Impact Of Globalisation On Ir Commerce Essay

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According to Brewster, the employment relationship within an organisation and industrial relations in its entirety are bound by international, national, and organisational constraints. The impact of such limitations, particularly in the midst of an increasingly globalised society, is of particular importance with business continuously extending across regional, national and international boundaries, now characterized by heightened permeability. As reiterated by Schuler (1998), with organisations competing in a global marketplace, it has become increasingly important to recognise the significance of globalisation's effect on industrial relations (IR) and the employment relationship. Of particular importance is the "convergence-divergence" debate, the argument regarding whether Globalisation forces have lead to the convergence of IR practices or if the barriers created by both institutional (hard) and cultural (soft) discrepancies between nations have prevented the pressures for universal isomorphism from engulfing organisation's industrial relations systems. While advocates of convergence stress that changes in markets, technological advancements and shifting managerial forces linked with Globalization compel organizations to converge, to adopt common philosophies and practices and foster homogenization across borders, institutionalism argues quite the contrary. The latter approach suggests that the complex nature of national institutions and cultures act as a counterweight for convergence and are hence, drivers for heterogeneity within organizations and their IR systems (Quintanilla and Ferner,2010). As eloquently stated by Quintanilla and Ferner, 2010, p.363), "At the same time as globalization forces promote the standardization of certain elements of management systems … local culture, institutional arrangements and labour practices manifest the resilience of capitalist variety". Hence, industrial relations systems and the employment relationship in its entirety are shaped by not only unyielding globalization forces, but a broad spectrum of resilient institutional and cultural barriers.

Globalisation: An introduction

1According to Held and McGrew (as cited in Barret and McCallum,1997), Globalisation refers to deep-rooted global interconnectedness, an increase in the permeability of interregional and international borders. It refers to the increase in enduring, meaningful connections between countries, to the convergence of the threads of nations into a single tapestry. Globalization involves the "construction and weaving of networks of interaction and interconnectedness across states and societies which make up the world community" (Barret and McCallum, 1997,p 6). As noted by Lansbury et al (2008), Globalization is a phenomenon linked with (1) capital flows within and across global markets that are becoming increasingly deregulated (2) internationalization of trade / financial markets and (3) the development of stronger links between countries. Petrella (1996, as cited in Barret and McCallum,1997) notes that Globalization is not only associated with increases in trade and the transcendence of international barriers , but global homogenisation through the diffusion of organizational philosophies and strategies.

Table 1: A definition of Globalisation (Adapted from Barret and McCallum,1997)

Principal Characteristics of Globalization

Internationalization of Trade and Financial Markets

Internationalization of Corporate Strategies and Policies

Dissemination of technological developments, knowledge and R&D

Internationalization of regulations, standards and organizational politics

Minimization of trade barriers and improvements in communication networks

Context of Globalisation: Implications for Industrial Relations and the employment relationship

According to McGaughley and De Cieri (2011), Globalization has, undoubtedly, altered the dynamics of industrial relations (work relations processes, institutionalized relationships, legal frameworks and public policies) as a result of the juxtaposition of convergence and divergence pressures. However, while there is general consensus that globalisation's changes to the international economy have significant implications for employment relations, there is less agreement regarding the nature of such consequences (Lansbury et al, 2008). Reinforcing this notion, Vos (2006) and Lansbury et al (2008) argue that there are two contrasting philosophies regarding the effects of globalisation on Industrial relations and the employment relationship. While the convergent perspective advocates that technological and market forces linked with industrialisation are driving IR systems towards uniformity, the divergent standpoint argues that national level institutions maintain cross-national differences and drive heterogeneity within organizations.

According to the convergence hypothesis, globalisation calls for commonality or a common logic of industrial relations that disregards the significance of national discrepancies (McGaughley and De Cieri, 2011, p.236). Hence, as noted by Woywode (2022), heightened technological convergence, greater diffusion of international corporate standards, the growing impact and importance of MNCs (multinational corporations) in global markets and increased permeability of international borders has fuelled the spread of organizational systems and management practices. This, in turn, has caused an increase in similarities between organizations worldwide. Consequently, Lansbury et al (2008) argues that, at its polar extreme, the globalisation perspective predicts a "race to the bottom" of industrial relations practices, eliminating nationally specific adaptations. Further highlighted by Kerr et al (1960), in an increasingly globalised marketplace, both organizational and institutional patterns inherent in industrial societies are becoming increasingly interwoven. Despite the existence of incongruent politics, cultures and ideologies, contingencies such as the deregulation of financial markets, increased capital/labour mobility, substantial expansion of global communication networks, and greater interdependence between firms and have caused a shift of industrial societies and hence, their industrial relations practices, towards a common pattern or universal mould (Kerr et al, 1960) (refer to table 2).


