A Contested and Protected ‘Marketisation' of the Employment Relationship: A Multi-Actor Exploration in Multinational Firms' Pakistani Subsidiaries

The theoretical starting point of this study was the employment relationship continuum with the organization-oriented system at one end and the market-oriented system at the other end (Dore, 1989). According to Dore (1989) the former included features such as lifetime employment, wage determination on the basis of seniority, age and merit, organizational training, internal promotion and organizational provision of security and welfare for its employees. The latter exemplified relatively higher turnover, frequent job changes, market competitive wages, general rather than firm-specific training, entry at all levels of the organization and devolution of welfare to the individual and/or the state. Therefore, the organization-oriented system relied on internal labour market (ILM) principles while the market-oriented system ‘made much greater use of external market forces’ (McGovern et al 2007). However, many authors have argued that while organizations are increasingly under pressure to move to a more 'market-mediated form of employment relationship’ (Butler et al, 2006: 174) these new tensions continue to be played out within the confines of the ILM (Grimshaw et al, 2001). Research on multinationals specifically has underlined that aspects of the ILM are still visible even in predominantly market-oriented American firms (Butler et al, 2006). This contested backdrop of marketisation of the employment relationship alongside surviving ILM features has additional implications for multinational firms facing dual isomorphic pressures of maintaining internal legitimacy in the organizational domain and external legitimacy in specific foreign subsidiary domains (Kostova and Zaheer 1999, Kostova and Roth 2002). And this isomorphic complexity is likely to increase even further depending on the cultural/institutional distance between a multinational’s home and host country. Thus, the key research objectives of this paper are to explore the dual influence of internal and external pressures on an employment relationship from a multi-actor perspective by considering both multinational firms’ andindividual employees’ attempts at internal and external legitimacy creation.

Grimshaw et al (2011) argue that most multinationals engage in an ‘internal employment relationship’ which encompasses legal obligations and social traditions of the host country that results in considerable ‘variation in employment arrangements between national environments’ (p. 230). Therefore, it can be hypothesized that the ILM arrangements for host country nationals would vary significantly between a developed versus a developing/emerging subsidiary location. However, our understanding of the process of re-institutionalization of traditional ILMs and its subsequent implications for the employment relationship in developing/emerging countries like Pakistan remains incomplete. On the one hand, the application of the culturalist and institutionalist approaches to work values and business systems respectively (Hofstede 1980, 1991; Whitley 1999, 2001) would classify Pakistan as having a high cultural and institutional distance from the more Western, industrialized economies. This would imply that Pakistani managers might experience a more protected and stable employment relationship within collectivist and paternalistic organizational cultures (Eldridge and Mahmood 1993; Rieger and Wong-Rieger 1990). On the other hand, research on foreign multinationals in Pakistan suggests that employer-employee relationships and employee career objectives are becoming both increasingly individualistic and materialistic (Khilji, 2001, 2002, 2003 & 2004); signaling the coexistence of individualized/marketised career concepts alongside traditional, organizational career arrangements (Chaudhry, 2013). For the purposes of this specific paper data from 80 in-depth, semi-structured interviews with managerial/professional staff will be analysed. A multi-case approach was taken by considering four foreign multinationals operating in Pakistan. The chosen multinationals varied considerably in terms of size, industry/sector, labour and product markets, and international employment strategies. However, rather than controlling for these differences, the MNCs were strategically chosen to highlight these contrasts so that a range of internal and external pressures on the employment relationship could be considered.

Consideration of the employees’ perspective revealed active engagement with the external labour market and both acceptance and, in cases of personal benefit (such as bonuses and promotion), approbation of competitive forces dominating the ILM. Individual managers seemed to have internalized job responsibility and expected job security as long as they met their performance targets and objectives. Moreover, many employees exhibited both past and potential movement across different employment contexts based on in-depth analysis of the most advantageous employment conditions for them (taking into account both organizational constraints of their employing organisation and external business pressures). The existence of these Westernized employee expectations across my sample highlights a key implication with regards to host country institutional profiles and their subsequent impact on the employment relationship in foreign multinationals in particular. The managers/professionals being considered had significant direct or implicit exposure to, and experience of, Western management practices (primarily through education, international work experiences). This exposure seemed to positively influence their internalization of Western employment practices, and a relatively more ‘marketized’ employment relationship, and in doing so helped reduce institutional distance withinthese organizations.

However, the implementation of this ‘marketized’ employment relationship was not a straightforward process. On the surface senior management seemed to have embraced foreign headquarter mandates of creating competitive ILMs whereby the employment relationship both reflected, and constantly responded to, external market forces. Therefore, employer-level interviews highlighted conceptualization of job security, remuneration and upward promotion in increasingly individualistic, meritocratic and performance-oriented terms. However, there was also evidence of certain traditional societal values such as collectivism, paternalism and informal networking within these foreign subsidiaries. There were instances where senior managers sometimes circumvented the increasingly acceptable Western notions of competitive labour relations and sought to provide protection and atypical opportunities for their subordinates. This process of recalibration of the Western marketization of the employment relationship to the prevalent societal and institutional arrangements in Pakistan led to nationally-specific transmutations in the employment relationship. Within the ‘new institutionalism’ framework specifically this implies that the key issues were not simply the maintenance of internal legitimacy within the multinationals’ global operations or external legitimacy with the Pakistani host environment (Kostova and Zaheer 1999). Given the elite status and scarcity of these managers/professionals in the external labour market, there was also an equal (and sometimes opposing) focus of individual employees to create internal and external legitimacy with variable consequences for both the employing multinational and the local labour market.