The impact of country-level factors on the use of new work practices

Journal of World Business 46 (2011) 394–403

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Journal of World Business journal homepage: www.elsevier.com/locate/jwb

The impact of country-level factors on the use of new work practices Andrea Ollo-Lo´pez, Alberto Bayo-Moriones *, Martı´n Larraza-Kintana Departamento de Gestio´n de Empresas, Universidad Pu´blica de Navarra, Campus de Arrosadı´a, 31006, Pamplona (Navarra), Spain

A R T I C L E I N F O

A B S T R A C T

Article history: Available online 16 August 2010

The present work analyses the impact of country-level factors on the use of new work practices such as job rotation, autonomous teams, job autonomy and upward communication. Using employee-level information on 16 European countries from the ‘‘Fourth European Working Conditions Survey’’, the paper shows that the use of these practices is more common in countries with low power distance, high individualism, low masculinity, high uncertainty avoidance, high indirect worker participation and low labour market rigidity. The results help to explain why new work practices vary across countries. ß 2010 Elsevier Inc. All rights reserved.

Keywords: National culture Labour relations system Indirect participation Economic development New work practices

1. Introduction The cross-national diffusion and use of organizational practices has long attracted the interest of academics and practitioners. The intensification of globalization experienced in the last two decades has further stimulated this interest. Academics have assessed and found differences between countries in the use of human resource management practices in order to inform practitioners, particularly those involved in international management, about the countries in which specific organizational practices are likely to be used successfully (e.g. Croucher, Gooderham, & Parry, 2006; Gooderham, Nordhaug, & Ringdal, 1999; Poutsma, Ligthart, & Veersma, 2006; Tregaskis & Brewster, 2006). In spite of the research endeavours carried out to understand cross-national differences in the use of organizational practices, there is still a belief that more needs to be done to comprehend fully the mechanisms that favour or impede the acceptance of a given organizational practice (Guler, Guille´n, & Macpherson, 2002). Therefore, there is a call in the literature for further research on this topic. The literature on cross-national differences in the use of organizational practices draws mainly on institutional theory (e.g. Brewster, Wood and Brookes, 2008; Gooderham et al., 1999; Guler et al., 2002; Kostova & Roth, 2002; Tregaskis & Brewster, 2006). Institutional theory states that firm decisions are influenced by pressures of the environment in which the firm is acting. According to institutional theory, firms will show a tendency to conform to these external demands, given that it may be advisable for them to adhere to existing

* Corresponding author. Tel.: +34 948 169377; fax: +34 948 169404. E-mail addresses: [email protected] (A. Ollo-Lo´pez), [email protected] (A. Bayo-Moriones), [email protected] (M. Larraza-Kintana). 1090-9516/$ – see front matter ß 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2010.07.010

institutional rules and norms (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). As these pressures are homogeneous for all the firms in the same institutional field, a central statement of institutional theory is that firms become isomorphic (Bjo¨rkman, 2006; Meyer & Scott, 1983). Thus, firms that operate in the same institutional field tend to adopt the same organizational practices. Different institutional environments generate different pressures and therefore demand different responses from firms. Hence cross-country differences in the use of specific organizational practices are due to differences in the institutional environment, with countries that generate pressures that favour their use and countries that do not. In the attempt to understand the elements constituting that institutional environment and how they influence the use of practices, the existing literature has shown a particular preference for national culture (Guler et al., 2002). As a consequence, other elements of the institutional environment have not been the focus of research on cross-national differences in the use of organizational practices. That is the case, for example, with regard to labour relations systems. Although the way the labour market and labour relations are regulated or the mode in which such relations have been conducted over the years (i.e. cooperation vs. conflict) define the specific practices accepted by the institutional environment, labour relations have received less attention. The focus on arguments from institutional theory has led many authors to set aside other factors that do not clearly belong to the institutional environment. That may be the case, for example, with regard to the level of economic development. The successful implementation and subsequent use of certain organizational practices requires the firm to have access to certain economic and human resources. For example, new organizational practices may require new investment in areas like equipment or employee training in order to be implemented successfully. These resources are more likely to be obtained in countries with greater economic

