US Multi-Nationals and the German Industrial Relations System**

Article excerpt

This paper critically reviews literature on the behaviour of US-based Multi National Companies (MNCs) in Germany in relation to the historic institutions of the German labour market: works councils and industry wide collective bargaining. The German system is becoming increasingly company-rather than sectorally centred, and US-based companies have reinforced a wing of German employer opinion seeking to further these developments. Surveys show US-based companies generally accepting works councils and sectoral bargains but case study evidence also shows them seeking to weaken links with parts of the system external to the company. A typology is proposed and it is argued that many US-based companies appear to follow a 'formal compliance/content avoidance dichotomy' tending to exacerbate the system's existing tendencies towards disarticulation. They also tend to explore all options available to them within the existing system. A research agenda is suggested.

Key words: US Multinationals, Germany, Industrial Relations

Introduction

This paper critically reviews literature on the industrial relations behaviours of US-based multi-national companies (MNCs) operating in Germany. Though many management practices indirectly impact industrial relations, we restrict ourselves to considering managers' activities in dealing directly with representative institutions.

US companies are the biggest foreign investors in Germany; investment of around one hundred billion Euros makes Germany the country with the highest concentration of US capital abroad (www.amcham.de accessed on 12 July 2004). US-based MNCs' activities have recently attracted considerable interest, often located within the general discussion of 'convergence' and 'divergence' of business practices (see for example Streeck 1997 and Lane 2000 for two different views on the issue in relation to Germany). Some research has concentrated on companies' employment practices and their consequences in Europe or Germany (for example Gooderham et al. 1999; Edwards/Ferner 2002).

Both national economies are in different ways highly successful, and act as models elsewhere. The German system constitutes the core of the European social model. Despite debates about whether it is eroding in Germany, German requirements for informing and consulting employee representatives are currently being extended, albeit in diluted form, in Europe within and beyond the EU. The encounter between US MNCs and the German environment is one between two very different economies, described variously as 'Liberal' and 'Coordinated' Market Economies [LMEs/CMEs] (Hall/Soskice 2001) or as 'Compartmentalised' and 'Collaborative' (Whitley 1999). Both characterisations recognise that German industrial relations are central to its business system and highly regulated in comparison to the American. In Whitley's analysis (1999: 60), compartmentalised systems such as the USA's are characterised by low market regulation, 'low to some' union strength and low bargaining centralisation. Collaborative systems such as Germany's are characterised on the other hand by high market regulation, high union strength and high bargaining centralisation. However, business systems do not simply determine company practices abroad, where significant internal (employee expectations) and external (public relations) constraints exist. Ferner et. al have argued that the links between the US business system and US MNCs' behaviours are inadequately demonstrated in the literature (Ferner et al. 2004).

Moreover, the 'business systems' approach underemphasises historical dynamics and changes within models. US MNCs have a long history in Germany, marked by waves of German interest in US methods. Inter-war German employers and unions showed a great interest in American production methods, championed by German industrialists' associations (REFA) from 1924 onwards (Müller-Jentsch 1997: 250). Exchange between the two countries' management education institutions was intense before 1939 and contributed after 1945 to considerable interest in US management methods (Wächter et. …