the other it
suggests the emergence of new configurations of work and employment
relations that may represent viable competitors to existing dominant
models. At their best, then, analyses of hybridization have moved beyond
the juxtaposition of home and host country effects, to emphasize the
evolution of subsidiary operations over time and the emergence of
distinctive configurations that may depart from both home-based
templates and local practices. Nevertheless, analyses of hybridization
often provide inadequate accounts of the micropolitical processes that
condition such outcomes and neglect the varied roles of subsidiaries
within wider corporate structures and strategies. This section concen-
trates on the first theme but carries the second through into discussion
of the branch-plant approach.
Hybridization has sometimes been conceptualized as a process of
‘organizational learning’ that, in its ideal form, involves both local
learning and proactive adaptation (Beechler et al., 1998). Our research,
however, emphasizes that managers face cross-cutting constraints and
challenges, so that policy formation is often marked by uncertainties,
contradictions, conflicts and limitations, rather than a smooth or con-
sensual process of hybridization. Furthermore, such ‘learning’ cannot
be presumed to offer equivalent benefits to all participants, given
enduring conflicts of class interest between management and workers
and divergences in the status concerns and priorities of different
segments and levels of management.
Tony Elger and Chris Smith 75
wider range of sister plants and more sustained contacts with cluster
firms. By comparison, the major influences on the smaller subsidiaries
tended to be a limited number of parent or sister plants and pressures
emanating from major customers, though this left managers at PCB-co
with much less room for manoeuvre than those at Assembly-co. Even
in the larger firms such networks also involved hierarchies of power,
with headquarters as the dominant partner, sister subsidiaries as more
equal partners/competitors, and other firms having potential influence
more than direct leverage. At Part-co, and to a lesser extent at Copy-co,
the parent company could call upon a cadre of committed expatriate
managers who had experience of managing international operations.
Both could encourage expatriate and local managers to draw upon
recipes and comparisons across parent and sister plants in developing
initiatives within specific workplaces, and both could use funding deci-
sions and performance criteria to guide management priorities. Thus
borrowing from sister plants and occasional reverse transfer took place
within these parameters, though there was some scope for subsidiary
managers to make a case for their own policy preferences. Except for a
period at Computer-co, however, the efforts of subsidiary managers to
widen the ‘charter’ of their plant (for example Copy-co sought to
develop competences in design and development while PCB-co appealed
for a broader product range) were not supported by headquarters.
Processes of hybridization were not simply guided by top manage-
ment imperatives, as they were also influenced by relatively intractable
features of existing work and employment relations in the workplace
and the local labour market. Nevertheless our case studies emphasize
that the evolution of ‘hybrid’ policy repertoires within subsidiaries was
strongly influenced by distinctive organizational networks and power
relations, especially within the management structures of the parent
firms. In this sense they support the argument that corporate organiza-
tion is often a strong mediator of both home- and host-country effects
(Ferner and Quintanilla, 1998), undermining any analysis of hybridiza-
tion as the direct product of the interaction between such effects. Thus
the notion of hybridization may represent a valuable starting point for
developing a theoretical understanding of the operations of interna-
tional subsidiaries, but key features of the dynamics of subsidiary
operations risk being obscured by this metaphor. In particular, we need
to recognize the contested and problematical character of emergent
policy repertoires and to locate processes of management policy forma-
tion within varied and unequal networks of influence and corporate
power relations.
Tony Elger and Chris Smith 77
Branch-plants
We draw upon this imagery to underline the importance of the specific
roles played by the various factories within their parent firms and the
importance of top corporate decision-making at critical junctures in
both the expansion and closure of such plants. In line with the branch-
plant metaphor, we also argue that the efforts of national and local
states to capture such manufacturing investment have often created
clusters of routine assembly operations, characterized by low-skilled
and low-paid jobs and relatively vulnerable to closure and relocation.
However, our analyses have also shown that the roles of our case-study
subsidiaries differ significantly in ways that are not easily accommo-
dated within the branch-plant imagery. Indeed different subsidiaries
of the same parent company may differ in their relation to that parent.
This was evident in our research in PCB-co (which was untypical in
being a subcontractor subsidiary of its parent company) and Computer-co
(which was untypical in being designated as a product champion in an
area of parent company weakness). One way to conceptualize such
distinctive operations is in terms of the specific rationales or charters
that informed their formation and the distinctive relationships that
then developed between them and their headquarters, sister companies
and customers (a theme also addressed by Pulignano and by Meardi
and Tóth in this volume).
For all of our firms the establishment of their operations was primarily
an exercise in building market access, rather than delivering immediate
profits to the parent company, and this framed initial relationships with
corporate headquarters. To some extent this may reflect distinctively
Japanese corporate calculations, but it nevertheless underlines the perti-
nence of varied logics of foreign investment across both countries and
firms. Furthermore, the implications were interpreted differently in our
different firms and over time, in ways which were related to the distinc-
tive product markets and relationships with customers and competitors
that each company and subsidiary faced. In this regard the concept of
the production chain (Gereffi and Korzeniewicz, 1994) offers some illu-
mination, as it highlights the salience of distinctions between final
assemblers and various tiers of component suppliers, though it does not
provide a full characterization of the relationships involved.
The three larger companies each performed different roles within
their parent firms. Computer-co was distinctive as it was intended
to provide the parent company with a capability in the design and
production of a specific product range where Japanese operations had
earlier been unsuccessful. Copy-co was the final assembler of major
78 Multinationals, Institutions and the Construction of Transnational Practices
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84 Multinationals, Institutions and the Construction of Transnational Practices
Introduction
The impact of multinational corporations (MNCs) on host country indus-
trial relations (IR) has long been a source of academic debate (cf. Bomers and
Peterson, 1977). In evaluating the impact of MNCs, Gennard and Steuer
(1971: 144) argued that it is ‘the foreignness of subsidiary behaviour which
matters’, while, more recently, Ferner and Quintanilla (2002: 245) suggest
that their key influence is that they ‘act as agents of change by introducing
innovations into their subsidiaries and thence into the host business
system’. It is this latter influence with which this chapter is concerned.
The chapter examines the IR approaches of US-owned MNC subsidiaries
in Ireland. Using case study data from five US MNCs located there, we pri-
marily concern ourselves with subsidiary practice on trade union recogni-
tion and avoidance. We review the evolution of subsidiary IR policy and
practice against the backdrop of a changing official context for foreign
direct investment (FDI) in Ireland. Our main objective is to examine the
interaction between the agendas of MNCs and of the Irish host country
authorities and to review some of the implications for IR policy and prac-
tice. Beyond some survey data, relatively few insights are available on the
nature and development of IR in MNCs in Ireland. Our five cases generate
some important findings on the evolution of IR policy and practice over
time in subsidiaries of US MNCs in Ireland, and allow us to speculate on
the impact of FDI on Irish public policy in this key area.
2004
US 478 (46.7%)
Germany 140 (13.7%)
UK 116 (11.4%)
Rest of Europe 209 (20.5%)
Asia-Pacific 46 (4.5%)
Rest of the World 33 (3.2%)
Total 1022
with a cross section of middle and front line managers and team leaders,
lower-ranking employees, employee representatives (shop stewards) and
full-time trade union officials. In total, 63 interviews were conducted.
Each interview was conducted by a minimum of two interviewers.
Interviewees were briefed in advance regarding the research agenda.
With regards to IR, our objective was to evaluate the evolution of policies
in American MNCs in Ireland over time, within the dynamic of a chang-
ing national context for FDI. Although the study is limited to subsidiary-
level perspectives, we are confident that the broad range of people we
spoke with has provided us with a rounded and balanced perspective on
subsidiary-level IR. Moreover, for one of the companies, ITco, our
findings were triangulated by data from interviews at corporate HQ level
conducted by colleagues in the international research project of which
the Irish study was a part; for a second company, Logistico, a broader per-
spective was provided by interview data from the European regional
level. Our main findings are outlined below.
The decision of both companies to opt for union recognition was based
on the advice of key Irish institutions dealing with inward-investing
MNCs. In particular, Ireland’s major industrial promotions agency of
the time, the Industrial Development Agency (IDA, now known as IDA
Ireland) strongly supported this approach. The main employer associa-
tion, the Federated Union of Employers (FUE), reflecting the conven-
tional wisdom among local HR practitioners of the period, also keenly
favoured it. Another important factor influencing the decision was the
widely publicized but failed attempt of the American firm EI Ltd, to
operate on a non-union basis (cf. McGovern, 1989):
We are doing OK. They provide check-off at source [of union dues]
and they give us a room for union business. We are also beginning
to get workers into membership in the call centre. They are begin-
ning to like us. They have let us address workers. We seem a better
option to them… the other choice was X [widely perceived as a
more militant union]. They [the company] are smart and you can
do business with them.
(Union official, Logistico)
96 Multinationals, Institutions and the Construction of Transnational Practices
The IDA never tell us about new companies anymore…. I think the
IDA change is related to broader government change… instigated by
the PDs [Progressive Democrats2]. IBEC [Irish Business and Employers
Confederation] will not talk to us unless there is a problem they
want us to solve.
(Union official, Pharmaco)
Discussion
In Ireland, the issue of public policy with regards to union recognition
and avoidance is an area of intense current debate. This is largely a
result of the progressive fall in union density. The most recent employ-
ment density figure in Ireland, of 35 per cent in 2004 (Quarterly
National Household Survey), represents a fall of 27 percentage points
since 1980 when employment density in Ireland reached its high water
mark of 62 per cent. It is all the more noteworthy given that this
decline has occurred during a period when IR in Ireland has been dom-
inated by national-level ‘partnership agreements’ negotiated princi-
pally by government, employers and trade unions. While a number of
factors, many of which apply internationally, have been used to
explain this decline, we find broad consensus that FDI has played a key
role. For example, a survey of ‘greenfield’ firms in the manufacturing
and internationally traded services sectors found a high incidence of
union avoidance – 65 per cent of firms were non-union – especially
amongst US MNCs in the ICT sector (cf. Gunnigle et al., 2002).
