How Significant a Role Do Multinational Corporations (Mncs) Play in Today's Uk Economy in Terms of Their Impact on Employment Relations (Er) and Labour Conditions?

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How significant a role do multinational corporations (MNCs) play in today’s UK economy in terms of their impact on employment relations (ER) and labour conditions? This is the question the paper attempts to evaluate through drawing on academic literature and empirical evidence from the 2004 Wers survey. The first section profiles MNCs in the UK, currently dominated by US and German firms. Following this, there is a brief analysis of employment relations in the UK. The third section reviews literature from leading commentators on the subject, highlighting contrasting views and evidence of foreign IR and ER practices. The fourth section looks at key factors that influence the way labour is managed within MNCs subsidiaries. The country of origin effect, the home country effect, the global dominance effect and a global interaction effect as identified by Edwards and Ferner. This is important to assess to what extent MNCs use these factors in the management of labour. Finally, a conclusion will be drawn and a consideration whether MNCs have diffused home country employment relations practices to their UK foreign subsidiaries and if they have affected labour conditions for the UK workforce.

Introduction Foreign direct investment (FDI) as a percentage of GDP (Ferner Industrial) in the UK is the highest of any developed country in the world. Since the deregulation of the labour market in the 1980’s the UK has seen a rise in foreign owned companies. According to the WERS 2004 survey, 19 per cent of private sector workplaces with 10 or more employees had some degree of foreign ownership, an increase of 4 per cent on the 1998 survey. Similarly, a rise from 8 per cent to12 per cent of companies were predominantly foreign owned and controlled. For what reason do MNCs choose to set up subsidiaries in the UK? Could it be to take advantage of the nature of the

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open and deregulated national business system and transfer home country ER practices? Margaret Thatcher and



References: Alpin, C, Kersley, B (2006) Inside the Workplace: Findings from the 2004 Workplace Employment Relations Survey, Routledge Chapter 2, 11. Clark, I and Almond, P (2004) ‘Dynamism and embeddedness: towards a lower road? British subsidiaries of American multinationals. Industrial Relations Journal (IRJ), 35:6. Edwards, T., Ferner, F, Bach, S (2002) ‘The renewed ‘American Challenge’: a review of employment practice in US multinationals’. Industrial Relations Journal, Vol.33 No. 2, pp. 94-108. Edwards, T and Ferner, A (2005) ‘Managing Human Resources in Multinational Companies’. Managing Human Resources: Personnel Management in Transition (4th Edn), Oxford: Blackwell, Chapter 3. Ferner, A (2003) ‘Foreign Multunationals and Industrial Relations in Britain’, in Edwards, P (2003) Industrial Relations Theory and Practice (2nd Edn), Oxford: Blackwell, Chapter 4. Ferner, A et al (2005) ‘Policies on Union Representaion in US Multinationals in the UK: Between Micro-Politics and Macro-Institutions’, British Journal of Industrial Relations, 43:4. Lee, E (1997) ‘Globalisation and Labour Standards: a review of the issues’, International Labour Review, 136:2. Michael Muller-Camen, Phil Almond, Patrick Gunnigle, Javier Quintanilla, Anne Tempel (2001) Between Home and Host Country: Multinationals and Employment Relations in Europe Industrial RelIations Journal 32 (5) , 435–448 doi:10.1111/1468-2338.00210 Royle, T (1999) ‘The reluctant bargainers? McDonalds, unions and pay determination in Germany and the UK’. IRJ, 30:2. Tuselmann, H., McDonald, F., Heise, A. (2002). ‘Globalisation, nationality of ownership and employee relations – German multinationals in the UK’. Personnel Review, Vol. 31 No. 1, pp. 27-43. Williams, S and Adam-Smith, D (2006) Contemporary Employment Relations: A Critical Introduction, Oxford, Oxford University Press, pp 61-82. http://www.berr.gov.uk/files/file11423.pdf http://www2.warwick.ac.uk/fac/soc/wbs/projects/mncemployment/conference_papers/ voice_in_mncs.pdf http://www.certoffice.org/annualReport/index.cfm?pageID=annual 10 11

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