In this regard, globalization poses a significant threat to "the socio-economic basis for national regulatory systems, labour relations and trade union policies"(Vos,2006, p.313). While literature advocates that the majority of organizations have succumbed to demands for universal isomorphism as overwhelming globalization pressures leave no scope for national-level differences , McGaughley and DeCieri (2011) argue that globalization has resulted in convergence only on the surface level. The Institutional and Socio-economic factors embedded in a nation's skeletal framework, while arguably have decreased in significance, still pose a significant barrier to the global convergence of management practices and so, organisations "maintain their culturally based dissimilarities in terms of micro-level variables" (McGaughley and De Cieri,2011). Reinforced by Woywode (2002), despite isomorphic pressures on organizations worldwide, national institutions and cultures are resilient. They are the endospores of a country's underlying framework - unwavering and resistant to the most severe environmental changes and most vigorous of external pressures, globalization included. Thus, while globalization forces may catalyze the diffusion of practices on an international scale, increasing similarities "on the surface" of organizations, the application of the practices themselves will vary across nations. Consequently, while numerous authors advocate that convergence of IR and management practices is an inevitable consequence of Globalisation forces, theorists in support of divergent theory argue that studies regarding the effects of factors such as the macro-economy, governance legislation and national culture on the employment relationship within organizations suggest quite the contrary. The persistence of national variation cannot be underestimated (Vos, 2006).

3As stressed by Woywode(2002), heterogeneity is present and will persist within organizations as a result of discrepancies in both institutional and cultural factors at the national level irrelevant of the industry in which they operate and the external influences to which they are exposed. Empirical research conducted by Pauly and Reich (1997),for instance, emphasized that trends in organizational practices and structures of "leading" MNEs from the USA, Germany and Japan have, in fact, diverged in recent years. Internal governance, financial structures, R&D (research and development) activity, investment portfolios and trading strategies have not followed the predicted pattern of convergence, but rather demonstrate profound, enduring differences between nations. Similarly, Hunter and Katz (2012)noted that employment relations in the automobile industry, particularly in the areas of remuneration, governance, job security and work organization, have retained deep-rooted dissimilarities despite increases in international trade, greater technological diffusion and heightened flows of FDI (foreign direct investment) in recent years. Thus, while pressures for regional, national and international integration exist, socioeconomic and institutional factors prevent IR systems from following a cornucopia of commonality. Linking to this argument, Alder (as cited in McGaughley and DeCeiri, 2011) highlights that globalisation has indeed pressured organizations to converge in regards to macro-level variables such as division of labour, organisational structure and production technology, but numerous practices within the organizations continue to reflect national based dissimilarities. Claims that globalization has contributed to increased isomorphism in organizations through the diffusion of management practices, the transfer of industry "gold standards" and the adoption of operational effectiveness strategies are valid, but only to a certain extent. Adaptation to account for national incongruities is of pivotal importance and so, as noted by Woywode (2002), heterogeneity in the characteristics of organizations and their IR systems will persist. Though globalization may bridge gaps between organizational, regional, national and international boundaries, the crevices that distinguish each firm and each nation remain untouched. Maintaining sight of these differences, organisations' IR and employment relations systems have and will continue to be shaped by the institutional and cultural idiosyncrasies apparent between nations.

Case Study: Impact of Globalisation on IR within the Automobile Industry

According to Hunter and Katz (2012), a notable example within current literature of the divergences present in the complex web that is the employment relationship despite international demands for convergence is that of the Automobile industry. From the beginning of the 1980's, the "Big Three" auto companies - General Motors (GM),Ford and Chrysler in the US faced significant competition from a number of foreign automobile giants such as Toyota whom not only penetrated the American market, but rapidly gained market share through the importation of superior Japanese manufacturing processes such as lean production, Just in Time production, KAIZEN and TQM (total quality management) (Lansbury et al, 2008). According to convergence theorists, such "best practice" or gold standards developed by Japanese car companies within the automobile industry should be widely diffused within the automobile industry today as a result of globalization forces which encourage the spread of superior knowledge, techniques and concepts via the diffusion of "best practice" (Quintanilla and Ferner,2010) .

