Subsidiary responses to institutional duality: Collective representation practices of US multinationals in Britain and Germany
Identifieur interne : 001770 ( Istex/Corpus ); précédent : 001769; suivant : 001771Subsidiary responses to institutional duality: Collective representation practices of US multinationals in Britain and Germany
Auteurs : Anne Tempel ; Tony Edwards ; Anthony Ferner ; Michael Muller-Camen ; Hartmut W ChterSource :
- Human Relations [ 0018-7267 ] ; 2006-11.
Abstract
New institutionalist studies of human resource management in multinational companies argue that subsidiaries are faced with institutional duality-pressures to conform to parent company practices and to the local institutional environment in which they are based. To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany.
Url:
DOI: 10.1177/0018726706072863
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A" first="Anthony" last="Ferner">Anthony Ferner</name><affiliation><mods:affiliation>De Montfort University, UK,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: afhum@dmu.ac.uk</mods:affiliation></affiliation></author><author wicri:is="90%"><name sortKey="Muller Camen, Michael" sort="Muller Camen, Michael" uniqKey="Muller Camen M" first="Michael" last="Muller-Camen">Michael Muller-Camen</name><affiliation><mods:affiliation>Middlesex University Business School, UK,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: m.muller-camen@mdx.ac.uk</mods:affiliation></affiliation></author><author wicri:is="90%"><name sortKey="W Chter, Hartmut" sort="W Chter, Hartmut" uniqKey="W Chter H" first="Hartmut" last="W Chter">Hartmut W Chter</name><affiliation><mods:affiliation>University of Trier, Germany,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: 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Germany,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: anne.tempel@uni-erfurt.de</mods:affiliation></affiliation></author><author wicri:is="90%"><name sortKey="Edwards, Tony" sort="Edwards, Tony" uniqKey="Edwards T" first="Tony" last="Edwards">Tony Edwards</name><affiliation><mods:affiliation>King’s College, London, UK,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: tony.edwards@kcl.ac.uk</mods:affiliation></affiliation></author><author wicri:is="90%"><name sortKey="Ferner, Anthony" sort="Ferner, Anthony" uniqKey="Ferner A" first="Anthony" last="Ferner">Anthony Ferner</name><affiliation><mods:affiliation>De Montfort University, UK,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: afhum@dmu.ac.uk</mods:affiliation></affiliation></author><author wicri:is="90%"><name sortKey="Muller Camen, Michael" sort="Muller Camen, Michael" uniqKey="Muller Camen M" first="Michael" last="Muller-Camen">Michael Muller-Camen</name><affiliation><mods:affiliation>Middlesex University Business School, UK,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: m.muller-camen@mdx.ac.uk</mods:affiliation></affiliation></author><author wicri:is="90%"><name sortKey="W Chter, Hartmut" sort="W Chter, Hartmut" uniqKey="W Chter H" first="Hartmut" last="W Chter">Hartmut W Chter</name><affiliation><mods:affiliation>University of Trier, Germany,</mods:affiliation></affiliation><affiliation><mods:affiliation>E-mail: waechterh@uni-trier.de</mods:affiliation></affiliation></author></analytic><monogr></monogr><series><title level="j">Human Relations</title><idno type="ISSN">0018-7267</idno><idno type="eISSN">1741-282X</idno><imprint><publisher>Sage Publications</publisher><pubPlace>Sage CA: Thousand Oaks, CA</pubPlace><date type="published" when="2006-11">2006-11</date><biblScope unit="volume">59</biblScope><biblScope unit="issue">11</biblScope><biblScope unit="page" from="1543">1543</biblScope><biblScope unit="page" to="1570">1570</biblScope></imprint><idno type="ISSN">0018-7267</idno></series><idno type="istex">93DA013975F4B0E7DB58D0EEF9211B098F1BC638</idno><idno type="DOI">10.1177/0018726706072863</idno><idno type="ArticleID">10.1177_0018726706072863</idno></biblStruct></sourceDesc><seriesStmt><idno type="ISSN">0018-7267</idno></seriesStmt></fileDesc><profileDesc><textClass></textClass><langUsage><language ident="en">en</language></langUsage></profileDesc></teiHeader><front><div type="abstract" xml:lang="en">New institutionalist studies of human resource management in multinational companies argue that subsidiaries are faced with institutional duality-pressures to conform to parent company practices and to the local institutional environment in which they are based. To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany.</div></front></TEI><istex><corpusName>sage</corpusName><author><json:item><name>Anne Tempel</name><affiliations><json:string>University of Erfurt, Germany,</json:string><json:string>E-mail: anne.tempel@uni-erfurt.de</json:string></affiliations></json:item><json:item><name>Tony Edwards</name><affiliations><json:string>King’s College, London, UK,</json:string><json:string>E-mail: tony.edwards@kcl.ac.uk</json:string></affiliations></json:item><json:item><name>Anthony Ferner</name><affiliations><json:string>De Montfort University, UK,</json:string><json:string>E-mail: afhum@dmu.ac.uk</json:string></affiliations></json:item><json:item><name>Michael Muller-Camen</name><affiliations><json:string>Middlesex University Business School, UK,</json:string><json:string>E-mail: m.muller-camen@mdx.ac.uk</json:string></affiliations></json:item><json:item><name>Hartmut Wächter</name><affiliations><json:string>University of Trier, Germany,</json:string><json:string>E-mail: waechterh@uni-trier.de</json:string></affiliations></json:item></author><subject><json:item><lang><json:string>eng</json:string></lang><value>collective representation</value></json:item><json:item><lang><json:string>eng</json:string></lang><value>institutional duality</value></json:item><json:item><lang><json:string>eng</json:string></lang><value>multinational companies</value></json:item><json:item><lang><json:string>eng</json:string></lang><value>new institutionalism</value></json:item><json:item><lang><json:string>eng</json:string></lang><value>subsidiary responses</value></json:item></subject><articleId><json:string>10.1177_0018726706072863</json:string></articleId><language><json:string>eng</json:string></language><originalGenre><json:string>research-article</json:string></originalGenre><abstract>New institutionalist studies of human resource management in multinational companies argue that subsidiaries are faced with institutional duality-pressures to conform to parent company practices and to the local institutional environment in which they are based. To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. 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To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany.</p></abstract><textClass><keywords scheme="keyword"><list><head>keywords</head><item><term>collective representation</term></item><item><term>institutional duality</term></item><item><term>multinational companies</term></item><item><term>new institutionalism</term></item><item><term>subsidiary responses</term></item></list></keywords></textClass></profileDesc><revisionDesc><change when="2006-11">Published</change></revisionDesc></teiHeader></istex:fulltextTEI><json:item><extension>txt</extension><original>false</original><mimetype>text/plain</mimetype><uri>https://api.istex.fr/document/93DA013975F4B0E7DB58D0EEF9211B098F1BC638/fulltext/txt</uri></json:item></fulltext><metadata><istex:metadataXml wicri:clean="corpus sage not found" wicri:toSee="no header"><istex:xmlDeclaration>version="1.0" encoding="UTF-8"</istex:xmlDeclaration><istex:docType PUBLIC="-//NLM//DTD Journal Publishing DTD v2.3 20070202//EN" URI="journalpublishing.dtd" name="istex:docType"></istex:docType><istex:document><article article-type="research-article" dtd-version="2.3" xml:lang="EN"><front><journal-meta><journal-id journal-id-type="hwp">sphum</journal-id><journal-id journal-id-type="publisher-id">HUM</journal-id><journal-title>Human Relations</journal-title><issn pub-type="ppub">0018-7267</issn><publisher><publisher-name>Sage Publications</publisher-name><publisher-loc>Sage CA: Thousand Oaks, CA</publisher-loc></publisher></journal-meta><article-meta><article-id pub-id-type="doi">10.1177/0018726706072863</article-id><article-id pub-id-type="publisher-id">10.1177_0018726706072863</article-id><article-categories><subj-group subj-group-type="heading"><subject>Articles</subject></subj-group></article-categories><title-group><article-title>Subsidiary responses to institutional duality: Collective representation practices of US multinationals in Britain and Germany</article-title></title-group><contrib-group><contrib contrib-type="author" xlink:type="simple"><name name-style="western"><surname>Tempel</surname><given-names>Anne</given-names></name><aff>University of Erfurt, Germany, <email xlink:type="simple">anne.tempel@uni-erfurt.de</email></aff></contrib></contrib-group><contrib-group><contrib contrib-type="author" xlink:type="simple"><name name-style="western"><surname>Edwards</surname><given-names>Tony</given-names></name><aff>King’s College, London, UK, <email xlink:type="simple">tony.edwards@kcl.ac.uk</email></aff></contrib></contrib-group><contrib-group><contrib contrib-type="author" xlink:type="simple"><name name-style="western"><surname>Ferner</surname><given-names>Anthony</given-names></name><aff>De Montfort University, UK, <email xlink:type="simple">afhum@dmu.ac.uk</email></aff></contrib></contrib-group><contrib-group><contrib contrib-type="author" xlink:type="simple"><name name-style="western"><surname>Muller-Camen</surname><given-names>Michael</given-names></name><aff>Middlesex University Business School, UK, <email xlink:type="simple">m.muller-camen@mdx.ac.uk</email></aff></contrib></contrib-group><contrib-group><contrib contrib-type="author" xlink:type="simple"><name name-style="western"><surname>Wächter</surname><given-names>Hartmut</given-names></name><aff>University of Trier, Germany, <email xlink:type="simple">waechterh@uni-trier.de</email></aff></contrib></contrib-group><pub-date pub-type="ppub"><month>11</month><year>2006</year></pub-date><volume>59</volume><issue>11</issue><issue-title>Special Issue: Transnational Institution Building and the Multinational Corporation; Guest Editors: Mike Geppert, Dirk Matten and Peter Walgenbach</issue-title><fpage>1543</fpage><lpage>1570</lpage><abstract><p>New institutionalist studies of human resource management in multinational companies argue that subsidiaries are faced with institutional duality-pressures to conform to parent company practices and to the local institutional environment in which they are based. To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany.