Changing perspectives of employment relations in the globalized world: a critical review.

AuthorBose, Indranil

The increasing liberalization of international trade has been accompanied by a significant expansion of the activities and complexity of multinational corporations (MNCs), which now combine multinational ownership with control over multinational value-adding activities. MNCs appeared to have adopted either an ethno-centric or a polycentric approach to manage employee relations globally. However since the globalization, a tendency to drive the global convergence of employee relations practices based on either the best practice, high performance value adding or the least control model have become more preferred options. It is found that the power shift is fast changing towards the MNCs. This paper attempts to review the relevant literature and highlight the changing paradigm of employee relations approaches by MNCs, their mutual relationship with trade unions etc.


Multi-nationalism is a growing trend and led to globalization of the business world since 1980s (Thomson, 2006). It has been found that the number of organizations that have turned into globalized multi-national entities since 2000 increased almost thirteen times in comparison to what was in the previous decade across the globe. The maximum number of companies that spread their wings beyond their national borders is from Asia (Richardson, 2011). In the process of globalization and multi-nationalization of business, MNCs have adopted different choices when it came to decide how to manage trade unions in their overseas subsidiaries. According to Schuler et al. (2002), the MNCs' dilemma to handle the trade unions globally is conditioned by factors such as the industry in which they operate, their particular organizational or structural form, the stage of development which the concerned MNC has reached and their priorities between integration and differentiation between the parent company policies and the subsidiary related labor policies.

Typology of MNC Approaches

There have been debates about the culture of a company that determines specific practices pertaining to employee relations globally. There have also been debates about how culture specific particular practices may be and whether they can actually and meaningfully be transferred to other cultures, the culture free viewpoint. Perlmutter (1969) devised a typology of MNCs and their approaches to the management of their overseas operations. This typology seems to be an appropriate mechanism to be usefully applied to the management of employee relations. For example, under ethnocentric approach to management, employee relations in the overseas operations can be severely disturbed. An obvious example of the kinds of issues that can arise would be an American company, typically anti-trade union, setting up a subsidiary in Sweden and trying to avoid the recognition of trade unions and joint decision-making that are typical Swedish employee relations regime. MNCs adopting polycentric approach can facilitate the maintenance of policies and practices in the field of employee relations that are consistent with the culture and regulations of the host country. However, it is also possible that companies pursuing polycentric pattern, can face difficulty in maintaining internal consistency across the operations. For example, if a subsidiary of a multinational company signs an agreement with a trade union about employment protection for its members, it may prove to be an embarrassment to the corporate HQ which is planning a down-sizing or cost cutting exercise (Leat, 2007). Studies by Hendry (1994), Schulten (1996), Edwards et. al. (1996) have however shown that though region-centric and geocentric approaches attempt to maintain balance with local practices and HQ preferences, perfect employee relations have always remained a major challenge across the globe, though these two approaches have been suggested better options by most of the scholars like Schregle (1981), Schuler et al. (2002). However, in many parts of the world, MNCs are growingly adopting a blended practice of poly-centric and ethno-centric approaches. Based on 'Social effect theory' (Maurice et. al, 1980), scholars like Leat (2007) have highlighted such blended practice in employee relations, where attitudes towards the recognition of trade unions and involving employees and their representatives jointly in decision-making are found to be significantly practiced by maintaining balance between home country preferences and local compulsions. After conducting a detailed study on about twenty two major American companies doing business in Germany, Rodrigue (2009) has highlighted how these American companies have been virtually forced to leave their attitude of diffusing the influence of collective bargaining and allowed the trade unions to actively participate local trade unions of Germany to participate collective bargaining procedure.

Scholars like Leat (2007), Francis and...

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