Societal Effect, Organizational Effect and

Globalization
Frank Mueller*

Abstract

Frank Mueller This paper argues that traditional contrasts between countries as depicted by the
Strategic societal effect approach, among others, may have been over-emphasized. Diverse
Management evidence suggests that aspects of work organization, government policies and
Division, Aston
Business School, training arrangements have changed substantially over the last decade or so, and
multinational companies have been effective in diffusing best practices across
Aston University, borders. One implication is that organizational and globalization effects may
Birmingham,
U.K. complement or even counteract the societal effect. This suggests that some cases,
where the presumption has been that societal effects are dominant, may be open
to a modified analysis.

Introduction

Since the 70’s, there has been a strong research interest in comparative
management and social-science research. One of the early conclusions
of this intense comparative research activity was that instead of the
sometimes silently presumed hegemony of dominant production modes,
there was a clear distinctiveness in the way similar societies solved similar
problems and challenges.
Some authors established persistent significant differences between
business systems. This argument has been modelled as ’National Business
Systems’ (Whitley 1990), business cultures (Randlesome et al. 1990),
as a ’societal effect’ (Maurice et al. 1980), or as the ’neo-contingency
framework’ (Sorge 1990). The basic argument is that social institutions
influence companies’ strategies and organizational practices in a
systematic way, with the result that companies’ structures and processes
reflect typical national patterns. The only sectors that will be strong in a
society are those which harmonize with the prevailing institutions there.
Best (1990: 145) called this the ’institutional specificity of culture’, thus
accounting for the fact that only certain sectors in Japan succeed
internationally, while others do not.
While not questioning the basic tenet that society influences the
407- structures and processes of business organizations, there appears to be
an emerging argument over just how dominant this effect is. Plant-level
studies, for example, found some indications of a convergent
408

development as far as work organization was concerned (Mueller 1992;

Morris et al. 1992).
While some contributions in the early eighties addressed the
methodological and theoretical development of comparativee
management research (Child 1981; Kelley and Worthley 1981; Adler
1983; Negandhi 1983), a focus on content has clearly had the upperhand
since then. The aim of this paper is to bring together two largely separate
strands of discussion, research in the context of comparative industrial
relations and industrial sociology on the one hand, evidence on
globalization, multinational companies (MNCs) and international
business on the other hand. It is characteristic of most studies that thcB
tend to focus either on the institutional side, thereby overemphasizing
differences, or on the aspect of international business, thereby stressing
the aspect of similarity.
The evidence provided will show that a more balanced assessment is
required, and that societal effects are complemented by organizational
and globalization effects. The claim of the ’neo-contingency’ framework,
as far as generalizability is concerned, thus has to be modified. In the

following section, the variations of the societal-effect argument will be

discussed. The third and fourth sections discuss those processes which
appear to weaken societal effects.

Culture, National Institutions and the Societal Effect

The Cultural Effect

Although a cultural effect is obviously related to a societal effect, they

are not identical. Layers of culture can both cross societies (e.g. religious
or linguistic affiliation) or be small pockets within a society (occupational
or company cultures) (Hofstede 1991, 1983). Hofstede’s approach is

broadly in conflict with any assumption of a convergence between the

major industrialized economies. He sees three main reasons why nations
remain important: (a) nations have distinct institutions, rooted in their
unique history; (b) nationality has a symbolic value to citizens, and is
part of their personal identity; (c) people’s thinking is partly conditioned
by nationally specific cultural factors, something Hofstede (1983: 76) calls
’collective mental programming’. Hofstede found large cultural variations
between the subsidiaries of one large organization, namely IBM.
Other authors have analyzed the relationship between cultural factors
(such as trust and commitment) and organizational variables (such as
specialization and centralization) (Tayeb 1988; Dowling and Schuler
1990; Adler 1991), or have looked at how societal-level cultural forces
affect organizations (Feldman 1988). Partly due to Hofstede’s influence
’... the dominant approach has been to equate nations with cultures
...’ (Smith 1992: 40). However, as Schneider (1989) aptly puts it, ’...
many nations are multicultural and many cultures are multinational’.
 409

Hofstede warned against using the term ’culture’ for both nation and
organization, and suggested that corporate culture should be thought of
as a shared perception of daily practices (Hofstede 1991).
However, the analysis of organizational culture has opened the
perspective for cross-border influences of culture, resulting in the
realization that culture can actually make certain structures and processes
in different countries more similar. By means of the multinational
company, corporate culture can have a unifying effect across borders
(Evans et al. 1989). Thus, cultural influences can be discerned within
organizations, which are not necessarily due to societal-level forces.
Organization culture may permeate an MNC and may set a counterpoint
against societal influences. While Hofstede was aware of these influences,
he still maintained that even within a tightly integrated multinational like
IBM, with a strong corporate culture, there were still clearly discernible
societal variations in the varioius subsidiaries.

