Country of Origin Effects and New Financial Actors: Private Equity Investment and Work and Employment Practices of French Firms
| DOI | http://doi.org/10.1111/bjir.12284 |
| Author | Geoffrey Wood,Loris Guery,Chris Brewster,Anne Stevenot |
| Published date | 01 December 2018 |
| Date | 01 December 2018 |
British Journal of Industrial Relations doi: 10.1111/bjir.12284
56:4 December 2018 0007–1080 pp. 859–881
Country of Origin Effects and New
Financial Actors: Private Equity
Investment and Work and Employment
Practices of French Firms
Anne Stevenot, Loris Guery, Georey Wood
and Chris Brewster
Abstract
This is a study of the eects of alternative investors on a range of work and
employment practices in France, paying specific attention to whether investors
are indigenous or not. Weuse data from a detailed survey of French firms,and set
our research in the contextof the literature on comparative capitalisms. We find
that private equity (PE) investmentsfrom abroad are associated with greater job
insecurity, less spending on trainingand lower wages, but French PE investments
are not. We explore the reasons behind this variation and the implications for
theory and practice.
1. Introduction
The implication of new financial actors for companies and employees is
of growing concern in the field of management and employment relations,
including interest from an international perspective (Gospel and Pendleton
2014). In a recent article published in this journal, Appelbaum et al. (2013)
carried out four case studies for analysing the eect of private equity (PE)
funding on work and employment relations. Their results suggest that these
new financial actors ‘are not particularly embedded in, or constrained by,
national business systems’ (p. 515).
In this article, we focus on French companies where a financial firm
(alternative investors, most commonly PE) holds a majority stake,and accord
Anne Stevenotand Loris Guery are at ISAM-IAE, CEREFIGE, Universit´
e de Lorraine,Georey
Wood is at Essex Business School, University of Essex, Chris Brewster is at Henley Business
School, University of Reading, VaasaUniversity, Radboud University and ISCTE-UIL.
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2017 John Wiley& Sons Ltd.
860 British Journal of Industrial Relations
particular attention to whether the firm is indigenous or not. There is a
growing body of literature which suggests that PE will have significant
and far reaching eects on the work and employment practices of target
organizations; and there is much controversy as to whether such buyouts
prejudice employees (see, e.g., Appelbaum and Batt 2014; Bacon et al. 2010,
2012; Chambost et al. 2008; Clark 2013; Goergen et al. 2014). However,
much of the literature has tended to focus on the case of liberal market
economies (LMEs), on overall employment eects and on indigenous PE
players. By comparing the eects of French and foreign PE investment in
French companies on temporary employment, compensation and training,
this study seeks to contribute to the emerging literature on cross national
PE investments and the eect of PE on work and employment relations. It
brings to bear new evidence from France, supplementing an emerging body
of literature on PE in continental Europe (cf. Bacon et al. 2012; Boselie and
Koene 2010).
The varieties of capitalism literature (Hall and Soskice 2001; Lane and
Wood 2012) argues that, in general, the LMEs are associated with a primary
emphasis on shareholder value. In LMEs, job protection is lower and unions
weaker. In more coordinated market economies (CMEs), this is mediated
through stronger stakeholderrights. France has been categorized in numerous
dierent ways, from a CME, through a CME that is liberalizing, to state-
directed capitalism (Hall and Soskice 2001; Schmidt 2000). A recent study
by Witt et al. (2017) reveals that in terms of a range of regulator and macro-
economic features, France is closer to the Mediterranean and East European
EU member states than either an LME or a CME; such economies are
characterized by weaker institutional coupling and moreroom for innovation.
Nevertheless, a feature of the country is that employment protection and
union rights are relatively strong. The case of France is of particular interest
given the history of the higher levels of coordination found there than in
LMEs, a distinct body of corporate law, and the widespread assumption
that the French model is in flux (Culpepper 2005) and, hence, particularly
vulnerable to pressures from abroad. France is also the second largest
investment market for PE in Europe.1
Although there is an extensive literature on country of origin and domicile
eects in the case of firms crossing national boundaries, it has tended to focus
on dierences between the contextual circumstances of firm headquarters
versus the country of domicile, rather than the country of origin of investors
(Brewster et al. 2008; Edwards et al. 2010; Edwards and Kuruvilla 2005), and
the relative strength of ties between the investor and local actors (Jackson
and Deeg 2008). However, overseas investors may play an important role
in initiating and accelerating systemic change (Dore 2008). In addition to
country of origin eects, local players are likely to have denser ties to
other local actors, which may encourage them to stick to tried and tested
national recipes (Jackson and Deeg 2008; Morgan 2012). Earlier work by
Guery et al. (2017) indicated that PE investment from overseas was likely
to lead to job cuts, in contrast with French PE investments; we supplement
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2017 John Wiley& Sons Ltd.
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