Approaches to International Industrial Relations in Chinese Multinational Corporations**

By Shen, Jie | Management Revue, January 1, 2007 | Go to article overview

Approaches to International Industrial Relations in Chinese Multinational Corporations**


Shen, Jie, Management Revue


Using a longitudinal case study approach this study examines the approaches to international industrial relations (IIR) in eleven Chinese multinational corporations MNCs. It reveals that the Chinese MNCs adopted an integrative approach to IIR, combining both the home and host country industrial relations (IR) systems. The extent of home-based or host-based IR was dependent on the MNC's bargaining power, which was determined by the size of the subsidiaries, their abilities to transfer knowledge and technology, and their reliance on the host market. International experience and industry also affected IIR approaches. The practical implications of the findings are discussed.

Keywords: International Industrial Relations (IIR), Labour Relations, Labour Standards, Multinational Corporation (MNCs)

Introduction

International industrial relations (IIR) are related to international business success (Gunnigle/Collings/Morley 2003). The management of industrial relations (IR) by multinational corporations (MNCs) is challenged by cultural diversity and geographical dispersion (Shen/Edwards 2006). MNC managers cannot assume that they can simply transfer their home IR system to their overseas subsidiaries: political, legal, economic and socio-cultural differences between the home and host countries complicate the transfer (Shen/Edwards/Lee 2005). For example, although the post-war German IR system contributed to the success of the German economy, it put German MNCs at a competitive disadvantage in a global market with diverse national IR regulations and traditions (Streeck 1997). National differences in political, legal, socio-cultural and economic systems produce markedly different IR systems (Dowling/Welch 2004). Thus, the managements of MNCs are required to choose their approaches to their IIR and their choices are influenced by different factors. However, the literature lacks consensus on what these choices are and how they are made.

Although there has been an increased interest in IIR since the early 1990s, it lacks conceptual coherence (Shen and Edwards 2006), and such studies as have been undertaken have focused on Western MNCs rather than those from developing and transitional economies, such as China. Whether the findings on IIR in Western MNCs are generally applicable to non-Western market economies remains a matter of conjecture.

Labour disputes in MNCs are common and the relationship between MNCs and host countries' trade unions are often tense. The dominant role of MNCs in internationalization has led to IIR having strategic importance for MNCs' performance and even their survival in host markets. Consequently, MNCs' investment decisions, such as American MNCs' investment in Europe, are largely based on the character of IR in the host countries and the MNCs' IIR systems (Gunnigle et al. 2003).

A strong desire for natural resources and growing competition at home has resulted in an increasing number of Chinese companies expanding overseas - to more than 2000 in 2004 (Shen/Edwards 2006). By the end of 2003, China had invested US $33.2 billion in establishing 7,470 non-financial enterprises in more than 160 countries (China Development Bank 2004). Since economic reform in the late 1970s, the scope of Chinese overseas investment has widened - from trading, shipping and catering to processing, manufacturing, mining, engineering, farming, and research and development. Although most Chinese MNCs are small and not influential, the accession of China to the World Trade Organization (WTO) in December 2001 has led to further significant Chinese investment abroad. As a result, more and more Chinese companies are going oversea and growing fast. IBM's Institute for Business Value recently identified 60 Chinese companies as potential global players in the next decade (IBM 2006).

Success in international business will require Chinese MNCs to develop effective IIR. To this end, an understanding of how Chinese MNCs manage IIR and what factors determine Chinese MNCs' decisions on IIR policies and practices is necessary.

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