Institutions and Corporate Strategies for Reorganzation: Revising theoretical models to probe the impact of specific institutions on corporate behavior in the era of globalization.

Within the field of political economy scholars are attempting to assess the impact of globalization on systems of governance and corporate behavior. Increased global competition is generally seen as pressuring companies to increase the flexibility of their manufacturing processes in order to respond faster to market developments. Since labor laws and union strength would seem to limit the options available to corporations, many scholars argue for the loosening of labor laws and a decline in the power of unions. Although it appears that efficiency within the global marketplace can best be achieved through policies promoting external labor market flexibility, firms attempting to implement post-Fordist restructuring programs which stress worker empowerment through functional and cross-functional teams would seem to find the greatest support for such endeavors in an institutional environment which supports internal labor market flexibility. Such restructuring programs enable firms to more quickly adapt production processes to new demands, while also providing them the capability to improve product development times. The former occurs through teamwork between line workers, while the latter occurs through cross-functional teamwork between employees in production and those in research and development. Too often scholars seem to create broad categories which do not probe the manner in which specific institutions impact corporate behavior. Hence, Scholars studying the impact of globalization on corporate behavior need to adequately specify not only the types of institutions which impact corporate operations but also how they impact the implementation of specific corporate programs. After demonstrating how the relevant literature fails to directly link institutions to corporate behavior, this paper attempts specify the types of institutions which effect the ability of corporations to implement post-Fordist restructuring programs. It argues that labor laws, training systems, unions and employer associations have a substantive impact on the ability of corporations to implement such restructuring programs. Only with this level of understanding would scholars be able to make substantive policy recommendations. The final section of this paper discusses how these institutions impact the ability of corporations in Germany and the United States to implement such programs. Paradoxically this paper concludes that these institutions in German foster the type of internal labor market flexibility needed for such programs to succeed. If these institutions are not altered, firms in the United States will be forced to pursue low-road approaches, such as downsizing and outsourcing, which put downward pressure on wages, thereby increasing inequality. A high-road approach which strengthened labor laws, unions, training institutions and employer associations would enable corporations in the United States to create the type of institutional environment which firms need to retain workers and invest in the type of skills needed for these employees to function in genuinely flatter and more flexible organizations. [ABSTRACT FROM AUTHOR]