Why Do Some Foreign-owed Multinational Companies Recognize the Union in China while Others Resist?

A key element of comparative employment relations is explaining why diverse labor relations practices persist despite common pressures from globalization.  A great example of this scholarship is the examination of the behavior of multinational companies operating abroad as well as in their home societies.  Multinational companies operating in their country of origin are embedded in a web of rules and expectations for their behavior.  These rules differ from what the company will face in other societies that have their own distinct sets of formal and informal rules. The conceptual foundation underpinning the examination of formal and informal rules that influence actor behavior is called institutional, or more recently called neo-institutional theory.  

In 2014, Kim, Han and Zhao published a study based on neo-institutional theory to examine the behavior of multinational companies operating in China in the mid 2000s.  During this time, China had a policy to encourage multinational companies operating in China to recognize enterprise-level trade unions (gonghui) that are affiliated with the All China Federation of Trade Unions (ACFTU).  Some multinationals did so without hesitation while others resisted recognizing unions in their operations in China.

The authors argue that dual pressures shape MNC union recognition behavior.  One source of pressure is from the home country and the other is from the host country.  They hypothesize that a foreign-owned firm is more likely to recognize unions if it originates from a country in which the legitimacy of collective employee representation is high and also if it is located in a Chinese city in which union recognition is prevalent.  After examining a large data set of 10,108 foreign-owned firms operating in 755 cities in China from 32 nations, the authors found support for their hypothesis.  Below is a graph from their analysis.

Kim, S., Han, J. & Zhao, L. (2014) Union Recognition by Multinational Companies in China: a Dual Institutional Pressure Perspective, Industrial & Labor Relations Review 67(1) pp. 34-59. 

Available to read online at: http://ilr.sagepub.com/content/67/1/34.full.pdf+html