</p></abstract><kwd-group><kwd>collective representation</kwd><kwd>institutional duality</kwd><kwd>multinational companies</kwd><kwd>new institutionalism</kwd><kwd>subsidiary responses</kwd></kwd-group><custom-meta-wrap><custom-meta xlink:type="simple"><meta-name>sagemeta-type</meta-name><meta-value>Journal Article</meta-value></custom-meta><custom-meta xlink:type="simple"><meta-name>search-text</meta-name><meta-value> Subsidiary responses to institutional duality: Collective representation practices of US multinationals in Britain and Germany Anne Tempel, Tony Edwards, Anthony Ferner, Michael Muller-Camen and Hartmut Wächter ABSTRACT New institutionalist studies of human resource management in multi- national companies argue that subsidiaries are faced with institutional duality pressures to conform to parent company practices and to the local institutional environment in which they are based. To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary manage- ment responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the inter- dependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany. KEYWORDS collective representation institutional duality multinational companies new institutionalism subsidiary responses 1 5 4 3 Human Relations DOI: 10.1177/0018726706072863 Volume 59(11): 15431570 Copyright © 2006 The Tavistock Institute ® SAGE Publications London, Thousand Oaks CA, New Delhi www.sagepublications.com Introduction The influence of home and host countries on human resource management (HRM) practices in multinational companies (MNCs) has become a distinctive line of inquiry within the field of international HRM (Jain et al., 1998; Quintanilla & Ferner, 2003). A growing number of studies in this line of inquiry have adopted an institutional approach, the majority drawing on the comparative institutionalist perspective (Hall & Soskice, 2001; Maurice & Sorge, 2000; Whitley, 1999; for a review, see Tempel et al., 2006) while relatively few have drawn on the new institutionalist tradition (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). Scholars applying new institutionalist theory to HRM in MNCs focus on practice transfer from the parent company to its subsidiaries and argue that subsidiaries are subject to 'institutional duality' (Kostova, 1999; Kostova & Roth, 2002; Kostova & Zaheer, 1999; Rosenzweig & Nohria, 1994). Kostova and Zaheer (1999) portray institutional duality in terms of pressures for internal and external legitimacy. The former refers to the approval of a subsidiary by the parent company and results from it adopting practices which are institutionalized within the MNC and shaped by the home country environment of the parent company. The latter is awarded by the institutional environment in which the subsidiary is embedded and stems from it adopting practices institutionalized in that environment. Institutional duality is argued to pose more challenges where the 'institutional distance' between home and host country institutions is large (Kostova, 1999). Early new institutionalist studies on MNCs tend to portray subsidiaries as conforming passively to these pressures (cf. Rosenzweig & Nohria, 1994; Rosenzweig & Singh, 1991). More recently, Ferner et al. (2005a) and Kostova and Roth (2002) have drawn on Oliver's (1991) work to study the responses which subsidiaries and their managers develop towards parent company attempts to transfer practices. Kostova and Roth (2002) focus on the different 'adoption responses' of subsidiaries to parent company attempts to transfer practices. They argue that depending on the institutional distance between home and host country environments, subsidiary responses will range from minimal to active adoption of parent company practices. Ferner et al. (2005a) study how management in American-owned subsidiaries in Britain have resisted, avoided or accommodated diversity management practices. Our article focuses on subsidiary management responses to both parent company and host country pressures. We consider how these responses are shaped by the institutional distance between home and host country insti- tutional domains and the interdependence of subsidiary management with the parent company and the local context. We do so by comparing case study Human Relations 59(11)1 5 4 4 evidence of collective representation practices in US subsidiaries in Britain and Germany. Quantitative research on the HRM practices of US subsidiaries in these two countries has shown that although there is evidence of acquiescence by US subsidiaries to local institutional pressures, a signifi- cant degree of deviation from the local environment was also observed (Gooderham et al., 2004). By focusing on subsidiary responses to parent company and host country pressures in the face of varying levels of inter- dependence, the present article aims to contribute to our understanding of how such acquiescence and deviation occurs. The article is structured as follows. The next section builds up a frame- work for considering how subsidiary management responds to both parent company and host country pressures and how this is shaped by institutional distance and interdependence. Following a section describing research methods, the case study evidence on collective representation is discussed. The conclusion draws out the implications of the findings for new insti- tutionalist studies of HRM in MNCs. Subsidiary management responses to pressures for internal and external legitimacy Drawing on resource dependence theory (Aldrich, 1979; Pfeffer & Salancik, 1987), Oliver (1991) argues that new institutionalists can overcome their passive portrayal of organizations and proposes that organizations can deploy a range of responses to institutional pressures from adherence and compromise to defiance and manipulation (see Table 1 for a summary of Oliver's [1991] typology of responses). She suggests that a key factor influencing an organization's response concerns the constituents who exert pressure on the organization, in particular the multiplicity of their demands and the organization's dependence on them. Multiplicity of demands and institutional distance Oliver (1991) argues that the greater the degree of constituent multiplicity, the greater the likelihood of organizational resistance to institutional pressures. Where organizations face incompatible and competing demands from different constituents, conformity may be impossible because 'the satis- faction of one constituent often requires the organization to ignore or defy the demands of another' (Oliver, 1991: 162). The problem of multiplicity is clearly relevant for subsidiaries in MNCs. It can be particularly challenging where institutional distance is large, Tempel et al. Subsidiary responses to institutional duality 1 5 4 5 making the differences between home and host country institutions particu- larly visible. By considering subsidiary responses to the challenges of insti- tutional duality, particularly in conditions of institutional distance, it becomes apparent that subsidiary management responds both to parent company and local institutional pressures. Acquiescence to parent company pressures can mean the avoidance of local institutions. Compromises with local institutions can mean the defiance of parent company practices. Thus, Oliver's (1991) arguments are applicable to subsidiary management responses to pressures both for internal and external legitimacy. The institutional distance between collective representation institutions in Germany on the one hand and America and Britain on the other are clearly significant. However, the differences between the US and UK are also notable. While the two countries exhibit commonalities in many respects Hall and Gingerich (2004), for example, find that the level and degree of wage coordination are very similar the extent of anti-union sentiment appears to be stronger among American employers than their British counterparts. Indeed, US employment relations are marked by the prominence of non- unionism (Kochan et al., 1994). This is seen as stemming from the domi- nance of an individualistic ideology in the American business system, which questions third-party involvement, whether from the state or trade unions (Hollingsworth, 1997; Jacoby, 1991) and is manifest in deep-rooted anti- unionism. Human Relations 59(11)1 5 4 6 Table 1 Strategic responses to institutional pressures (Oliver, 1991) Strategies Definition Tactics Acquiescence Acceding to institutional expectations habit imitation compliance Compromise Conforming to institutional expectations but compliance is only partial balance pacifying bargaining Avoidance Organizational attempt to preclude necessity of conformity to institutional expectations concealment buffering escape Defiance Unequivocal rejection of institutional expectations dismissal challenge attack Manipulation Organizational attempt to actively change or exert power over the content or sources of institutional expectations co-optation influence control Although the 1935 Labor Relations Act temporarily strengthened trade unions by establishing legal mechanisms for trade union recognition, this has been continually challenged by employers (Jacoby, 1997) who have increasingly turned to non-union strategies, ranging from 'low-road' to 'high-road' variants (Katz & Darbishire, 2000). One high-road variant, 'welfare capitalism' (Jacoby, 1997), rests on the ideology that the firm alone should provide for employee security and welfare and has been adopted by many major American companies which, in order to keep unions at bay, introduced innovative HRM policies. In contrast, low-road non-unionism has combined fierce anti-unionism with more exploitative HR practices. Britain has not been marked by such a strong individualistic ideology or anti-union stance as the USA. Employment relations in Britain have traditionally been contingent on negotiated regulation between employers and trade unions. Collective bargaining and workplace employee represen- tation rest on a single channel system which is dependent on the strength of trade unions. Legal, economic and political changes in the 1980s have however undermined the strength of trade unions. The pluralist industrial relations system resting on collective bargaining has increasingly been replaced by unilateral regulation by employers (Cully et al., 1999; Edwards, 2003), and with the loss of trade union power and the reduction in collective bargaining, a 'significant representation' gap has opened up at workplace level (Towers, 1997). However, compared to the US, union presence in Britain is still more significant. Moreover, there have recently been a number of institutional changes which provide more support for collective represen- tation, including statutory union recognition procedures and European directives on European works councils and information and consultation arrangements. Collective representation in Germany rests on the two pillars of col- lective bargaining and workplace representation. Collective bargaining is the responsibility of unions and employers' associations at industry level or of unions and single employers at company level. The provisions of industry- level collective agreements cover all organized workers and employers affiliated to employers' associations. Traditionally, the pay and working conditions of the vast majority of employees in Germany were regulated through industry-level collective agreements (Hassel, 1999), but since the 1990s, collective bargaining coverage has declined and company-level bargaining has become more important (Kohaut & Schnabel, 2003; Streeck & Rehder, 2003). The Works Constitution Act has the potential to subject all workplaces with more than five employees to uniform regulation of the Tempel et al. Subsidiary responses to institutional duality 1 5 4 7 employeremployee relationship at plant level. Works councils have an array of rights, ranging from information and consultation to co-determi- nation rights, these being strongest in relation to social policy and weakest in financial and economic matters (Wächter, 1983). Dependence on the pressurizing constituents The concept of institutional distance is useful in providing a broad insight into the differences between the institutional frameworks to which subsidiary management are subject. However, it is not institutional distance alone which may lead subsidiary managers to respond passively or proactively to parent company and host country pressures. Turning to Oliver's (1991) second concern in relation to pressurizing constituents, that of dependence, she argues that where dependence is high, organizations will tend to acquiesce; where it is low, they may defy or manipulate those constituents exerting insti- tutional pressure. As new institutionalists argue, subsidiary managers are subject to insti- tutional pressures emanating from two main sources, the parent company and the local environment. In relation to the former, subsidiaries are reliant on their parent firms for a range of vital resources (Kostova & Roth, 2002; Taylor et al., 1996). The most obvious of these is investment funds; numerous sources of evidence indicate that corporate HQs in many MNCs engage their operating units in a competitive game in order to allocate funds to the best performing subsidiaries (e.g. Mueller & Purcell, 1992). Subsidiaries and their managers are also dependent on the HQ for other types of resources, such as technology and managerial knowledge (Kostova, 1999). Moreover, the pay packages and promotion prospects of subsidiary managers are heavily shaped by the corporate HQ (Coller, 1996). Through these mechanisms, parent company managers are able to structure the choices and actions of those in the subsidiaries. They can use them to exert pressure on subsidiary managers to introduce home country practices. MNCs of American origin have been shown to adopt a more ethnocentric, centralized and standardized approach to HRM than MNCs of other nationality (for a review, see Edwards & Ferner, 2002) and, informed by their home country institutional environment, are particularly hostile to collective worker representation (see Ferner, 2000a). However, the relationship between parent company and subsidiaries is not one of clear-cut, one-way dependence. As a large body of international management literature has highlighted, MNCs are not simply 'hierarchical monoliths' (Birkinshaw & Hood, 1998: 778), but display a range of different parentsubsidiary relationships, from those based on tight, centralized Human Relations 59(11)1 5 4 8 control to more decentralized, loosely coupled, network-based relationships (see particularly Bartlett & Ghoshal, 1989; Birkinshaw, 2003; Hedlund, 1986). The nature of these relationships has implications for the structuring of resource transactions within MNCs (Taylor et al., 1996). Moreover, subsidiaries can build up resources which are useful to the parent company and the MNC as a whole (Birkinshaw & Hood, 1998; Gupta & Govindarajan, 1991). Such resources can stem from subsidiary performance and from the capabilities which subsidiaries create and the knowledge they possess. As subsidiaries build up strategic resources, parent company dependence on them increases. Taylor et al. (1996) argue that in such cases, the parent company will attempt to exercise control over the subsidiary. At the same time, greater parent company reliance on the subsidiary increases the power of the subsidiary to resist such control efforts. The extent to which the parent company is able to control and influence its subsidiaries is also shaped by the method of subsidiary establishment. Research has shown that parent companies are more likely to be able to influence practices in greenfield subsidiaries, for example through the careful selection of staff, than in acquired operations, where practices are already in place (e.g. Rosenzweig & Nohria, 1994; Schuler et al., 1993). While Birkinshaw and Hood (1998), Gupta and Govindarajan (1991) and Taylor et al. (1996) pay attention to the resources which subsidiaries can accumulate, they do not explicitly link such resources to the local insti- tutional environment in which subsidiaries are located. A number of authors drawing on the comparative institutionalist tradition identify subsidiary management knowledge of the local institutional environment as an important resource (see particularly Ferner, 2000b; Geppert et al., 2003; Kristensen & Zeitlin, 2005). They argue that subsidiary managers can derive resources from their role as 'interpreters' of the local environment for parent company management who may have difficulty understanding it. Kostova (1999), Kostova and Roth (2002) and Taylor et al. (1996) have focused on the dependence relationships between subsidiary manage- ment and parent companies. However, the relationship between subsidiary management and the local institutional environment is equally important and not necessarily one of clear-cut, one-way dependence. Subsidiaries may for example be dependent on their local context for developing and sustaining high levels of performance and creating knowledge and expertise. An illustration of this is Kristensen and Zeitlin's (2005) account of the Danish plant of a British MNC, which they argue derived its reputation within the firm from its highly skilled workforce. Dependence on the local environment can also stem from the close relationships which subsidiary management may have with local stakeholders such as governments, trade unions or works Tempel et al. Subsidiary responses to institutional duality 1 5 4 9 councils. Such stakeholders may have the power to constrain subsidiary management action, particularly where their power is underpinned by regulative institutions. Local stakeholders such as trade unions and works councils are also dependent on subsidiary management, for example on the way in which subsidiary management interprets parent company