Lincoln electric
Siegel and Larson: Labor Market Institutions and Global Strategic Adaptation
Labor Market Institutions and Global Strategic Adaptation:
Evidence from Lincoln Electric
Jordan Siegel and Barbara Zepp Larson
Harvard Business School, Boston, MA 02163, jsiegel@hbs.edu and blarson@hbs.edu
Although one of the central questions in the global strategy field is how multinational firms successfully navigate multiple and often conflicting institutional environments, we know relatively little about the effect of conflicting labor market institutions on multinational firms’ strategic choice and operating performance. With its decision to invest in manufacturing operations in nearly every one of the world’s largest welding markets, Lincoln Electric offers us a quasiexperiment. We leverage a unique data set covering 1996-2005 that combines data on each host country’s labor market institutions with data on each subsidiary’s strategic choices and historical operating performance. We find that Lincoln
Electric performed significantly better in countries with labor laws and regulations supporting manufacturers’ interests and that Lincoln Electric performed significantly better in countries that allowed unconstrained use of incentive-payfor-performance. Furthermore, we find that in countries with labor market institutions unfriendly to manufacturers, the company was still able to enhance its performance significantly by what we term flexible intermediate adaptation.
Key words: global strategy; institutions, labor market; adaptation; complementarity
History: This preliminary draft is dated January 25, 2007. Please do note cite, quote, or circulate without the authors’ permission. ____________________________________________________________________________________
1. Introduction
One of the most significant questions in the global strategy field is how multinational firms should navigate their way through multiple and often conflicting host-country
Labor Market Institutions and Global Strategic Adaptation:
Evidence from Lincoln Electric
Jordan Siegel and Barbara Zepp Larson
Harvard Business School, Boston, MA 02163, jsiegel@hbs.edu and blarson@hbs.edu
Although one of the central questions in the global strategy field is how multinational firms successfully navigate multiple and often conflicting institutional environments, we know relatively little about the effect of conflicting labor market institutions on multinational firms’ strategic choice and operating performance. With its decision to invest in manufacturing operations in nearly every one of the world’s largest welding markets, Lincoln Electric offers us a quasiexperiment. We leverage a unique data set covering 1996-2005 that combines data on each host country’s labor market institutions with data on each subsidiary’s strategic choices and historical operating performance. We find that Lincoln
Electric performed significantly better in countries with labor laws and regulations supporting manufacturers’ interests and that Lincoln Electric performed significantly better in countries that allowed unconstrained use of incentive-payfor-performance. Furthermore, we find that in countries with labor market institutions unfriendly to manufacturers, the company was still able to enhance its performance significantly by what we term flexible intermediate adaptation.
Key words: global strategy; institutions, labor market; adaptation; complementarity
History: This preliminary draft is dated January 25, 2007. Please do note cite, quote, or circulate without the authors’ permission. ____________________________________________________________________________________
1. Introduction
One of the most significant questions in the global strategy field is how multinational firms should navigate their way through multiple and often conflicting host-country