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development. However, these considerations have been for the most part absent in previous studies. Another significant aspect of the existing literature is that most of the evidence has been obtained by looking at differences between countries–that is, by including country dummies in the multivariate analyses. The countries selected were identified as being representative of a given culture, system of labour relations, etc. Such an approach generates only limited and indirect evidence about the specific effect of the elements that shape the institutional environment of a country, thereby impeding a more detailed understanding of country-level determinants in the use of organizational practices (Chui & Kwok, 2008). We seek to contribute to this literature by analyzing the factors that determine the cross-national differences in the use of a specific set of organizational practices: the so-called new work practices. The new work practices entail alternative job design practices, such as the membership of workers in work teams with capacity to decide how to organize their job (i.e. autonomous teams), allowing workers to take the decisions in their jobs on issues such as methods or task order (i.e. job autonomy), to rotate tasks with co-workers (i.e. job rotation), as well as practices that give employees the chance to express their opinions to bosses (i.e. enhanced upward communication) (Godard, 2004). They are referred to as ‘‘new’’ in the literature (e.g. Handel & Levine, 2004; Ichniowski, Kochan, Levine, & Strauss, 1996; Ramirez, Guy, & Beale, 2007) as they differ from the more traditional work organization systems, focused on cost minimization and based on job standardization, strict and narrow task delineation as well as low delegation, discretion and participation. Although different aspects may be emphasized (for example, job rotation in multitasking or job autonomy in empowering), new work practices share common underlying values. They all seek to enhance the commitment of employees to the company by means of increasing their abilities and motivation and creating a work context where these can be put into practice (Appelbaum, Bailey, Berg, & Kalleberg, 2000). Compared to traditional work organization, the execution of a larger and more varied number of tasks with autonomy allows workers to acquire more skills of all kinds (technical, analytical, interpersonal, etc.). Motivation is also enhanced because of enriched and challenging jobs. These improvements at the employee-level lead to better firm performance in terms of productivity and, more interestingly, quality and flexibility (Gittleman, Horrigan, & Joyce, 1998). We make several contributions to the current state of the art. First, we consider the influence of several country-level factors in order to gain a better understanding of what determines crosscountry differences in the use of new work practices. In particular, we take into account national culture, the country’s labour relations system and economic development. Second, we go beyond the usual country-effect analysis and study the separate effect of those country-level factors. Hence we are able to provide a more detailed account of their individual effect. Furthermore, we consider the multi-dimensional nature of some of these factors and offer theoretical predictions and empirical evidence on how different dimensions of the country’s culture and features of the labour relations system affect the use of new work practices. Specifically for national culture we consider Hofstede’s (1980, 2001) dimensions. In our analysis of the structure of labour relations we look at the degree of implementation of indirect participation mechanisms for workers and the regulation of the labour market. Third, we provide an integrated model and test of the cross-national differences in the use of new work practices. The resulting model follows the tradition started by of Fombrum, Tichy, & Devanna (1984) and continued by authors such as Budhwar and

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Debrah (2001) or Yeganeh and Su (2008). These authors classified all the relevant environmental factors that influence the use of human resource management practices in three groups: cultural, institutional–political and economic. No empirical evidence exists in relation to the influence of the national context on new work practices (Kirkman, Lowe, & Gibson, 2006).1 Finally, our results help to explain why and how management practices vary across countries. In this way, we try to draw implications for managers and human resource management professionals, so as to enable them to establish the practices that may best fit a given national context. The article is structured as follows. In the next section we provide the arguments that explain the link between three key country-level factors on the degree of use of new work practices. We begin with two central elements of the institutional environment of a country: culture and the labour relations system. We then look at the effect of the country’s level of economic development. Our arguments are summarized in seven hypotheses. The idea driving these hypotheses is that new work practices are to a great extent used by firms in a country as long as they conform to the country’s culture and labour relation system and as long as the country can provide the resources needed to put these practices into operation. The third section describes the dataset, the variables and the methodology used to test the aforementioned hypotheses. The empirical results of the estimations are given in section four. The fifth section comprises the conclusions to the paper.

2. Country-level factors and new work practices 2.1. Cultural factors The definition of national culture most widely used and accepted in the literature is that of Hofstede (1980). Hofstede (1980, 2001) defines national culture as ‘‘the collective programming of the mind that distinguishes the members of one group of people from another’’. He uses five dimensions to describe and measure it. Hofstede’s 1980 study has been subject to intense debate and monitoring. For example, Sondergaard (1994) reviews 550 papers that use the work of Hofstede, either to corroborate it (Ferna´ndez, Carlson, Stepina, & Nicholson, 1997; Sondergaard, 1994) or to refute it (Jeanquart-Barone & Peluchette, 1999; Schramm-Nielsen, 2000). The opponents of Hofstede’s framework offer several critiques: the inadequacy of extrapolating the results extracted from only one company to a whole country (Goodwin & Goodwin, 1999), the fact that the cultural dimensions used are at country level and not individual level (Armstrong, 1996) and the small number of dimensions (McSweeney, 2001). However, in spite of these criticisms, the definition of the dimensions proposed by Hofstede has been widely accepted and used in research on international management (Newman & Nollen, 1996; Luthans, Marsnik, & Luthans, 1997), as a basis to compare cultural groups (Triandis, 1982; Schwartz, 1994; Todeva, 1999), supporting in addition Hofstede’s idea that existing cultural differences remain throughout history (Child, 1981). The results obtained by Hofstede in his first study, as well as its importance for the studies of national culture in the organizational context, were corroborated and strengthened after the second revised edition of his book (Hofstede, 2001). For these reasons, in this paper we adopt 1 However, there is empirical evidence indicating that other human resource management practices such as compensation systems (Newman and Nollen, 1996), selection practices (Ryan, McFarland, Baron, & Page, 1999) and supervision and enrichment in the workplace (Aycan, Kanungo, Mendonca, Yu, Deller, Stahl, & Kurshid, 2000) vary according to national context.