practices and the pressures for internal legitimacy. Subsidiary management may be able to exaggerate the extent of pressures exerted on them to adopt parent company practices and the likely sanctions from HQ if these practices are not adopted. The dependence of these local actors is particularly high where the subsidiary is very important to the local economy, especially where there is a realistic prospect of it relocating elsewhere. In the case of collective representation practices in US-owned subsidiaries in Britain and Germany, both institutional distance between home and host country environments and dependence on the local environ- ment seem to be greater in Germany than in Britain. However, institutional distance and dependence on the local environment are not necessarily co- extensive. First, the fact that the local environment is more distant does not necessarily mean that subsidiaries are more dependent on the local environ- ment than in institutionally close countries. What is important is the extent of interdependencies which the local environment creates and the sort of resources it offers to management and local stakeholders. Comparative insti- tutionalists have compared the relatively few dependencies which the 'compartmentalized' British business system (Whitley, 1999) creates between firms and stakeholders with the social embeddedness of firms in the German business system (see particularly the work of Lane, 1995, 1998). As we have outlined, this is reflected in the area of collective representation. Collective bargaining and workplace representation institutions in Germany have the potential to involve management in close relationships with local stake- holders. In contrast, the collective representation institutions in Britain create relatively little local interdependence between management and trade unions. Second, within a given local environment, and therefore a given insti- tutional distance, dependence of subsidiary management on the local environ- ment can vary, depending on the dynamics of their relationships with local stakeholders. In relation to collective representation, such variation can be found at sectoral level, reflected for example in higher union density rates in manufacturing than services industries (Cully et al., 1999; Hassel, 1999; Waddington & Hoffmann, 2000). Variance may also occur at organization level, even in countries where stakeholders are underpinned by statutory regu- lations (Katz, 2005). For example, research in Germany has shown that in Human Relations 59(11)1 5 5 0 practice the nature of relationships between management and works councils ranges, for example, from management bypassing works councils and dealing directly with employees to powerful and respected works councils working alongside management as 'co-managers' (Kotthoff, 1994). Equally, organizational-level variance can be found in local environments such as Britain which can create interdependencies in the area of collective repre- sentation. For example, Ferner et al. (2005b) found examples of management in US-owned subsidiaries in Britain not wanting to disrupt constructive relationships with local unions. Thus, the distance between home and host country institutions may be greater or less in some sectors and in some organizations than the formal nature of national institutions might suggest. We use this framework to address a number of important questions. How intense are the pressures for external and internal legitimacy on subsidiary management in the two countries? How does subsidiary manage- ment respond to them? To what extent do British and German subsidiary management responses differ? How are their responses shaped by their inter- dependence with the constituents of these pressures? Methodology In order to investigate these questions, we chose the in-depth case study method. To date, new institutionalist studies of HRM in MNCs have adopted only quantitative research methods. Although appropriate for identifying broad differences in HRM practices, they are less useful for exploring the complex ways in which pressures for internal and external legitimacy are exerted and how actors respond to these pressures. Case studies can help 'the researcher to go deep in complex matters, which are not wholly understood' (Stewart et al., 1994: 13). Moreover, whereas quantitative studies have major advantages in answering 'how much' questions, they are less appropriate for assessing 'how' and 'why' questions which are of pivotal interest for this study (Yin, 1994). The case studies reported in this article were conducted in a wider project on HRM in US MNCs in Europe (see Almond & Ferner, 2006; Wächter & Peters, 2004 for further details). This article discusses four case study companies, two manufacturing and two service sector companies, in which sufficient access was granted in the US, Britain and Germany. Case studies in different sectors were useful in investigating the questions at the centre of this research as dependence of subsidiary management on the local environment can vary according to sector. Tempel et al. Subsidiary responses to institutional duality 1 5 5 1 Interviews were conducted in the German and British subsidiaries and at corporate and/or European headquarters in each company. In all, 75 interviews were conducted with senior HR managers, managers from other relevant functions such as finance and operations, workforce representatives and, in two of the British subsidiaries, with non-managerial employees. Such data triangulation enabled us to gain a fuller picture of the pressures for internal and external legitimacy on subsidiary management and their responses to these pressures. Table 2 provides an overview of the companies which have been given pseudonyms as access was granted on condition of anonymity. The semi-structured interviews were based on interview templates designed to ensure comparability while allowing for adaptation to the differ- ent institutional frameworks of Germany and Britain. Interviews generally lasted between one and two hours, were tape-recorded and transcribed. They were supplemented with internal company publications and published data. It will become apparent in our discussion of the findings that some of the events surrounding subsidiary management responses to pressures for internal and external legitimacy date back to the 1970s and 1980s. Detailed information about these events was accessible to us because of the critical nature of these events and the longevity of many managers. Human Relations 59(11)1 5 5 2 Table 2 The case study companies Company pseudonym CPGco ITco Business Services Logistico Sector Manufacturing: consumer and professional products Manufacturing and servicing of IT equipment Business consultancy and technical services Logistics services Employment global 75,000 >200,000 75,000 >200,000 % Workforce outside US 40 50 50 10 % Revenues outside US 50 60 50 20 Employment Britain 2000+ 20,000+ 5000+ 2000+ Employment Germany 2000+ 20,000+ 2000+ 10,000+ US HQ interviews 4 4 3 Euro HQ interviews 3 6 1 Interviews Britain 9 12 2 2 Interviews Germany 3 5 4 4 Interviews total 19 27 9 7 In addition, interviews were conducted with a sample of non-managerial employees in the British subsidiaries of CPGco and ITco. Empirical findings Parent company orientations to collective representation The companies show a variety of approaches towards collective representa- tion in their domestic operations and international policies. ITco and CPGco have a long 'welfare capitalist' tradition, strongly shaped by the anti-union ideologies of their founding fathers. Both have used employment policies that seek to instil in employees a commitment to the organization without union interference and in turn offer long-term employment and attractive material rewards. More recently, they have considerably weakened some of these policies, such as job security and high pay, in particular because of financial crises and a strong shareholder value orientation. However, their clear anti- union attitude remains. Business Services also adopts a welfare capitalist style, but keeping unions at bay is a secondary aim as this style has been adopted primarily to retain good employees in a sector which is marked by high levels of fluctuation. The tendency for employees in that company to look towards unions is relatively weak as its workforce is professionalized and highly fluid. Logistico is the one company in our sample which recog- nizes trade unions in the US. Union density there is very high at about 80 percent of the workforce. Only Logistico has a written policy regarding collective representation in their foreign subsidiaries, which states that good relationships with trade unions and employee representatives should be maintained and local laws respected. The lack of a clear policy towards collective representation in Business Services reflects the fact that unionization is not perceived as a big threat to the company, either domestically or abroad. ITco and CPGco have clearer, but unwritten, corporate strategies of avoiding unions and collective representation where host contexts permit it. As our discussion of the collective representation structures in their British and German subsidiaries will show, corporate management often exerted pressures for internal legitimacy on subsidiary management in less obtrusive but no less powerful ways than through central directives. Collective representation in the British subsidiaries Corporate anti-unionism seems to have been replicated