This article argues that the institutional "home" and "host" country effects on employment policy and practice in multinational corporations (MNCs) need to be analyzed within a framework which takes more account both of the multiple levels of embeddedness experienced by the MNC, and processes of negotiation at different levels within the firm. Using in-depth case study analysis of the human resource (HR) structure and industrial relations and pay policies of a large U.S.-owned MNC in the IT sector, across Germany, Ireland, Spain, and the United Kingdom, the article attempts to move towards such a framework.

New institutionalist studies of human resource management in multinational companies argue that subsidiaries are faced with institutional duality-pressures to conform to parent company practices and to the local institutional environment in which they are based. To date, they have concentrated on how subsidiaries respond to parent company pressures. This article considers how subsidiary management responds to both parent company demands and host country pressures in trying to reconcile the challenges of institutional duality. It focuses on how such responses are shaped by the interdependence of subsidiary management with the parent company and the local environment. It does so by comparing case study evidence of collective representation practices in US-owned subsidiaries in Britain and Germany.

Looking at the economic development and importance of German companies in Europe, one might expect that an important aspect of a good economic performance is a well‐functioning HR system. Although a number of scholars claim this, the empirical evidence seems to point to the opposite. Several comparative studies have found that HRM in German companies is less strategically integrated and proactive than that of comparable firms in other countries. This article argues that the empirical results reported fail to grasp the essence of HRM in German firms. This lacuna is partly due to the co‐determination structure. HRM in large German firms has to be evaluated within the co‐determination structure, with the Betriebsrat (works council) being an important actor. For German firms co‐determination might even be a strategic resource. By examining this issue within such a framework, a more favourable picture of HR integration in German firms emerges.

There is a dearth of existing literature on cross-national variations in the organization, role, and boundaries of the personnel function. This chapter explores the evolving role and structure of the personnel function within the different national subsidiaries of US multinationals, and how these fit with the multinational company’s conception of the function’s role at an international level. It is argued that personnel departments in US multinationals face mounting pressures to reduce costs, leading to structural innovations such as shared service centres. Subsidiary personnel departments have pursued a more strategic role as ‘business partner’, and as contributor to the design of international HR policies. The management of tensions between the US approach and different host-country traditions of personnel management are examined, as well as the way in which subsidiary personnel managers ‘negotiate’ with higher levels of the international HR function, drawing on the institutional resources of their local environment.

This paper examines the impact of contemporary business practices with the American Business System on established patterns of industrial relations management in European subsidiaries of US multinationals, specifically how established firm-level settlements for industrial relations management may or may not combine with host-country effects to constrain such innovations. The empirical material leads us to evaluate subsidiaries of US multinationals as a contingent factor that indicate institutional effects at the level of the national business system are likely to be more embedded that the effects of ownership on employment and industrial relations at firm level.