From the Firm to the Network: Global Value Chains and Employment Relations Theory
| Author | Ariel Avgar,Tashlin Lakhani,Sarosh Kuruvilla |
| Published date | 01 September 2013 |
| Date | 01 September 2013 |
| DOI | http://doi.org/10.1111/bjir.12015 |
From the Firm to the Network: Global
Value Chains and Employment
Relations Theory
Tashlin Lakhani, Sarosh Kuruvilla and Ariel Avgar
Abstract
We posit that traditional employment relations theories that focus on individual
firms embedded in distinct national institutional contexts are no longer
adequate for the analysis of employment relations in a globalized era where
production and services are increasingly coordinated across countries and firms.
Building on global value chain theory, we introduce a configurational frame-
work that explicitly addresses the employment relations implications of the
interconnections within and between firms in the global economy. We argue that
different value chain configurations will evidence differentemployment relations
patterns, and we validate our framework by applying it to the study of three
contemporary global issues. In sum, the framework permits a shift in the focus
of employment relations scholarship away from the individual firm to the global
networks in which they belong, and hence provides a new theoretical lens for the
analysis of employment relations in the global economy.
1. Introduction
The profound effects of globalization on the strategies and structures of
organizations have called into question the adequacy of existing theoretical
frameworks for understanding and analyzing employment relations. The
dominant employment relations theories in use today focus on the firm
embedded in distinct national institutional contexts (e.g. Kochan et al. 1986)
or on the analysis and implications of different national contexts for firms
(e.g. varieties of capitalism). Globalization, however, characterized by pro-
duction and services that are increasingly coordinated across countries and
firms, requires an analysis of the different linkages between a variety of firms
Tashlin Lakhani and Sarosh Kuruvilla are at Cornell University. Ariel Avgar is at the University
of Illinois at Urbana-Champaign.
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British Journal of Industrial Relations doi: 10.1111/bjir.12015
51:3 September 2013 0007–1080 pp. 440–472
© John Wiley & Sons Ltd/London School of Economics 2013. Published by John Wiley & Sons Ltd,
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across a variety of national contexts. Thus, there is a need for new theoretical
lenses that are sufficiently nuanced to capture the diverse employment
systems that are likely to arise from these varied linkages and interdependen-
cies inherent to a global context.
In this article, we propose that global value chain (GVC) theory, developed
in sociology and based on transaction cost economics, network and organi-
zational learning theories, can provide scholars with a new framework for
understanding employment relations across interlinked firms and countries.
We argue that the focus of employment relations analysis should shift away
from the individual firm to the interconnected networks in which they belong.
GVC theory suggests that different value chains create different relationships
between firms in the network operating under multiple national systems. As
such, we propose that employment relations will also vary across value
chains. There is emerging research that has begun to incorporate GVC per-
spectives into the analysis of different employment relations phenomena (e.g.
Bair and Ramsay 2003; Knorringa and Pegler 2006; Riisgaard and Hammer
2011; Robinson and Rainbird 2011). We draw on and move beyond these
studies to develop a framework based on GVC theory that systematically
highlights how key employment system criteria vary across value chain con-
figurations. In doing so, this framework contributes to the study and practice
of employment relations.
2. Traditional employment relations frameworks
In this section, we review two frameworks that examine how firm-level
employment relations are shaped by key actors and the external environment
(Dunlop’s Industrial Relations System and Kochan, Katz and McKersie’s
Strategic Choice Framework)1and two frameworks that focus on how
national institutional configurations affect firm-level employment relations
strategies (Whitley’s National Business Systems approach and the Varieties
of Capitalism perspective by Hall and Soskice).
In his book Industrial Relations Systems, Dunlop (1958) argued that the
major output of the industrial relations system is a ‘body of rules created to
govern the actors at the work place and work community’ (p. 7). These rules
are a product of interactions between three key actors, management, labour
and the government, who are tied together by a common ideology, and are
responding to changes in three environmental contexts, namely markets,
technology and societal power relations. Dunlop’s theory recognized the
centrality of the firm’s external environment and its effect on the employment
relationship. This systemic view of the employment relationship contributed
to our understanding of the interdependencies between actors. Dunlop’s
framework, however, has been criticized for, among other things, being too
static, failing to specify how change occurs in industrial relations, and not
capturing interactions and strategic choices made by actors.
From the Firm to the Network 441
© John Wiley & Sons Ltd/London School of Economics 2013.
Kochan et al. (1986) proposed an alternative framework that not only
emphasized the role of the external environment but also stressed the strate-
gic choices made by management, and, to a lesser extent, labour and the
government, as being critical for understanding employment relations pro-
cesses and outcomes. They also stressed multiple levels of interaction among
the actors that went beyond Dunlop’s focus on the functional level of collec-
tive bargaining and personnel policy making. They highlighted the role of the
strategic level (where decisions over business strategies and investments are
made) and the workplace level (where policies are administered and where
supervisors, employees and union representatives interact on a daily basis).
Kochan, Katz and McKersie’s framework is, however, a firm-centred
approach, anchored in a view of organizations as vertically integrated and
operating primarily within specific national institutional boundaries. Thus,
both Dunlop’s and Kochan, Katz and McKersie’s frameworks fall short in
their ability to explain how the strategies and practices of firms operating
across national borders are affected by the multiple, and, at times, conflict-
ing, national institutional environments in which they operate. Moreover,
these frameworks do not help us understand how employment relations are
affected by coordinating production (or services) across firms in a network,
including the extent to which strategic choices and interactions in a nodal
firm affect the strategies and practices of other firms in the network.
In contrast to these industrial relations frameworks, comparative institu-
tional approaches emphasize the importance of distinct national institutional
configurations that result in distinctive national capitalisms and, in turn,
structure firm strategies and practices, including those pertaining to employ-
ment relations. Whitley’s (1999) framework focuses on differences between
‘national business systems’, or systems of economic organization and
control, based on the specific features of national institutional environments.
Whitley argues that institutional contexts influence the particular character-
istics of business systems, which give rise to distinctive national capitalisms.
Accordingly, a national business system is established in a specific institu-
tional context and the more integrated and mutually reinforcing the
dominant institutions and their specific features are, the more coherent and
distinctive the national business system will be. Distinctive national business
systems and the institutional contexts in which they are created, in turn, have
a substantial effect on the nature of firms, in terms of their governance
characteristics and their organizational capabilities and the competitive strat-
egies they pursue, and the ways in which they organize and control work.
The relationship between national institutions and firm strategies is also at
the heart of the varieties of capitalism approach by Hall and Soskice (2001).
According to Hall and Soskice, firms within a given national context ‘can
perform some types of activities, which allow them to produce some kinds of
goods, more efficiently than others because of the institutional support they
receive for those activities in that political economy’ (p. 37). The institutional
configuration of national economies supports the use of specific modes of
coordination and the adoption of particular competitive strategies which can,
442 British Journal of Industrial Relations
© John Wiley & Sons Ltd/London School of Economics 2013.
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