National Institutions and Comparative Empirical Social Research

Towards the end of the seventies, there were strong arguments against

organizational universalism, as espoused in the ’Aston School’ (Pugh et

al. 1969; Hickson et al. 1974; Hickson et al. 1979; Hickson and McMillan
1981). Comparative social research, based upon matched-sample
comparisons oforganizations located in different countries seemed to
indicate that organizational relationships were shaped in culturally- or
societally-specific ways, thus questioning the Aston findings. Child and
Kieser (1979) and Budde et al. (1982) established that contextual
contingencies were not fixed givens, but could be resolved in several
alternative ways, with different patterns characterizing different societies.
Similarly, Whitley (1990, 1991) established that in Asia environmental
pressures were resolved in societally distinct ways. On this basis, he
distinguishes the Japanese Kaisha, the Korean Chaebol and the Chinese
family-business structure, all constituting disparate ’National Business
Systems’. This implied that there were institutional arrangements specific
to nations, which to a substantial degree shaped the structure and
processes through which business is conducted.
Organizational institutions which have been subjected to detailed
comparisons include financial systems, planning systems and training
institutions. Loveridge (1990) compared the development of the two
major automotive supplier companies, Bosch in Germany and Lucas in
Britain. One significant difference was that (privately-owned) Bosch’s
financing was more tightly integrated into the local banking system with
a resulting longer-term perspective on Bosch’s business development,
while Lucas was highly dependent upon satisfying stockmarket demands.
Kreder and Zeller (1988) compared a sample of German with a sample
of U.S. companies. They found that decentralized, direct, participatory,
socio-emotional control was more prevalent in Germany, while a
systems-oriented, directive, task-oriented concept of control was more
410

prevalent in the U.S. sample. Capon et al. (1980) found greater

commitment to strategic planning in Japanese companies compared to
U.S. firms, where corporate planning was more often jeopardized by a
short-term focus. Based upon systematic comparisons, Prais and Wagner
(1988) established significant differences in the amount of training
received and privileges enjoyed between German and British supervisors
in industry.
Two major studies in the automobile industry in the eighties-
concentrating on Britain and Germany, and partly including the United
States-found systematic differences between subsidiaries of both Ford
and General Motors, and established a significant role of the specific
national institutional environment in shaping these differences. One
study focused on the role of technology in the process of production
rationalization. The study established that Germany’s industrial-relations
institutions (co-determination at company level and works councils at
both company and plant level) facilitated the introduction of modern
production technology (Streeck 1985b; Streeck and Hoff 1983), while in
Britain there was much greater difficulty in modernizing the shopfloor
(Conti 1992; Tolliday and Zeitlin 1986; Marsden et al. 1985). In a
subsequent study in the automobile industry, these results were partly
confirmed, partly modified (Jürgens 1987; Jurgens et al. 1986, 1989).
While work-organization reform was again found to be heavily influenced
by national/institutional factors, technology and innovation management
was also found to show a significant corporate influence, more resembling
a corporate pattern. Country-specific patterns therefore interact with

company-specific profiles to form varying blends (Jfrgens et al.

1989).
In addition to industry-specific studies, broader comparative research was
also carried out. Streeck found that in Germany cooperative structures
in national industrial relations and labour-market institutions have left
the industry with high cost structures which has pushed many (including
automobile) firms into adopting a new ’industrial strategy of upmarket
restructuring’ (Streeck 1988: 20), which has subsequently turned out to
be a godsend, the basis of a ’virtuous circle’. In order to let employees
share in a larger pie, unions and works councils in German industry
were rather cooperative in agreeing to flexible, ’intelligent’ forms of work

organization, and technological change, which had become necessary in

view of the high cost structures (Streeck 1985a). The German union I.G.
Metall has long adopted a generally positive attitude towards
technological change (Mahnkopf 1992) and this, combined with its
insistence on training and skill development has, with hindsight, had a
positive impact both on shopfloor productivity, as well as on the
innovativeness of the industry (Streeck 1991). Crouch (1993) pointed out
that encompassing organizations such as I.G. Metall cannot afford to
ignore the externalities they create-for example when damaging the
prospects of sectors particularly exposed to foreign competition-, and
can thus become pillars of national economic policy. The persistent
 411

influence of the institutional context has thus created viable firms in

Germany, while in an Anglo-American context the Fordist inheritance
remained much more deeply ingrained and more difficult to overcome.