Looking at our case evidence, we see a pattern of union avoidance in
four of the five case firms. Compuco and ITco began and remained non-
union, while both the traditionally heavily unionized firms, Healthco
and Pharmaco, opted for a non-union strategy in their new sites. This
leaves Logistico as the only company where union penetration
increased over its time in Ireland; even in this case, union recognition
was limited and did not extend to full collective bargaining. In
attempting to explain these findings we can point to a number of
factors. In particular, the changing political context and has progres-
sively shifted from being comparatively prescriptive with regards to the
IR approaches expected from inward-investing MNCs to one which
allows such firms immense scope to pursue their preferred IR approach.
98 Multinationals, Institutions and the Construction of Transnational Practices
Table 4.3 Foreign direct investment and trade union recognition, 1994–1995
and 2001–2003
The fall in union penetration at enterprise level has not gone unchal-
lenged by the labour movement. Amid increasing union concern, a
‘High-Level Group’ was established in 1997 under the prevailing
national accord (Partnership 2000) to examine the issue of trade union
recognition. Comprising representatives of government, the Irish
Congress of Trade Unions (ICTU), IBEC, and IDA Ireland, it recom-
mended the use of voluntary rather than mandatory procedures to deal
with recognition disputes. However, its publication in 1998 coincided
with a major dispute at Ryanair, which refused to recognize a union
representing some of its workers in Dublin Airport. The union side
rejected the report, opting to pursue their goal of mandatory recogni-
Patrick Gunnigle, David G. Collings and Michael J. Morley 103
criterion was unlikely to be met. The ACC’s lobbying met with some
success, prompting the head of IDA Ireland to support the Chamber’s
position in stating that the proposed legislation would make it more
difficult for the IDA to attract international – particularly US – firms to
Ireland.
Donaghy’s (2004) recent work on social partnership further notes the
influence of US MNCs on Irish public policy. Donaghy found that the
MNC sector significantly influenced the social partners’ approach to
institutional change, leading them, for example, to reject any type of
works council arrangements along German lines. Based on interviews
with representatives of IBEC, ICTU, the Services Industrial Professional
and Technical Union and the National Economic Social Council
(NESC), Donaghy (p. 110) found that:
Conclusions
In evaluating the interaction between the agendas of MNCs and of the
Irish host country authorities, our evidence points to an evolutionary
dynamic in this interaction with attendant implications for enterprise-
level IR. Specifically we point to the incidence of ‘double-breasting’
in three of our five case firms, and the success of the remaining two
companies in effectively sustaining non-union status. In essence, the
data demonstrate the fluidity of the Irish business system over time,
particularly in the IR sphere. We argue that this is primarily due to the
country’s openness to, and its remarkable success in attracting, FDI. In
great measure Ireland’s economic fortunes are critically dependent on
the MNC sector and its export performance. To ensure Ireland remains
Patrick Gunnigle, David G. Collings and Michael J. Morley 105
Notes
1 This article draws on the Irish node of an international study of human
resource management in US MNCs, co-ordinated by Professor Anthony
Ferner, De Montfort University, UK. This study involves a large number of
researchers from De Montfort University and King’s College, London, UK,
106 Multinationals, Institutions and the Construction of Transnational Practices
the Universities of Trier and Erfurt, Germany, IESE Business School, Spain
and the University of Limerick, Ireland. The Irish study is supported by the
University of Limerick Research Office, the Irish Research Council for the
Humanities and Social Sciences and the Labour Relations Commission.
2 The Progressive Democrats are a small centre right party, founded in
the 1980s. They are currently (2005) the junior partner in the coalition
Government.
3 Both companies had earlier established non-union sales operations. This was
to be expected given their very small scale.
4 This interview formed part of research undertaken in the US by Patrick
Gunnigle while working as a Fulbright Scholar in the Department of
Management, San Diego State University; see, for example, Gunnigle and
McGuire (2001).
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Patrick Gunnigle, David G. Collings and Michael J. Morley 107
Introduction
For many years, the field of international human resource management
(IHRM) has struggled with the question of whether or not it is better for a
multinational firm (MNC) to integrate its IHRM practices across the
various geographies in which it operates. The debate revolves around two
issues: whether it is desirable, and whether it is possible. The obstacles to
integration are obvious, and include such barriers as the vast array of
labour law regimes, the enormous divergence in labour market character-
istics and highly divergent cultures, all of which impede global integra-
tion of HRM. Yet MNCs, and the IHR function within them, are likely to
become ever more intent on overcoming the many barriers that exist to
integrating their HRM practices on a global basis. In short, global integra-
tion of HR is becoming more desirable. There are two emerging trends in
particular that are creating strategic imperatives for greater HRM global
integration. These two trends are the increasing need to focus on the cre-
ation of social capital within the MNC’s global internal network, and the
growing need to focus on sustainability as part of the company’s global
strategic imperative. Interestingly, and fortuitously for MNCs and their
management, achieving these two goals is a mutually reinforcing process.
This chapter first reviews the major forces for HRM integration
identified in previous work before turning to a description of these two
new trends in MNCs. It then examines how each is likely to increase
the desire for global integration of HRM, and which set of employees
and which HRM practices are most likely to be affected. The chapter
ends with a look at the barriers to implementation most likely to dis-
courage IHRM integration, as well as a discussion of how the pressures
these trends create for HRM integration are complementary.
109
110 Multinationals, Institutions and the Construction of Transnational Practices
Kostova and Roth (2003) go on to argue that while the private good
form of social capital is important for informal coordination and
control as well as knowledge sharing, the public good form of social
capital may be the most important one to develop in MNCs. This is
because MNCs are becoming increasingly complex in their interdepen-
dence, and the fluidity of exchange relationships means that employees
at many different levels and locales constantly need to combine and
exchange knowledge with a new member in the network. ‘New ex-
changes may require contributions by individuals who have not been
previously part of the network and who are geographically and cultur-
ally distant. Yet these employees have to be motivationally predisposed
to participate’ (p. 303).
In sum, given the increasing interdependence in MNCs, particularly
with regard to knowledge creation and sharing, there is greater need to
build social capital, particularly of the public good sort. Social capital
facilitates the access individuals have to others within the network,
their motivation to share with them, and their ability to share. Thus
one of the most crucial tasks of MNCs today, particularly those that are
highly interdependent or moving towards greater interdependence, is
to build social capital throughout the network.
Sully Taylor 115
signal what kind of behaviour is desirable (Leana and Van Buren, 1999).
Also, as Leana and Van Buren state, ‘(T)he presence of significant pay
differentials among employees may undermine cooperative behaviour
within the organization as whole’ (1999: 547). They also point out that
compensation policies are important both because they can affect
turnover (Campbell, 1994), and can reward collective over individual
action (Leana and Van Buren, 1999; Campbell et al., 1998).
Table 5.1 presents a summary of the HR areas most likely to be
involved in the creation of social capital in MNCs. A central question,
however, is which employees will be affected by the need to create
social capital. Knowledge exchange and coordination between all
employees in an MNC is highly unlikely, even in the most knowledge-
intensive, interdependent firms. Kostova and Roth (2003) argue for a
focus on key ‘boundary-spanners’ in each affiliate, who through building
greater social capital on an individual basis with headquarters can
transfer their heightened trust and general social capital to the rest of
the members of the unit. In essence, these boundary-spanners turn a
‘private’ social capital into a ‘public’ social capital. While not disputing
the importance of these boundary spanners, theory and research suggest
that consideration should be given to the entire employee population
when deciding which groups of employees to target. This is important
because, as Kostova and Roth themselves note, the interactions
between units occurs at multiple levels and functions, and thus the
attitudes and behaviours of a large number of people affect the successful
combination and exchange of knowledge.
Taylor et al. (1996) suggest that MNCs transfer HRM policies only
when the group of employees is considered ‘critical’ to the functioning
of the affiliate and/or firm. Lepak and Snell (1999) offer a more elabo-
rated approach, in which they designate employees who have a high
degree of uniqueness of human capital combined with high potential
for contributing to the competitive advantage or core competence of
the firm as ‘core’ employees. Utilizing such a heuristic may be more
appropriate than designating one group of employees, such as man-
agers, as the most important group within which social capital should
be built. First, it accommodates research that has found quite varied
groups of employees as targets for HR transfer in MNCs, from R&D
personnel (Béret et al., 2003), higher-level employees (Schmitt and
Sadowski, 2003; Muller, 1999), to shopfloor workers (Doeringer et al.,
2003; Marginson et al., 1995). That is, research has found that MNCs
have attempted, more or less successfully, to transfer or centralize HR
policies with regard to all of these groups. This would indicate that
Sully Taylor 117
Table 5.1 HR Principles most likely to affect the building of social capital in
MNCs
Source: Partially based on ideas in Inkpen and Tsang (2005) and Leana and Van Buren
(1999).
these groups are seen as key to the firm’s competitiveness in some way.
Second, by arguing that different groups of employees can be ‘core’ to
the firm’s success, it is possible to encompass the wide diversity of
firms operating in the global arena. Industry as well as individual firm
strategy will influence which group of employees most need to build
social capital in order for coordination and knowledge sharing to
occur. For example, in large multinational consultancy companies, it
can be argued the consultants themselves will have as much need for
high social capital as the managers of the company. Thus, it is not
118 Multinationals, Institutions and the Construction of Transnational Practices
borders. The HR system is probably the most potent tool an MNC has
for creating social capital.