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Hofstede’s framework to analyse the influence of national culture on the use of new work practices.2 2.1.1. Power distance Power distance indicates the extent to which the less powerful members of organizations and institutions expect and accept that power is distributed unequally (Hofstede, 1991). Previous studies have shown how power distance influences not only the use of elements of status, but also the centralisation of decisions and the preferences of individuals regarding styles of leadership (Newman & Nollen, 1996; Pheng & Yuquan, 2002; Raghuram, London, & Larsen, 2001; Schramm-Nielsen, 2000; Sondergaard, 1994). In particular, it has been shown that the greater the power distance, the more individuals will prefer more autocratic management styles, in which superiors have all the power and lower level employees limit themselves to accepting the commands they are given (Bochner & Hesketh, 1994; Jeanquart-Barone & Peluchette, 1999). New work practices involve greater levels of employee participation, with workers performing their tasks under lower levels of authority, involving a levelling of the hierarchical structure of the organization (Pfeffer, 1998). For example, the introduction of job autonomy and autonomous teams not only means that employees work under lower levels of supervision and participate more in the company, but also that they have the freedom to decide on working methods and working pace. In line with this argument, Hofstede (1991) showed that employees in countries with low power distance are less dependent on their manager(s). Therefore, it is expected that the greater the power distance, the more likely it is that employees will feel uncomfortable in a workplace that promotes employee participation, as it is at odds with their national culture, according to which superiors have the power and subordinates must accept their commands (Newman & Nollen, 1996). Taking the above arguments into account, we formulate the following hypothesis. Hypothesis 1. Power distance is negatively associated with the use of new work practices. 2.1.2. Individualism/collectivism Individualistic cultures put emphasis on the needs of the person, whereas collectivistic cultures concentrate on the needs of the group. This leads people in collectivist countries to act in favour of the interests and objectives of the group (Noordin, Williams, & Zimmer, 2002; Pheng & Yuquan, 2002; Triandis, 1989), looking above all for the maintainance of cordial relations within the group (Kozan, 1997; Schermerhorn & Bond, 1997). On the other hand, people in individualistic cultures are more concerned about the consequences their activities have for their own interests and objectives. Therefore, the degree of individualism or collectivism is likely to affect the way work is organized, since social relations arise and are important in the workplace. While the new work practices fit nicely with the system of values of collectivistic countries, they generate group integration and cohesion dynamics that are at odds with the preferences of individualistic societies. Taken globally, new work practices not only seek to favour employees’ use of their knowledge but also to motivate employee integration and commitment to the firm (Gould-Williams, 2004). Additionally, the participation and autonomy levels granted by the new work practices need to be complemented with horizontal coordination mechanisms. These 2 Since the score of the long-term orientation dimension is not available for a significant number of countries in our sample, it has been excluded both theoretically and empirically from our study.

horizontal coordination mechanisms complement and at times replace traditional, hierarchy driven, vertical coordination mechanisms. The need for horizontal coordination is likely to maintain and even increase the relations and solidarity between people in the organization. The employees involved in the new work organization practices share physical space, as well as working time and even responsibilities, which implies greater interaction among them. This, in turn, reinforces work relations and fortifies group cohesion. Because new work practices emphasize group level values it seems clear that countries with individualistic cultures will not push for the implementation and use of new work practices in their firms as much as collectivistic countries. Therefore, we expect firms in individualistic countries to be more reluctant to use the new work practices. Hypothesis 2. Individualism is negatively associated with the use of new work practices. 2.1.3. Feminity/masculinity Masculinity connotes the importance attached to earning power, recognition and promotion, whereas femininity indicates the importance attached to good relations with supervisors, cooperation, quality of life and employment security (Dawar, Parker, & Price, 1996; Hofstede, 1980; Swaidan & Hayes, 2005). According to Hofstede, masculine societies are those in which the ‘‘ethos’’ of work tends to be ‘‘to live to work’’, because they put more emphasis on results, competitiveness and the work in itself than on life outside work. Therefore, organizations in masculine societies will put more emphasis on the fulfilment of the duties at the expense of individuals’ needs. We expect masculinity to have a negative influence on the use of new work practices, since they provide important intrinsic rewards to workers (Eriksson & Ortega, 2006). Working under these practices, employees enjoy greater levels of decision power and job autonomy, which improves their self-esteem. Additionally, many of them urge employees to cooperate with colleagues, reinforcing their sense of belonging. Similarly, employees establish more relations with superiors, favouring their integration within the firm (Earley & Mosakowski, 2000). All these intrinsic rewards are highly valued within feminine cultures but not within masculine ones. Consequently we hypothesise that: Hypothesis 3. Masculinity is negatively associated with the use of new work practices. 2.1.4. Uncertainty avoidance Uncertainty avoidance is defined as the extent to which the members of a country feel threatened by uncertainty and unknown and ambiguous situations. Individuals in societies with high uncertainty avoidance regard security and certainty as important. Because of this, they demand mechanisms that increase their sense of security in uncertain situations (Raghuram et al., 2001). In organizations, this dimension becomes evident through the degree to which the relations, processes or work systems are clarified and detailed in structured plans of work (Jeanquart-Barone & Peluchette, 1999; Rodrigues & Kaplan, 1998). Uncertainty is reduced by the number and clarity of the elements described in reports, in such a way that the feeling of anxiety and uncertainty faced by employees in unknown situations is reduced through these actions (Dawar et al., 1996; Punnett, 1998; Swaidan & Hayes, 2005). Therefore, we expect employers in countries with high uncertainty avoidance would be more likely to promote work strategies that increase control over the processes and plans of work of their employees, as well as over their results.

