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The end of national models? Future of comparative institutional analysis.

David Marsden, LSE

Changing Business, Innovation and Employment Systems

University of Manchester workshop

November 10 2006

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The end of national models? Future of comparative institutional analysis.

• Decline of the ‘national model’• Build up from the micro-level

– Diffusion by inherent advantages and by complementarity

– Complementarity among HR practices

• Clustering of HR practices across organisations• Contracting problems, solutions & external

linkages• Illustration: coal mining and construction as

sectoral systems.

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Erosion of national models

• G: significant: the exemplar of corporatism• German trends: works councils & bargaining

coverage• Nearly 50% of West G employees no B/r

West Germany 1995 1996 1998 2001 % employees 72.2 69.2 67.8 63.1

Source: IAB Panel cited in Kohaut and Schnabel (2003)

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Building up from micro-level

• Not an individualistic agenda, but want to see what macro institutions interact with.

• Evolutionary games: eg Hawk-Dove-Bourgeois (Maynard-Smith)

• Illustrate how a territory rule can emerge from interaction without a central authority

• Rule emergence can be boosted by institutional intervention

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Building block 1: Evolutionary rules Other’s strategy Own strategy

Hold-up ‘Hawk’

Full flexibility ‘Dove’

Job boundary rule ‘Bourgeois’

Total net gains to own strategy

Hold-up ‘Hawk’

-5 (open conflict)

+10 (hawk takes all)

+2.5 7.5

Full flexibility ‘Dove’

0 (dove gets zero)

+2 (protracted

conflict)

+1 1

Job boundary rule ‘Bourgeois’

-2.5 (negative because

bourgeois defends rule

against hawk)

+6 (B wins on own territory & if

interloper plays dove)

+5 (procedura/ regulated conflict)

8.5

Pay-offs to ‘own strategy’ are shown in the rows. Key assumption: cost of serious injury (= -20) > gains of victory (= +10); long contest = -3) Based on Maynard Smith (1982).

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Diffusion processes

• Institutionalisation: mimetic / normative / coercive

• Particularly interested in diffusion by mutual advantage, hence interest in:– Benefits and costs of rule observance– Complementarities among rules

• Supporting institutions

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BB 2: diffusion

• Complementary institutions may shift curves to right– Eg. rules on training and skill content– Eg. Diffusion of job classification principles

• Boost effectiveness & increase adaptability• Weakness is assumption of continuity

Figure 2. Trade-offs in the diffusion of rules.

Gains from sharing a common norm

Cost of conformity

Increasing marginal dissimilarity among firms.

Cost, gain

A

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Discrete Complementarity

• Discrete models– Q(A&B) >Q(A&B’) and

>Q(A’&B)– Ditto for Q(A’&B’)

• Matching process – Level of institutions

(Amable et al: coop IR & l-t finance)

– Level of practices (MacDuffie et al)

• Mutual diffusion of complementary rules / practices

Collective incentive

Individual incentive

Hierarchical control

Participative management

AB

A’B’

AB’

A’B

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Clustering of HR practices across organisations

• HR flows– HR development– Managing performance– Adapting to change

• Moral hazard problems• Solutions: substantive v procedural

commitments• External dependencies

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Approaches to regulating moral hazard in employment relationships

• In search of complementarities:

• Illustrate from HR literature

• Agency, Psych contract, OJ, job design, expectancy, goal setting etc.

• Institutional supports

Focus on substantive outcomes

Focus on procedural regulation

Organisational incentives

Market incentives

‘Efficiency wages’, compensating differentials, ‘transactional’ ethos

Commitment building, fair procedures, diffuse job boundaries, broad rewards

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An illustration at sub-national level• Dunlop’s analysis of HR practices & work rules in

coal mining and construction– Many rules predate legal and TU regulation

– Influence of technology and market organisation

– Influence of contracting issues: defining performance, monitoring & fair rewards

• Ideal is to go beyond Dunlop: WERS/REPONSE/IAB?

• Search for sub-national and cross-national systems

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An illustration of rule complementarities within sectoral IRS

Characteristic of technology and markets

Examples of shared work rules

Isolated communities and dispersed sites Difficulties of measuring work done Hazardous working conditions Water and ambient conditions Need for specialist tools Temporary nature of work Training

Bituminous coal mining

Subsidised housing or rents Concessionary coal Measurement of the coal produced (employee checkweighmen)

Accident and safety rules

Rules for wet conditions or high temperatures Tools and protective clothing allowances

Seniority in lay-offs and re-hiring

Elements of seniority rules

Construction

Travel time and expenses Area wage rates

Protection of standard conditions, even with subcontractors Not mentioned

Bad weather rules: work suspended or dangerous Allowances for craft tools Short notice of lay-off owing to short duration of sites, hiring often regulated Apprenticeship: adapted to transient sites