The Transformation of Labour Relations: Restructuring and Privatization in Eastern Europe and Russia

By J. E. M. Thirkell; K. Petkov et al. | Go to book overview
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8
Foreign Ownership and its Consequences

In the period after the political changes of 1989 there were widespread expectations in Central and Eastern Europe of a substantial inwards now of foreign investment. This was hoped to raise technological standards and improve export potential and, by implication, lead to the introduction of new management techniques and improve the quality of management. Although there has been significant foreign investment in, for example, Hungary, in general the expectations have not been fulfilled so far (ECE 1994: 159; Ernst et al. 1996: 19, 52; Kogut 1996). The aim of this chapter is to examine the impact of foreign ownership on labour relations. The effects of foreign direct investment may, of course, derive from various causes, depending, in part, on the nature of the changes in ownership. Bangert and Poor ( 1993: 820-1) have outlined the evolutionary pattern of multinational involvement in the Hungarian economy and the corresponding input to HRM policies for different stages from 'buyer-seller' to joint venture and wholly owned subsidiary. They suggest that in joint ventures there will be a large input to HRM practices while in the last the input will be total. There are choices to be made by foreign companies in respect of a range of issues linked to HRM and labour relations. Thus, the balance between expatriate and local managements is a strategic choice for HRM. In terms of labour relations there is potentially a wide range of choices. At a general level there is the possibility, first, of accepting local institutions and mechanisms of labour relations, secondly, of seeking to adapt or replace them, and, thirdly, of attempting to transfer those operating in the foreign company's home plants. In practice some combination is probable. Research in Hungary has illustrated specific consequences for labour relations in joint ventures. Thus Bangert and Poor ( 1993: 837) note that 93 per cent of 165 joint ventures surveyed did not have union representation. An extensive review of both HRM and labour relations at the workplaces of joint ventures is provided by Neumann ( 1992). From their study of multinational firms operating in Hungary, Mako and Novoszath ( 1994: 161) concluded that these organizations had adopted a variety of very different strategies for developing their labour relations, so that the generality was one of heterogeneity.

This chapter is based on five cases (see Fig. 8.1). The first, Slovcar, from Slovakia, shows how foreign management was able to introduce managerial practices for restructuring the organization of work which it had not yet tried in its domestic plants whilst retaining the indigenous representational structures. This is followed by the cases of the Hungarian Promed and the Bulgarian Foundry. These are treated as a pair, linked by the fact that in both

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