Human Resource Management and the Institutional Perspective

Geoffrey Wood, Chris Brewster, Michael Brookes

• Publisher: Routledge
• Year: 2014
• eBook ISBN: 9781317749431
• Topic: Negocios y empresa
• Subtopic: Negocios en general

One of the most influential debates across business and management studies has centered on the relative impact of institutions on the fortunes of firms and nations. However, analyses have primarily focused on institutional effects on societal features, rather than actual firm practices. This volume brings together recent trends in comparative institutional analysis with a rich body of data on firm-level human resource management practice, consolidating and extending more than a decade of research on the topic.

Human Resource Management and the Institutional Perspective explores the overlapping and distinct elements in work and employment relations both within and across country lines. The authors focus on intra-firm relations, internal diversity within varieties of capitalism, and the uneven and experimental nature of systemic change, all the while employing an impressive level of theoretical rigor and empirical evidence. In a single volume, this text unites soundly based, theoretically strong and empirically new chapters that bring advances in institutional theory to bear on the subject of international and comparative human resource management.

This book is a valuable resource for students and scholars interested in contemporary developments in institutional theory, the relationship between regulation and practice, and innovation and continuity in human resource management.

1	Institutions and Firm Level HRM Practice

GEOFFREY WOOD, CHRIS BREWSTER AND MICHAEL BROOKES

One of the most influential debates across business and management studies has been the relative impact of institutions on the fortunes of firms and of nations. However, what the specific defining features and consequences of institutions are is itself a matter of contestation. Moreover, a major limitation of the literature on comparative institutional analysis has been that, despite a central interest in firms and economic outcomes, analyses have drawn on a primary focus on societal features, rather than actual firm practices. There have been calls for more work on HRM that uses the institutional literature in general and the comparative capitalisms literature in particular as an analytical base (Delbridge et al. 2011). The Cranet surveys on firm level HRM practice have documented national and sectoral variations in how firms manage their people for many years. The purpose of this volume is to bring together recent trends in comparative institutional analysis with this rich body of firm level evidence, consolidating and extending more than a decade of research on this broad topic.

Understanding Institutions

Institutions may be conceptualized as structural societal features that mould social and economic conduct in a manner that goes beyond the doings of a single individual or collective. As such, they embody a certain continuity, even if, over time, they are in turn redefined through both agents and wider environmental circumstances. Whilst this very loose definition may be broadly acceptable to those operating from a range of different perspectives, there is, as will become apparent through this volume, much debate beyond this. Individual chapters will provide further insight into specific institutional features and questions, but this broad introduction serves to highlight schools of thought, and their relative applicability to understanding differences in HRM according to context. In this review, we focus primarily on different conceptualizations within the broad literature on political economy that accord specific attention to the role of the state and differences on national lines. Whilst we recognize that the more sociological approaches in the tradition of Powell and DiMaggio (1991) may have relevance in understanding how actors opt for familiarity in different settings, and how this may serve to reinforce any differences within and between settings, our focus in this book is on understanding national differences.

Institutions and Private Property Rights

A dominant approach within the economics and finance literature is one that prioritizes the role of institutions in the protection of private property rights. From a starting point that assumes that individuals and firms constitute rational actors, it is held that institutions are providers of incentives or disincentives to the latter (Goergen et al. 2009; Peters 2005); some institutional features may encourage optimal choices, and others sub-optimal ones. What is really important here is an underlying ideological assumption that the role of the state should be primarily one of a ‘nightwatchman’, a guardian of individual rights and, above all, the right to private property (Peters 2005; North 1990). Associated with this is the similarly ideologically-rooted assumption that nations with strong private property rights will perform better, in terms of generating wealth, than those without. Hence, in comparing national institutional features, the most important question is what aspects of institutions are most central in protecting private property, with subsidiary issues about the mechanisms through which this translates into stronger economic growth. In an influential account, North (1990) provided a broad foundation for subsequent comparative institutional analysis in this tradition, refining and loosely substantiating this general case.

However, it was left to Rafael La Porta and colleagues associated with Chicago to provide more detail on what precisely is the institutional foundation of property rights (1999). Quite simply, they suggest that it is the law and, more specifically, legal origin; common law systems are defined by a focus on case law, underpinned by basic assumptions as to the inalienability of core rights, above all, private property ones. In contrast, civil law systems are characterized by systematically weaker property rights, with the role of the legal system being defined by a desire to reconcile opposing interests. At firm level, this enables and encourages managers to engage and collude with employees, to the detriment of shareholders (see also Goergen et al. 2009).