Implementation will not be without challenges. Harking back to the
myriad obstacles to integration discussed at the beginning, IHR directors
must address the concerns of local HR directors and local employees
regarding the cultural, institutional and legal differences. This indicates
a critical need for IHR to be involved not only in designing the IHR
system in conjunction with foreign affiliates, but also the imperative
IHR has to communicate what it is up to, and why. IHR must do this in
order not only to avoid resistance simply because HQ is involved, but
also to actively help local people understand the role that certain HR
policies play in creating knowledge valuable to the firm. This is partic-
ularly important if one accepts the argument put forward by Fukuyama
(1995) that the trust levels in unknown others differs widely between
countries. In order to be truly effective, IHR must become a champion
of an integrated HR system, a communicator of the reasons for it, and
a booster for the overarching global vision of the firm that underpins
the need for interdependence.
Implementation challenges
While the force of these two trends will be strong, it is unlikely that
the IHR function will be able to achieve the level of integration of HR
within the global firm that it sees as most desirable. Various factors can
inhibit the ability of MNCs to transfer their HRM policies across
national borders (Ferner and Quintanilla, 1998). Broadly speaking,
these factors can be grouped into three areas: institutional, cultural and
organizational (Evans et al., 2002). Institutional factors include the
legal, political and labour market facets of the host countries in which
the MNC operates. Legal constraints can include prohibitions on certain
types of compensation schemes, limits on hire-at-will principles, and
requirements for certain kinds of employee benefits (Rosenzweig and
Nohria, 1994). Labour market characteristics may make it necessary for
MNCs to adapt their HRM policies in order to attract local talent, such
as the modification of seniority-based pay by Japanese investment
firms operating in the US. Political history and structures can also
influence HRM adaptation, with foreign firms that need to keep a low
political profile often adapting their HRM policies in order to not stand
out from locally owned and managed companies.
A second key factor is the culture of the host country (Newman and
Nollen, 1996; Schuler and Rogovsky, 1998). Here the premise is that
cultural values and norms so tightly interact with behaviour that
human resource management practices that encourage ‘unnatural’
behaviours – such as individual performance rewards in a collectivistic
society – are destined to fail. Empirical evidence seems to provide some
support for the importance of this factor in constraining integration of
HRM in MNCs (Ngo et al., 1998).
Last is what can be called organizational factors, into which can be
placed the strategic posture and imperatives of the firm as well as the
power relationships of key implementers. Organizational factors
include some moderating variables, such as the role of the affiliates in
the overall MNC network, or how embedded the affiliate is in the
local environment (Rosenzweig and Nohria, 1994) due to the way it
was founded or its age. It also includes the overall strategic orientation
124 Multinationals, Institutions and the Construction of Transnational Practices
imposing policies from the centre to creating them in tandem with the
global network of affiliates, a desirable goal in any case as it increases
the sense of procedural justice throughout the firm.
Table 5.2 HR policies that foster both social capital and sustainability goals
his or her time out of the country, often in meetings with global team
members or other stakeholders. While this face-to-face interaction may
build relational social capital, it may also undermine the firm’s attempts
to meet its social sustainability goals by contributing to stress from
travel, family separation and the negative effects on the health of the
traveller. As another example, both social capital and social sustainability
goals may be enhanced by more equitable and egalitarian wage
schemes, but the firm may find that over time it cannot recruit the top
managers it needs to remain economically competitive. This happened
to the Ben and Jerry’s Ice Cream company, which began life with a
very low ratio between the top CEO pay and average worker pay but
was eventually forced to modify its approach in order to attract top
managers. There are equal challenges from trying to support through
HR policies all three sustainability goals simultaneously. For example,
selecting employees who share the firm’s values, including environ-
mental values, could lead to a collective way of thinking about prob-
Sully Taylor 127
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128 Multinationals, Institutions and the Construction of Transnational Practices
Introduction
Key elements of multinational behaviour have been attributed to by
observers adopting an institutionalist approach to the interplay of
parent and host national business system pressures (Whitley, 1999).
On the one hand, the behaviour of multinationals (MNCs) is
influenced by ‘country-of-origin’ effects relating to the embeddedness
of companies in a parent national business system with distinctive
characteristics. On the other, different national host environments
impose institutional constraints on MNCs: national legislative frame-
works, labour market regulation and business environments shape to
what degree and in what form employment practices are transferred
across countries. In the terms of the ‘institutionalist’ approach, the
normative or coercive ‘isomorphic pressures’ exerted by host country
legislation or collective bargaining condition the extent to which
such practices are transferred (Brewster and Tregaskis, 2003). Host
institutional constraints on the transfer of HR and IR practices seem
to exist most notably in countries with strong institutional labour
systems. In such cases, there are stronger pressures for adaptation of
transferred Anglo-Saxon HR/IR practices (Muller, 1998). Host-country
isomorphic pressures have also been postulated in the case where
MNCs from highly regulated parent company systems establish
subsidiaries in weak institutional settings (Tüselmann et al., 2003).
Nonetheless, parent country influences may still be present in more
qualified and mediated forms; for example case-study evidence on
German MNCs in Britain shows that despite pressures to adopt
Anglo-Saxon business practice, German influences still persist (Ferner
and Varul, 2000).
131
132 Multinationals, Institutions and the Construction of Transnational Practices
Research design
The chapter is based on a large case-study analysis of a big American
MNC in two European countries, Italy and Britain, and in two sectors,
metalworking and chemicals. The analysis focuses on three different
business units of the same American corporation, two in the metal-
working (referred to as Metal Electrical co, Metal Power co) and one in
the plastics industry (i.e. Plastic co). Overall, five subsidiaries were
selected for investigation within these business units. Two of five are
based in Britain – Metal Electrical UK and Plastic UK – and three are
based in Italy – Metal Electrical IT, Metal Power IT and Plastic IT.
Within the limits of access granted by the company, operations were
selected according to the following criteria: similarity in the nature of
136 Multinationals, Institutions and the Construction of Transnational Practices
the production process, union presence, and (where possible) size. The
business units are unionized and have headquarters (HQ) in Europe. In
two of the subsidiaries, the European HQ coincides with the global HQ
for that business.
The company selected for investigation is one of the most profitable
in the global economy, with a global workforce of 340,000 employees.
Its innovative success has been dependent on the management of orga-
nizational learning, and on high-skilled professional workers. More
recently, skilled employees have been partly supplanted by unskilled
and manual employees as the result of the expansion of the business in
non-customized products, in particular in the electronics sector. With
the advent of globalization the company executed a new strategy of
integrating its operations internationally while increasing exports and
expanding global sourcing for both products and services. This has
been intertwined with the explicit corporate goal of maximizing
efficiency and profit while minimizing employment levels around the
world through the continuous rationalization of production and
service provision.
The three business units selected for investigation, Metal Electrical
co, Metal Power co and Plastic co, have global HQs in Europe. Each
subsidiary has significance within its host country. For instance, Metal
Power IT is the subsidiary with the highest employment and it is the
European HQ for Metal Power co. Metal Electrical IT and Plastic IT are
smaller but they both focus on the production of specialized products
in the electronics and plastics industry respectively; the electronics
subsidiary is one of three technology centres in Europe. In contrast,
production in Metal Electrical UK does not cover specialized products,
and Plastic UK is a manufacturing site with a large workforce, which
provides assistance on the development of HRM practices to the other
plants within Plastic co in the UK. The subsidiaries in both Britain and
Italy are highly unionized, with union density of more than 50 per cent.
Data collection took place at both the European and the local
subsidiary level. The cross-country and inter-subsidiary comparison
allows examination both of contrasting national patterns of employ-
ment regulation, and of a rich variety of subsidiary organizational
features and structural relationships to the wider corporation. The
primary method of data-gathering was the in-depth interview. A total
of 40 semi-structured interviews were conducted with key local,
European and global managers, international, European and national
union officers, employee representatives at the local and the European
Works Council (EWCs) (see Table 6.1). Attendance at EWC-related
Valeria Pulignano 137
Plastic UK
Plastic UK was established at the beginning of 1990s when the American
corporation took over a big American company in the plastics industry.
At that time the business was integrated with the rest of the manufac-
turing, commercial and financial operations. The global HQ of Plastic
co was in the Netherlands and also functioned as the European HQ.
Overall, operations in Europe were present in seven countries:
Netherlands, Spain, Italy, Germany, Austria, France and the UK.
Production within Plastic UK was prevalently based on panels. The
British-based subsidiary assisted other British operational units with
the implementation and diffusion of HRM practices. The subsidiary
had a total workforce of 170 employees, 70 of whom were shopfloor
workers. It was highly unionized (Amicus and T&G were the most
representative unions).
Metal Electrical IT
Metal Electrical IT was one of three Metal Electrical co subsidiaries in
Italy. It was the one that best survived the huge restructuring plan that
led to a drastic reduction of the labour force in Italy, and more widely
in Europe, in the previous ten years or so. Metal Electrical IT was the
centre for the production of specialized electronics products, such as
electrical control systems for appliances. The Italian subsidiary was also
one of three technology centres in Europe for equipment products (the
others being in Germany and Belgium). The total workforce was
around 400. Union density in the plant was 80 per cent, with members
predominantly represented by FIOM-CGIL (Federazione Italiana Operai
Metalmeccanici), the largest Italian union federation in the metalworking
sector. At the time of the research, the European HQ was based in Spain.
Metal Power IT
Metal Power IT was the largest European subsidiary of Metal Power co,
with both European and global HQ in Italy. The total workforce was
around 3000. The subsidiary produced stem propellers, compressed
spin-driers and equipment for the extraction of oil and gas. Union
coverage was 100 per cent, with FIOM-CGIL as the most representative
union. As in the case of the European HQ of Plastic co, Metal Power IT
had responsibility for coordinating the diverse operations of the busi-
ness across the globe. Production units in Europe were concentrated in
Italy, Spain and the UK. The administration of personnel as well as
training policies, salary planning and management–labour relations
were centrally managed by the European HQ in Italy.