The Societal Effect

A second stream of research during the eighties focused on the

mechanical engineering and chemical industries in Britain, France and
Germany. Earlier studies of these industries had established that British
firms were more ’suited’ for large-batch and mass or process production,
given that there were weak links between worker and technician careers,
much less use of shopfloor and operator programming compared with
Germany, and a substantial communications gap between engineering
and planning functions and the shopfloor (Maurice et al. 1980; Sorge
1983; Hartmann et al. 1983). The later machine-tool-industry studies
(Sorge and Maurice 1990; Sorge and Maurice 1993) found that there is
a correspondence between the institutional structure of society on the
one hand, and organizational forms and human-resource practices on the
other hand. In turn, organizational forms and human-resource practices
correspond to product-market strategies and product-market segments,
were a country shows particular strength.

Theoretically, the most interesting version of the institutional argument

.

has become known as the ’Societal- effect approach’ (SE) (Maurice 1979;
, Maurice et al. 1980; Maurice et al. 1986; Sorge and Maurice 1990), which
asserts that organizational processes such as training, people at work,
industrial relations, and remuneration should be considered as
phenomena within a society, and that consequently the organization-
environment distinction should be abadoned. The approach tries to
determine how actors construct organizations, and how this constructive
process is influenced by the societal fabric in which the actors operate.
The analytical focus is on the connections between different societal
spheres, such as manufacturing, industrial relations, education and
training. For the analysis, both historical and ecological factors need to
be taken into account. Applying this approach to a comparative study of
matched samples in different industries (using unit, batch and continuous
flow-line technology), the authors identify distinct national patterns of
work organization with respect to type of hierarchy, promotion avenues,
wage differentials, and the worker-management ratio. The SE approach
is related to the isomorphism argument; that organizations can be viewed
as ’social entities integrated into the institutional and value structures

constituting the culture of a society. In this view organizations and society

tend to reflect each other structurally’ (Inzerilli 1981).
Societal patterns are related to the prevalence and success of specific
; sectors in the respective economy. Warner (1987), for example, pointed
out that the absorption of prestigious higher schools of engineering into
Germany’s system of higher education is the historical background for
the present strong link between managerial and technical competence in
412

German companies. While Germany does indeed enjoy strength in the

mechanical-engineering sector, the argument would imply a more
substantial comparative advantage than is actualy the case-a fact
acknowledged by Sorge (1991).
While these authors have dealt with significant differences in specific
functional areas, others have compared national systems more broadly.
Lane, for example, argued that a strategy of flexible specialization
became widespread throughout German industry, while in the United
Kingdom a mixture of Fordism and external flexibility remained more
dominant (Lane 1989: 193). Concluding her comparative account of
industrial development and industrial structure in Britain, Germany and
France, Lane (1989: 292) asserted that

’Although the three economies and the business organizations which constitute
them present, being confronted with similar problems and opportunities,
are, at
management, labour and the state in each society continue to interact in
nationally distinctive ways to cope with these challenges. Cultural specificity,
expressed in, and reinforced by, different institutional frameworks has withstood
the strong pressures towards uniformity exerted by advanced industrialism and
an increasingly more gobal capitalist economic system.’

The Neo-Contingency Framework -

The theoretically most coherent and precise formulation of SE arguments

has been provided by Sorge (1991), and we will therefore use his position
as representative of alternative formulations. Different studies in the

eighties appeared to confirm what Sorge (1991) called the

’neo-contingency framework’ (NCF): namely that there is a
correspondence between the institutional structure of society on the one
hand, organizational forms and human-resource practices on the other
hand. (For variations on Sorge’s framework, see Begin 1992; and
Gronhaug and Nordhaug 1992). Organizational forms and human-
resource practices in turn correspond to the product-market strategies
and product-market segments in which a country shows particular
strength. Thus the institutional environment could indirectly explain why
intervening variables such as organizational forms and human-resource
practices can cause a country to be strong in certain product-market
segments. Similar industrial goals in similar task environments can be
achieved in ways which differ substantially in terms of work organization,
organization structure and skill and knowledge requirements (Sorge and
Maurice 1990).
Sorge provides many examples of relationship ’B’, and there is also a
substantial literature starting with Burns and Stalker (1961), continuing
with Miles and Snow (1978), Tushman et al. (1986) and, very recently,
with Huo and McKinley (1992). Our argument will, in no way, imply a
critique of relationship ’B’. However, the more critical and problematic
relationship is that of ’A’ which is basically in the tradition of the
societal-effect approach, as discussed earlier. The main problem with
 413

