Flexibility and Fairness in Liberal Market Economies: The Comparative Impact of the Legal Environment and High‐Performance Work Systems
| DOI | http://doi.org/10.1111/j.1467-8543.2006.00488.x |
| Date | 01 March 2006 |
| Published date | 01 March 2006 |
| Author | Alexander J. S. Colvin |
British Journal of Industrial Relations
44:1 March 2006 0007– 1080 pp. 73–97
© Blackwell Publishing Ltd/London School of Economics 2006. Published by Blackwell Publishing Ltd,
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Blackwell Publishing Ltd.Oxford, UKBJIRBritish Journal of Industrial Relations0007-1080Blackwell Publishing Ltd/London School of Economics 2006March 20064417397Articles
Flexibility
and Fairness in Liberal Market EconomiesBritish Journal of Industrial Relations
Alexander J.S. Colvin is at the Department of Labor Studies and Industrial Relations, The
Pennsylvania State University, USA.
Flexibility and Fairness in Liberal Market
Economies: The Comparative Impact
of the Legal Environment and
High-Performance Work Systems
Alexander J. S. Colvin
Abstract
This paper compares management flexibility in employment decision making in
the United States and Canada through a cross-national survey of organizations
in representative jurisdictions in each country, Pennsylvania and Ontario,
respectively, that investigates the impact of differences in their legal environ-
ments. The results indicate that, compared to their Ontario counterparts, orga-
nizations in Pennsylvania have a higher degree of flexibility in employment
outcomes, such as higher dismissal and discipline rates, yet do not experience
any greater flexibility or simplicity in management hiring and firing decisions.
One explanation for this result may lie in the finding that organizations in
Pennsylvania experience greater legal pressures on decision making, reflecting
the generally more intense conflict in the employment law system in the United
States. By contrast, high-performance work systems, which some have looked
to as a possible management-driven mechanism for enhancing fairness in
employment, had more modest effects.
1. Introduction
What factors affect the employment practices of organizations in liberal
market economies? Are they primarily a function of management human
resource strategies or do institutional factors such as the influence of the legal
environment play a major role? Cross-national comparisons have tended to
emphasize the contrast between the stronger constraints on management in
institutionally dense economies, such as Germany or Sweden, and the weaker
institutional and regulatory structures of liberal market economies, such
as the United States, Canada or the United Kingdom (e.g. Hall and Soskice
74
British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2006.
2002; Turner 1991). From this perspective, a characteristic feature of liberal
market economies is the weakness of their institutional constraints on
employers, allowing a high degree of flexibility in management decision mak-
ing. Conversely, from an employee perspective, this characteristic could be
described as the relative weakness of legal and other institutional protections
ensuring fairness in employment relations in liberal market economies. In the
absence of strong legal or other institutional protections, the degree of fair-
ness or flexibility in employment practices in liberal market economies then
would primarily be a function of management choice of employment relations
strategies. Where management chooses to place greater value on employees,
for example under high-performance work systems (HPWS), then employees
may be accorded a higher degree of fairness in employment relations. By
contrast, where management decides economic or other imperatives necessi-
tate greater flexibility in deployment of labour, fairness to employees may be
de-emphasized or ignored entirely.
In the past, strong trade union movements provided a counterbalance
to management power in many liberal market economies. However, with
declining unionization rates and reduced union bargaining power, organized
labour’s ability to play this constraining role on management in liberal market
economies has been substantially diminished. At the same time as organized
labour’s strength has weakened, legal protections of individual employment
rights have been expanded in many countries. Strengthened employment laws
provide a potential alternative institutional structure for ensuring fairness in
employment practices. It is unclear, however, to what degree pressures from
employment laws and litigation can serve as a force similar to that of strong
unions and other institutional structures in constraining unilateral manage-
ment decision making. Litigation in the United States is often portrayed in
both the popular press and political debates as a plague on the American
economy and a constant worry for American companies and individuals
(Olson 1991, 1997). However, it is unclear to what degree these complaints
are simply political rhetoric or actually represent the reality of the legal
system. It is important to recognize that despite the reports of sizable verdicts
against American companies based on claims such as sexual harassment or
racial discrimination, the underlying basis of employment law in the United
States continues to be the rule of employment-at-will, allowing termination
of employment without cause or prior notice. On the other hand, some recent
research suggests that despite its limitations, the legal environment does exert
a significant influence on the employment practices of organizations in the
United States. In particular, researchers in the ‘new institutionalist’ literature
in sociology have argued that organizations in the United States responded
to the normative environment created by the enactment of civil rights laws
by adopting organizational policies and procedures that met social and
cultural norms of due process (Edelman 1990; Edelman
et al
. 1999; Godard
2002: 253; Sutton and Dobbin 1996; Sutton
et al
. 1994). Thus, the legal
environment may exert indirect influences on organizations that extend
beyond the direct application of legal rules.
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