Cooperative Corporate-Level Strategies and Divergent Labor Relations Outcomes: An Institutional Analysis

By Smith, Suzanne Konzelmann | Journal of Economic Issues, September 1996 | Go to article overview

Cooperative Corporate-Level Strategies and Divergent Labor Relations Outcomes: An Institutional Analysis


Smith, Suzanne Konzelmann, Journal of Economic Issues


Since the late 1970s, firms in most American industries have experienced increasing pressure from domestic and foreign competition. This pressure has generated changes in product markets, which, in combination with changes in technology, have forced them to rethink traditional ways of doing things. The result has been the restructuring of industries and companies and significant changes in the nature of work organization and industrial relations systems [Kochan and Cappelli 1983; Kochan, Katz, and McKersie 1986; Kochan, McKersie, and Cappelli 1984]. An important component of these changes is the belief that labor-management cooperation is an effective strategy for solving competitive difficulties and responding to change. Cooperation, it is argued, potentially benefits organizational performance through improved productivity, product quality, organizational flexibility, and responsiveness to changes in the external environment [Kochan, Katz, and McKersie 1986; Delaney, Ichniowski, and Lewin 1988; Arthur and Dworkin 1991; Konzelmann Smith 1995].

The role of strategic choice as an important determinant of industrial relations, and organizational performance has received widespread attention. In fact, industrial relations research is now dominated by use of a strategic choice theory that focuses on the choices available to parties subject to economic and technological constraints [Kochan, McKersie, and Cappelli 1984; Kochan, Katz, and McKersie 1986; Arthur 1992; Cappelli and Singh 1992]. As Kochan, Katz, and McKersie explain, "Industrial relations practices and outcomes are shaped by the interactions of environmental forces along with the strategic choices and values of American managers, union leaders, workers and public policy makers" [1986, 5]. This theory represents an improvement over past frameworks not only because it draws attention to organizational strategies, but also because it underscores the existence of three "tiers" of industrial relations activity: long-term strategy and policy making, collective bargaining and personnel policy, and workplace and individual organizational relationships. However, applications of strategic choice theory seldom devote much attention to non-management parties. They also give little attention to the mechanisms through which strategic choices affect outcomes and to the interaction of elements of systems. Consequently, most analyses do not account for cases where companies that are pursuing similar objectives and strategies realize diverse plant-level outcomes.

This article treats strategic choice as part of a broader productive systems framework that allows focus on these often neglected aspects of contemporary industrial relations.(1) It presents the results of a comparative analysis of two American steel companies that pursued similar business and industrial relations strategies that were implemented in workplaces organized by the same union, yet realized quite different plant-level outcomes. In one case, outcomes were consistent with objectives, whereas in the other, company tactics precipitated intense conflict in the plant.

This article also describes the methodology and analytical framework that guided the case studies. The approach taken is that of institutional economics, which served as the roots from which contemporary industry relations research evolved. Institutional economics seeks to understand the process and institutions shaping labor market and industrial relations outcomes; it differs from mainstream theory in that no optimal outcome is presumed.

Institutionalism is holistic because it focuses on patterns of relations among parts and the whole . . . systemic because it believes that those parts make up a coherent whole and can be understood only in terms of the whole . . . [and] evolutionary because changes in the pattern of relations are seen as the very essence of social reality [Wilber and Harrison 1978, 71].

Summaries of the two cases identifying the patterns of similarities and differences are then given. …

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