Figure I
The ’Neo-
Contingency
Framework’

’A’, in our opinion, is that it underestimates the ’organizational effect’

and the influences of globalization. This will be demonstrated in greater
detail in the next section and the one following.

The Argument for Globalization

International Diffusion of Technology

The convergence argument was pursued with regard to technology, econ-
omic development, industrial policies and, more recently, management
style. In line with modernization-convergence theory (Kerr et al. 1960;
.
Dunlop et al. 1975), some argued that institutional differences and
idiosyncracies would gradually disappear. Similarly, technology-diffusion
literature emphasized the increasing convergence of the wealth of coun-
, tries, because of the spillovers of technology across borders (for a discus-
sion see Dosi and Kogut 1993, and Kogut and Zander 1992).
Earlier, Dunlop (1958) had argued that common technology and similar
market constraints in the coal mining industry, had forced the rules in
the industry-with respect to employment conditions, layoff procedures,
and health and safety-to take a similar direction, irrespective of the
,
different national environments. Kerr et al. (1960) and Dunlop et al.
(1975) argued that intrinsic trends in the industrialization process-
mainly the technology needed for mass production -drive industrial soci-
,
.
eties in the same direction, namely that of industrialism. They pointed
out-thus continuing a debate started by Max Weber ( 1921/68)-that
industrialism is characterized by a universal adoption of the modern busi-
ness organization which, in turn, is characterized by formalization, spe-
cialization and division of labour, where authority is based on rules. Kerr
et al.’s contribution can be seen to have highlighted the role played by
the forced universal adoption of similar technology. Subsequently, the
argument was made that industry environmental forces were forcing
plants in different countries to show a fairly common response to modern
technological development.
In mass-market industries innovations, both in process and product tech-
nologies, are likely to follow established technological trajectories.
Altshuler pointed out that, in the car industry, competitive rewards are
particularly high for those product advances which are achieved by giving
simultaneous attention to production economics, manufacturability and
vehicle performance (1985: Chapt. 4). In mature industries, radical
414

innovations become increasingly rare as a basis for competitive

distinction.
In the automobile industry, manufacturers do not only sell the same
model in different countries (within a continent) but, increasingly, they
also use common platforms across continents. In addition, they often
share the same process technology and machine equipment. One might
take one step further and say that within a sector, common product and
process technology suggest a similar type of work organization, even
though certain differences in corporate strategies will remain (Dankbaar
1989).
Another aspect where technology has influenced work organization
rather directly is the increasing demand for a maximization of machine-
running time. Shift arrangements in European car factories have moved
in an overall convergent direction, with a two-shift system remaining
dominant in labour-intensive areas, while a three-shift system has become
standard in capital-intensive areas (Lehndorff 1991). Osterman (1991:
233) found that technological developments had the following unifying
effects on work organization: there is a tighter integration across func-
tions, a greater interdependence of activities and greater speed of
response, and the consequences of breakdowns are more costly. Overall,
it appears that in certain industry contexts there are global technological
and strategic trajectories which companies in various countries follow.
As in the NCF, strategic orientation will shape their internal design of
structure and processes. However, in these circumstances, the strength
of relationship ’A’ (see Figure 1) will be reduced accordingly.