Four broad conclusions are drawn from this. The first is that common law systems are bound to perform very much better than civil law ones (La Porta et al. 1999). In support of this argument, the authors provide some comparative economic evidence, although the conclusions they desire are greatly facilitated by the inclusion of the Francophone (civil law) West African states, who battle with severe physical, environmental and, indeed, historical legacies of brutal, externally led resource expropriation. Again, the time period covered by their review is rather selective, focusing on the latter 1980s and 1990s, which, together with the early 2000s, constituted the heyday of neo-liberalism. A comparative analysis conducted prior to or post this period would yield very different results.

A second conclusion is that institutional arrangements are hierarchical (see Boyer 2006). By this, it is meant that a single institutional feature over-codes all others. In practical terms, this means that the legal origin will, in turn, affect how all other institutions work, and any effects of the latter will be over-ridden by relative differences in property rights (Goergen et al. 2009). Again, this assumption could be contested. In many contexts, it is not just formal property rights under the law that matter, but how they may be exercised in practice. For example, in much of the Mediterranean world, worker rights are largely ignored by smaller and medium firms and not enforced there by the state. Conversely, the relative power of property owners may be stronger than a scrutiny of the countries’ civil law origins and subsequent legislation might suggest; this would even encompass the relative proportion of profits paid back to the state in the form of taxation.

Third, these approaches assume that owner and worker rights are a zero-sum game (Goergen et al. 2009). In practical terms, it is assumed that in contexts where property owner rights are weaker, worker rights will be stronger, and vice versa (Botero et al. 2004). What this would suggest is that, at any particular time, organizational resources and external environmental conditions will lead to the generation of a finite amount of value which has to be, in some or other way, shared out, with inevitable losers and winners. A problem with this approach is that it assumes that labour in general, and human capabilities specifically, can be readily costed out, and can only be harnessed through clear incentives and disincentives, forcing individual employees to exert maximum effort for wages defined in external market terms. In reality, individuals and collectives may be motivated by a wide range of factors; and human capabilities are flexible and intangible (Aoki 2010). We do not deny that class conflict is a feature of capitalism but, by the same measure, as the regulation theorists remind us, compromises between classes and interest groupings are an essential feature of trajectories of accumulation (Lipietz 2001; Boyer 2006). In practical terms, this means that there is the possibility for compromise, synergies or complementarities, the latter being a situation where the outcomes are greater than a sum of the inputs would suggest (Crouch 2005). Indeed, much of the literature on HRM, since the early days (see for example Pfeffer 1996; Kochan and Osterman 1994; Osterman 1999), is precisely about understanding the circumstances under which such synergies may arise, and which HRM practices are most likely to unleash and sustain them.

The fourth conclusion that can be reached is that the legal origins approach is one that completely denies the possibility of diversity within national settings, whilst legal origin itself is seen as a coherent phenomenon. However, the reality is somewhat different. Within the UK, for example, whilst England may represent the epitome of common law, Scotland has a hybrid legal system incorporating civil law features (Deakin et al. 2007). This might explain the social democratic drift of Scotland in recent years, but would not explain the hard neo-liberalism imposed on that country during the Thatcher years or, indeed, changes in the fluctuations in union fortunes across the United Kingdom at large. Again, although La Porta et al. (1999) do recognize that some countries have weaker or more diluted forms of civil law than others, they discount the extent to which some aspects of law may be closer to the civil law model, and some to the common law model within a single country. A good example of this would be South Africa, which has a legal system somewhat akin to that of Scotland (Deakin et al. 2007; Deakin and Sarkar 2008). This has meant that the relative regulation of labour is in some areas closely defined according to explicit legislation, and in others left to case law.

Why, then, should we bother about La Porta et al. at all? One reason is that this approach has been undeniably influential and has impacted on the policy prescriptions of bodies such as the World Bank; its ‘Doing Business Report’ condemns countries with specific legal traditions and associated legislation as poor environments in which to do business (Cooney et al. 2010). Empirical evidence to the contrary may not shake ideological certainty, but does contribute to the development of effective counter-narratives. Second, the law may exert effects even if not on the lines suggested by La Porta et al. (Deakin and Sarkar 2008). Worker rights do matter, enforcement capabilities notwithstanding. In fundamentally disagreeing with the view that workers represent little more than greedy conspirators, seeking to extract more from property owners than is their due, it could be argued that worker rights will deter owners from the most exploitative short-termist strategies. In turn, this will encourage more intelligent utilization of labour, which will result in mutually beneficial long-term gains, even if the short-term costs would otherwise have made such an endeavour unattractive.

