The Organizational Consequences of Host Country Institutions on Mnes: The Case of Work and Employment Relations

Friday, 3 July 2015: 10:15 AM-11:45 AM
TW2.3.01 (Tower Two)
Geoffrey Wood, Warwick University, Coventry, United Kingdom
Chris Brewster, University of Reading, Reading, United Kingdom
Michael Brookes, University of Newcastle, Newcastle, United Kingdom
Based on the composite understanding of institutions in the comparative capitalisms literature, we examine host country effects on the intra organizational practices of MNEs, using transnational level survey data and exploring change over time.  We found that the less comprehensive institutional mediation of the Liberal Market Economies, correlated with greater diversity and a more pronounced difference between domestic firms and foreign MNEs.   However, MNEs tended to follow the lead of local firms in adjusting work and employment policies and practices towards liberalizaton. This highlights the continuing importance of context, and the relative limitations of strategic innovation by a single firm.  

More specifically, this study attempts to add to our understanding of these issues by examining work and employment relations policies and practices. It has long been understood that such human resource management (HRM) policies are the area of management action most likely to be constrained or supported by the local context (Rosenzweig & Nohria, 1994). Based on different waves of trans-national survey evidence, we explore the extent to which structural changes in the global economy may, because they increasingly make certain types of national order more fluid, open the way for MNEs to disseminate their chosen alternative practices across the world.  We use the literature on comparative capitalisms (Jackson & Deeg, 2008), but note that a limitation of this literature has been a general lack of attention to MNEs (Hall & Soskice, 2001; Amable, 2003). Although more recent accounts have begun to address this lacuna (Whitley, 2010), there remains much ambiguity as to whether country of origin or host country institutions exert the stronger influence, although it often assumed that the former might be the case (Cooke, 2007; Poutsma, Ligthart & Veersma, 2006; Meardi, Marginson, Fichter, Frybes, Stanovich & Toth, 2009).  There is a recent body of literature that has highlighted the role of host country effects (and, indeed, regional ones) in forcing MNEs to modify their policies, leading to the adoption of hybrid practices that will differ from local norms in at least some key features, whilst retaining aspects of others (Ferner, Almond, Colling & Edwards, 2005; Rugman & Oh, 2013).   In looking at these effects, a key concern has been the relative embeddedness of national regulations and associated ways of doing things, and the impact of strategic choices made by individual firms (Cantwell et al., 2010).  Here, it could be argued that the relative density or thickness of host institutional arrangements may determine the extent of this hybridization, and the relative departure from local norms (Jackson & Deeg, 2008). 

            This study seeks to shed further light on the effects of host country institutions on practice, and the extent to which some institutional settings may be more open than others to the dissemination of new models, and whether there has been an increased tendency towards openness over the past decade.   Although we control for sector and size, we recognize that the strategic choices made by the firm, and their HRM policies and practices, represent the product of a complex mix of local and sectoral, regional, national and supranational factors; comparing practices according to country of domicile represents only one dimension of a very much more complex picture (Wood and Lane, 2012).   As Cantwell et al. (2012) note, national orders co-evolve at both firm and societal levels.  

This study differs from earlier work on the subject in that it explores changes over time and the role of MNEs in pioneering or following on systemic change. The study confirmed that there has been a limited move away from higher value added work and employment relations practices in many national contexts, but this has been driven by domestic firms, rather than by MNEs, a process that would both reflect and accelerate a progressive unwinding of existing institutional arrangements.   Whilst institutional arrangements are subject to constant redefinition and change, the study reveals not so much a radical departure from the past, but rather incremental adjustment; this reflects the persistently embedded nature of institutions and associated practices.  This would not necessarily reflect fundamental and wide ranging institutional redesign.