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New work practices generate a more uncertain work environment and consequently we expect to observe lower levels of implementation of such practices in countries that rate highly in uncertainty avoidance. These new work practices propose a less structured and standardized work environment with higher participation and responsibility levels. Higher autonomy and freedom come at the cost of correspondingly higher responsibility (Barker, 1999). In short, it means that workers face a more uncertain environment, in which they have to make decisions without knowing the consequences, as compared to situations where they are given clear instructions. Therefore, the less structured work environment involved in the new work organization is less likely to be implemented in countries in which uncertainty avoidance is high. This prediction is reflected in the following hypothesis: Hypothesis 4. Uncertainty avoidance is negatively associated with the use of new work practices. 2.2. Labour relations system The labour relations system is another significant element of a country’s institutional environment. Two key aspects of this system are the extension of indirect participation, particularly through unions and collective bargaining, and the regulation of the labour market. 2.2.1. Indirect participation One of the central elements of the labour relations system is indirect participation, which refers to worker participation in the decision-making process through some form of representation (Levine & D’Andrea Tyson, 1990). Typically this representation is performed by union representatives who exchange opinions and bargain with managers and owners about work and workplace issues. The way this indirect participation mechanism is organized and regulated as well as the bargaining power and influence of employee representatives varies across countries. The degree of indirect participation of workers in a country is likely to influence the use of new work practices. In countries where indirect participation of workers is strongly guaranteed by legislation, there is an important tradition of employees having a voice on work issues. This is not the case in countries where the labour relations system does not provide them with a formal channel for such representation. Workers and managers in these countries should be more used and open to other mechanisms, such as new work practices, that grant employees more decision-making power. For example, job autonomy allows workers to decide about issues such as, for instance, the way the job is performed. The implementation of direct upward communication mechanisms between the worker and the firm provide the former with the opportunity to make suggestions about how the department or company is run. This kind of practices or behaviours seems to fit better with a pluralist labour relations context where interaction between employee representatives and the company is encouraged. In the end the existence of indirect and direct (through new work practices) participation mechanisms would be the reflection of a society that believes workers should have a say in decisions about work and the workplace. While indirect participation is usually concerned with issues outside the job as such, such as employment conditions and pay at the firm level, direct participation would be the way for the worker to participate in her daily tasks. Indirect participation can also favour the use of new work practices from another perspective. New work practices require the development of specific skills by workers as well as an atmosphere of trust between managers and employees. One

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important condition for this is a long-term employment relationship (Osterman, 1994). In this sense, unions may be beneficial for the use of new work practices, since they contribute to the achievement of employment stability through lower turnover (Bennett & Kaufman, 2004). For these reasons, we anticipate new work practices to be used more in countries where indirect participation is promoted by the labour relations system and, therefore, is higher. Hypothesis 5. Indirect participation of employees is positively associated with the use of new work practices. 2.2.2. Rigidity of the labour market Modern economies rely on systems of labour regulation to improve labour conditions and to protect jobs in order to guarantee workers a minimum standard of living. These systems regulate, for example, working days, the payment of indemnifications for dismissal and minimum wages. The intensity of this regulation is not uniform across countries, ranging from tight regulation to quite high deregulation. As argued below, these differences in regulation are likely to explain some of the variation in the use of new work practices across countries. Previous studies have highlighted that new work practices improve a firm’s internal flexibility, since they require workers to be versatile and trained to perform different tasks (Cappelli & Neumark, 2004). Under new work practices, the range of strategic options available to firms is wider, since, for example, functional subcontracting can be reduced or new products and services can be offered in the market. The use of flexibility enhancing practices (e.g. new work practices) is dependent upon labour market regulation. The flexibility of the labour markets moves beyond firm boundaries, in such a way that its absence outside the firm is translated into a lack of internal flexibility. It can be said that the norms and rules that govern the country’s labour market filter down into the firms. That is, the set of values and preferences that give raise to labour regulation also constrain managerial action inside the firm, promoting a tightly delineated organization of work. Thus, rigid labour markets create rigid workers and employers, reluctant to be flexible in work assignments and prone to traditional job demarcations. As Bloom, Dorgan, Dowdy, and Van Reenen (2007) argue, flexible labour markets encourage firms to adopt best management practices, such as new work practices. Hence we expect new work practices to be used more in countries where labour market is less rigid. Hypothesis 6. Labour market rigidity is negatively associated with the use of new work practices. 2.3. Economic development The level of economic development of a country influences several key aspects for companies, so that it largely conditions the management practices adopted by employers. It is expected that the extension of new work practices will not be free of these effects. Several reasons can be mentioned to support this statement. First, the introduction of new work practices requires not only time but also investment, whose full benefits are reaped in the long term (European Commission, 2002). As the economic development level of a country is an indicator of the wealth and resources that individuals and organizations enjoy, it seems that in more developed countries firms should have better access to the financial resources needed to implement these practices. Secondly, the availability of skilled employees is another characteristic associated with economic development. Consequently, it is important for the good management of the firm to

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have qualified managers at all hierarchical levels (Bloom et al., 2007). In the case of work organization it must be noted that the lower the degree of skills of those in charge of management, the greater their preference to concentrate on traditional forms of work organization (Erickson & Jacoby, 2003). The participation of employees in decision-making associated with new work practices (Pfeffer, 1998) involves a reduction in the number of hierarchical levels and the loss of power by managers, which causes many of them, especially those less qualified and less educated, to argue against the use of such practices (Kochan, Katz, & McKersie, 1986). Conversely, more qualified and educated top managers are more aware of advances in management such as new work practices (Huselid & Rau, 1997). Therefore, more educated managers are more likely to adopt them, which leads to the expectation of a positive association between their incidence and the economic level of the country. Hypothesis 7. The level of economic development of the country is positively associated with the use of new work practices.

