Introduction
This paper focuses onhow social actors within multinational companies (MNCs)shape employment policies at the sub-national level. We argue that the two key factors influencing their ability to contribute in constructing sub-national employment policies are the presence of sub-national resources and the complementary effect of these levels. In other words, we expect social actors in MNCs to engage in these levels if there are resourcesavailable at multiple sub-national levels that enable them to do so. However the extent of social actors’ engagement depends on the specific historical development of the sub-national levels and the role taken up by social actors within this development.
Many empirical studies have usedthe business system approach (Whitley, 2000)to explain the way in which employment policies are set up within MNCs (Almond et al., 2005; Edwards et al., 2013). Scholarsusing this approach generally focus only on the national level;limited attention has been devoted to sub-nationalemployment policies andthe social actors involved at these levels (Amable and Palombarini, 2009;Dunning and Lundan, 2010; Morgan, 2009). These shortcomings have been addressed in part by institutional scholars who have focussed on within country variations and how they are constituted by social actors. Empirically, Crouch et al. (2009) studied how local coordination forms were shaped by MNCs based on international competition and companies’interests. Pulignano (2006) emphasized the role of trade unions, noting they have made use of subsidiaries’ performance to play a role in constructing employment policies. Similarly regional economic studies have shown MNCs to be influencing employment policies within former industrial districts (Beccatini, 2002). As leading firms,MNCs enter these districts by merger or take-over and link indigenous companies with the international market (Whitford, 2001). Through this activity, they shapeinformation on employment, internal labour markets and the presence of supporting institutions like universities, vocational training centres and trade and professional organizations (Molina-Morales and Martinez-Fernandez, 2008).Still missing amidst this research, however, is information on how employment policies atdifferent sub-national levels are structured by social actors within MNCs. In this paper, we fill this gap by investigating under which conditions employment policies at each of several levels namely in the regional government, at the inter-firm level and at the company level are shaped by social actors within MNCs in Belgium. In doing so, we consider issues of space and location in a more fully elaborated way than do studies that examine the national level. This more nuanced examination fits with the idea that growing attention should be devoted to the sub-nationalrelations of MNCs’ subsidiaries (Dellestrand and Kappen, 2012).
In order to investigate how social actors within MNCs contribute to sub-national employment policies, we have selected four MNCs with subsidiaries located in the three regions of Belgium and in different industry sectors. We focus on MNCs because they are the companies most likely to have more than one subsidiary in the same country and thus to be involved in different sub-national contexts (Morgan, 2007). Second, we focus on Belgium because of its highly institutionalized sub-national character including regional governments and a multi-layered system of industrial relations.
At the MNCs’ subsidiaries we organized interviews with different social actors (trade unions, local management and representatives of the industry sector). Analysis of the interviews shows that, within Belgium, three levels of employment policies besides the national level emerge;regional, inter-firmand company-specific employment policies. However, these employment policies can be understood only in close connection with the aims of the social actors and the specific historical context of each level.
The remainder of the article is organized as follows. First we examinehow the sub-national level has been defined and consider theoretically how social actors in MNCs can contribute to the shaping of sub-nationalemployment policies. We end the literature section by formulating propositions for the Belgian case. The next section presents the research designfollowed by an in-depth description of the case studies used and an analysis of the amount of diversity found with regard to the social actors and their roles. We then present brief concluding remarks.
Sub-national employment policies and social actors within MNCs
What are sub-nationalemployment policies?
Based on studies in economic geography and studies focusing on institutional variance we observedthree levels of sub-national activity: regional employment policies, inter-firm employment policies and company specific employment policies(Crouch et al., 2009; Lane and Wood, 2009). Each of these levels and their evolution will be described in turn.
Regional employment policies.Regional employment policiesrefer to formal constitutionsor regulations applicable in a particular area or territory (Lane and Wood, 2009). Regional policy is hereby considered as a political construction closely connected to national politics (Trigilia, 1991, p.307). In this respect, it is an intermediate regulatory level between the national and the local level (e.g. provinces and municipalities)that aims to contribute to the economic development of different regions within a country (Halkier and Danson, 1997). Regions can be expected to have differing policies and socio-economic profile partly due to the varying priorities of the players in each region. This is particularly the case when regional governments are influenced by interest groupsor social actors within MNCs (Trigilia, 1991). According to Lane and Wood (2009) and Trigilia (1991) the differing regional contexts can result in different employment policieswhich in turn increase the uneven development between regions (Phelps et al., 2003).
