German Automotive Multinationals in Central Europe: Enterprise Coalitions for Production

Abstract

Understanding patterns of internationalization strategies and firm governance of multinational companies (MNCs) is a crucial task for those who want to understand the forces and counter-forces of increased international competition. For a long time scholars studying MNCs have operated with simplistic dichotomies that characterised firm strategies of internationalization: market access vs. cost reduction or home country vs. host country traditions. However, such dichotomous theorisation of internationalization strategies and upgrading outcomes is not very useful. Using the case study of the internationalization of Volkswagen Group to Central Europe this paper presents the internationalization and upgrading strategy of this automotive MNC as a multifaceted and dynamic process. Managerial and labour agency are conceptualized as being at the core of the firm governance. The paper argues that the industrial upgrading taking place since the late 1990s- early 2000s has been achieved due to coordination between local labour representatives and local management. Although local unions did not drive the change, their role has however been crucial for upgrading. It is the intensified exchange between labour and management since the late 1990s that contributed to the success of industrial upgrading. This is why we refer to the upgrading process as ‘multifaceted’: it is not managerial agency alone but the cooperation of several stakeholders that allowed for a successful upgrading. ‘Dynamic’ refers to the open-ended process of upgrading. It has been a trial-and-error rather than a linear process in which different enterprise coalitions have been competing for dominance in firm governance. In Central Europe, the two central pillars of these enterprise coalitions or production have been wage moderation and high functional flexibility. These were traded by unions for company expansion and most importantly, product and production upgrading.