The Diffusion of Employment Practices of US‐Based Multinationals in Europe. A Case Study Comparison of British‐ and Italian‐Based Subsidiaries
| Published date | 01 September 2006 |
| Author | Valeria Pulignano |
| Date | 01 September 2006 |
| DOI | http://doi.org/10.1111/j.1467-8543.2006.00510.x |
British Journal of Industrial Relations
44:3 September 2006 0007– 1080 pp. 497– 518
© 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 2006September 2006443497518Articles
Diffusion of Employment Practices of US-Based MultinationalsBritish Journal of Industrial Relations
Valeria Pulignano is at the Department of Sociology in the Katholieke Universiteit of Leuven,
Belgium.
The Diffusion of Employment Practices
of US-Based Multinationals in Europe.
A Case Study Comparison of British-
and Italian-Based Subsidiaries
Valeria Pulignano
Abstract
A number of approaches to the diffusion of employment practices within
American-based multinational companies (MNCs) can be discerned. In this
paper, two theoretical approaches are contrasted: a ‘country-of-origin’ approach
in which the influence of the home country is mediated by national features of
host-country institutional environments; and a power resources or strategic
choice approach that emphasizes the autonomy of local actors within MNCs
and their capacity to shape the diffusion of employment practices. Using a case
study comparison of three Italian and two British-based subsidiaries owned by
an American MNC, the paper examines factors and patterns of diffusion of
employment practices from the parent company to the local subsidiaries. The
argument is put forward that company-specific features enhance the strategic
power of the subsidiary firm within the wider corporation, thus complementing
institutional host-country characteristics in shaping the diffusion of employment
practices abroad. Hence, organizational as well as institutional effects contrib-
ute to creating the space that the various actors across host countries possess
for protecting their interests and for exercising power on the terms and condi-
tions of the diffusion.
1. Introduction
One approach to the study of employment relations in multinational compa-
nies (MNCs) suggests that there is a country-of-origin effect, deriving from
the home country of the parent corporation (Ferner 1997), which is mediated
by host-country institutions, in particular the nature of labour market regu-
lation (Whitley 1999). The proponents of this thesis focus on the normative
498
British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2006.
or coercive isomorphic pressures promoted via host country national institu-
tions in order to explain the extent to which employment practices are dif-
fused across borders (Brewster and Tregaskis 2003). This can be observed,
on the one hand, in countries with strong institutional systems of labour
regulations, where there are pressures for the adaptation of Anglo-Saxon
human resources and industrial relations practices to the local environment
(Muller 1998), as well as in the case where parent companies from highly
regulated systems, such as Germany, set up subsidiaries in the weaker insti-
tutional settings of Britain and United States (Tuselmann
et al.
2003; Ferner
and Varul 2000).
This paper confronts the institutional host-country perspective with the
strategic approach according to which the transfer of the employment prac-
tices from the parent to the local subsidiaries is primarily affected by the
influence of social actors within MNCs (Frenkel and Royal 1998; Kristiansen
and Zeitlin 2004). It implies that power relations between the social actors as
well as the resources that they control to leverage influence over the nature
of corporate strategy and policies are central to the process of diffusion
(Edwards
et al
. 2004). For example, the power relations approach forms the
core of Bélanger
et al
.’s (1999) study on ABB. It illustrates how the local
company structure strongly affects the degree of influence exercised by the
subsidiary upon the parent company. The aim of the paper is to assess the
institutional approach, which sees host-country influences as mediating
the country-of-origin effect, contrasting it with the organizational perspec-
tive, which focuses on the dynamic interplay between the actions of the parent
company and its subsidiaries.
In this paper, we present a more developed version of the home- and host-
centred institutional approach, as mediated by company-specific factors,
including the organizational and market power of the firm. This version
points to the fact that not only host-institutional factors but also subsidiary-
organizational factors influence transnational phenomena. These influences
can have relevant implications on the extent to which various actors at the
subsidiary level are able to defend and extend their scope for influence and
discretion with regard to the parent company. In particular, the paper argues
that the practices of the parent company are not mechanically applied to a
specific local subsidiary within the limits of national legislation and employee
rights in the host country, but their application also depends on the influence
that company-specific features have on the scope of strategic choice by local
management and trade unions at the subsidiary level. This is not to say that
host-country institutional settings, which figure prominently in the literature
on the diffusion of employment practices in MNCs, no longer matter for the
explanation of the driving forces leading the transfer of practices within
MNCs. These are still important features. However, they have to be combined
with power-based explanations when it comes to examining how and why
transfer occurs.
We demonstrate that company-specific factors shape the diffusion of
employment practices within MNCs, together with institutional host country
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