3. Data and methodology 3.1. European working conditions survey The data used in the empirical part of the present study come from the Fourth European Working Conditions Survey, conducted by the European Foundation for Living and Working Conditions in 2005. One of the objectives of this survey is to provide an overview of the situation of labour conditions in Europe, as well as of the nature and content of changes affecting workplaces. It provides comparative information on the conditions of work and employment of employed persons in different EU countries. The sample of the EWCS is representative of the persons in employment (employees and self-employed) during the fieldwork period in each of the countries covered. In each country, the EWCS sample followed a multi-stage, stratified and clustered design with a ‘random walk’ procedure for the selection of the respondents at the last stage (except for Belgium, Netherlands, Sweden and Switzerland, where the selection of the respondents was made using a phone register). All interviews were conducted face-to-face in the respondent’s own household. The target number of interviews was 1,000 in all countries except Cyprus, Estonia, Luxembourg, Malta and Slovenia, in which it was 600. The fieldwork was carried out from 17 September to 30 November 2005, with different durations by country but an average of seven weeks. The total number of interviewers involved in the survey fieldwork was 2745 who visited a total of 72,300 households, in which 29,766 interviews were actually carried out. This data set has been completed with additional country-level information extracted from diverse sources, as indicated below. Since this country-level information is not available for all the countries included in the survey, the data used have been restricted to 16 countries (Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Italy, the Netherlands, Poland, Portugal, Spain, Sweden and the United Kingdom). Throughout the empirical study, only the data on salaried employees are used. The initial sample comprises 10,229 observations, but, because of missing data, fewer observations are used in the estimations. The exact sample size is indicated for each model. 3.2. Dependent variables Four core new work practices are measured. Job rotation is measured through a dummy variable that takes value one when

work requires rotating tasks with colleagues, and zero otherwise. The presence of autonomous teams is captured by means of another dummy variable that takes value one when the worker does his/ her job or part of it as part of a team whose members have the right to decide the division of tasks, and zero otherwise. Job autonomy is measured by means of an index (a = 0.744) defined by the sum of three dummy variables relating to the employee’s capacity to choose and change the order of tasks, the method of work and the speed of work. Upward communication is also measured through an index (a = 0.607) defined by the sum of three dummy variables that indicates whether or not in the last 12 months the employee has been consulted on changes in the organization of work, whether or not she is subject to formal regular evaluations on her performance and, whether or not she discusses problems related to her work with her manager. The definitions of these dependent variables and their descriptive statistics by country are shown in Table 1. The data summarized in Table 1 shows the existence of variations in the use of new work practices across countries. Factor analytic techniques showed that while rooted in the same managerial philosophy the four practices considered do not load in a unique latent factor. Rather, they appear as separate dimensions. Although these dimensions are positively correlated with each other, these relationships are not strong enough to consider them a reflection of the same underlying factor. This suggests that firms that implement one of the practices do not necessarily implement the others. The reason for it could lie on the complexity of new work practices emerging from different aspects of work organization (such as teamwork, multi-skilling, participation or empowerment) converging on them. Our findings seem to indicate that firms involved in new work practices tend to use them together, but not with the same intensity. By considering the different dimensions we will be able to check whether the countrylevel factors considered in the study show different links with different new work practices, or conversely relations are stable across practices. Consequently, these practices are to be analyzed separately. 3.3. Independent variables The independent variables are the country-level factors analyzed in the previous section. This information has been extracted from various international databases. In particular, the four dimensions of national culture considered were obtained from Hofstede’s website. Two different indices are used to capture the country’s labour relation system. The first index measures the degree of indirect participation of employees in the labour relations system of the country. It is defined as the average of union density, workers’ representatives coverage and collective bargaining coverage in the country. Through this index we try to capture the influence of unions in the labour market as opposed to a situation where employment conditions are determined individually and there are no intermediaries between the worker and the employer. Data refer to 2004 and were collected from the European Foundation for the Improvement of Living and Working Conditions EFILWC (2004). These three variables were factor analyzed. Only one factor emerged with eigenvalue greater than one, loading the three variables on this single factor. Since factor loadings were similar, an index was created by averaging the three variables. A larger value of this index indicates greater indirect participation of workers in the labour relations system of the country. The second index measures the rigidity of the labour market. The scores were extracted directly from the work published by Botero, Djankov, LaPorta, Lo´pez-de-Silanes, and Shleifer (2004). These authors computed the value of this indicator of labour market rigidity as the average value of four sub-indices measuring

Table 1 Definition and mean of the variables by countries. AT Job rotation

BE

CZ

DK

FI

FR

DE

EL

HU

IT

NL

PL

PT

ES

SE

UK

0.537

0.453

0.718

0.482

0.379

0.510

0.608

0.294

0.388

0.665

0.496

0.316

0.296

0.545

0.561

0.369

0.348

0.294

0.498

0.558

0.224

0.346

0.183

0.275

0.214

0.417

0.264

0.208

0.194

0.562

0.374

1.797 0.578

2.210 0.740

0.157 0.533

2.469 0.868

2.262 0.813

1.969 0.676

1.783 0.503

1.572 0.462

1.896 0.576

1.744 0.444

2.236 0.787

1.744 0.553

1.766 0.523

1.652 0.570

2.421 0.874

0.647

Your methods of work? 0 = no, 1 = yes 0.570 0.758 Your speed or rate of work? 0 = no, 1 = yes 0.682 0.718 Upward communication 1.358 1.358 1.645 Over the past Been consulted about changes in the 0.509 0.564 12 months have you: organization of work and/or your working conditions? 0 = no, 1 = yes Been subject to regular formal assessment 0.399 0.416 of your work performance? 0 = no, 1 = yes Discussed work-related problems with 0.478 0.669 your boss? 0 = no, 1 = yes National culture Power distance 11 65 Individualism 55 75 Masculinity 79 54 Uncertainty avoidance 70 94 Labour relations system Indirect participation of employees 64 70.33 Labour market rigidity (0–1 scale) 0.500 0.513 Economic development GDP per capita (in PPS) (average 129 121.2 Europe = 100)