4As noted by Porter (1996,p.15), firms who hope to survive in an environment suffocating from hypercompetition must "benchmark continuously to achieve best practice". Hence, mirroring Darwin's "survival of the fittest ", it would be expected that American car manufacturers would have quickly imitated the management techniques, new technological advancements and superior means of achieving operational effectiveness developed by firms such as Toyota to avoid hurtling down the precipice of business failure (Dolvik,1999). However, as noted by Hunter and Katz (2012), while the concept and relevant "rules" of such practices have been adopted within the "Big Three", the practices themselves differ significantly between firms and between countries. On a similar note, Lansbury et al (2008), highlighted that while lean production principles have diffused through auto manufacturers, the patterns of uptake were not homogenous. Variation in employment relations, according to the authors, has in fact increased within the car industry as a whole over the past few decades to reflect the national market, regulatory environment and culture within which the firm operates (Hunter and Katz, 2012).

Linking to this notion, Woywode (2002), in reference to the diffusion of the working group concept in French and German Car manufacturers, argued that while the Toyota Model has indeed become more widespread in the auto manufacturing industry, national education systems and industrial relations have caused cross-national differences. Organizations have become increasingly harmonized in matters of principle, such as the appeal of lean production systems, however substantial gaps in socioeconomic and institutional factors between countries have influenced the adaptation and application of the concept itself at firm level (Contrepois et al, 2011). Thus, as argued by Lansbury et al (2008), diversity prevails in the ways such convergence is translated into practical application.

Globalisation: A compromise between Isomorphic and Idiosyncratic Forces

As emphasized by the Automobile Industry, despite Globalization's philosophy and strategic mandate that calls for convergence in organizations and their industrial relations systems, socio-economic and institutional factors remain influential forces in shaping the employment relationship (Hunter and Katz,2012). They act as barriers preventing convergence forces from suffocating firms into homogeneity- they exert an equal pressure for organizations to adapt internal philosophies, practices and policies to fit the national imperative. Further highlighted by Stone and Stone-Romero (2008), a singular method of best practice for IR systems is not feasible in the midst of an increasingly globalised and multi-cultural society. While practices, techniques and philosophies may diffuse through organizations worldwide as a result of globalization, leading to convergence on the surface of firms, this is merely convergence of the flesh, not of the underlying skeletal framework. National culture and institutional factors are deeply instilled into the heart of the continent and so, idiosyncratic tendencies will continue to pose a formidable threat to isomorphism. Thus, as concluded by Quintanilla and Ferner (2010), depictions of trends towards convergence or sustained diversity as mutually exclusive fails to acknowledge the complexity inherent within organizations operating in the midst of heightened globalization. The employment relationship and the policies, practices and philosophies utilised in the management thereof are shaped by both pressures for convergence and national diversity. They are the result of a perpetual play between the diffusion of best practice (global congruence) and the need for adaptation to national idiosyncrasies. Hence, in support of Lansbury et al's (2008) rejection of the convergence/divergence dichotomy, complex interactions between global and national forces shape the employment relationship, not one or the other.


As noted by Woywode (2002), the "convergence-divergence" phenomenon has generated considerable debate within literature over the past decade as claims that globalisation has augmented isomorphic tendencies within organizations' industrial relations systems have been brought to light. While the globalisation approach argues that the convergence of national patterns of employment relations is an inevitable consequence of internationalization of trade and financial markets, the dissemination of knowledge, the minimization of trade barriers and increased harmonization of countries, the institutionalist approach suggest the contrary. According to the latter philosophy, national institutional systems and cultural barriers continue to "play an important role in mediating and refracting common pressures"( Lansbury et al, 2008,p.63). However, convergence and divergence pressures on employment relations are not mutually exclusive. Industrial relations systems and the employment relationship are the result of a highly complex interplay between both forces of isomorphism (globalization) and heterogeneity (socioeconomic/institutional barriers).