The Globalization Argument

According to some (like Ohmae 1990), recent developments which make
it easier to cross linguistic, trade and structural barriers have put a question
mark over the importance of national institutional barriers. The worldwide
diffusion of technologies, knowledge and information contrasts with the
traditional economics argument, which said that there are substantial dif-
ferences between costs of communication incurred in transferring know-
ledge within a nation and those incurred in transferring knowledge across
borders (e.g. Teece 1977). This argument was used to explain the apparent
fact that knowledge which enabled one nation to achieve high productivity
was not acquired by another, competing, nation.
For others, the benefits of foreign corporations for a country include the
creation of new jobs, payment of taxes, bringing new technology and
knowledge, and even (part) control (Reich 1991). For Ohmae (1990),
capital has become increasingly footloose. There is an internal market
of mobile managers. Increasingly, MNCs have no strong national culture
or identification-and thus are ‘stateless’-and competitive advantage is

largely unaffected by national industrial policy. (A critique is provided

by Hirst and Thompson 1992)
However, Hu argued that if certain criteria are applied-centre of grav-
 415

ity, ownership and control, people, legal nationality, tax domicile-most

so-called TNCs could more appropriately be called national corporations
with international operations (Hu 1992). Similarly, Lazonick (1993) also
emphasizes ownership because a market for corporate control has only
arisen in the United States and the United Kingdom, which implies that
shareholders are sole owners of an enterprise. In contrast to Reich
(1991), he asserts that the national identity of owners matters insofar
that Anglo-American investment trusts will be more short term in their
investment orientation. Another reason why ownership matters is
because of national technology policy. Foreign-owned MNCs threaten
the rapid diffusion of new technologies across borders, which poses the
question of whether a country can fully appropriate the benefits of its
national technology policy. Governments are hesitant to include MNCs
in national technology consortia (Heiduk and Yamamura 1990).
More recently, there has also been renewed emphasis on the role of
the home base, and the societal-effect argument has thus received some
indirect support from the corporate strategy angle. Porter pointed out
(1991) that explaining competitive advantage by referring to a superior
competitive strategy is a less plausible way to stop questions along the
chain of causality (such as ’why has management chosen this route rather
than the management style of the competing firm’?’) than by referring to
the factor-input markets. These include the ways in which a firm acquires
capital (i.e. industry-bank relationships), how it recruits qualified man-
power (i.e. national, regional, or local labour markets and national indus-
trial-relations systems), and how it can build a reputation.
Overall, evidence for Ohmae’s argument can be found. Equally, how-
ever, the limitations of his argument can be pointed out.

Does Politics Still Matter?

An additional argument (emanating from the public-policy literature) is

that dominance of economic and demographic development would
ensure greater similarities between advanced industrial societies and
would leave few possibilities for politicians to have a significant impact,
one way or the other. Some went even so far as to argue that (national)

politics have become relatively unimportant in the formation of policies.

Within this logic, Amoroso (1992: 337) sees the globalization of indus-
tries as the dominant ’threat’ to the established social compromise in
Western European welfare societies.
As long ago as the 60’s, Shonfield detected a process of convergence in
the management of the institutional apparatus, and particularly in econ-
omic planning between Western countries (1965). Wilks and Wright
found that the room for manoeuvre in governments’ industrial policies
has been extremely limited over the past two decades, and that ’There
is, thus, a degree of convergence, in that government activity and transac-
tions constitute a practical relationship with industry, regardless of ideo-
logy or tradition’ (1987: 291).
416

Others, however, pointed out that ’politics is important’ in the sense that
the party composition of governments has a discernible effect on policy
outcomes and thus on the industrial development of countries
(Heidenheimer et al. 1983). The argument was that rather than economic
development as such, the particular political programme adopted has-
especially so at the beginning of a government’s term of office-a discern-
ible impact upon a country’s institutional change. ’Thatcherism’ was the
most obvious candidate to support the idea of ’politics matters’.
While there were some significant variations in industrial, economic,
fiscal and monetary policies in the early eighties, the late eighties and
early nineties witnessed a renewed pressure towards convergence. Bag-
lioni argued that government policies became increasingly similar in the
80’s, and objectives such as achieving higher GDP growth, productivity
growth, low inflation, reduced budget deficits, and restrained wage rises
began to dominate the policy agenda in all countries (Baglioni 1990: 5).
The restructuring of labour markets and privatization have also been
typical policy elements over the last ten years or so. On a European
level, certain economic policy decisions have increasingly been taken
away from national decision-makers, most importantly the decision on
interest rates. Further moves towards European integration along the
Maastricht agenda, will increase the pressure on governments to bring
their national economic policies in line in order to meet the strict conver-
gence criteria. However, the overall effect is contentious. Streeck (1992)
pointed out that in spite of increased international economic coordina-
tion, institutional divergence -especially as far as industrial relations are
concerned-remains.
The European Social Charter is one instrument which should make the
legal framework constraining businesses more similar between the coun-
tries of the EC in order to preempt ’social dumping’ (Due et al. 1991).
While Teague (1991) detected signs of a ’Europeanization’ of national
industrial-relations systems, he also pointed out that these trends should
be interpreted as diffusion of certain policies between countries, rather
than uniformity or harmonization. Grahl and Teague (1991) used the
concept of industrial-relations trajectories in order to account for these
developments.
However, these arguments are not incompatible with the societal effect
argument, because they describe institutional processes which so far
affect only small parts of economic life, and leave most other areas open
to other, national influences. Furthermore, the societal effect model is
open to processes of institutional convergence, and could analyze the
consequences of a more ’Europeanized societal effect’.
A greater difficulty with the previous line of argument is, however, that
the evidence available is very ambivalent. For every example of globaliz-
ation, counter-examples of national differentiation can be provided.
Events as recent as the quasi break-up of the ERM in summer 1993
might be interpreted as providing the way for a re-assertion of national
economic policy agendas. While the ’globalization effect’ undergoes
 417