Valeria Pulignano 139
Plastic IT
Plastic IT was a small-medium production unit of Plastic co with both
European and global HQ located in the Netherlands. Its workforce was
about 70 and the level of unionization was around 60 per cent with
FEMCA-CGIL (Federazione Operai Chimici) as the predominant union.
Plastic IT was originally an Italian family-owned company which was
bought by the American corporation at the beginning of the 1990s.
Production in the subsidiary comprised specialized plastic components,
and as a result the workforce included skilled employees. In the prev-
ious two or three years the plant had been affected by a wide-ranging
restructuring plan which contributed to a reduction in the workforce
of nearly 30 per cent.
Management–labour relations
The pattern of direct relationships with employees was used by the cor-
porate level to undermine the role of unions as bargaining agents and
Valeria Pulignano 143
Personnel policy
Other employment issues, notably training and recruitment practices,
were centrally coordinated and strongly monitored by the parent
company which decided whether future training courses and recruit-
ment were needed and for how long. Decisions on whether subsidiaries
could recruit as well as the process whereby they did so, such as the use
of particular skills and competences as recruitment criteria, needed
central authorization from the parent company, which also had the
right to decide whether changes in standard criteria requested locally
were needed. As with pay and appraisal policies, there was a distinction to
be made between managerial and non-managerial employees. Training
and recruitment policies tended to be highly prescribed for certain
occupational categories, most notably managers and senior managers.
An electronic management system was used to identify employees’
developmental needs, and specific training courses were recommended
by senior managers, following authorization from corporate HQ.
A questionnaire was completed annually by individual employees as
part of self-assessment procedures. The process was centrally monitored
through periodic communication between parent and subsidiary in the
course of which individual cases were discussed and solutions proposed
regarding further development plans. While the financial cost of training
courses was borne locally, courses were normally organized centrally
by corporate HQ in the US, and they involved personnel experts
144 Multinationals, Institutions and the Construction of Transnational Practices
Firm Pay, appraisal and rewards Training and recruitment Collective bargaining Trade unions and
employees’ rights
Metal Electric UK Centrally individualized Centrally defined training Plant-level bargaining. Employees’ rights
pay and performance and recruitment practices guaranteed within the
appraisal systems. with low possibility of national context of social
Employees are rewarded on local adjustments. rights indicated by British
the basis of the level of regulation (very low).
performance.
Low level of discretion by
local managers over the
implementation of local
adjustments.
Plastic UK Centrally individualized pay UK operation developed Plant-level bargaining. New discipline system and
and performance appraisal local training. holiday scheme and
systems. System aligned to training procedures
Employees rewarded on the requirements of local negotiated at plant-level
basis of performance. labour market. with trade unions. Pay
and working conditions
regulated by British
legislation (very low).
149
150
Table 6.2 The adjustment of practices in American-based subsidiaries – continued
Firm Pay, appraisal and rewards Training and recruitment Collective bargaining Trade unions and
employees’ rights
Metal Electric IT No individualization of Centrally defined training Coordination on pay National statutory rules
employment practices. and recruitment practices bargaining at company and collective agreements
Pay and rewards system but for certain managerial level under 1993 cover employees’ rights at
negotiated with trade unions positions (i.e. within tripartite national the shopfloor.
at company-level as part of HR/IR), those practices agreement (Social
pay increase. are adapted locally. Pact).
Metal Power IT Limited space for trade Centrally defined Coordination between National statutory rules
unions to negotiate local recruitment and training sector and company- and collective agreements
adaptations of pay, appraisal practices. level bargaining in cover employees’ rights at
and reward systems with accordance with 1993 the shopfloor.
management. tripartite national
agreement.
Plastic IT Appraisals at plant-level – Centrally defined training Coordination between National statutory rules
trade unions indicate space and recruitment practices. sector and company- and collective agreements
for discussion on appraisal level bargaining in cover employees’ rights at
and reward systems with accordance with 1993 the shopfloor.
management. Collective tripartite national
agreements regulate pay agreement.
increases.
Valeria Pulignano 151
Conclusions
The findings from this study confirm the analytical value of arguments
which critically assess the ‘country-of-origin’ influences in American
MNCs (see e.g. Ferner et al., 2000; Almond et al., 2003; Colling and
Clark, 2002). Whilst the five case studies present evidence of centralized
patterns in employment practices, the chapter also highlights host-
institutional and company-specific factors that, rather than being
mutually exclusive, co-exist in complicated and dynamic configurations.
Company-specific factors include whether European subsidiaries are
good or poor performers, and whether they occupy a strategic position
within the international structure of the corporation. The latter often
depends on the nature of the company’s products and business opera-
tions as well as on the relationship between subsidiary, the regional
level and corporate HQ.
Thus institutional and organizational factors together affect the
extent to which local actors at subsidiary level are able to mediate the
diffusion of employment practices from the parent. These factors offer
local actors’ scope for bargaining with the corporate centre over the
transfer of employment practices, at the same time as jointly shaping
local actors’ strategic choices. Thus the chapter is in line with arguments
pointing to ‘trends’ rather than ‘convergences’ in the way in which
patterns of national business systems are transferred overseas (Almond
et al., 2005). For example, a complex picture, in which national and
company-organizational features strongly interact, can be drawn to
explain trends in the diffusion of employment practices in Metal
Electrical IT and Metal Power IT in Italy. The tight integration of the
functions of new product research and manufacturing in Metal
Electrical IT, as well as the position of the subsidiary in the local market,
contributed to an increase in the autonomy of local management. In
152 Multinationals, Institutions and the Construction of Transnational Practices
Acknowledgements
The author thanks the British Academy (SG-36170) which funded the
research, and Tony Edwards, Paul Marginson, Paul Edwards and the
editors of this book for the stimulating comments on an earlier version
of this paper.
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7
Who is Hybridizing What? Insights on
MNCs’ Employment Practices in
Central Europe
Guglielmo Meardi and András Tóth
Introduction
Within an enlarged and more diverse EU, the opportunities have
increased for international reorganization of production and, with this,
for ‘coercive comparisons’ and efficiency-oriented transfers of practices.
This chapter discusses the dynamics of transfer through longitudinal
case studies of two foreign investors active in the region since the
beginning of the economic transformation in Central Europe (CE). The
two cases represent contrasting situations: a greenfield investment in a
non-union site by a medium-sized German company, compared with a
large Italian multinational company (MNC) investing in strongly
unionized brownfield sites.
Both cases, through different paths, show that the transfer of prac-
tices by MNCs in CE leads to hybridized outcomes, but with dynamics
that are difficult to understand through the lens of prevalent images of
‘hybridization’. Rather than the country of origin pushing through
its models against host-country constraints and resistance, it is the
‘permissive environment’ of the host country that attracts MNCs and
encourages the management of the mother company to innovate. This
recalls what Dörrenbächer (2002) refers to as ‘hybridization at source’.
We argue that management innovation in such cases takes advantage of
the permissive environment of the host country to replace constraining
elements of the home model, developed through decades of state and
union pressure, with host-country assets. In this logic, managers seek
to re-create more flexible, more unilaterally managerial versions of the
production process they operate at home, using human resource (HR)
policies that are ‘functional equivalents’ of home employment regimes.
The importance of host-country dynamics is reflected in the need for
155
156 Multinationals, Institutions and the Construction of Transnational Practices
different from other free trade areas where, as in the case of NAFTA,
non-tariff barriers persist and virtually no supranational labour rights
exist. International pressures and processes are most visible within a
single market like the EU, where the debate has been shaped by the
idea and threat of relocation.
For the reasons discussed in the previous section, change in CE is
particularly visible in the case of German MNCs. Bluhm (2003) has
shown that although some German investors in Poland and the Czech
Republic do transfer parts of the German model, they do not promote
sector-level regulation, even seeking to oppose and undermine sector-
level employer organizations. This applies not only to smaller German
companies but also among larger MNCs, despite the fact that such
regulation should be a pillar of the ‘German model’ for these firms.
Thus German operations in Poland are oriented towards individual-
flexible models of labour relations that have little in common with
German models of representation. Domsch et al. (1999) confirm that
German companies in Poland have the same recruitment strategies and
the same personnel development policies as Polish firms; local actors
do distinguish between Poles and Germans, but more on the basis of
stereotypes than on actual differences.
Our (unpublished) survey of German and US investors in the Polish
automotive sector (N = 30) confirms the departure of German compa-
nies from the classic German model. Controlling for size and mode of
entry, the findings show no significant difference in the presence of
trade unions between US and German subsidiaries, which is itself a
challenge to the meaningfulness of home-country models. Such depar-
tures are not confined to German firms. The French firm Danone
experimented in Poland with non-union employee representation
bodies (Meardi, 2000); although management presented them as a
traditional Danone practice, such bodies are clearly unknown in the
home country. Durand (1997) gives further examples where local
managers in French companies in CE react more quickly to innovation
than their home-country counterparts.
It is important to stress that the attractiveness of the periphery does
not simply derive from low wages, as the traditional New International
Division of Labour theory would have argued. It reflects a broader com-
bination of employee relations, flexibility, organizational fluidity, skills
and work attitudes. As recent studies show, since the second half of
the 1990s, CE has attracted higher-value MNC operations, often not
dissimilar from those of home countries and already at the level of
southern Europe (Baldone et al., 2002; Radosevic et al., 2003). The most
162 Multinationals, Institutions and the Construction of Transnational Practices
important targets for FDI in the region are not the traditional low-skilled,
labour-intensive sectors like textiles, but sectors that are important for
market access or that are technologically advanced (motor vehicles,
chemicals, electronics). Some companies, like Peugeot and Toyota in
the Czech Republic, also locate centres for R&D in the region, and
General Electric is locating all of its European customer services in
Hungary. The fragmentary evidence available shows that as long as
they have made the necessary technological investments, MNCs
usually obtain similar hourly levels of labour productivity in the
region, and hence often achieve higher overall productivity thanks to
longer working time.
