Industrial relations in the transnational business scenario: an overview.

AuthorBose, Indranil

In the pursuit of business excellence, the transnational corporations have aggressively adopted the practice of off-shoring of production and operations. In response to this development transnational industrial relations scenario have experienced continuous evolution from 'Rules Model' (1990-2000) of employee relational connectedness to 'Bargain Model' since 2000. Though both the models are fundamentally different in their approaches, yet a spirit of mutuality is looming large in the contemporary situation governing industrial relations in transnational business environment. This is a conceptual paper based on extensive literature survey on the back-ground, development and future development in the industrial relations practice under transnational business framework.


Industrial relations and workers' rights have been traditionally managed by the processes of collective bargaining and industry level agreements between organizations and unions under various degrees of government intervention and supervision in different countries over the years. It has also been observed that the three main actors--firms, unions and governments--are mostly involved in determining industrial stability by addressing workers' issues. However, the role of international institutions, like the ILO are playing the tripartite constellations based on these actors of industrial relations system. Similarly, systems of industrial relations have predominantly been based on national legislation and thus been characterized by a high degree of national path-dependence. However, this industrial relations landscape currently is undergoing a fundamental change with the emergence of transnational organizations like never before, who have distinct strategic priority of off-shoring production system to developing countries, changing role of governments and challenges faced by the unions in these developing countries in the new political and economic context.

In the above background two different models of industrial relations are being promoted by the actors--i.e., the 'Bargaining Model' on the one hand and the 'Rules Model' on the other. These two models are growingly treated as manifestations of different forms of social capital configurations, implying specific types of 'civicness' or 'relational connectedness' in the industrial relations context.

Research Trends: an Overview

During recent years it has been argued that a process of globalization is at the matured stage of development leading to the marking of a profound shift in economic structures, institutional arrangements and the organization of work (Stieglitz, 2003; Bhagwati, 2005; Cohen, 2006). Evidence of this development usually includes increasing competitive pressures, global outsourcing, communication technology evolution, and a homogenization of consumer tastes and branding. The transnational organization of production became prevalent during the 1980s and 1990s as European and US-based TNCs started to offshore much of their production to developing countries (Jones, 2005; Taylor, 2005). This trend has been particularly evident in low -skill industries --such as the garment, footwear and toy industries in which TNCs, to a large extent, pursue low-cost strategies (Christenson & Appelbaum, 1995; Hathcote & Nam, 1999). Through this off-shoring of production, workers' rights issues in low-skill and other industries continue to move geographically from a European and US backdrop to a predominantly Asian condition (Frenkel, 2001). In the process, the European and US national arenas where workers' rights issues traditionally have been negotiated become less relevant and, consequently, the dominant actors in these settings such as the national European and US governments loose influence. In contrast, the national backdrops of developing countries in mainly Asia increase in importance. Many of these countries have fairly stringent labor laws similar to those in Europe and US with countries such as China, India and Vietnam recently making profound changes in their labor laws (Warner, 1996; Chan, 1998; Cooney et al., 2002). However, there are large gaps between the labor laws and corporate practices in these countries--especially in the countries with recently changed laws (Zhu & Fahey, 1999; Cooney et al., 2002). In practice, this means that TNCs that are off-shoring production to Asian countries are entering national settings with little labor law enforcement. Since transnational institutions for workers' rights have not yet developed to balance the off-shoring trend and the weak enforcement of Asian labor laws, the workers' right situation can be characterized as 'governance without government' with TNCs, unions, NGOs governing industrial relations (Beck, 1992; Rosenau & Czempiel, 1992; Strange, 1996...

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