0.522 0.538 1.632 0.449

0.826 0.804 1.635 0.566

0.727 0.738 2.188 0.727

0.638 0.665 1.206 0.414

0.690 0.606 1.176 0.387

0.473 0.639 1.616 0.500

0.609 0.716 1.632 0.502

0.631 0.689 1.179 00.363

0.719 0.736 2.021 0.816

0.554 0.666 1.346 0.419

0.621 0.629 0.983 0.265

0.492 0.601 1.230 0.396

0.913 0.648 1.814 0.625

0.547

0.540

0.347

0.636

0.259

0.346

0.403

0.385

0.267

0.503

0.388

0.341

0.340

0.450

0.540

0.667

0.745

0.829

0.539

0.460

0.725

0.749

0.559

0.704

0.546

0.380

0.500

0.743

0.634

Job autonomy Are you able to choose or change

57 18 33 68 35 60 58 74 63 71 67 35 57 16 26 43 66 57 74 23 59 86 65 112 33.67 76.67 81 54.33 43.33 42.33 0.520 0.572 0.736 0.744 0.701 0.518 75.4 126.1 116.7 110.5 116.8 94

46 50 38 80 76 80 88 70 14 82 75 53 31.67 56.67 56.67 0.377 0.649 0.725 63.4 107.1 129.7

0.636 0.681

68 63 57 31 35 60 27 51 71 89 64 31 42 5 66 93 104 86 29 35 24.67 46 46 85 37 0.639 0.808 0.744 0.740 0.282 50.8 74.9 101.4 125.2 122.2

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0.526

Autonomous teams

Does your job involve rotating tasks between yourself and colleagues? 0 = no, 1 = yes Does your job involve doing all or part of your work in a team in which the members of the team decide by themselves on the division of tasks? 0 = no, 1 = yes 1.797 Your order of tasks? 0 = no, 1 = yes

AT = Austria; BE = Belgium, CZ = Czech Republic; DK = Denmark; FI = Finland; FR = France; DE = Germany; EL = Greece; HU = Hungary; IT = Italy; NL = Netherlands; PL = Poland; PT = Portugal; ES = Spain; SE = Sweden; UK = United Kingdom.

399

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Table 2 Probit and ordered probit results of the influence of national factors on the use of new work practices. Job rotation Power distance Individualism Masculinity Uncertainty avoidance Indirect participation of workers Labour market rigidity GDP per capita in PPS R2 N Chi square Estimation method R2 with control variables only R2 with control variables and country dummies

0.967 (0.695) 0.323 (0.666) 1.293*** (0.387) 0.722 (0.590) 0.622 (0.375) 1.115* (0.525) 0.484 (0.484) 8.51% 9448 343.91*** Probit 5.09% 11.75%

Autonomous teams *

1.004 (0.411) 0.615* (0.275) 0.383 (0.354) 0.040 (0.350) 0.668* (0.322) 0.034 (0.376) 0.387 (0.219) 11.89% 9419 507.86*** Probit 6.29% 13.11%

Job autonomy **

0.840 (0.299) 0.971*** (0.278) 0.943*** (0.216) 0.553* (0.282) 0.524** (0.198) 0.439* (0.193) 0.400*** (0.091) 13.65% 9544 724.80*** Ordered probit 10.44% 14.11%

Upward communication 1.699*** (0.579) 1.277** (0.449) 1.652*** (0.333) 1.469* (0.471) 0.054 (0.463) 1.364*** (0.360) 0.436 (0.264) 12.02% 9502 319.48*** Ordered probit 8.76% 15.20%

Control variables included: sex, age, level of education, family structure, occupation, full-time employment, temporary employment, firm size, public sector and industry. Standard deviation in brackets. Except for the rigidity of the labour market (0–1 scale), coefficients are reported multiplied by 100. * p < 0.05 ** p < 0.01. *** p < 0.001.

the cost of alternative employment contracts, increasing hours worked, firing of workers and dismissal procedures. The higher the value of this index the higher the cost to the employer of deviating from a completely rigid contract, where the conditions of employment cannot be modified and the worker cannot be fired (Botero et al., 2004). Finally, the country’s level of economic development was measured by the Gross Domestic Product (GDP) per capita in purchasing power standards, provided by EUROSTAT (2008), in relative terms with 100 corresponding to the average GDP of the European Union. To reduce reverse causality concerns, the value of the GDP per capita used relates to 2004. Basic information on these variables, as well as their descriptive statistics by country, can be seen in Table 1. 3.4. Control variables A series of control variables that, according to previous literature, influence the use of new work practices are included (Chi, Freeman, & Kleiner, 2007; Murphy & Southey, 2003; Pil & MacDuffie, 1996). These variables capture employee characteristics (sex, age, level of education, family structure, occupation), employee activity (full-time, temporary contract) and firm characteristics (firm size, public sector, industry). 3.5. Methodology Probit models were estimated for binary dependent variables, whereas ordered probit models were used when the dependent variables were an ordered scale. In order to prevent the problems derived from biased standard errors when combining micro-level (employee) with macro-level (country) data, models are estimated using Moulton’s (1990) correction. In addition, it should be mentioned that condition indices and variance inflation factors show values below the usual thresholds of 30 and 5, respectively (Judge, Carter, Giffiths, Lu¨tkepohl, & Lee, 1988), indicating that multicollinearity is not a problem in our models. 4. Results Results show (Table 2) that all the dimensions of national culture affect the use of new work practices. The estimates show that individuals in countries with less power distance are those that participate more in autonomous teams, in upward communication and have more job autonomy. The effect of power distance on job rotation is not significant. Consequently, our results provide