Thus it seems that most hybridization research has neglected the
growing power of MNCs, especially in diverse free trade areas like the
enlarged EU. A recent example is Siemens’ new form of organization,
‘Siemens Management System’, whereby all company functions, from
pure research to the simplest operations, should be capable of world-
wide relocation in the name of ‘global value creation’. Interestingly,
Siemens has decided to locate important new operations in Hungary in
spite of the failure of a previous more traditional transfer to the
country. The transfer of practices may still occur in many cases, as a
result of control, integration and quality standardization constraints,
but there are no longer reasons to take it as the natural state of things.
Despite MNC power, other actors must also be included in the analysis.
Even when MNCs want to diversify productive systems instead of
diffusing the original one, the factors influencing the feasibility of
transfer still operate: coercive forces in the host country (laws, institu-
tions, organizations) and the resources of actors at different organiza-
tional levels, including those within the host country (Ferner and
Edwards, 1995). However, such channels may operate to attract rather
than to resist transfer. Public bodies, employee representatives, and
other host-country actors may make use of arguments about ‘fairness’,
product standardization and ‘product reputation’ arguments to attract
home-country practices even when the MNC does not intend to diffuse
them. European works councils, as networks if not as deliberative bodies,
are potentially privileged channels for such bottom-up pull attraction
and even upwards ‘coercive comparisons’ whereby standardization
operates through the upgrading of labour conditions (Meardi, 2004).
A final and particularly ambiguous actor is local management. Local
managers may reject diffusion when employees are requesting it.
Research in progress shows that local managers in German subsidiaries
may be disappointed by the transfer of HR or IR practices as it can reduce
Guglielmo Meardi and András Tóth 163
retraining. Some 3000 workers (25 per cent) were involved in training
in 1992–1993 and hundreds visited the Italian plants, although such
activity often had, in the workers’ view, an ideological rather than a
technical content. A final important change was the widening of pay
differentials, with the pay of a workshop director increasing from three
times that of a manual worker to seven times. The resulting production
system, still Taylorist in nature, generated conflict and adversarial
relations (Meardi, 1996). Overall, between 1992–1996, the Fiat model
was rationalized and many aspects of socialist management and
work practices were rejected.
Turin) allowed for faster and more direct change, and for better results
from training. Finally, interviews point to the counterintuitive judge-
ment that their past work experience in the planned economy had
made Polish workers more suited to lean production and continuous
improvement. In fact, as Burawoy detected during his Hungarian
research in the 1980s, under the shortage economy workers became
accustomed to responding creatively to unforeseen events in produc-
tion, and were therefore more flexible than their American counterparts
(Burawoy and Lukács, 1985). These capacities turned out to be of value
to the company within a Japanese model that which required workers
to take immediate action on problems instead of leaving them to final
quality control to address, as under traditional Fordism. Fiat managers
both in the Polish plant and at headquarters insisted that Polish
employees were more open to change and innovation than the Italians.
Managers gave a rather uncritical culturalist explanation (Polish mental-
ity versus Italian mentality) and made political use of it to pressurize
Italian unions and employees. A broader look at society and economics
in Italy and Poland would clearly discard a culturalist explanation: the
smooth introduction of Japanization in Poland in 1996–1997 must have
been prepared by workplace-related preconditions.
With time, managerial authority was delegated from Italian to local
managers, many of whom had already been managers under state
socialism, and everyday production management was undertaken by
Polish technicians and ETU heads, with much less intervention by
Italian technicians. Already in the late 1990s, rather than telling Polish
workers to learn from the Italians, supervisors were starting to advocate
the reverse to Italian workers (which was not welcome in Italy). In 2003,
the Polish factories pioneered a new phase of Japanization based on
‘lean manufacturing’ and the introduction of (management-appointed)
team leaders. On both lean manufacturing and quality management, it
was now the Italian factories that followed Polish practice.
The process seems to have achieved its peak in 2003–2004, when
production of the new Panda was introduced in Tychy with minimal
Italian intervention, and with a smoother and more successful outcome
than in the previous cases of the Cinquecento and Seicento. Productivity
and quality levels were the best in the group and were fast approaching
the Toyota benchmark; the Polish factories were the first to obtain ISO
9001 certification. The local union August 80 could proudly claim in
its bulletin to have overtaken the Italians (Mordasiewcz, 2003).
With regards to outsourcing, which had a dramatic impact on IR at
Italian sites (Bonazzi and Pulignano, 2002), change involved an apparent
Guglielmo Meardi and András Tóth 173
status clashes between Italian and Polish workers were so deep that
they created long-lasting anti-Italian feeling, still evident in 2004.
But above all, the ‘Agnelli’ strategy of privileging one trade union,
Solidarity, in order to facilitate dealings with the government (the
Tychy plant Solidarity leader happened to be the former prison cell-
mate of Polish president Lech Wal⁄ ec sa), and to capitalize on the Polish
desire to welcome capitalism, did not produce the expected results in
either Polish site. In Bielsko-Bial⁄ a, Fiat would use the plant branch of
Solidarity as a channel to the regional, Solidarity-inspired government
(Domański, 2001). But in Tychy, where the company even recruited a
leading Solidarity activist as advisor to the personnel director, conflict
erupted and Solidarity collapsed.
Discontent with the privatization procedure, run from Warsaw without
consultation with the workforce apart from two union leaders, led to a
two-month occupation and strike in the summer of 1992. After the first
few days the two largest unions, Solidarity and Metalowcy (the post-com-
munist OPZZ federation), abandoned the strike which was continued by
the smaller organization Solidarity 80. At that point, Fiat was still not the
official owner of the plants, so that the unions formally lacked a negotiat-
ing partner. The strike was totally defeated. Fiat used techniques already
well-tested in Italy: mobilization of non-strikers, legal action against tar-
geted activists, intervention by the political authorities. Eventually,
however, the strike crystallized a militant identity in a situation of intense
conflict (Meardi, 1996; Ga̧ciarz and Pańków, 1996).
The evolution of employment practices following the strike and
privatization was surprising: it reflected a dynamic and shifting attempt
by the company to make the most out of the different forms of union-
ism in Poland and in the factory. Solidarity, the initially favoured
partner, almost collapsed after the strike and was excluded from the
Tychy factory for a decade. Fiat replaced it by strengthening its rela-
tionship with its political rival, Metalowcy, for the rest of the 1990s.
Metalowcy provided the support and loyalty of clerical and core manual
workers, and constituted a solid negotiating partner. The relationship
with Metalowcy recalls Fiat’s support of the company union Sida in
Italy before 1968, echoing the ‘Valletta’ model. August 80 (as Solidarity
80 relabelled itself in 1993) was still, however, the largest union in
Tychy, with a very militant stance. Conflict mostly took the form of
individual, but union-supported, legal action. Two short strikes took
place in 1994, and a ‘work-to-the-rule’ strike was threatened in 1996
(curiously, this form of industrial action is known in Polish as an
‘Italian strike’).
Guglielmo Meardi and András Tóth 175
The lessons
The two cases show, under contrasting structural conditions, how
foreign investment within the enlarged European Union follows paths
that cannot be understood in terms of a conception of ‘hybridization’
as a mix between home-country model and host-country constraints.
MNCs adopt a range of models, none of which corresponds to their
home-country dominant practice, and many of which are stimulated
by the host environment.
178 Multinationals, Institutions and the Construction of Transnational Practices
Conclusions
There are some specific reasons that make actors in CE willing to ‘pull’
selective features of home-country models. These include the reputation of
Guglielmo Meardi and András Tóth 179
investing companies and hopes for personal, local, and national develop-
ment. On a closer look, such factors reflect the actors’ limited power and
their economic dependence as a result of the lack of suitable alternatives
following the collapse of the socialist industrialization model.
Limited power is, however, combined with important resources such
as high levels of education, flexibility, openness to change and innova-
tion, and experience of arrhythmic production. The resulting ‘idealized
managerial model’ is a filtered version of the home one, free of con-
straints imposed by other stakeholders, rationalized and made more
flexible. This works both in high-tech sites, as in the case of GC, or at
relatively lower levels of technology, as in the case of Fiat. This model
is not free from tensions and conflicts, however. In particular, the
problem of its long-term social sustainability remains open. Will the
wage gap with the West remain acceptable? Will the lack of job security
lead, in the event of recession or restructuring, to the destruction of
existing levels of trust and consent? What will be the effects of high
levels of stress, flexibility and insecurity? More generally, will foreign
investors be perceived as ‘fair’ in the long run, or will political and
cultural reactions emerge?
Although only two cases have been presented, they do not seem to
be isolated. Flagships of the German industrial model like VW, Siemens
and Opel are now asking their German employees to look to their
eastern neighbours as benchmarks for productivity, flexibility and
order: something quite new for a country where the idea of polnische
Wirtschaft was a favourite joke.
In both case studies, what is striking is how disparate elements drawn
from past traditions (paternalism, company union) or from contexts
beyond the parent company (Japanization) were reformulated in ways
that fitted with the employer’s interests. Hybridization was not some-
thing to be endured by the MNC: host-country conditions did not
constrain the investor but on the contrary attracted it. A form of
‘hybridization à la management’ was evident, in which elements of
different models were combined by managerial strategies and interests.