in ITco's British subsidiary, while CPGco subsidiary management has recognized unions since the 1970s, thus diverging from its parent company's welfare-capitalist orien- tation. Business Services' policy of using sophisticated HR practices to keep collective representation structures at bay is displayed in its British subsidiary Tempel et al. Subsidiary responses to institutional duality 1 5 5 3 and the presence of collective agreements for manual workers in Logistico's British operations corresponds with the parent company's acceptance of collective representation in the US. How have these structures been shaped by subsidiary management's reactions to institutional pressures and inter- dependence with parent companies and the local context? The variation in collective representation structures between the British subsidiaries of ITco and CPGco can be traced back to subsidiary managers' responses to pressures for internal and external legitimacy in the 1970s and to the 'administrative heritage' (Bartlett & Ghoshal, 1989) of the companies. At that time, subsidiary managers in both companies were faced with union campaigns for recognition and with the anti-union ideologies of their parent companies. However, these ideologies were communicated to subsidiary management with different force by corporate management. The founding family of ITco had created a corporate philosophy in which its anti-union norms were deeply engrained. As the company's foreign operations grew, corporate management saw this ideology as being applicable not just domestically but globally. Although CPGco's founding family was also strongly antagonistic to union intervention, corporate management saw less need for a globally applied non-union policy. In the 1970s, CPGco's operations were heavily concentrated in the US compared to ITco. Corpor- ate management was therefore more concerned with fending off union inter- ference in its domestic than foreign operations. These differences shaped subsidiary management strategies towards union campaigns. Highly socialized in their parent company's ideological norms, managers in ITco's British subsidiary campaigned hard to convince employees that union recognition would not be in their interests. They did so by stressing the paternalistic nature of the company and highlighting the effectiveness of the existing company council. This proved successful in fighting off union recognition, and increased subsidiary management's internal legitimacy for some time afterwards: So we were heroes to the States. Here was a system, this great system which was the creation of the [founding family]; this was the system being tested. So we had letters of congratulation, 'wonderful achieve- ment' . . . It was a vindication that had never been attained before because there had been no vote on the [ITco] system. (British HR manager) Union recognition attempts in CPGco's British subsidiary also provoked considerable management hostility. However, subsidiary management did eventually recognize unions in 1973. Since then, union representation has Human Relations 59(11)1 5 5 4 become well established with a strongly unionized workforce and an active shop steward system. Despite changes in the local political and legal context in the 1980s and greater intervention by corporate management in its foreign operations since the 1990s, representation has been preserved. Subsidiary management has developed expertise and has learnt how to deal with unions. Moreover, it has come to recognize the benefits of collective representation and thus has an interest in perpetuating recognition agreements with trade unions. In contrast, subsidiary management opposition to unions has not weakened in ITco. The firm has recently moved into the outsourcing market and as a result of outsourcing deals, employees who were previously union members were transferred into the British subsidiary. Subsidiary manage- ment has come down very strongly on attempts by individual employees and European works council representatives to coordinate these unionized employees and to increase employee awareness of the potential changes to their rights contained in the 2002 EC Directive on national information and consultation. Continuity can therefore be observed in the strategic responses of British subsidiary management in both companies. Subsidiary manage- ment's initial strategy of compliance with corporate expectations at ITco and its defiance of union demands have informed its non-union strategy today. CPGco British subsidiary management's deviation from corporate norms in the face of strong demands from unions in the 1970s has not been revised in more recent years as the disruption of constructive relationships with trade unions would go against management interests. (For a more detailed account of collective representation in these and other US subsidiaries in Britain, see Ferner et al., 2005b.) In contrast, British subsidiary managers in the two companies in the less heavily unionized service sector, Logistico and Business Services, have not been faced with union recognition battles. Subsidiary management at Business Services has dissuaded employees from seeking third-party repre- sentation by introducing a number of channels of communication common throughout the company. This has enabled management to comply with corporate HRM policies designed to enable the company to offer global consulting solutions to its customers. The British subsidiary of Logistico, formed out of acquisitions of local companies which were gradually integrated into the company by local management, is partially covered by collective bargaining. These collective agreements, which apply to manual workers, were inherited in the acquisitions and are in keeping with unionization in the parent company. However, subsidiary management has used its relationship with trade unions to avoid parent company intervention in employment relations. For example, Tempel et al. Subsidiary responses to institutional duality 1 5 5 5 it did not comply with corporate guidelines on resolving employee disputes on the grounds that these did not fit in with the subsidiary's industrial relations policy. Collective representation in the German subsidiaries The German subsidiary of Business Services is the only one in our sample not involved in collective bargaining and in which works council represen- tation covers only a minority of the workforce. At first glance, the German operations of ITco, CPGco and Logistico comply fully with local collective representation practices, being covered by either industry-level or company- level collective agreements and being involved in workplace negotiations with works councils. However, collective representation structures in these three subsidiaries are not a reflection of the defiance of corporate expec- tations and acquiescence to local institutions on the part of subsidiary management. In ITco and CPGco, collective representation structures have long been established in the German subsidiaries and are well known to parent company managers. Nevertheless, subsidiary managers feel under intense pressure from corporate management to deliver results regardless of local collective representation arrangements and argue that they cannot use these arrangements as a buffer: It would be short-sighted of us to try to use collective representation legislation as an excuse for not implementing policies. It might help for the moment but the next time an investment decision is made, they [corporate management] would not even consider Germany. (CPGco German HR manager) Corporate management is familiar with German co-determination legislation. They know that, because of the legislation, things have to be done differently compared to Britain for example. But this does not mean that we can go our special national way and have an easy life. They still expect that we implement our agenda even under these exacerbated conditions. (ITco German HR manager) Moreover, subsidiary management in both companies came under increasing pressure from corporate headquarters in the 1980s and 1990s because of collective bargaining arrangements. Such pressure took the form of corporate management communicating its perceptions of the German business system very clearly to subsidiary management. These perceptions Human Relations 59(11)1 5 5 6 were shaped by the negative effects of third-party intervention on subsidiary performance. At that time, both subsidiaries were covered by the metal- working industry agreements involving the powerful IG Metall. These stipu- lated a 35-hour working week and left firms with very little opportunity to link pay to individual performance. As a result of poor performance, three of ITco's four production sites in Germany were sold off or closed in the 1990s and the German workforce fell by 40 percent. In CPGco Germany, the German workforce shrank by 50 percent in the 1980s and 1990s through operations being sold off or relo- cated to other countries. In one business division, Germany was one of three locations for production, alongside the USA and Mexico. As CPGco sought to rationalize, it undertook a comparison of the three sites. The German site did not fare well and was sold off. In the face of corporate management's negative perceptions and the loss in status of the German subsidiaries, subsidiary management in both companies changed their collective bargaining arrangements in the 1990s. At that time, both companies were in severe crisis and corporate management sought to enforce rationalization