Embedding multinationals in postsocialist host countries : social interaction and the compatibility of organizational interests with host-country institutions

The internationalization of postsocialist countries brought about by the activities of multinational corporations (MNCs) has produced a growing diversity of actors capable of shaping work standards in these countries. The organizational and institutionalist literature on MNCs has concentrated only on the outcomes of such internationalization processes in terms of diffusing MNCs' organizational practices or adapting them to host-country conditions. This paper offers a theoretical and empirical scrutiny of the process through which MNCs establish and reinforce their position in host-country labor markets and societies. In particular, the focus is on how MNCs become legitimate actors in changing work standards in host-country labor markets, and how host-country actors (i.e., workers, trade unions, and the local society) become capable of shaping MNCs' organizational practices in postsocialist subsidiaries. This process is referred to as MNC embedding. Building on a qualitative case study of a Dutch MNC and its subsidiaries in Hungary and Poland, the paper theorizes and empirically documents how embedding occurs and what conditions facilitate it. It is argued that particular interaction dynamics in each MNC subsidiary studied account for the extent to which MNC embedding occurs via unilateral managerial decisions or with the involvement of local actors. Moreover, social interaction between MNCs and host-country actors facilitates institution building from below. This means that through social interaction MNCs become legitimate actors contributing to institution building in environments where broader institutional underpinnings of work practices and traditions of collective bargaining are less extensive than in continental Western Europe.