MNCs were positively surprised not only by how permissive the new
environment was but also by how welcoming local actors were. MNCs
did not behave like missionaries (the frequent metaphor for their
action in economically weaker countries) but rather, to follow the
simile, like the Quakers fleeing their corrupt land of origin to recreate
an ideal version of their faith, which had never actually existed before,
on more accommodating shores.
What explains such developments? IHRM and ‘global firm’ models
are of limited help. Even the idea of reverse diffusion of practice, for
180 Multinationals, Institutions and the Construction of Transnational Practices
Notes
1 Some parts of this paper draw on two international projects on FDI in
Central Europe, sponsored by VW Foundation and the UK Economic and
Social Research Council. The authors are therefore grateful to the coopera-
tion of research team colleagues, without whom these parts would not have
existed: Mike Fichter, Christoph Dörrenbächer, László Neumann, Martin
Wortmann, Paul Marginson, Miroslav Stanojević, Marcin Frybes and Adam
Mielczarek. However, the authors are solely responsible for the content and
mistakes of this paper.
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Guglielmo Meardi and András Tóth 183
Introduction
The clothing industry in developed economies was among the first to
take on a global dimension, and is today geographically dispersed
around the world (Dicken, 2003). As the industry has not been amenable
to technological rationalization, its low capital and relatively high
labour intensity1 have made it an obvious candidate for development
in newly industrializing countries. Due to huge discrepancies in wage
levels between developing and developed countries (Figure 8.1), firms
in the latter have had to reorganize their value chain. The result has
been the steadily increasing (in some European countries, almost total)
outsourcing of production to lower-wage developing countries and
drastic employment cuts in developed countries, particularly of semi-
skilled jobs like sewing. Nevertheless, the clothing industry remains a
significant employer.
The literature on this industry in developed countries has mainly
focused on how organization of the supply chain (conceptualized
both as global commodity chain (GCC) and as global production
network) has affected developing countries (e.g. Gereffi, 1994, 1999;
Henderson et al., 2002). Firms in developed countries that construct
and coordinate global commodity chains have received far less acade-
mic attention, particularly with regards to the impact of foreign
sourcing on domestic employment. The established wisdom is that
the loss of low-skilled manual jobs in developed countries is compen-
sated for by a general upgrading of the occupational structure
184
Christel Lane and Jocelyn Probert 185
Figure 8.1 Clothing industry costs per working minute in different countries (in
euros)
Source: Volksbanken/Raffeisenbanken, 2003
Theoretical considerations
The competence-based approach in strategic management
To gain competitive advantage, managers develop organizational com-
petences/or capabilities2 which facilitate not only technologically and
188 Multinationals, Institutions and the Construction of Transnational Practices
There are at least five ways of organizing the clothing value chain,
resulting in five different types of clothing enterprise (Table 8.1). Each
type, as we elaborate below, involves different decisions about the
activities and capabilities to be externalized through markets or within
networks, and about their geographical location.
These five types of clothing enterprise evidently differ in the capabil-
ities and capital invested, and in the resulting products and hence the
markets they can enter. Consequently, each type also has different
consequences for the quantity and quality of employment created both
within coordinating firms and in the network as a whole.
Type 1 Branded merchandisers High emphasis on High quality brands, Creative and technical High
steps 1–3 and 5–6 oordinated collections design; technical
preparation of
production; marketing
Type 2 Domestic suppliers to Same steps as type 1, Standardized made to Lower design, technical Low
large retailers but steps 1,2 and order for retailers and marketing
5 receive low capability than type 1
emphasis
Type 3 ‘Cut, Make and Trim’ Step 4** All types Managerial coordination Medium
firms *** of semi-skilled operators
Type 4 Branded/high fashion A. Steps 1–3, 5–7 As in type 1 A. Combines competences Very high
merchandisers with B. Steps 1–7 of type 1 with retailing
forward integration capability.
into retailing B. As A, plus manufacturing
Type 5 Retailers, with backward Steps 1, 2 and 7 Standard clothing, Mainly retailing Medium
integration into design full package or competences, combined
and supply chain imported with some design and
organization supply chain management
+
Includes retailers
* Steps in value chain: 1. Development of collection; 2. Design; 3. Prototyping of models; 4. Manufacturing; 5. Marketing; 6. Distribution/logistics;
7. Retailing.
** If ‘full package’ suppliers, also buy fabric and trim.
191
*** Located in developing countries or in informal sector of developed ones.
192 Multinationals, Institutions and the Construction of Transnational Practices
and large, are able to exert little or no power over their customer firms.
Additionally, the impact of international institutions and rules systems,
particularly those relating to trade, needs to be incorporated into the
theory. Here we consider the Multifibre Arrangement (MFA)/Agreement
on Textiles and Clothing (ATC) under the World Trade Organization
(WTO), and import tariffs. (Although defunct since January 2005, the
ATC was still operative at the time of our empirical study.) Tariffs are
differentially enforced for different regions and countries, and have been
completely abolished for a significant number of exporting countries.
studies there were none at all (Owen and Cannon Jones, 2003: 60). The
German industry’s ratio of trainees to total employees of 7.5 per cent in
2001, mostly in sewing and tailoring (BBI, 2002), is in a different league.
To sum up, these striking differences in qualifications and skills in
the two national clothing industries indicate that capability-building
by UK managers meets much greater constraints, and that some capa-
bilities, like the combination of creative and technical competences
to develop brands, have been achieved only in exceptional cases.
Finegold and Soskice’s (1988) characterization of the general British
situation in terms of a low-skill equilibrium where, given low quality
and technology specifications, the demand for skilled labour remains
low, is pertinent also to this industry.
3.5
Hourly labour costs (US$)
3
2.5
2
1.5
1
0.5
0
Tu d
M ey
um o
Tu ia
a
Sa la
r
Th as
Bu nd
ia
In ndia
a
Vi na
Pa pt
an
H ado
an
C cc
ua ni
si
b
El ema
ar
na
y
rk
r
la
hi
st
ne
G is
Eg
du
o
l
lg
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ai
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lv
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ol
this model. Since both countries are relatively high labour cost loca-
tions, ownership of domestic manufacturing is no longer regarded
positively and the availability of subcontractors offering the right price
at the right quality levels provides a more attractive alternative. A lack
of suitable domestic subcontractor networks pushed the search for
flexibility abroad. Although some ‘quick response’ manufacturing does
occur in the UK, as explained below, this could sometimes descend
towards the informal sector.
The competences externalized by firms may be described as standard,
facilitating easy substitution of one supplier firm by another. But
suppliers of CMT garments must nevertheless be considered as having
complementary capabilities. The quantitative coordination of output
volume and the qualitative coordination of product features, all under
intense time pressure, could not take place through purely market links.
Coordinating firms have four options when considering the location
of their production:
garment parts, they have greater control over the appearance and
quality of the garment – a course of action congruent with an empha-
sis on high quality and branding. In distant second place for German
firms are both direct importing and full package manufacturing,
although the latter is growing; and in third place, manufacturing in
lower-wage countries through direct investment in their own manufac-
turing subsidiaries (Adler, 2003, interview notes 2003). Domestic sourcing
for short runs and re-orders in Germany is infrequent, presumably due
to the absence of an informal sector, and instead occurs in neighbouring
CEE countries (Donath, 2004).
UK firms’ outsourcing of manufacturing to low-wage countries, in
contrast, started only from the mid-1990s onwards (BATC, 2003), due
both to lower wage levels and to dependence on Marks & Spencer,
which maintained a ‘Buy British’ policy well into the 1990s. There are
no systematic studies of the mode of outsourcing, and we rely on our
interviews to present an account. Manufacturing exclusively in self-
owned domestic plants no longer exists following numerous plant
closures in recent years, and even partial domestic manufacturing is
very rare (interview notes, 2003). A few larger firms own production
facilities in low-wage countries, both in CEE and in Asia. This strategy
is more prevalent than in Germany, especially among the large M&S
suppliers, which have sought to obviate adoption by M&S of large-scale
direct importing. Outsourcing to independent third-party suppliers is
by far the dominant UK strategy. Concerning the mode of foreign
sourcing, the ‘full package’ option is more prevalent and outward
processing much rarer than for German firms. The volume of outward
processing of clothing in 1998, to the value of €444m, was one-seventh
that of Germany’s (Dunford and Greco, 2004). The ‘full-package’ strat-
egy shifts costs and risks onto the supplier (Richardson, 1996) but also
permits the latter to upgrade its capabilities; it also results in loss of
expertise and control over the final product for coordinating firms.
Where clothing firms supply to a dominant retailer, the latter now
more frequently specifies the fabric source, depriving clothing firms of
another area of expertise (Baden and Velia, 2002).
German coordinating firms source four-fifths of outward processed
garments from Poland, Romania and other CEE states, plus Turkey
(Groemling and Matthes, 2003: 80). According to BBI (2002: 24), in
2001 only eight non-CEE countries – namely Tunisia, Turkey, Morocco,
Portugal, Greece, Vietnam, Malaysia and China – figured among the
23 largest German suppliers. ‘Full package’ production is most likely to
occur in Turkey and China (Volksbanken Raiffeisenbanken, 2003: 4).
This locational pattern is also supported by our interviews.
Christel Lane and Jocelyn Probert 203
imports over the period 1990–2000 (Groemling and Matthes, 2003: 49,
figure 13b; interview notes, 2003). British firms are also moving east-
ward in CEE countries and have become more focused on China, but
Turkey and Morocco have also gained greatly in popularity (interview
notes, 2003; BATC, 2003).
To what degree and how do German and UK coordinating firms
exert control over their nominally independent suppliers and thus over
the quality of the finished product? Although coordination of the
relationship by German firms occurs through contractual agreements,
production remains ‘to a high degree’ under the influence of the
German coordinating firm (Wrona, 1999: 161; interview notes, 2003).