programmes. In ITco, corporate manage- ment set cost-cutting targets for subsidiaries. In order to achieve its target and as a result of increasing frustration with IG Metall's campaigns against it over working time and pay, subsidiary management reorganized the German operations. It formed a holding company and organized the operations as legally independent firms. It extricated all but its production facilities (10 percent of the workforce) from the metalworking agreement. Management considered keeping its other operations outside of the collective bargaining system. However, works councils organized a petition to secure collective bargaining coverage and quickly gained majority support from the workforce. Management had to react and negotiated a deal with a more moderate service sector union. It concluded a framework agreement with the union to set minimum standards, leaving works councils and management in each indi- vidual company to tailor pay and working time to local conditions. These changes enabled subsidiary management to increase working time to 38 hours and to implement the company's new global variable pay system. They also enabled it to over-fulfil the cost-cutting targets, increasing its legitimacy in the eyes of corporate management. Indeed, ITco Germany was the first subsidiary in Europe to conform to the variable pay mandate, provoking the following comment by a British HR director: If [corporate management] asked the Germans to do something, they went and did it. If the French were asked to do something they went on and did nothing. And if you asked the British they would say: 'Why?' Tempel et al. Subsidiary responses to institutional duality 1 5 5 7 However, such acquiescence to corporate demands was the result of the intense pressure on German management compared to its counterparts in other countries. In order to comply with corporate demands, German management sought ways to free itself from relationships with those trade unions placing most restrictions on its autonomy. Moreover, its move to the service sector agreement was the result of a compromise with more moderate works councillors, who were equally frustrated with the tactics of IG Metall and the restrictions of the metalworking agreement, but wanted some form of collective bargaining. Subsidiary management sought to work together with these works councillors to achieve the targets laid down by corporate management and thus to improve the subsidiary's image within the company. This seems to have worked as the new working time and variable pay arrangements have helped the German subsidiary to become more flexible than some of the company's other European sites. German management at CPGco also came under pressure from corpor- ate management and has taken similar steps to avoid the most restrictive collective bargaining arrangements in Germany, but has done so by adopting a more defiant approach towards works councils. Its response has been shaped by works council resistance in the production facilities towards corporate mandates which exacerbated the negative image of the German operations in the eyes of corporate management. In 1999, CPGco Germany changed its legal status from a public to a private limited company. In the process, it moved its operations from the metalworking industry agreement to a sub-agreement of the chemical industry which offered major advantages in terms of working time and pay. The move was made unilaterally by management without works council agreement. The change in legal status of the German subsidiary and the reduction in the size of the workforce meant that a new works council had to be elected. Management also used the change in legal status to free itself from many of the restrictions which had been imposed on it by works councils. Works agreements drawn up for the former company no longer applied wholesale in the new company. These changes have given subsidiary management greater scope to accede to corporate demands. However, these demands have intensified even more as corporate management has sought to standardize HRM policies. According to a works councillor, the German HR director has sought to deal with these pressures by presenting policies issued by US or European head- quarters in the following way: He implements decisions which have been made in Geneva or in the US without any criticism and gives the impression that there is no room for manoeuvre. He says: 'we are going to do it their way because there is nothing we can change anyway'. Human Relations 59(11)1 5 5 8 In the light of the reduced status of the German subsidiary, subsidiary management lacks sufficient resources to challenge such policies. Moreover, it has been able to take advantage of the fact that works councillors cannot assess the true extent of corporate pressures because they have no direct contact with decision-makers at European or US headquarters. The European works council does not have enough rights and is not yet effective enough to counteract the information deficits of the German works council. The German operations of Logistico and Business Services have not been confronted with a corporate management sharing the same negative perceptions of the German business system as in ITco and CPGco. This is firstly due to their collective bargaining arrangements. Like their counter- parts in the British subsidiaries, German subsidiary management in these firms has not been faced with union pressure for collective bargaining. Subsidiary management at Business Services has been successful in avoiding union campaigns for collective bargaining by paying its employees well over collectively bargained pay rates. Logistico's German subsidiary remained outside of the collective bargaining system until the early 1990s, when it joined the service sector employers' association. This was less the result of union pressure than a voluntary move of strategic compliance by subsidiary management, motivated by a desire to gather information about pay levels in the industry and to maintain its pay differential to its competitors. Second, subsidiary management in the two companies has sought to limit the restrictions placed on it by works council representation. However, it has done so in different ways and against the background of different pres- sures for internal and external legitimacy. It would be difficult for German subsidiary management at Business Services to conform with corporate HRM policies if it had to consult with works councils. Moreover, works councils could impose significant restrictions on workflow planning and working time, key factors influencing the competitiveness of consulting firms. Subsidiary management has introduced employee communication channels and sophisticated HRM practices designed to retain good employees in order to prevent works councils being set up: We strive to be an employer who is so attractive that consultants want to join us and stay with us. And that is more than any works council could offer. When the company, all the HR people and all the senior managers are daily putting a lot of effort into finding ways to make this an attractive place to work, then they are doing exactly the same as what a works council should do. (German HR manager) Such practices have been successful in avoiding demands from consult- ing staff for works council representation and this has enabled the subsidiary Tempel et al. Subsidiary responses to institutional duality 1 5 5 9 to implement a wide range of HRM practices similar to those in the British subsidiary and throughout the company. They have been less successful with regards to support staff, but although works council representation does impose some restrictions on employment practices for these employees, they make up only 20 percent of the workforce. Works council representation could also impose significant restrictions on the way Logistico's German subsidiary operates. But in the face of initial attempts by workers to set up works councils, German subsidiary managers took a much more confrontational stance against works councils than their counterparts at Business Services. At first glance this would seem to be at odds with the acceptance of union representation in US operations. However, subsidiary management's strategy was strongly shaped by pressures for internal legitimacy. The German subsidiary was the company's first foreign location outside North America and in contrast to the British and the company's other European subsidiaries which grew out of acquisitions, was set up by expatriate managers 'from the American blueprint' (German senior manager). Working methods based on scientific management principles were central to this blueprint, some of which violated German working time and health and safety regulations. As a result, workers sought to set up works councils in order to voice their grievances. This met with considerable irri- tation from corporate management, which was communicated very clearly to subsidiary management, as argued by a works councillor: If a works council was set up, then management had failed in the eyes of the Americans . . . failed meaning that was the end of your career. In a company with an elaborate internal labour market which operates inter- nationally, German subsidiary management was strongly influenced by such views in its responses to works councils. When representatives called the first works meeting, which according to the Works Constitution Act can take place during working time without loss of pay, a letter was issued by a