Embedding multinational firms in regional business systems: neoliberal and social‐democratic models in Spain

• Date: 01 January 2018
• Author: Gabriel Pruneda,David Luque Balbona,María C. Gonzalez Menendez,Phil Almond
• DOI: http://doi.org/10.1111/irj.12202
• Published date: 01 January 2018

Embedding multinational firms in regional

business systems: neoliberal and

social-democratic models in Spain

María C. Gonzalez Menendez, David Luque Balbona,

Gabriel Pruneda and Phil Almond

ABSTRACT

The paper analyses how regional actors have mobilised to attract and retain foreign

direct investment in two Spanish regions with different political approaches to the

management of economic issues, including industrial relations. These regions are

Madrid, the main pole of attraction of foreign direct investment in Spain, and

Asturias, with a large tradition of heavy industry and a greater dependence on a small

number of large employers. It finds the regions have adapted to international

competition in substantially different manners and considers the alternative reasons

why this might be the case, highlighting the role of organised labour both in the

inward investment regimes themselves, and in shaping the nature of the different

compromises they involve.

1 INTRODUCTION

This paper explores how international competition to attract foreign direct invest-

ment (FDI) shapes the governance of regional business and employment systems in

Spain. It highlights the importance of the sub-national regional level in institutional

adaptation to the requirements of the international productive system (Almond,

2011; Beugelsdijk and Mudambi, 2013). Specifically, it analyses how regions organise

their business and employment systems to compete for FDI, and the role of industrial

relations actors within this.

In recent years, the growing mobility of productive capital has substantially

modified the role of states as coordinators of the economy. Commentators speak of

a shift from the Keynesian welfare state to the Schumpeterian workfare state, and

from demand-side to supply-side interventions (Jessop, 1993). This has led to

pressures for a ‘hollowing out’of the national state: ‘some state capacities are trans-

ferred to pan-regional, pluri-national, or international bodies; others are devolved

to the regional or local level inside the national state; and yet others are assumed

by emerging horizontal networks of power―regional and/or local―which by-pass

❒María C. Gonzalez Menendez, David Luque Balbona and Gabriel Pruneda, University of Oviedo,

Oviedo, Spain and Phil Almond, Loughborough University London, London, UK. Correspondence

should be addressed to María C. Gonzalez Menendez, University of Oviedo, Ov iedo, Spain; email:

m.gonzalez@uniov i.es

Industrial Relations Journal 49:1, 50–68

ISSN 0019-8692

© 2018 Brian Towers (BRITOW) and John Wiley & Sons Ltd

central states and link regions or localities in several societies.’(Jessop, 1993: 10).

Equally, capital mobility has played an important role in shifting relations between

collective actors from traditions of confrontation in industrial relations to social

partnership (Martínez Lucio and Stuart, 2005).

In this environment, and in a national governance context which gives substantial

autonomy to sub-national regions, we focus on how regional governance may

constitute an arena within which various social actors―governmental actors, the

managers of firms, unions, employer organisations and educational institutions,

among others―attempt to ‘tailor’regional business systems to attract and retain

investment (Phelps and Fuller, 2001). Through a comparative study of two Spanish

regions, we show variations in the strategies deployed to attract and retain FDI,

and in the involvement of different actors in these strategies. The research question

addressed is which factors determine the choice of a particular mode of governance

of regional business and employment systems. We demonstrate that the extent to

which co-ordination mechanisms in the sphere of FDI competitiveness involve

collective industrial relations actors is affected by ideological beliefs on the benefits

of social partnership, but that the political power and legitimacy needs of ruling

parties and the power of trade unions in regional governments also play a significant

role, which may in combination be of even greater importance.

The paper is structured as follows. First, we present the analytical framework used

in the research, alongside some important contextual features of the environment of

regional political economies in Spain. We then present the methodology for our

empirical research, before presenting results for the two regions examined―Asturias

and Madrid. Finally, the discussion and conclusion consider reasons for our findings.

2 ANALYTICAL FRAMEWORK AND CONTEXT

Our analytical framework is based on how global production networks (GPN)

structure, and in part are structured by, political exchange at regional levels. The

GPN literature (Henderson et al., 2002; Coe and Yeung, 2015) is drawn upon

because it goes beyond older, more static accounts of comparative institutional

advantage, in focusing on the continual processes of adaptation between regional

resources and the constantly evolving requirements of firms within GPNs. These

requirements are seen as inherently dynamic; they are always, by definition, ‘in a

process of flux—in the process of becoming—both organisationally and geographi-

cally’(Coe et al. 2008: 272).

Analysing this dynamism requires a relational framework; ‘within a network

framework, it makes sense to conceive of the firm as a relational network embedded

in wider networks of social actors and institutions’(Coe et al., 2008: 277). Focusing

on the relations between firms and territorial actors requires analysis of how regional

social and political actors activate networks to respond to the requirements of

international competition, and to attempt to embed lead firms within their territorial

ambit (Henderson et al., 2002). This enables investigation of potential differences in

the dynamics which may arise in differentregionsofthesamenationalstate:

‘despite certain path-dependent trajectories, regional development remains a highly

contingent process that cannot be predicted a priori’(Coe et al., 2004: 469).

Such research attempts to evaluate Sub-National Institutional Capacity, a concept

derived from economic geography (Phelps, 2000). Following Monaghan et al. (2014:

132), subnational institutions can be defined as ‘the body of local regulatory and

51Neoliberal and social-democratic models in Spain

© 2018 Brian Towers (BRITOW) and John Wiley & Sons Ltd