Employee Relations in Multinational Companies

As outlined in Chapter 2, employee relations (ER) in different national economies are often portrayed as being distinct. This raises a number of issues when a company from one country establishes a subsidiary in another with a different ER infrastructure. In short, do the subsidiaries conform to the prevailing institutional logic of the host country or do the investing firms attempt to ‘export’ some of their home-country ER practices to their subsidiaries abroad? Or, indeed, do investing companies attempt to establish what might be termed ‘best practice’ ER policies in their subsidiaries abroad? In the literature, an emphasis tends to be placed, very broadly, either on country-of-origin effects or on best practices. In the former, distinct patterns of ER will emerge in MNCs based on nationality of ownership; in the latter, ER practices will be expected to converge towards the best-practice model. Convergence towards best practice should lead to the adoption of ‘global best practice’ ER systems in MNCS. If country-of-origin effects are dominant over global best practice effects, ER systems in foreign-owned subsidiaries are likely to display complex interactions between national institutional frameworks and ER practices that come from the home country of the MNC. Differences in competitive environments also affect the adoption and evolution of ER systems in foreign-owned subsidiaries. In order to compete in tough market conditions, MNCs often face strong pressures to adopt global best practice systems, despite national institutional constraints that hamper the reform of ER systems.