Work Practices in Multinational Companies: Theoretical and Empirical Considerations

Marta Kahancov Max Planck Institute for the Study of Societies, Cologne, Germany WIBAR-2 Conference, Brussels, October 16, 2008

Transnationality index of European countries

1999 Central/Eastern Europe Czech Republic Estonia Latvia Lithuania Slovakia Slovenia Poland Romania Ukraine Western Europe Belgium and Luxembourg Denmark France Germany Ireland Netherlands Spain Sweden United Kingdom

2002

17.6 23.2 18.3 13.2 7.1 7.9 11.5 9.4 4.8

30.9 39.0 18.8 23.3 27.5 22.3 15.6 12.1 10.3

287% increase 182% increase

66.0 17.9 9.4 10.6 35.7 25.2 14.7 33.0 14.5

77.1 35.3 13.5 14.3 69.3 38.4 20.5 28.5 16.8

97% increase

94% increase

Source: Drahokoupil, J. (2008) Globalization and the State in Central and Eastern Europe: The Politics of Foreign Direct Investment. London: Routledge.

Multinational companies (MNCs)

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Important for accelerating transnationalization in production Metal and electronics sectors one of the most transnationalized sectors Cross-border transfer of work practices

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MNCs become embedded in host country labor markets potential to change, influence and challenge nationally specific work standards and regulations produce a response of national trade unions, governments and other organizations
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Understanding what MNCs do

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Need for internationally comparable empirical data Case study evidence from particular MNCs (General Motors, Volkswagen, Renault, Philips, Siemens) Internationally comparable survey data (Wage Indicator)

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How do MNCs construct work practices in different host country conditions? What is the role of local trade unions in shaping MNCs work practices? Why do we find differences in MNCs work practices in different countries?
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Presentation outline

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Theoretical considerations Case study of a Dutch MNC in electronics Conclusions and policy implications

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Theoretical considerations

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Organizational and management perspective: diffusion of best work practices across MNC subsidiaries in different countries Institutionalist perspective: adaptation of work practices to national standards in host countries Reverse diffusion of work practices Hybridization of work practices

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Sociological perspective: social relations influence what MNCs do; strong role of host country trade unions in constructing work practices in MNC subsidiaries
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How work practices in MNCs emerge

Organizational influences
(profits, market power of the firm)

Institutional influences
(laws, norms, collective agreements)

Economic behavior of MNCs

Social interaction with employees, trade unions (trust, informal relations)

Outcome: work practices in MNC subsidiaries

Stability/change in work standards, harmonization across Europe

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Case study I.

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Multico a Dutch MNC in the electronics sector, established in late 19th century, about 159,000 employees worldwide (in 2005)

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Long history of international operation

Past: decentralized company with a portfolio of independent businesses Recent reorganizations: integrated organizational structure, centralization of core competencies, but Human Resource Management stays decentralized Five product divisions, focus on Consumer Electronics with four production sites in Europe: Belgium, France, Poland, Hungary

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Case study II.

Television factories

Belgium

France

Poland

Hungary

Western Europe Extensive legal regulation of employment practices Strong trade unions Centralized collective bargaining

Central / Eastern Europe Less extensive legislation on employment practices Weak and fragmented trade unions Decentralized collective bargaining

Findings

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Consistent with the Wage Indicator survey, justifies a combination of research methodologies (surveys and case studies)

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Wages 10-20% above average wages in the electronics sector in host countries
Higher employment flexibility compared to non-MNCs, thus less direct compensation for overtime Internal promotion possibilities vary across subsidiaries Better working conditions than non-MNCs, thus higher job satisfaction Intensive training and coaching in all countries Higher unionization rates than non-MNCs in all countries Unions more involved in constructing MNC work practices in subsidiaries where informal relations between management and unionists are cooperative
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Interpretation of findings

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Why do we find differences in MNCs work practices in different countries? No diffusion of best practices within MNCs, no adaptation in working conditions to non-MNCs in host countries; but making the most of local diversity to develop subsidiary-specific work practices How do MNCs construct work practices in different host country conditions? Innovative practices regardless of an East-West divide result of social interaction between the MNC and local trade unions What is the role of local trade unions in shaping MNCs work practices? social interaction with MNC managers cross-border cooperation of trade unions at company level
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Conclusions and policy Implications I.

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Making the most of diversity: work practices in MNCs beyond host country standards instead of adaptation Organizational and institutional factors alone cannot account for what MNCs do and why Central role of MNCs and host country trade unions in shaping working standards in European countries Social networks that MNCs and unions form are important for the kind and quality of working conditions and their harmonization across countries

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MNC behavior vis--vis trade unions: profit interest, a power perspective, but also moral company values. Outcome: trust building joint informal agreements construction of work practices and institutional change from below
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Conclusions and policy implications II.

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Trust and personal relations between managers and trade unionists may be an additional resource for strategies (next to legal resources and unions internal capacities for action) Attention to diversity among MNCs each company is unique in its values, interests and openness to social interaction with trade unions Transnationalization of trade union initiatives should mirror the intensive transnationalization of production in metal and electronics

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National/local trade unions to substitute nationally embedded interests for international structures with a common strategy

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Cross-border cooperation of trade unions

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Legitimacy effect: allows national/local trade unions to bypass MNC subsidiary managements and to access MNC headquarters to create an international alliance Information effect: trade unions, by being more exposed to interaction with their foreign counterparts, draw on international resources and are thus better equipped for collective bargaining in national conditions These effects not only relevant for national trade union (con)federations, but mainly for company-level unions

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