Inter-firm employment policies.The second level, inter-firm employment policies refer to informal employment policies within industrial districts, local production systems, regional economies or territorial clusters. These policies are typically set up by agglomerations of small and medium-sized enterprises (SME) specializing in a particular industry sector andamong which cooperation and trust have been installed based on tacit knowledge and informal social norms (Beccatini, 1990; Pyke and Sengenbenger,1992). Key to these employment policies is their focus on internal labour market issues such as good labour conditions, training and aspects of flexibility(Crouch et al.,2009). Policies at this level are valuable in encouraging companies’ growth and development through differentiation and specialization (You and Wilkinson, 1994) as well as in fostering a high level of innovation and adaptive capacity to changing environments. In this respect, policy-making at the inter-firm level had long been considered as an alternative form to the fordist mode of production. (Sforzi, 2002). Therefore employment policies focusing on internal labour market have been important in the development of thisadaptive capacity (Dei Ottati, 2002).
Company-specific employment policies.Finally, company-specific employment policies function at the subsidiary level.They can be shaped by collective agreements, works councils and co-determination rightsin the host country andthe MNCs’ worldwide employment policy (Almond et al., 2005). Deviation from prescribed policies can be the result of the prior existence of local policies that have survived over time (Lane and Wood, 2009).Indeed, subsidiaries can be former SMEs in which the employment policies of the previously independent company remain because of their ability to attract and keep employees (Lane and Wood, 2009). In addition management and trade unions in high performing subsidiaries can leverage this performance quality to advocate for a particular employment policy (Anderson et al., 2007; Pulignano, 2006).
These three levels are however interlinked as companies are operating in a given regional government and belong to a particular inter-firm level. Similarly clusters of companies can be located in more than one regional government. The occurrence of cross-border clustering depends on the way the political and socio-economic borders are reinforcing one another. Specifically, if political borders coincide the socio-economic ones, cross-border ties are few and companies will cluster in one regional government. If this is not the case, networks have been found to operate across borders (Strihan, 2008). In addition, these three levels are not staticso sub-national employment policiescan and do evolve over time. Regional employment policiesfor example are in many cases no longer considered as an intermediate level but as the primary policy-making level. Indeed in many European countries, we can observe a delegation of responsibility from the national state towards lower political levels with regard to employment policiessuch as vocational training (Cognard, 2011; Jessop, 1990). This trend is supported by the increasing presence of regional development agenciesdesigned to promote indigenous economic development through additionalmeans like advice, financial support and infrastructure (Burroni, 2014; Halkier and Danson, 1997).So the study of regional employment policies must encompass the political parties involved in the regional government but also governmental agencies.
In addition, the original definition of inter-firm employment policies has been challenged as MNCs also gained access to these clusters (Coro and Grandinetti, 2001) with the result that SMEs were no longer the only corporate participants at the inter-firm level. Furthermore,within this change only a part of the production process remained endogenous as external products and services enteredthe inter-firm level. The companies actively involved at the inter-firm level generally remain quite close to each other geographically however,as informal interaction between entrepreneurs occurs more often when they are near each other, thus enhancingthe diffusion of employment policies (Molina-Morales and Martinez-Fernandez, 2008). In addition, access to employmentservices reduces the cost of looking for new ideas, knowledge or other relevant information (Coro and Grandinetti, 2001; Molina-Morales and Martinez-Fernandez, 2008; Pyke and Sengenberger, 1992). This convenient access is particularly importantas employees are the least mobile production factor within companies (Meyer et al., 2011; Ter Wal and Boschma, 2011). Furthermore, the notion of trust among companies remains strong at the inter-firm level althoughmore formal institutions (e.g. training institutions, knowledge exchange, information)have been set up in order to reflect their common interest (Molina-Morales and Martinez-Fernandez, 2008). So the inter-firm employment policies are still largely characterized by internal labour markets for geographically clustered groups of companies, even though their common institutions have become more formalized and larger companies are part of the inter-firm level as well.
Finally the company-specific level has also been subject to change. Systems of collective bargaining in many coordinated countrieshave lost their previous inclusiveness. Indeed,employment policies have been observed to be fragmented and segmented because they are increasingly negotiated at the company levelrather than more collectively(Balier and Thelen, 2010; Holst, 2014). In addition the normative character of labour institutions has changed as theyare increasingly seen as voluntary organizations (Holst, 2014). As such company-specific employment policies have greater potential to become diversified.
The above paragraphs clearly illustrate that employment policies on the three sub-national levels have changed over time. Specifically, regional employment policies overall have become more elaborated, inter-firm employment policies have become more formalized and company-specific employment policies have become more fragmented. The evolution of policies at these levels results from a continuous interaction between institutional levels and social actors which will be described in greater detail in the next section.