law firm representing subsidiary management, threatening a fine if the meeting took place. After the works council took legal advice, the meeting did eventu- ally occur. Since then, works councils have been set up in a number of the company's plants in Germany and in some cases, management has come to realize the advantages of having works councils as bargaining partners. However, resistance to the setting up of new works councils remains: It was very difficult to set up a works council and it's the same today I am convinced that [Logistico] would do everything to prevent a works council from being set up both through lawful and unlawful means. (Works councillor) Human Relations 59(11)1 5 6 0 Once German subsidiary management acceded to corporate expec- tations by defying local institutions, it has become difficult for them to change their strategy, as a German HR manager commented: We Germans always try to apply the law in such a way that there are no problems. We have always tried to find a solution and the Americans realized that very quickly, they say 'the Germans will manage it'. I think we made some mistakes at the outset. We saw ourselves as pioneers and we wanted the company to be a success . . . The other European countries have done it differently, for example the French are very rigid or in Britain, they set working hours or pay levels themselves and there is no room for discussion. Conclusion At first glance, our investigation supports new institutionalist arguments that the challenges of institutional duality are greater in institutionally distant Germany than in institutionally closer Britain. Overall, German management has had to reconcile strong isomorphic pulls from local insti- tutions with intense pressures for internal legitimacy. With the exception of ITco, British management has not been subject to such divergent iso- morphic pulls. However, institutional distance alone cannot explain the complex picture of pressures for internal and external legitimacy faced by subsidiary management in the two countries which vary not only between countries, but also between sectors within countries, and between and within companies (see Table 3 for a summary). For example, in both countries, subsidiary management in the manufacturing companies ITco and CPGco has been confronted with much stronger pressures from local collective representation institutions than their service sector counterparts. German and British managers in Business Services have in common that they have faced less intense pressures for external legitimacy than subsidiary managers in the other companies, while German management in Logistico has confronted much more intense pressures for internal legitimacy than its counterpart in Britain. Our research has also thrown up a variety of responses to these pressures. First, there are no examples of subsidiary management exerting full-blown defiance of corporate expectations. Second, our case studies show how the initial responses of subsidiary management to pressures of internal and external legitimacy have shaped its later responses. ITco and CPGco Britain and Logistico Germany highlight how these initial responses at critical junctures have laid the foundation for relationships with corporate Tempel et al. Subsidiary responses to institutional duality 1 5 6 1 Human Relations 59(11)1 5 6 2 Table3Subsidiarymanagementresponsestopressuresforinternalandexternallegitimacy BritishsubsidiaryGermansubsidiary Parentcompany strategyand structure Statusof subsidiary Pressuresfor internallegitimacy Pressuresfor externallegitimacy Subsidiary management responses Statusof subsidiary Pressuresfor internallegitimacy Pressuresfor externallegitimacy Subsidiary management responses ITcoStrong international integrationof production Influential corporate philosophy createdby foundingfamily whichis communicatedto managersglobally MajorEuropean subsidiary,several European functionsare locatedinBritain Globally applicable philosophyof ideologicalnon- unionism Union recognition campaignin 1970s 'Insourced' unionized employeesin 1990s Acquiescenceto parentcompany pressures Defianceofunion demands MajorEuropean subsidiarybuthas lostimportant chartersin1990s includingmajority ofproduction facilities Corporate perceptionof Germanbusiness system Cost-cutting targets Collective bargaining arrangements withIGMetall Workscouncil representation Compliancewith corporate expectations Avoidanceof mostrestrictive collective bargaining arrangements Compromise withmoderate workscouncils CPGcoCompanywas strongly concentratedin theUSuntilthe 1990s.Sincethen operationshave become increasingly integrated internationally andpoliciesare increasinglybeing appliedglobally MajorEuropean subsidiary Ideologicalnon- unionism Union recognition campaignin 1970s Avoidanceof parentcompany pressures Acquiescenceto uniondemands Formerlymajor European subsidiary,but lostimportant chartersinthe 1990s, particularly production facilities,reducing itfromamajor subsidiarytoa 'meretrading company'(HR manager) Corporate perceptionof Germanbusiness system Rationalization programme Collective bargaining arrangements withIGMetall Workscouncil representation Compliancewith corporate expectations Avoidanceof mostrestrictive collective bargaining arrangements Defianceof workscouncils continued Tempel et al. Subsidiary responses to institutional duality 1 5 6 3 Table3Continued BritishsubsidiaryGermansubsidiary Parentcompany strategyand structure Statusof subsidiary Pressuresfor internallegitimacy Pressuresfor externallegitimacy Subsidiary management responses Statusof subsidiary Pressuresfor internallegitimacy Pressuresfor externallegitimacy Subsidiary management responses Business Services Globally integrated companyoffering aglobalbrand Globalbrandis supportedby commonpolicies foralmostall aspectsofHRM MajorEuropean subsidiary UniformHR policiesincluding practicestokeep unionsatbay Conformancewith uniformHR policies MajorEuropean subsidiary UniformHR policiesincluding practicestokeep unionsatbay Potential restrictionson flexibilityimposed byworkscouncils Conformancewith uniformHR policies Avoidanceof workscouncil representationfor majorityof workforce LogisticoHeavily concentratedin theUS(90%) Important European subsidiary, acquiredand integratedvery slowlyintothe company Corporate policies Collective agreements inheritedfrom acquisitions Choosingto conformwith corporate policiesandto avoidthem where appropriate Oldestand largestforeign subsidiary,setup asablueprintof USoperations Company philosophyis instilledin managersby internallabour market Working methods transferredby expatriates Corporate influenceon management careerprospects Irritationwith workscouncil interference Potential restrictionson flexibility imposedby workscouncils Employee initiativestoset upworks councils Compliancewith corporate expectations Strategic compliancewith collective bargaining Defianceof workscouncils management and local stakeholders, which at a later date they may not wish to or may not be able to change. However, our study is marked by the striking differences between the responses of the German and British subsidiary managers. German subsidiary management in all four companies acceded to pressures for internal legitimacy. In relation to local collective representation institutions, subsidiary managers have adopted a whole range of the proactive responses proposed by Oliver (1991), compromising with, avoiding, defying, manipu- lating or strategically complying with them when this was in their interests. In contrast, with the exception of ITco, there has been less clear-cut com- pliance with corporate expectations and less defiance of local expectations among British subsidiary management, particularly evident in the case of CPGco. In the light of German and British collective representation institutions, it may seem surprising that German management have been so proactive in responding to local institutional pressures and that any evidence of subsidiary managers using their role as interpreters of the local environment to avoid compliance with corporate expectations has been found in the British rather than the German subsidiaries. Dependence on corporate management is a key explanation as to why German management has acceded to pressures for internal legitimacy, particularly evident in ITco and CPGco, whose German subsidiaries performed badly in the 1980s and 1990s and lost important 'charters' (Birkinshaw & Hood, 1998). German subsidiary managers have thus lacked resources and a good performance track record to try to lessen the pressures for internal legitimacy, and have not been able to use their role as interpreters of the local environment to 'preclude the necessity of conformity' to corporate expectations (Oliver, 1991: 154). Dependency on the source of institutional pressures can also explain why German management in Logistico has displayed such conformant behaviour towards corporate expectations compared to its counterparts in the British subsidiary. However, this stems less from the poor performance of the German subsidiary, than from it being set up and tightly controlled by corporate management. This stands in contrast to the greater autonomy of the acquired British subsidiary which subsidiary management has utilized to adopt a cherry-picking approach to corporate mandates, complying with those that it sees as attractive and avoiding others. The extent of pressures for internal legitimacy on German management in these three companies and the level of dependence on corporate