swings and changes, there is more clear-cut evidence with regard to the
organizational effect, as will be demonstrated in the following
section.

Learning Across Borders and the ’Organizational Effect’

Long-running evolutionary processes in the organizational life cycle have

made nationally based corporations cross borders and continents. For-
eign direct investment is often followed by the transfer of technology,
the transfer of management practices through expatriates or the imple-
mentation of a firm-specific management style. Organizational processes
which appear to be working against the ’Societal Effect’ include techno-
logy diffusion, diffusion of organizational and managerial practices and
greenfield sites. As argued by both strategic management theorists and
’internalization theory’ in economics, a multinational corporation is a
relatively effective mechanism for transferring knowledge across borders
(Bartlett and Ghoshal 1989; Buckley and Casson 1985; Teece 1977).
Evidence for such intra-organizational learning processes can be provided
in various forms, and some of them will be discussed in this
section.

Learning Across Borders

Adler (1990) showed that those plants of an MNC which started opera-
tion later, also started at higher productivity levels. Adler explained this
through ’shared learning’ between the operations of an MNC, and firm-
specific knowledge appeared to cross borders with relative ease.
An argument by Sullivan and Nonaka (1986) can serve to illustrate the
difference between a societal effect on the one hand and an ’organiza-
tional effect’ on the other. Sullivan and Nonaka argue that variety ampli-
fication (e.g. encouraging varied interests and points of view) followed
by variety reduction is the basis for successful management, as demon-
strated by Japanese companies. Greater Japanese capability cannot, how-
ever, be explained in cultural or societal terms, because educational
establishments teach conformity and encourage low mobility, which is
detrimental to variety amplification. Rather, these capabilities develop
in response to labour market and organizational characteristics, and are
the result of a rational analysis of the environment and appropriate
human-resource policies, not only in Japan, but also in the overseas
operations of Japanese companies. This suggests that while societal
effects clearly had an important influence initially, in the case of some
companies at least, these initial influences created a somewhat independ-
ent organizational capability.
A further argument is provided by Mueller (1992) who reports how both
Ford Britain and Ford Spain have embraced a team-based work organiza-
tion which requires more skills in production, much fewer demarcations
418

and more cooperative attitudes, although this was in contrast to their

historical shopfloor practice. Ford Europe transferred best practices and
knowledge across its European operations, even if that involved substan-
tial changes to the ’native’ traditions-as was the case in the United
Kingdom. Multinational organizations whose investment decisions arc
often crucial for the medium- and long-term viability of a plant, have an
additional and powerful leverage in influencing organizational processes
(Mueller and Purcell 1992). The case demonstrates how the organiza-
tional effect can work against, and to some extent neutralize, the societal
effect. (A different, but possibly equally justifiable argument would be
to say that the organizational effect has been modified in societally spec-
ific ways, but this is not the perspective adopted in this paper.)
The third example is provided by Morris et al. who, in their research
into the German and British steel industry, found a similar ’broad traject-
ory of change’ in the two countries (1992: 311), characterized by a pattern
of change comprising a new and integrated work organization, new skills,
and new programmes of vocational training to allow for the production
of higher quality products.
More generally, over recent years there has been increasing, although
scattered, evidence for common developments in European companies:
skill-development strategies among the production workforce; the use of
certain HRM practices; elements of functional and numerical flexibility;
decentralization of management structures; and a shift to plant-level or
enterprise-level bargaining (Mueller 1992; Grahl and Teague 1991;
Grootings et al. 1989; Boyer 1988).
..:. i: ’ ’ .. ’:: èa I’ , ’! ’- L ~
’