Our interviews confirm the use of strategies to retain control, such as
placing the coordinating firm’s own technical staff with the supplier.
British firms employ mixed methods of control, ranging from the use
of agents to employing roving inspectors who conduct quality con-
trols. Since British firms are more distant geographically from their
suppliers and employ fewer trained technical staff compared with
German firms, it appears that ‘virtual’ vertical integration is more
rarely achieved and control less fully maintained than in the German
case.
Firms from both countries demand from their suppliers a combina-
tion of high quality, low price and timely delivery. It might be conjec-
tured that these are now global standards from which suppliers cannot
depart, or that quality means very different things to firms from these
two countries. Our knowledge of the different quality standards in final
products, as well as of the preferred mode of sourcing – outward
processing (OPT) versus full package – leads us to think the latter
interpretation more probable.
Conclusions
This chapter has advanced a number of theoretical claims and has sub-
stantiated them in the light of data on the organization of German and
UK clothing firms. It has been suggested that, to understand the
impact of global production networks on labour market segmentation
208 Multinationals, Institutions and the Construction of Transnational Practices
Acknowledgements
This paper is an output of the project, The Globalising Behaviour of UK
Firms in Comparative Context, undertaken in collaboration with the
Industrial Performance Center at MIT and funded by the Cambridge-
MIT Institute (CMI).
Notes
1 This discussion ignores the high-end knitwear sector, where the capital
intensity of the machinery utilized can be high and labour intensity low.
2 Some writers distinguish between the two concepts (e.g. Teece et al., 1997)
but most use them interchangeably as we do in this paper.
210 Multinationals, Institutions and the Construction of Transnational Practices
3 For ‘full package’ manufacturing, the supplier purchases the fabric and trim
specified by the coordinating firm and makes up the garment.
4 In the German clothing industry, now organized by a section under IG
Metall, the degree of industrial organization is 22 per cent, compared with
an overall union density of 28 per cent (figures supplied by P. Donath, IG
Metall), whereas for the UK unions with membership from the clothing
industry – KFAT, T&G and GMB – a density of under 20 per cent has been
estimated, which is well below the general level of organization (personal
communication from W. Brown, Professor of Industrial Relations, University
of Cambridge).
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Between 1996 and 2000. Brussels: Euratex, Bulletin, 5: 18–159.
Finegold, D. and Soskice, D. (1988) ‘The failure of training in Britain: analysis
and prescription’, Oxford Review of Economic Policy, 4: 21–53.
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Christel Lane and Jocelyn Probert 211
Introduction1
The 2004 World Investment Report produced by UNCTAD was entitled
‘The Shift towards Services’. The report stated that ‘the structure of FDI
has shifted towards services. In the early 1970s, this sector accounted
for only one-quarter of the world FDI stock; in 1990 this share was less
than one-half; and by 2002, it had risen to about 60 per cent or an
estimated $4 trillion’ (p. xx). The report also noted that ‘despite the
growth and dominance of services FDI, the services sector is less
transnationalized than the manufacturing sector’. In this chapter, we
examine one particular services sector that is a fast growing area for
FDI – that of legal services. As the UNCTAD report states, ‘the legal
business is skills oriented and strongly host-country specific. Each
country has its own legal code upon which firms operate’ (p. 112).
This raises three issues which we seek to explore and which constitute
the three core sections of the paper. Firstly, what has changed in the
legal business that makes internationalization an important issue, given
that nation-states remain the predominant source of law and, as a pro-
fession, lawyers are predominantly educated, regulated and controlled by
national associations? Our main argument here concerns the changing
nature of client demands on legal firms pushing them to find ways of
evolving more international capacities for advice. Secondly, how have
legal firms sought to become international against the backdrop of
national legal systems and national forms of professional regulation?
Here we describe two basic models of internationalization which we
label the ‘global firm’ model and the ‘network model’. We differentiate
each of these models further in order to capture the broad range of inter-
nationalization models currently being pursued. We also consider the
213
214 Multinationals, Institutions and the Construction of Transnational Practices
When there are stable sets of rules providing legal rights and guar-
antees to parties to exchange, this enhances certainty and pre-
dictability in contractual relations. Because guaranteeing enforcement
of contracts according to known rules increases the probability that
promises are kept, law encourages making contracts and also other
forms of business activity on which market exchange depends….
Full-blown capitalist economic systems are unlikely without legal
enforcement of contracts.
• Building new systems of public and private law at the transnational level.
This final process reflects the fact that law and institution-building
is a continual process at the international level. MNCs require their
law firms to be active in this process not just through acting for
them in specific cases but through their participation in the
processes of institution-building itself. International law firms gain
reputation and position (and through this the ability to charge
premium fees) by their ability to interact with powerful lawmakers.
This is reflected at all sorts of levels. In formal terms, it is demon-
strated by the law firm’s ability to respond to consultative exercises
launched by various governments or international bodies on matters
of corporate law. In informal terms, it is reflected in the c.v.’s of the
lawyers present in these firms – for example, their education in top
institutions, their experience in government or politics, their role in
prestigious international bodies.
Types of networks
We identify four types of networks, that is to say where law firms in
different countries retain their independence but become part of a
network of cooperating firms. The degree of cooperation is the pre-
dominant factor of difference between the different types of networks.
consultancy. Even the largest law firms tend to be present in only 20–30
countries compared to the big four accounting firms which have offices
in around 150 countries (Table 9.1). We distinguish two types of global
firms, according to the degree to which the firm is seeking to incorporate
different forms of law and expertise within its boundaries or is rather
seeking to export a particular form of law to other countries.
Table 9.1 Top 10 law firms in the world by gross revenue in 2002–3
Sources: for gross revenue, see American Lawyer, November 2003; numbers of partners,
lawyers and countries taken from UNCTAD, 2004: 326.
Rank Law firm Total turnover National origins Ratio of local to Geographical International
(mil. €) total offices spread of foreign networks
offices
Rank Law firm Total turnover National origins Ratio of local Geographical International
(mil. €) to total offices spread of foreign networks
offices
231
and US
232
Table 9.2 Top 15 law firms in Germany, ranked by turnover, 2002 – continued
Rank Law firm Total turnover National origins Ratio of local Geographical International
(mil. €) to total offices spread of foreign networks
offices
11 Haarmann 78.5 Germany 9:22 Europe, CEE, Asia Cooperation with law firms
Hemmelrath in Austria, Singapore and
Shanghai
12 Shearman & 73 US–Germany 4:19 Global –
Sterling
13 Taylor Wessing 73 UK–Germany 6:12 Europe, Middle Member of EEN, TechLaw
East, Asia Group, Unilaw and World
Law Group*
14 Beiten Burkhardt 70 Germany 8:17 Europe, CEE, Asia –
Goerdeler
15 White & Case, 67 US–Germany 6:38 Global –
Feddersen
* EEN (European Environmental Network) is a network of nine European and US law firms specialized in environmental law; TechLaw Group com-
bines worldwide 4000 lawyers from US and European law firms which have a strong practice in new technologies, media, health system, and so on;
collaboration is limited to individual mandates; UNILAW is an international non-exclusive network of European law firms which was already
founded in the 1970s to facilitate referrals; membership is restricted to one firm per country; the World Law Group combines more than 30 indepen-
dent international law practices worldwide on a non-exclusive basis; membership is restricted to one firm per country.
** offices of German law firm CMS Hasche Sigle.
Sources: Websites and annual reports of law firms, downloaded from June 2004; figures on turnover are based on JUVE Rechtsmarkt, October 2003.
Glenn Morgan and Sigrid Quack 233
state, undermining further, for example, its ability to sustain its tax
base or its regulatory system as firms move profits around internally or
restructure their legal incorporation in order to avoid certain restric-
tions. The extension of US law also pressurizes firms from different
varieties of capitalism to utilize that as their ‘choice of law’ in emerging
markets. This in turn may facilitate a broader change towards US law
with consequent effects on how the firm is structured more generally.
In conclusion, our argument has been that legal arenas have become
more internationalized. Clients demand more of their lawyers than
they have done in the past, from easy systems of referrals through to
lobbying on the development of international institutions. Whilst still
predominantly based on the national partnership structure, law firms
have found various ways of responding to these changes. This variety
of models of internationalization relates to different sorts of client
needs in complex ways. Whilst simple referral systems allow SMEs to
enter international markets with relative ease, the capabilities of global
law firms are increasingly being utilized to free the largest MNCs from
regulation. Whether this can be interpreted as a simple process of
convergence or Americanization is to be doubted. Undoubtedly, there
are strong pressures for law to move in that direction. US law firms
are predominantly built on a model of exporting US law and they
therefore support this. However, other global law firms are more
complex in structure and more like alliances of different national part-
nerships. Their role in the nature and establishment of international
corporate law is therefore likely to be more complex. These issues
remain open and are fruitful contexts for further research on processes
of internationalization.
Notes
1 The authors are grateful to Paul Conville (WBS) and Maria Konrad (WZB) for
their support in collecting and analysing data used in this paper.
2 This term arose in the 1990s to describe what were perceived to be the five
elite corporate law firms in London – Slaughter & May, Clifford Chance,
Freshfields, Linklaters and Allen & Overy. Whilst the other four Magic Circle
firms engaged in acquisitions and mergers overseas, Slaughter & May
remained a UK-based partnership with a network of high quality contacts in
other major markets for corporate law. These were its ‘best friends’.
References
Boyle, E. H. and Meyer, J. W. (2002) ‘Modern Law as a Secularized and Global
Model: Implications for the Sociology of Law’, in Dezalay, Y. and Garth, B. G.
(eds), Global Prescriptions: The Production, Exportation and Importation of a New
Legal Orthodoxy, Ann Arbor: University of Michigan Press, 65–95.