support for Hypothesis 1, according to which power distance has a negative impact on the use of new work practices. We have also found that individualism has positive effects on the use of autonomous teams, job autonomy and upward communication. Thus, Hypothesis 2 is rejected. Masculinity, the third dimension of national culture considered, shows a negative effect on the use of job rotation, job autonomy and upward communication. Hence, we find strong support for Hypothesis 3. Uncertainty avoidance has a positive effect on the use of job autonomy and upward communication. Therefore, we do not find support for Hypothesis 4, according to which uncertainty avoidance compromises the use of new work practices. As far as the effect of indirect participation of workers in the country’s labour relations system is concerned, our estimates show a positive effect on two of the new work practices analyzed: the use of autonomous teams and job autonomy increases with the extent of indirect participation. Consequently, we find partial support for Hypothesis 5. The other element of the labour relation system analyzed is labour market rigidity. Consistent with Hypothesis 6 we observe that it is negatively associated with the use of job rotation, job autonomy and upward communication. As regards the effect of economic development, we observe that the greater a country’s GDP per capita, the lower the use of job autonomy. The effect on the use of the other three new work practices is not significant. According to Hypothesis 7, economic development level should have a positive effect. Therefore, we find no support for this hypothesis. From Table 2 we can also infer the capacity of our independent variables to explain the cross-country differences in the use of new work practices. For each practice we provide the R-squared of the reported model as well as the R-square of two additional models, one including only the control variables and another one that also includes country dummies. In the case of job rotation our independent variables captured 51.35% of the country effect.3 For autonomous teams and upward communication the independent variables explained 82.11% and 87.47%, respectively, of the country effect. Finally, for upward communication, 50.62% of the country effect was explained by country-level factors. We can therefore argue that the country-level factors considered in the paper explain a large proportion of the variation in new work practices due to country effects. 3

It has been calculated as ðR2model  R2control  R2control variables Þ  100.

dummies

2 variables Þ=ðRcontrol variables and country

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5. Discussion and conclusions The aim of this paper was to contribute to the literature on the determinants of cross-national differences in the use of organizational practices by testing a series of hypotheses about the impact of country-level factors on the use of new work practices. With the caution demanded by the limitations attached to single item binary variables in measuring some of the dependent constructs and the usual causation caveats, our study shows that countries with a lower degree of masculinity and lower rigidity of the labour market show a higher degree of use of job rotation. In addition, countries with lower power distance, greater individualism and greater indirect participation of workers (through trade unions, employee representatives and collective bargaining) use more autonomous teams. Moreover, countries with lower power distance, greater individualism, lower masculinity, greater uncertainty avoidance, greater indirect participation, lower rigidity of the labour market and lower economic development level grant workers more job autonomy. Finally, it has been reported that countries with less power distance, more individualism, less masculinity, more uncertainty avoidance and less rigid labour markets use upward communication devices more frequently. Our theoretical framework captures the idea that new work practices are to a great extent used by firms in a country as long as they conform to the country’s culture and labour relation system and as long as the country can provide the resources needed to put these practices into operation. While in general our findings support this view, there are issues that deserve further consideration. In the first place our framework was considering both institutional (i.e. culture and labour relation system) and economic (i.e. degree of economic development) factors. According to our results, institutional factors are more relevant than the economic factor considered in our analysis, at least in the context of European countries. This comes to support the relevance that institutional theory has had in the past as the main explanatory framework to understand cross-country differences in the adoption of organizational practices (e.g. Brewster et al., 2008; Tregaskis & Brewster, 2006). This does not necessary imply that economic factors are not relevant. Rather, it may just be signalling that the European countries represented in our sample have the minimum level of economic development necessary to implement these practices. At this point it should be noted that economic development is the independent variable for which variation is lowest among the countries considered in the sample. This is congruent with the fact that all these countries, in spite of their differences, are part of a common economic area, and may account for the relatively low explanation power of this variable. Further, contrary to ex-ante beliefs we have found some nonsignificant relationships, as well as effects opposite to those predicted. This was the case of individualism and uncertainty avoidance. While these unexpected results may be driven in part by the previously mentioned weaknesses of some of our measures, they also suggest the need to explore theoretically the existence of more complex patterns of influence of institutional and economic factors on the use of management practices. For the sake of simplicity, our theoretical model implicitly assumes that the effects of country-level factors were independent of each other. They may interact in complex ways, however producing some of the unexpected findings observed in our study. For example, the proposed negative effect of individualism on the use of new work practices might be moderated by the degree of economic development, such that we could observe a non-significant or even positive effect of individualism if the analysis is run in a sample of sufficiently developed countries. It may be worth exploring these interactive relationships in more detail in future research projects.