Internationalization of ’Best Practices’

.
Within MNCS, benchmarking and the transfer of best practices are
important processes which exchange information within the firm and
between countries. Thus, processes of ’isomorphism’ can work in both
intra-societal and inter-societ a 1/1 nt ra- firm ways.
In the sixties and seventies, the common expectation was that the U.S.
management style would spread around the world and gain dominance
in foreign countries as well. However, from the seventies onward, this
argument was increasingly applied to the Japanese management style. In
(1973) Dore argued that ’welfare corporatism’ would emerge as a form
of organizational control in late developing economies, including Japan,
but that ’reverse convergence’ was the most likely scenario. Confirming
this, he stated in 1989 that indeed organization-based employment sys-
tems played a greater role in many western companies, more and more
of which showed clear intentions of embracing more status-based employ-
ment relationships. Similarly, Lincoln and Kalleberg established, on the
basis of a comparative study on worker commitment in Japanese and
U.S. factories, that there is substantial supporting evidence for the ’wel-
fare corporatist hypothesis of a universally applicable commitment-
maximizing organizational form’ (1990: 251). Ozaki noted that the
 419

Japanese-style management system is becoming part of a global model

towards which different countries are converging (1991:99).
The message of convergence was presented even more forcefully by the
MIT international automobile project, where the performance of
Japanese transplant operations in Europe and the United States was used
in order to justify the conclusion that the lean-production system can be
practised in any national environment, namely North America (Krafcik
1988; Business Week, 14 August 1989; Womack et al. 1990; Rehder 1992;
Kenney and Florida 1993), Europe (Jiirgens et al. 1989; Mueller 1992),
.

and Australia (Gahan 1991). Similarly, the Japanese model of cross-

functional cooperation, simultaneous engineering and rapid product
development has become adopted by both American and European man-
ufacturers, which led Clark and Fujimoto to speak of an ’emerging para-
digm for rapid product development in the world auto industry’ (1989).
Also, this form of organization is related to their increased capability for
learning in vertical and horizontal directions, partly through self-
managed project teams (Imai et al. 1987), but also in the form of net-
works between companies. In the United States, there have been
increased efforts by the auto companies to build such assembler-supplier
..
networks based on relational contracting, trust and cooperation.
Others, however, have doubted that the lean model could be such a
powerful convergent force that it could completely override institutional
.
differences (Berggren 1993). Whitley made the point that Japanese inter-
firm networks have to be understood as part of a society-specific arrange-
ment, where companies are highly specialized within narrow business
.

boundaries and a higher degree of vertical integration (Whitley

1990 ) .
Kochan et al. stressed the role of professional networks in order to
account for the diffusion of organizational policies, in the sense of appar-
ently successful policies or remedies spreading between organizations
thus ensuring that ’organizations tend to become more alike’ (1986: 52).
.
However, greenfield sites are probably an even more important transmis-
sion belt for the adoption of foreign practices. While Buckley and
Enderwick ( 1985 ) cautioned against over-estimating the extent of indus-
j trial-relations innovations practised in foreign-owned firms in Britain, the
overall more widespread evidence suggests that new practices are not
restricted to greenfield sites, but diffuse from these sites to established
.

operations (Dunning 1986; Collard and Dale 1989; Williams et al. 1989;
Oliver and Davies 1990).
The overall evidence, although in many instances not conclusive and
somewhat preliminary, still suggests that a reassessment of the SE argu-
ment is necessary.

A Reassessment of the Societal Effect

While these considerations do not deny the overall usefulness of the
’neo-contingency’ framework, they do suggest three conclusions: on a
420

