Employer Association Responses to the Effects of Bargaining Decentralization in Australia and Italy: Seeking Explanations from Organizational Theory
| Date | 01 March 2016 |
| Author | David E. Morgan,Peter Sheldon,Francesco Paoletti,Raoul Nacamulli |
| Published date | 01 March 2016 |
| DOI | http://doi.org/10.1111/bjir.12061 |
Employer Association Responses to the
Effects of Bargaining Decentralization in
Australia and Italy: Seeking Explanations
from Organizational Theory
Peter Sheldon, Raoul Nacamulli,
Francesco Paoletti and David E. Morgan
Abstract
The literature has neglected to analyse employer associations as organizations
facing potential environmental threats to their financial sustainability. We
examine associations’ responses to collective bargaining decentralization, a
major, contemporary threat. Using a qualitative, comparative case approach,
we examine eight associations — four each in Australia and Italy — to develop
a model of response types. Stronger decentralization effects increase associa-
tions’ exposure to new and heightened competition, which in turn produces
stronger association responses. These include prioritizing commercial over
associational objectives. We analyse responses using strategic choice and
resource dependence theories, finding that associations use both. However, the
decision how to combine them reflects environmental conditions as well as
choices linking organizational purpose and financial sustainability.
1. Introduction
Employers establish employer associations (henceforth associations) to con-
front industrial relations challenges, mainly from unions and state interven-
tion. Lacking the resources to confront these challenges, they associate for
co-ordination, solidarity and a more substantial political profile. These moti-
vations become associations’ principal sources of organizational purpose,
generating strategic choices of roles and activity that associations embrace on
behalf of employers. In particular, associations provide them with ‘collective
Peter Sheldon and David E. Morgan are at the University of New South Wales. Raoul
Nacamulli and Francesco Paoletti are at the University of Milan-Bicocca.
© John Wiley & Sons Ltd/London School of Economics 2014. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
British Journal of Industrial Relations
54:1 March 2016 0007–1080 pp. 160–191
doi: 10.1111/bjir.12061
goods’ (Olson 1971: 14–16), non-exclusive, non-market solutions to em-
ployers’ ‘class’ needs: leading or supporting employers in multi-employer
collective bargaining, lobbying governments, and mounting public policy
campaigns (Behrens 2004; Schmitter and Streeck 1999: 19–21).
The literature on associations focuses almost entirely on these institution-
ally oriented roles even when changing circumstances, as in recent years,
appear to threaten associations’ organizational sustainability (Barry and
Wilkinson 2011; Behrens and Traxler 2004; Traxler 2010). Implicit is an
assumption that the institutional pillars underpinning ‘western’ industrial
relations — particularly multi-employer collective bargaining — are robust
enough to provide associations with sufficient purpose, roles, membership
and revenue. This neglects the relationship between associations’ economic
circumstances and the activities, as organizations, they choose to perform,
and how environmental variation can challenge an association’s financial
resource base.
Association revenues traditionally depended largely on membership sub-
scriptions. In turn, these depend on membership numbers and the subscrip-
tion amount that each member pays. Typically, members pay a fixed
subscription, plus an amount related to workforce size. Accordingly, mem-
bership numbers and composition represent an association’s core economic
resource. Yet, reliance on collective goods leaves an association’s finances
vulnerable to free-riding and larger members cross-subsidize smaller ones
(Traxler 2010: 154), heightening the financial (as well as representational)
importance of having them as members.
Many associations, therefore, provide ‘selective goods’ (Olson 1971:
60–64) to encourage and reward membership. These are free, and mostly
standardized services solely for members. Examples include collection and
dissemination of information on industry trends, published advice and semi-
nars on regulatory compliance, guidelines for bargaining, and call centre
employer advisory services.
We investigate an emerging industrial relations phenomenon: associations’
responses to effects from the decentralization of collective bargaining (hence-
forth decentralization). Decentralization represents a substantial change to
industrial relations contexts evident in a number of countries. It has encour-
aged much research on unions’ responses (e.g. Chaison 2004) but little
on associations. The phenomenon was first evident in Australia, but early
studies (Mortimer et al. 2004; Sheldon and Thornthwaite 2004; Spooner
2004) lack comparative or contextual analysis and eschew theorizing. They
also limit exploration that is focused on the degree of decentralization effect.
Silvia and Schroeder (2007) more recently explored German associations’
attempts to maintain relevance and membership. However, their causal
sequence works in the opposite direction: decentralization emerges as (mostly
smaller) employers exit associations for other reasons.
This article focuses on associations in Australia and Italy. It poses four
empirical questions. First, how have associations’ environments changed
with decentralization? Second, how have associations chosen to respond to
© John Wiley & Sons Ltd/London School of Economics 2014.
Employer Associations in Australia and Italy 161
the effects of decentralization? Third, do associations in one country appear
to have shifted further than the other? Fourth, which factors appear to
explain these outcomes?
To aid analysis and theorizing, we use two influential organizational theo-
ries: strategic choice (Child 1997) and resource dependence (Pfeffer and
Salancik 2003). Although developed separately during the 1970s, their pro-
ponents have increasingly acknowledged greater convergence or commonal-
ity (Child 1997: 57; Child and Tsai 2005: 99; Pfeffer and Salancik 2003: xii,
xiv). Crucially, for our focus on associations’ externally facing responses,
both explain how organizations, as open systems, respond to challenges from
environmental variation by changing externally oriented activities. We use
them with the assumption that associations can ‘scan, interpret, and act
upon events in their environments’ (Bode et al. 2011: 835). Campling and
Michelson (1998) used these theories for examining union mergers, and they
seem well suited for examining other organizational interdependencies
(Hilman et al. 2009: 1416), such as associations with different experiences of
decentralization in two countries.
Our first contribution is to highlight associations’ nature as organizations
operating within environments shaped by more than institutional industrial
relations activity. It does this by examining the environmental challenges they
face from decentralization, including, for the first time, explicit treatment of
associations’ own product markets. Second, it explores the range of responses
of these member-based voluntary organizations, including shifting their
activities into commercially oriented contexts and the environmental factors
that influence those choices. Third, it also explains new challenges that these
varied shifts bring for associations. Finally, through the use of strategic
choice theory (SCT) and resource dependence theory (RDT), we develop a
theoretical model of those responses. After a brief examination of relevant
literature on employer associations, the following section introduces those
theories in the context of association purpose and behaviour.
2. Associations, their product markets and decentralization
Associations as representative, participatory organizations still need to be
financially sustainable. To understand this better, we outline associations’
product markets. This is an approach that the industrial relations literature
mostly ignores but is well understood in organization studies (Child and
Rodrigues 2011: 805). Associations provide firms with services in exchange
for paid memberships. The supply side of an association’s product market,
therefore, may include competing associations and for-profit providers of
labour market services, such as management consultancies and legal firms. It
can also include employers providing these services in-house.
Formed and consolidated to deal with industrial relations concerns, asso-
ciations have depended on industrial relations to generate demand from
employers. Employers can freely choose not to join an association, or to join
© John Wiley & Sons Ltd/London School of Economics 2014.
162 British Journal of Industrial Relations
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