Dominance Effects from Local Competitors: Setting Institutional Parameters for Employment Relations in Multinational Subsidiaries; a Case from the Spanish Supermarket Sector
| DOI | http://doi.org/10.1111/j.1467-8543.2009.00716.x |
| Author | Luis Ortiz,Tony Royle |
| Date | 01 December 2009 |
| Published date | 01 December 2009 |
Dominance Effects from Local
Competitors: Setting Institutional
Parameters for Employment Relations in
Multinational Subsidiaries; a Case from
the Spanish Supermarket Sectorbjir_716653..675
Tony Royle and Luis Ortiz
Abstract
Dominance effects are normally associated with multinational corporations
(MNCs). However, we argue that a strong local competitor can create ‘domi-
nance effects’ setting the institutional parameters for employment relations in
multinational subsidiaries. Moreover such an effect can be persistent. In this
case the Spanish-owned El Corte Inglés (ECI) used its power and influence to
establish an employer’s federation and two ‘yellow unions’. These yellow unions
infiltrated the French-owned MNC Carrefour and most of the Spanish super-
market sector by the early 1980s and continue to dominate collective bargaining
rounds and works council elections, marginalizing the main independent trade
unions. This has resulted in poor pay and working conditions and a lack of
effective employee representation across most of the Spanish supermarket
sector. The fact that Carrefour established an international framework agree-
ment to observe union rights in 2001 has as yet not changed this situation.
1. Introduction
Recent attempts to provide a theoretical framework for the cross-border
employee relations practices of MNCs have increasingly focused on trying to
explain variation within national societal arrangements (Katz and Darbishire
2000; Locke and Kochan 1995). The Smith and Meiskins (1995) ‘system’,
‘society’ and ‘dominance’ effects model also tries to engage with the complex
nature of cross-border work organization and variation within national
Tony Royle is at the Department of Management, JE Cairnes Graduate School of Business and
Public Policy, National University of Ireland, Galway. Luis Ortiz is at the Departamento de
Ciencies Politiques i Socials, Universitat Pompeu Fabra, Barcelona, Spain.
British Journal of Industrial Relations doi: 10.1111/j.1467-8543.2009.00716.x
47:4 December 2009 0007–1080 pp. 653–675
© Blackwell Publishing Ltd/London School of Economics 2009. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
employment relations systems. In a more recent interpretation of the Smith
and Meiskins model, Elger and Smith (2006) and Smith (2004) suggest that
the concept of societal effects recognizes the unique nature of societal settings
in which firms operate and the way in which such settings influence the
behaviour of managers and workers. However, their concept also takes
account of the possibility of variation within national systems, recognizing
that societal arrangements are likely to be characterized by differentiation,
conflict and reconstruction. The system effects concept recognizes that whilst
national variations are evident, capitalist countries share certain fundamental
systemic commonalities; however, such commonalities may not be perma-
nent as they are subject to the contradictory nature of the capital-labour
relationship. Finally, Elger and Smith’s (2006) interpretation of dominance
effects suggests a ‘best practice’ mode of production and work organization
that has been developed in leading national economies, industrial sectors or
firms which can exert a distinctive influence on key actors in a wide range of
firms in different societies. Such effects are said to occur due to the ‘efficacy’
of their ‘best practice’ regimes. However, the term ‘efficacy’ appears to be
largely focused on benefits to the firm and the efficiency of production, and
less is said about the possibility of ‘best practice’ dominance effects resulting
in low road employment practices. In Royle’s (2004, 2006) study of the
fast-food service sector in Spain, Germany and Italy, he argues that the
leading MNC in the sector, the McDonald’s Corporation, created a ‘best
practice’ dominance effect resulting in a form of low-road convergence that
undermined societal effects. Despite very different evolutionary and owner-
ship patterns, local competitors were increasingly altering their employee
relations practices to emulate McDonald’s ‘best practice’ employment rela-
tions. This entailed the de-skilling and the removal of long serving workers,
union-busting and a general and concerted attack on the pay and conditions
of workers. Royle therefore argues that dominance effects need, at least in
part, to be understood in the context of both the sector, the role of powerful
individual firms and that dominance effects can have negative outcomes for
employees. Finally, as with system and societal effects, questions remain
about the stability of dominance effects over time.
Elger and Smith (2006) suggest that the system, society and dominance
concept highlights the contradictory and conflicting pressures and priorities
faced by capitalist firms and the varied repertoires of practices that managers
can draw on in response to the ‘contested’ nature of the firm (Amoore 2000).
In other words managers strategize and respond to different structural forces
and contingencies, which are subject to competing social forces and power
relations involving influential individuals and various interest groups. Whilst
different national arrangements may provide different structures and priori-
ties for senior management, senior management arguably possess strategic
capacity to shape the way the firm organizes itself through a combination of
bureaucratic, personal and cultural controls (Ferner 2000). Bureaucratic
controls, for example, might include the use of rules and targets, the moni-
toring of performance, financial and career inducements, penalties and the
654 British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2009.
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