Chapter 6: Multinational Companies and the Host Country Environment

1. Identify three types of legal regulation that shape the type of labour market in a host country environment and provide one example of country differences for each type.

The chapter discusses employment protection, minimum wage rules and working time legislation. There are many examples of country differences, including the absence of federal legal employment protection in the U.S., the absence of a statutory national minimum wage in Germany and limited entitlements to working-time rules in Japan. Conversely, relatively strong employment protection rules for individual dismissal prevail in the Netherlands, the value of the statutory minimum wage is high in France and France is also renowned for its policy reforms in reducing working time.

2. What are the major pressures encouraging a convergence of country employment systems and what pieces of evidence suggest change has in practice been mixed in recent years?

Pressures towards convergence include the internationalisation and liberalisation of financial markets, the spread of inflation-targeting macroeconomic policy, reductions on FDI restrictions, advances in information and communication technologies that facilitate offshoring and reductions in transport costs that improve the cost effectiveness of long-distance trade. Several areas of employment organisation suggest a nuanced pattern of change, including in policies of employment protection, welfare policy and collective bargaining, among others.

3. Describe the employment characteristics associated with Hall and Soskice’s two types of market capitalism.

The coordinated market economy is based on both stronger employment protection and stronger coordination among employers. These arrangements encourage long-term investment in skill development, coordinated wage settlements and social cohesion. The liberal market economy model has flexible labour markets and promotes general education with short-term investment in skills and high job mobility.

4. What factors in host country environments have been found to constrain the diffusion of PRP and individualised payment practices in MNC subsidiaries?

The studies cited in the chapter point to the roles of Works Councils as a potential constraint, as well as the more general institutional features of the legal framework and industrial relations system.

5. What features of a host country environment can facilitate an MNC’s attempt to diffuse a high skill, high value-added model of work organisation?

The evidence suggests that well-developed systems of vocational training (such as in Germany) provide the appropriate skill base from which to diffuse high-skill models of work organisation. Host country features that encourage greater worker autonomy also improve the receptiveness of a country to such forms of work organisation.