Similar, but still different: how US multinational companies in Germany and Switzerland use host‐country training and skill practices

• Author: Kerstin Pull,Marlies Kluike
• Published date: 01 November 2013
• DOI: http://doi.org/10.1111/irj.12031
• Date: 01 November 2013

Similar, but still different: how US

multinational companies in Germany and

Switzerland use host-country training and

skill practices

Marlies Kluike and Kerstin Pull

ABSTRACT

We examine in how far US subsidiaries in Germany and Switzerland display charac-

teristics of a strategic fit with their host country and mostly find support for our

predictions. Subsequently we determine each subsidiary’s host-country fit and test for

within country differences in using local training and skill practices. We find the extent

of continuing vocational education and training and the extent to which training on

the job is important to vary with host-country fit in Germany, while in Switzerland,

as predicted, we find no such relations.

1 INTRODUCTION

Strategically utilising comparative advantages that different country locations offer

has become more and more important for multinational companies (MNCs), also in

terms of employment relations. Among others, the varieties of capitalism approach

(Hall and Soskice, 2001) highlights the comparative advantages different country

locations and their institutional settings might offer. While the varieties of capitalism

approach and its implications have received a lot of attention in the literature (e.g.

Hancké, 2001; Harcourt and Wood, 2007; Heyes et al., 2012; Parry et al., 2008;

Schneider et al., 2010; Teuber et al., 2011; Vitols, 2001b), applications concerning

MNCs and how these may strategically use comparative location advantages are few

and far between.

In this article, we aim to fill this research gap by focusing on two research questions:

First, we analyse whether in their choice of location MNCs use the comparative

advantages that different institutional settings offer according to the varieties of

capitalism approach in terms of employment relations. From this, we deduct a subsid-

iary’s specific host-country fit. Second, we then analyse the role a subsidiary’s host-

country fit plays when it comes to the adoption of local employment relations

❒Marlies Kluike is PhD Candidate, Department of Human Resource Management and Organization,

University of Tübingen and Kerstin Pull is Professor, Department of Human Resource Management and

Organization, University of Tübingen. Correspondence should be addressed to Marlies Kluike, Depart-

ment of Human Resource Management and Organization, University of Tübingen, Nauklerstr. 47, 72074

Tübingen, Germany; email: marlies.kluike@uni-tuebingen.de

Industrial Relations Journal 44:5–6, 495–513

ISSN 0019-8692

© 2013 Brian Towers (BRITOW) and John Wiley & Sons Ltd

practices. The idea is the following: The larger the degree to which a subsidiary is able

to gain comparative advantages from its host-country location (as measured by its

host-country fit), the higher the probability that it uses local employment relations

practices.

By focusing on employment relations comparative location advantages and by

comparing two similar but—as we will argue—still different host-country locations

(Germany and Switzerland), we provide a rather strong test of the varieties of capi-

talism approach in our first research question. With respect to our second research

question, we contribute to the literature on host-country effects (e.g. Pudelko and

Harzing, 2007; Rosenzweig and Nohria, 1994; Schmitt and Sadowski, 2003) by (i)

deriving a measure for a subsidiary’s host-country fit and by (ii) analysing the relation

between the uptake of local Human Resource (HR) practices and a subsidiary’s

host-country fit—separately for the two countries under consideration and control-

ling for a set of potentially important variables.

The article proceeds as follows: In section 2, we start by comparing the two country

locations under consideration (Germany and Switzerland) with respect to their

employment relations systems. We find Germany and Switzerland to form an inter-

esting contrast regarding employment relations with both similarities (e.g. dual

apprenticeship system) and differences (e.g. labour market regulation). Next, we

present the literature and our hypotheses regarding our two research questions. In

section 3, we describe the data. In section 4, we present and discuss our results. The

article ends with conclusions in section 5.

2 THEORY, LITERATURE AND HYPOTHESES

2.1 The differently coordinated market economies Germany and Switzerland

In analysing our research questions on whether multinationals systematically utilise

the comparative location advantages different employment relations settings offer by

(i) choosing an appropriate country location and (ii) adopting ‘local’ employment

relations practices, we focus on US subsidiaries and on the two country locations

Germany and Switzerland. We choose US subsidiaries because US multinationals are

of central importance as investors worldwide (e.g. for the UK, see Clark and Almond,

2004). By concentrating on the two host-country locations Germany and Switzerland,

in terms of the varieties of capitalism approach (Hall and Soskice, 2001) we choose

two rather similar but still different country locations. We do so because—in com-

parison to the United States—Germany and Switzerland represent an ideal test

scenario concerning the different comparative advantages of different employment

relations institutions: Both countries are quite similar with respect to their vocational

education and training systems while they differ a lot with respect to the labour

market flexibilities they offer. Further, in light of the many similarities between the

two countries, we provide a rather strong test of the explanatory power of the varieties

of capitalism approach.

When assessing the two chosen country locations from the perspective of the

varieties of capitalism approach, Germany is a typical example for a coordinated

market economy (Hall and Soskice, 2001) whereas Switzerland—although originally

considered a coordinated market economy (e.g. see Hall and Soskice, 2001; Schneider

and Soskice, 2009)—has more liberal tendencies (Hall and Gingerich, 2009: 458;

Schneider et al., 2010). In terms of the different market economy spheres in which the

496 Marlies Kluike and Kerstin Pull

© 2013 Brian Towers (BRITOW) and John Wiley & Sons Ltd