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Besides the existence of interactions between nation-level factors, differences in significance levels also suggest that while the direction of the influence is very similar across practices, the size of the effect may be, and this is important, specially relevant for particular pairs. The identification of those particular dyads may provide an interesting guide to managers in multinational corporations who want to know which practices are favoured or not by the external environment. The understanding of similarities and differences between countries can help them in the process of implementation and, where necessary, of use of new work practices in relation to local idiosyncrasies. In terms of theory development our findings call for a more fine grained analysis of the relationships. Instead of considering groups of practices and single indicators of multi-dimensional explanatory factors, something may be gained putting more emphasis on relationships between separate practices and dimensions. Also, the results of the factor analysis suggest the existence of different configurations of use of new work practices. Future research should be devoted to define taxonomies of implementation as well as to understand the process that leads to such configurations and the interrelationships between the different practices. Although the factors considered explain a substantial part of the country effect on the incidence of new work practices (over half of it in the four cases), an important proportion still remains to be explained. In consequence there is room. This calls for further theoretical and empirical research. Theoretical frameworks should be enriched to include other relevant aspects not taken into account so far like for example the presence of obstacles, such as worker resistance, scarce resource availability, reluctance to innovation or poor quality of management, which compromises the extension of best management practices, such as new work practices. In countries where these difficulties are found, firms will show a lower degree of incidence of new work practices. From the empirical point of view, more effort should be made to develop alternative measures for the key theoretical constructs. In this line, it should be noted that special efforts have been made in the case of national culture (House, Hanges, Javidan, Dorfman, & Gupta, 2004; Schwartz, 1994). Although the alternative constructs and measures developed have limitations and have not been able to replace Hofstede’s dominant framework (Berry, Guille´n, & Zhou, 2009; Tang & Koveos, 2008), they are examples of the direction further efforts might pursue. An additional question that our results leave open for future research is to determine precisely the implications of the differences found between countries in the use of new work practices. The main idea driving this research would have to do with the existence of a contextual effect in the impact of new work practices on performance. This means that the influence of new work practices on firm results is not uniform across countries. This would be against the universalist paradigm, which identifies some practices as universally successful in any geographical context (Pfeffer, 1998). In order to shed more light on this debate, more empirical research is needed. Although there is a substantial amount of research on the impact of human resource management on performance (e.g. Boselie, Dietz, & Boon, 2005; Wall & Wood, 2005), specific research that considers country-level issues is needed. In spite of such empirical research having been conducted in many different countries, methodological dissimilarities prevent the comparison of the results of existing articles from leading to fully valid conclusions. One example of the kind of research needed is provided by Apospori, Nikandrou, Brewster, and Papalexandri (2008), who find mixed results regarding the impact of human resource management on organizational performance in northern and southern Europe. A related debate is that concerning convergence or divergence in human resource management practices in Europe (Brewster, 2007; Brewster, Mayrhofer, & Morley, 2004). Our results are consistent

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with recent results associated with the lack of convergence hypothesis (Nikandrou, Apospori, & Papalexandris, 2005; Poutsma et al., 2006), since the importance of the national context emerges clearly in our analyses. Therefore, the incidence of new work practices does not seem to be affected by institutional pressures coming from European Union policies. Given previous results regarding other more highly regulated human resource management practices at the European level such as contingent employment (Tregaskis & Brewster, 2006), our findings seem reasonable, since work organization remains an area where managerial prerogative prevails to a great extent. The findings for our independent variables suggest that differences in new work practices across Europe are likely to persist. Although future changes promoted by the European Union could lead in the medium term to a certain degree of convergence in aspects of the institutional setting such as the regulation of labour markets and industrial relations, it is very unlikely that they will reduce cultural differences, which have been identified in this paper as key variables in explaining cross-country differences in the incidence of new work practices. 6. Managerial relevance Last but not least, the results of this study will be of great significance to managers in multinational firms. Our research provides some indication regarding the country-level conditions that favour the implementation, and probably the success, of certain organizational practices, particularly the new work practices. On the basis of what we found, managers should infer that the decision to use new work practices has to take into account the culture, the labour relations system and to a lesser extent the level of economic development of the specific country in which those practices are going to be employed. However, as noted already, managers should pay close attention to particular effects as the influence of country-level factors is not homogeneous across work practices. While the use of new work practices tends to be more common and fit better in countries with low power distance, high individualism, low masculinity, high uncertainty avoidance, high indirect worker participation and low labour market rigidity, managers should realize that the sensitivity of use is greater for particular national factor-new work practice pairs. In summary, in this paper we have established that the use of new work practices is not uniform across countries even on the same continent. The incidence of such practices has been shown to be related to differences in cultural, labour relations and economic factors. Therefore, there are circumstances that favour the use of new work practices. Managers should take these circumstances into account when deciding whether or not they should implement a given new work practice. This is particularly important for managers in multinational companies because of the potential nation-level differences between the home and the host country. Practices that are more natural in a certain country environment may not be so easy to introduce in other countries. Acknowledgements The authors wish to acknowledge financial support from the Spanish Ministry of Education (projects SEJ2007-66511 and SEJ2007-67895-C04-01). The first author also acknowledges financial support provided by the Universidad Pu´blica de Navarra. Likewise, the authors wish to acknowledge the availability of data from the Economic and Social Data Service. References Appelbaum, E., Bailey, T., Berg, P., & Kalleberg, A. (2000). Manufacturing advantage: Why high-performance work systems pay off? Ithaca, NY: Cornell University Press.

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