theoretical note, a first conclusion is that in many instances of organiza-

tional change it might be necessary to look for organizational effects,
either in addition to, or instead of, the societal effect, depending upon
the individual case. Second, and on a different level of argument, one
might be tempted to suggest that broader contextual changes have
brought about a general weakening of societal effects-this is obviously
Ohmae’s (1990) argument. Third, the methodological point is that the
various sides to the argument should become clearer as to what type of
evidence they regard as admissible.
Based on the discussion so far, and building upon earlier synthetic efforts
by Child (1981) and Child and Tayeb (1983), it appears plausible to
distinguish a Societal Effect from an Organizational Effect (OE) on the
one hand, and a Globalization Effect (GE) on the other hand.
The model presented in this paper makes it possible to distinguish
between OEs and GEs. These are sometimes mixed up in expositions of
the convergence thesis. With regard to GEs, stating broad contextual
changes (such as perhaps greater similarities between political ideologies,
or equalization of monetary and fiscal policies across the EC) may ring
true today, but may be much less so only a few months later. On the other
hand, stating that, under certain conditions, intra-societal isomorphistic
processes are replaced by intra-organizational processes of knowledge
transference and best practices is of more general and conceptual import-
ance. Conversely, the societal-effect thesis not only has to show that
societal or cultural forces can influence organizational structures and pro-
cesses-because this is rarely in doubt-but also that SEs consistently
dominate OEs. This is a rather more difficult point to make.
The content argument, namely that there is a trend towards footloose
capital or a levelling of differences (as expressed in the GE) is supported
by only ambiguous and preliminary evidence. The multitude of relevant
variables and potential perspectives will make any early conclusion to
this debate unlikely. Also, the GE has had a greater effect on some
societal institutions than others, and in some cases there appears to be
government drawing lessons (Rose 1991): if routine is disrupted and
policy-makers look at other countries in order to learn something they
do not already know, then the question arises of whether a programme
can be transferred from one place to another, or from one time to
another. Examples of such ’looking at what the neighbours are doing’
include in Germany, lowering the compulsory school leaving age (to end
after twelve years of schooling instead of thirteen). Reducing the length
of university education is also on the agenda in order to reduce the
competitive burden on the public, and to bring Germany more in line
with the practice in neighbouring countries. Britain has looked towards
Germany for the reform of its vocational training system for some years
now. Prominent German bankers have raised the issue of whether, with

increasing liberalization and competition in the financial-services sector

in Europe, Germany’s banks can retain their substantial shareholdings
in industry for longer periods, and distance them from performance con-
 421

xigure 2
3ocietal Effect,
)rganizational
Effect and
31obalization Effect

siderations. However, these points refer very much ongoing

to
developments.
Organizational effects can clearly be evidenced where integrated MNCs
pursue global manufacturing strategies. Aspects of work organization,
the technology-organization interface, workplace training, and
cooperation by local worker representatives has been influenced by the
OE. However, broadly speaking, financial institutions and education still
appear to exert a strong societal effect.
As far as the disappearance of major normative and political divides is
concerned, ambivalent evidence could be found. Similarly, while OEs
can be observed between highly industrialized nations, there would be

greater limits to MNCs transferring their best practices to their subsidiar-

ies in developing countries. Authors comparing very dissimilar countries
will be likely to find a much greater influence of cultural and societal
effects (e.g. Tayeb 1991).
However, as we know, much of the SE literature has compared highly
industrialized countries, and it is in these comparisons, where the balance
needs to be adjusted, in favour of processes of transnational diffusion of
technologies, knowledge and best practices.
422

Conclusion

There appears to be strong evidence that aspects of work organization,

government policies and training arrangements have changed substan-
tially over the last decade or so. While the focus here was on Europe.
we also mentioned evidence from other countries. The implication is that
traditional contrasts between countries which have underpinned the SE
or NCF approach have become weaker. While societal effects continue
to be important objects for comparative studies, the emphasis in this
paper was placed on showing the limitations to societal effects, and on
providing evidence for globalization and organization effects.
These are complementary in some cases, while in others they are contra-
dictory to societal effects. Thus, in many instances, there may be doubt
over whether organizational processes and structures are subject to a

powerful structural isomorphism between firms and societal institutions,

and whether they cannot better be explained by referring, for example,
to the strategies and organizational logic of an MNC.
The OE and GE perspective showed that in certain circumstances, com-
panies are part of larger ’institutions’: they are subjected to a world
market to which they have to adapt; they may be part of an MNC;
or they may be on a global technological trajectory, which demands
standardized responses. In so far as a company draws resources from
these larger (sometimes global) institutions, its internal structure and
processes will be substantially influenced and shaped by them.
This paper has tried to reach a balanced evaluation of the societal,
globalization and organizational effect. The implication is that the article
is less of a critique of the societal effect as such, and more of a theoretical
contribution to redress apparent imbalances in the literature-including
the assumption that societal effects are always the dominant
ones.

*
Note For valuable discussions leading to this paper I am grateful to Peter Clark and John
Purcell. Very helpful comments from two anonymous reviewers are gratefully acknow-
ledged. All remaining errors are my own.

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