Another way of conceptualizing national differences in property rights is in terms of electoral systems. Pagano and Volpin (2005) argue that ‘first-past-the-post’ electoral systems are most effective in securing property rights. In such systems, political parties concentrate their attentions on ideologically uncommitted swing voters. The latter are unlikely to identify with the working class, and may be swayed by issues that leave fundamental questions surrounding property rights untouched. Furthermore, it could be argued that such voters are likely to be affected by expensive electoral campaigning and, hence, monied interests. In practical terms, most liberal market economies/Anglo-Saxon style economies do have first-past-the-post electoral systems, and most continental European countries have proportional ones. There is, at first glance, considerable evidence that can be marshalled in support of the consequences of electoral systems. Worker rights are indeed stronger in more proportional ones. Ireland’s neo-corporatist experiments represented in part, a product of electoral realities. New Zealand’s move to a more proportional system (in return, prompted by right wing governmental excess) has forced the main right wing party to adopt more moderate policies in government. That party’s hostility to the MMP proportional system, and its failed attempt to scrap it, reflects the pressures towards coalition building embodied in such systems. However, this perspective does not explain why Ireland periodically undergoes periods of extreme neo-liberalism; again, the Quebec question forces Canadian governments onto more conciliatory paths than its first-past-the-post electoral system might suggest.

What does this mean for comparative HRM? In more proportional systems, neo-corporatist deals are more likely. In turn, this will lead to a more entrenched role for unions in such contexts, with inevitable pressures towards plant level codeterminist and supplemental bargaining structures. In contrast, in first-past-the-post systems, there will be less pressure on governments to engage in coalition building; hence, right wing governments will have a freer hand to impose their agendas in favour of the wealthy and the powerful. Left wing governments will be deterred from imposing worker-orientated agendas for fear of the uncommitted swing voter and in order to ensure adequate electoral finances to help sway those voters. Hence, moves to extend worker rights and restrain the hand of property owners will be muted. However, as can be seen from the above examples, electoral systems are neither immutable nor always exert consistent effects. At the same time, this would explain the importance of electoral reform, if the zero-sum assumptions of the rational–hierarchical property rights tradition are discounted. The more progressive HRM literature would suggest that compromises between workers, managers and owners are possible, and that this may lead to complementarities and, hence, more beneficial outcomes than if each party had pursued its own selfish interest.

In contrast to the above two approaches which focus on structural institutional features, Roe (2003a and 2003b) argues that it is political party ideologies and, more specifically, that of the ruling party, which really matter. Again, it is assumed that right wing parties, in their primary concern with property owner rights, will generate better economic outcomes, a point that can be contested on account of the vast structural contradictions such governments tend to engineer and the problems that these store up. Thatcher may have had the good fortune to have a North Sea windfall to fuel a boom in financial speculation, but this left the UK with all the adverse consequences of the resource curse, and, indeed, an uncontrollably voracious and often destructive financial services industry.

This is not to deny that politics matter. As Gourevitch and Shinn (2007) note, politics plays a central role in corporate governance. As Goergen et al. (2013) reveal, firms are more likely to lay off workers under right wing governments, than under left wing ones. However, in other areas of HRM practice, the effects of politics appear rather less pronounced. This may reflect the extent to which the espoused policies of political parties may vary from their actual practice. Indeed, as Streeck (2009) argues, much of the blame for the present crises can be placed at the door of the political classes at large and the failure of electoral politics. Hence, in concluding that political realities may mould work and employment relations (and firm conduct at large), a focus on formal ideologies of governments may discount structural political failures, and the extent to which politicians regardless of stated policy preferences may be co-opted to suit the interests of an emerging oligarchy.

Comparative Capitalism and HRM

The broad socio-economic literature on comparative capitalisms also embodies certain inherent (if, at times, implicit) assumptions as to the relative desirability of specific national growth trajectories. In a rather similar way to the legal theorists a...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Figures
• Tables
• Contributors
• 1 Institutions and Firm Level HRM Practice
• 2 Researching Comparative Institutional Contexts
• 3 Understanding Contextual Differences in Employee Resourcing
• 4 Variations in Financial Participation in Comparative Context
• 5 Is There Convergence Towards Individual Voice in Europe?
• 6 Corporate Governance Systems and Investments in Human Capital
• 7 Context and Working Time: Diversity in Practice
• 8 Diversity Between and Within Varieties of Capitalism
• 9 Institutions, Labour Management Practices and Firm Performance in Europe
• 10 What Role do MNCs Play in Different Market Economies?
• 11 How Much does Country Matter? A Cross-national Comparison of HRM Outsourcing Decisions
• Index