Glenn Morgan and Sigrid Quack 237
Introduction
In this contribution I focus on some tensions between ‘globalization’
(as we all know, an imprecise and contested concept) and established
mechanisms of employment regulation at national level. To this end I
draw on a number of recent explorations in the comparative political
economy of capitalism, and apply these to the specific arena of the
European Union (EU). I first offer a broad-brush account of the conflict
between neoliberal globalization and the established regulatory
processes of ‘social Europe’, and discuss in particular the role of multi-
national capital in challenging nationally-specific ‘post-war compro-
mises’ between governments, trade unions and employers. Next I link
this to the advance of a new ‘Brussels consensus’ driven by the overar-
ching priority of competitiveness and a shift to ‘social Europe lite’.
After this I ask whether ‘embedded liberalization’, to borrow from
Ruggie (1982), is an option for Europe; and finally, I explore other
alternatives for resistance.
239
240 Multinationals, Institutions and the Construction of Transnational Practices
forces within the real policy-making processes may ensure that quite
different priorities prevail.
In these real policy-making processes, it is an uphill struggle to
defend a meaningful social Europe against the threats of neoliberal
globalization. There is an evident imbalance of influence between
labour and capital. Employers and industrialists work with the grain
of entrenched EU policy to encourage the free movement of goods,
services, labour and capital and for the interpretation of these freedoms
as requiring a diminution of nationally embedded social regulation,
while defenders of ‘social Europe’ seek a major change of course in the
priorities of economic integration. In such a context, veto power is
typically both effective and discreet. Recall the argument of Offe and
Wiesenthal (1985: 191–3) concerning the ‘structural asymmetry’ of
capital and labour in their relationship with the state. Since govern-
ments are dependent on the investment decisions of a multiplicity of
individual firms, capital exerts political pressure without the need to
mobilize collectively. The normal economic rationality of company
decision-makers has a political significance which may not even be
intended. Against this background, at European level the relative orga-
nizational weakness of UNICE in comparison with the ETUC may
constitute a strength for capital: even if its professional representatives
were inclined to compromise on principles which some employers
consider sacrosanct, it lacks the capacity to commit those it supposedly
represents.
There is also a familiar imbalance within the institutions of the EU:
the Parliament, the most ‘popular’ (directly elected) element in the
decision-making architecture, is the most reliable supporter of an
effective social dimension to European integration, but is also the most
limited in its powers (in no way matching those of any national
legislature). The Commission, while dependent for its own status on
the extent of EU regulatory capacity, is at best an ambiguous supporter
of the European social model(s). While the Commission’s Directorate-
General for employment matters, DG EMPL, may be sympathetic to
aspirations for social regulation, its own influence is subordinate to
that of the many Directorates-General with a primarily market-making
mission. Note that for several decades, DG EMPL has always been
assigned a Commissioner from a ‘peripheral’ country, after the more
influential briefs have been carved up amongst the heavyweights. And
within the Council, in effect the decisive policy-making instance, veto
power is strongly entrenched despite the limited advance of scope for
qualified majority voting on social issues.
Richard Hyman 247
profit priority over individual and public welfare’. The latter aspect of
the Treaty serves ‘to elevate this contested pattern of failed and
harmful policies into a constitutional imperative’ (EuroMemorandum,
2005: 1–2).
In a recent assessment, Ruggie (2003: 95–7) argues that the ‘anti-
globalization backlash’ derives to an important extent from the fact
‘that the social embeddedness side of the equation is losing out to the
dictates of globalization’. He diagnoses ‘a growing imbalance in global
rule making. Those rules that favor global market expansion have
become more robust and enforceable in the last decade or two… but
rules intended to promote equally valid social objectives, be they labor
standards, human rights, environmental quality or poverty reduction,
lag behind and in some instances actually have become weaker.’ This
imbalance, he suggested, has stimulated ‘civil society actors’ to engage
in an effort to re-regulate terrain which national governments have
increasingly abandoned. At least some of the processes of EU integra-
tion, and resistance to the EU Constitutional Treaty, can be interpreted
in similar terms.
However, ‘civil society’ is a notoriously diffuse concept. Tradi-
tionally it was often interpreted as presupposing competitive markets
and the unfettered rights of private capital, and thus was employed
as a slogan against social and political regulation of economic trans-
actions (Hyman, 2001: 57–9). If, alternatively, it is understood as the
whole non-government sphere, multinational companies seeking to
maximize their freedom of action are as much ‘civil society actors’ as
are those who campaign to limit such freedoms. Accordingly, civil
society is a terrain of conflict and contention.
From this divided character stem two implications. The first is a
contest between mindsets. Within the market mindset, economic
transactions are ideologically neutral: but this proposition is itself an
ideological rallying cry. To transform social relations into commodities
– in many cases, as Polanyi put it, ‘fictitious commodities’ – is a political
process of dehumanization. Krippner (2004: 112) has made an analo-
gous point with great cogency: ‘congealed into every market exchange
is a history of struggle and contestation that has produced actors with
certain understandings of themselves and the world which predispose
them to exchange under a certain set of social rules and not another.
In this sense, the state, culture and politics are contained in every
market act.’ I see clear affinities between this argument and Thompson’s
account of popular resistance to the growing dominance of purely
market principles over social relations in eighteenth-century England.
Richard Hyman 251
A labour of Sisyphus
For Luxemburg, trade union action was ‘a sort of labour of Sisyphus,
which is nevertheless indispensable’. Opposition to the neoliberal
Brussels consensus may be viewed in similar terms. To create an alter-
native form of European integration, to defend the idea of social
Europe by (re-)inventing it, is to struggle against the odds.
Central to such a struggle must be an effort to shift the balance of
forces. In part, this must mean an attempt at containment of the prerog-
atives of capital. An initial point of attack could well be the very mobility
of capital – one, and in practice the most decisive, of the EU’s four free-
doms – and its capacity to disrupt embedded social relations. Such a
proposal is no longer an ‘extremist’ idea. Dore, for example, suggests
(2003: 70) that ‘the globalization of financial markets… is by no means
irreversible, and it is not clear that financial protectionism would
damage the world trading system for goods and non-financial services.’
In similar vein, Stiglitz (2002: 236–7, 265–6) stresses that ‘short-term
financial flows (“hot money”) impose huge externalities, costs borne
by those not directly party to the transaction…. Whenever there are
such large externalities, interventions – including those that are done
through the banking and tax systems – are desirable.’ He endorses
the idea of a ‘Tobin tax’ to curb short-term speculative financial flows.
What seems clear is that such a tax, at global level, is politically out of
the question. At the EU level, given the existing regulatory architec-
ture, a Euro-Tobin is less politically fanciful. It could be a starting point
for a counter-offensive to market fanaticism.
The converse of constraining capital is empowering labour. This
topic requires a chapter (indeed a book, or a whole library) in its own
right. Let me simply remark, before concluding, that while constraining
capital must be primarily a task of external imposition, empowering
labour must be in large measure a task for workers and their unions
Richard Hyman 253
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254 Multinationals, Institutions and the Construction of Transnational Practices
256
Index 257
EU – continued French-Canadians, 39
imbalance within institutions, 246 Frenkel, S. J., 35–6
key element in the official discourse Freshfields, 229, 233
of, 240 Freshfields Bruckhaus Deringer, 229
market liberalism, 247 Fruin, M., 59, 61
‘symbolic politics’ of the, 19 Frybes, M., 181
tariff-free trade agreement, 203 Fukuyama, 119
trade, 243
Euratex, 198 Garth, B. G., 235
Eurocrats, 251 GATT (General Agreements on Trade
Euro-liberalism, spectre of, 244–53 and Tariffs), 34
Europe, 43, 56, 137, 178, 225 GCC, 184, see also global commodity
European chain
Commission, 252 GDP, measure of value added,
‘European social model’, 239, 244–5 not sales, 26
insulated from ‘global’ challenges General Electric, 26, 162
to, 244 General Motors, 27
rhetorical commitment to the, Gennard, J., 86
244 Gereffi, G., 9, 192
integration, 243, 246, 248 Gerhart, B., 118
European Employment Strategy, German/Germany, 37 42, 87, 105,
see EES 137–8, 140, 179, 196, 200
European Parliament, see EP clothing firms/industry comparison
European Union, see EU with UK, 186, 194–5, 198, 206,
European Works Councils, see EWC 208
Euro-Tobib, 252 co-determination system, pillars of,
EWC, 26, 136, 145, 177, 180–1 158
Exxon, 26 concentrations of ethnic minority
populations, 205
Fame and Factiva, 187 coordinating firms, 201, 204,
FDI, 7, 36, 162, 181 see also coordinating firms
developments in Irish public policy FDI, 159, see also FDI
on, 101 firms, in Hungary, 159, see also
FDI-dependent economies, 87 Hungary
global downturn in, 87 firms, direct importing and full
in Ireland, see also under Ireland package manufacturing, 202
Ferner, A., 30, 86, 105, 111 MNCs, 157–8
Fiat, 160, 170–1, 174, 178 in Britain/UK, 131, 156
Fichter, M., 159, 181 hybridization, 159, see also
Finegold, D., 198 hybridization
Florida, R., 57–8 pluralistic HRM, Anglo Saxon
flexicurity, 245 context, 157, see also HRM;
Fordism, 170, 172 IR
Foreign direct investment (FDI), see FDI in Spain, 158
Fortune 500 companies, 36, 89 Standortdebatte, 157
France, 26, 137–8 transfer of, 158
free market and UK coordinating firms,
agenda, 19 see under coordinating firms
concept of, 248 Ghoshal, S., 46, 112
self-regulatory virtues of, 244 Gleiss Lutz, 224
Index 261