Dynamic sub-national levels
In this paper we aim to investigate how social actors within the spheres of capital, labour and finance shape sub-national employment policies (Amable and Palombarini, 2008; Crouch et al., 2009; Morgan, 2009). The ways in which this influence occurs relates to an ongoing discussion in mainstream social science regarding how change can be produced by endogenous social actors operating within different institutional, path-dependent systems (Crouch and Farrell, 2004). More specifically, Crouch (2005) argues that social actors engage in experimental behaviour in order to cope with changing demands and expectations from the institutional environment. As a consequence, other institutions or combinations of institutions emerge. Crouch uses the term ‘institutional entrepreneurship’ to describe this process of innovation –or combination rather than adaptation to the existing national institutional logic. It is therefore argued that the high level of strategic leeway for social actors within MNCs, as they operate within different institutional settings, helps to explain sub-national employment policies. Similarly, Hall and Thelen (2009) argue that national institutions alone do not enable business to meet competitive demands. Thus, other mechanisms must be in place, and these mechanisms help to explain the different levels of competitive advantage observed between (and within) national economies.
These other mechanisms are not just the result of social actors shaping the institutional environment, but they imply a creative reinterpretation of resources at the sub-national levels by social actors within MNCs (Heidenreich, 2012). Endogenous creation of sub-national employment policies is then rooted in the levels themselves as actors at these levels use their resources (seats on the advisory boards of regional development agencies or the system of collective bargaining) to influence policy development (Musyck, 1995).The result is the creation of employment policies which in return shape MNCs’ activities and perhaps provide the actors with additional resources to reshape employment policies (Hervas-Olliver and Albors-Garrigos, 2007; Gibbon et al., 2008). Cantwell et al. (2010) refer in this respect to co-evolution between the aims of social actors and the institutional environment, typified by a continuous interaction between their value adding activities and the institutions that sustain these activities.
Engagement at one of the sub-national levels is, however, not dependent on the presence of specific resources. Even if an entity has limited resources at one level, engagement in that sub-nationals level is possible because of complementary sub-national employment policies. Employment policies are expected to be complementary if there are aspects of two or more levels that enhance and maintain one another. This occurs through a reinforcing or compensating effect for each other or for the national level meaning respectively that the multiple levels are compatible or that one level is somehow supplementary and makes up for the deficiencies of the other (Deeg, 2009: 613; Lane and Wood, 2009). In addition, complementarity between levels can be observed only if it contributes to social actors’ employment aims and as such influences the strategic choices of social actors. If this is not the case, actors will not express their engagement in institutions (Reid and Musyck, 2000; Deeg, 2009: 612).
This means that social actors in MNCs will engage at a givensub-national level when the specific historical context enables the social actors to have resources by which to intervene at the level and when multiple resources are complementary- that is, that the engagement will allow them to set up the employment policies that they desire to establish (Meyer et al., 2011). The next paragraph will describe sub-nationalemployment policies in Belgium and how the various sub-national levels offer resources enablingsocial actors to become engaged. The inter-firm level is understood in two dimensions: the level of the joint committee and the web of inter-firm relations.
Sub-national levels in Belgium
Political domain (regional government). The first relevant level comprises theemployment policiesof the three regions within the federal state Belgium (Flemish, Walloon and Brussels-Capital Region). As a result of five state reforms beginning in the early 1970s (for an overview see Swenden et al., 2006) many policy domains, including vocational training, have been delegated to the regions and their agencies (Swenden et al., 2006). These reforms result in the creation of regional training bodies (public as well as private), regional incentives to promote vocational training of some target groups orregional training cheques for companies. Also the content of obligatory training sessions for specific economic activities are regionally determined. In order to set up these initiatives, regional agenciesaresupported by an advisory board based on parity meaning that representatives of both employers and as employees are represented. As the number of agencies, committees and advisory boards has increased with state reforms, more resources have been given to social actors. Therefore, we can expect social actors to shape employment policies if they are represented on these advisory boards.
System of industrial relations (level of joint committee[1]). The first interpretation of the inter-firm level entails employment policiesat the level of the joint committee. Specifically, within the system of collective bargaining, social partnersdevelop first of all the framework for training for all employees at the national level. Bi-annually guidelines are defined in terms of financial contribution from the employers to the training fund but also in terms of participation rate to the training programs. With regard to pay, social partners discuss the level of pay increase acceptable to remain competitive with the neighbouring countries. In each joint committee, these guidelines for pay and training are then further aligned with particular needsresulting in differences between joint committees. Specifically, differences in training policies can be traced back to the presenceof training centres and the distinctions made between white-collar and blue-collar workers regarding vocational training. As for the former, some but not all joint committee have a training centre, financed by collective means to better align the training needs with the requests of the sector. In addition vocational training for white-collar workers, in contrast to thatof blue-collar employees, is usually organized across joint committees, although in some joint committees additional training for white-collar employees is planned. Differences in compensationare the result of negotiation between employers and employees as theybargain on other remuneration instruments such as pension schemes or variable pay. Many joint committees have a social fund to which employers contribute as part of their employee compensation.All these institutions of the joint committee have similar structures to those of the regional governments. So social actors can shape this level too if they are the representatives for the joint committeeon the advisory boards of training centres and pension funds.