manage- ment have overridden dependence on local institutions. This highlights that even where relationships between subsidiary management and local Human Relations 59(11)1 5 6 4 stakeholders are underpinned by regulative institutions, subsidiary manage- ment can call these relationships into question and seek ways to reduce its dependency on local stakeholders (ITco and CPGco), or seek to avoid becoming involved in such relationships from the outset (Business Services and Logistico). Moreover, the responses of German management at ITco and CPGco have shown that within one macro-level institutional framework, dependence on local stakeholders such as unions and works councils can vary. Such variation can be found at sectoral level, for example between the restric- tive collective agreements of the metalworking sector underpinned by the power of the metalworking union and the less constraining provisions of service sector or other agreements. Micro-level variation can also be found, for example in the different factions within works councils in ITco. Subsidiary management can use such variation to reduce its dependence on those local stakeholders which have the most power to constrain its activities. Our findings have implications for studies of HRM in MNCs in the new institutionalist tradition. First, they have shown that subsidiary prac- tices cannot be read off from broad differences between home country and local institutional frameworks alone as implied by the concept of insti- tutional distance. Institutional distance can inform us of the broad similarity or dissimilarity between home and host country institutions. However, it is not nuanced enough to reflect the dependencies which host country insti- tutions can create, dependencies which subsidiary managers may be able to use as resources vis-à-vis their parent company and which may exacerbate the challenges they face in dealing with pressures for internal and external legitimacy. Moreover, it cannot depict variance in the dependencies which local institutions create, not only between countries, but also at sectoral and micro-levels within countries. Second, it has shown that a deeper understanding of how HRM outcomes emerge in subsidiaries can be gained by focusing on inter- dependencies between parent company and subsidiary management and between subsidiary management and the local environment. These outcomes are the result of interaction between subsidiary management and these pressurizing constituents to negotiate just how strong the pressures of internal and external legitimacy are. Such interaction is not a one-off event, but a continuous process. The complexity and dynamics of the processes by which institutional pressures and interdependence with pressurizing constituents shape HRM outcomes in subsidiaries cannot be captured with quantitative methods alone, yet such methods continue to dominate in new institutionalist studies. Our article has drawn on evidence from four companies in two countries. Our findings deserve testing in a wider sample to explore further Tempel et al. Subsidiary responses to institutional duality 1 5 6 5 the interactions between institutional distance and interdependence. Investi- gation in a larger sample of cases with a greater variety in the degree of subsidiary management interdependence with parent companies and local institutions would also be useful in revealing more about how interdepen- dencies shape subsidiary management responses. This may be particularly fruitful in the case of Germany and other institutional environments which generate strong conformance challenges for subsidiary management and also provide them with potential resources with which to resist parent company influence. In this respect, the enthusiasm with which German subsidiary managers in our case studies have conformed to parent company demands stands in contrast to the findings of Geppert et al. (2003). It is also contrary to the expectations raised by Kristensen and Zeitlin (2005) that the likeli- hood of 'game-playing' between parent company and subsidiary manage- ment should be greater where subsidiaries operate in institutional environments which create deeper webs of interdependence between manage- ment and local stakeholders. The contrast between our findings and the work of these authors may reflect differences within the German system, particu- larly sectoral differences. Indeed, our cases do reveal differences in the extent of local dependencies between subsidiaries in manufacturing and services sectors. We may have found less willingness and ability on the part of subsidiary management to question collective representation structures in sectors at the heart of the German system, such as engineering. Acknowledgements The research on which this article draws is from a wider project on the manage- ment of HRM in US MNCs in Europe. We are grateful to the other members of the German and British project teams: Phil Almond, Peter Butler, Ian Clark, Trevor Colling, Len Holden and René Peters. We are also grateful to the Anglo- German Foundation for the Study of Industrial Society (award no. 1292) and UK Economic and Social Research Council (award R000238350) for financial support. Finally, we would like to thank three anonymous reviewers and the guest editors for their helpful comments. References Aldrich, H. Organizations and environments. 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Anne Tempel (BSc, MA, PhD) is Senior Lecturer in Organization Theory and Management at the University of Erfurt, Germany. Her research focuses on the cross-national transfer of employment and organizational practices, particularly in multinational companies and has been published in a number of outlets including Journal of Management Studies, Industrial Relations Journal and Zeitschrift für Personalforschung (German journal of HRM research). [E-mail: anne.tempel@uni-erfurt.de] Tony Edwards (BA, MA, PhD) is Senior Lecturer in Comparative HRM in the Department of Management at King's College, London. He pre- viously held positions at Warwick and Kingston universities. His research focuses on employment issues in multinational companies,particularly the diffusion of practices across borders. He is the author of numerous articles in this area and of a new text 'International HRM: Globalization, national systems and multinational companies'. [E-mail: tony.edwards@kcl.ac.uk] Anthony Ferner is Professor of International Human Resource Management at Leicester Business School, De Montfort University, Leicester. His research is concerned with employment relations in multi- national companies, focusing in particular on the interaction between multinational behaviour and national employment relations systems, and on the 'micro-politics' of the cross-border transfer of HR policies. He has published a wide range of articles and books, most recently (as co-editor with Phil Almond) American multinationals in Europe: Managing employment relations across national borders. [E-mail: afhum@dmu.ac.uk] Tempel et al. Subsidiary responses to institutional duality 1 5 6 9 Michael Muller-Camen is Professor of International Human Resource Management at Middlesex University Business School in London. His work has appeared in outlets such as the International Journal of Human Resource Management, Journal of Management Studies and Organization Studies. His main research interests are the comparative study of human resource management, age diversity and sustainable human resource management. [E-mail: m.muller-camen@mdx.ac.uk] Hartmut Wächter is Professor of Business and Human Resource Management at the University of Trier, Germany. He has published widely on many aspects of HRM, including work design, industrial relations, manpower planning and comparative and international HRM. He has recently published books on Managing in a European context and on Cross- national management of human resources. He is also chief-editor of the leading German academic journal in HRM,Zeitschrift für Personalforschung. 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To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany.</abstract><subject><genre>keywords</genre><topic>collective representation</topic><topic>institutional duality</topic><topic>multinational companies</topic><topic>new institutionalism</topic><topic>subsidiary responses</topic></subject><relatedItem type="host"><titleInfo><title>Human Relations</title></titleInfo><genre type="journal">journal</genre><identifier type="ISSN">0018-7267</identifier><identifier type="eISSN">1741-282X</identifier><identifier type="PublisherID">HUM</identifier><identifier type="PublisherID-hwp">sphum</identifier><part><date>2006</date><detail type="title"><title>Special Issue: Transnational Institution Building and the Multinational Corporation; Guest Editors: Mike Geppert, Dirk Matten and Peter Walgenbach</title></detail><detail type="volume"><caption>vol.</caption><number>59</number></detail><detail type="issue"><caption>no.</caption><number>11</number></detail><extent unit="pages"><start>1543</start><end>1570</end></extent></part></relatedItem><identifier type="istex">93DA013975F4B0E7DB58D0EEF9211B098F1BC638</identifier><identifier type="DOI">10.1177/0018726706072863</identifier><identifier type="ArticleID">10.1177_0018726706072863</identifier><recordInfo><recordContentSource>SAGE</recordContentSource></recordInfo></mods></metadata><serie></serie></istex></record>Pour manipuler ce document sous Unix (Dilib)
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