Commodity chains, foreign investment and labour issues in Eastern Europe

Abstract

In terms of ownership and operations, many companies in Eastern Europe have now been integrated into the world economy. In this article, informed in part by a critical engagement with the Global Commodity Chains (GCC) perspective, we explore the nature and significance of international linkages among firms in Eastern Europe. In particular, we argue that it has been the legacies of the state socialist past embedded in the inherited macro-and microeconomic structures, on the one hand, and the strategies of multinational firms on the other, rather than the international linkages in any simple sense, that have been the main influencing factors. While we do not deny the existence of inter-firm relations similar to the ones described in the GCC literature, we point out that these relationships are much more complex than assumed in that approach and that this complexity is a product of the very different historical backgrounds and modes of incorporation into the world economy of the various Eastern European societies. Drawing on empirical evidence from Hungary and focusing specifically on employment and other labour issues, we argue that there are a variety of firm development paths in Eastern Europe and that these have differing implications for the integration of firms, regions and countries of Eastern Europe into the world economy.

Global competition, institutional context and regional production networks: up- and downgrading experiences in Romania’s apparel industry

“…In addition to trade policy, the historical legacy of the state socialist past, including its industrial fabric and existing social networks (Czaban/Henderson 2003;Lane/Probert 2009;Schüßler 2009) as well as the 'transition' process 1 and its strong bias towards 'free market' policies and reliance on foreign capital (Becker/Jäger 2010; Bohle/Greskovits 2013) have structured CEE integration into apparel production networks. In the run up to EU accession the policy context changed importantly.…”

Global production and local jobs: can global enterprise networks be used as levers for local development?

“…For instance, Katz and Darbishire (2000) have shown that country-specific labour market structures and institutions play a critical role in shaping employment relations systems, although they are affected by the spreading of new practices in highly globalized sectors. On a different ground, Czaban and Henderson (2003) show that the unfolding of global production networks in Hungary has been conditioned by the institutional and business legacy of a central command economy. In order to understand how the global governance of production networks interacts with different institutional and social forces at the local or national level, it is thus necessary to combine GVCs with 'locally-oriented' analytical approaches.…”

“…This framework has been primarily applied at the national and regional levels to highlight differences between business systems found in Europe, East Asia and North America. Combined with a global perspective, it can be used to investigate how firms embedded in distinct business systems participate in GVCs, and how the specific role and behaviour of these firms in turn influence the development of global value chains (Czaban and Henderson 2003). For instance, American firms have been found to exercise greater formal control, set more stringent product and service expectations, and make greater investment in supplier training than their European counterparts (Gibbon 2001(Gibbon , 2002.…”

“…Second, the value created through industrial upgrading does not seem to be shared with workers under the form of higher wages. Case studies in the Mexican centre of Torreón, a major producer of jeans for the US market (Bair and Gereffi 2001), in the Mexican auto component centre of Cuidad Juarez (Carillo 1998), and in the auto and electronics industry of Hungary (Czaban and Henderson 2003), suggest that local labour market conditions in terms of labour shortage and labour regulation play a greater role than firm-level upgrading strategies in promoting wage increases. In other words, higher wage levels appear to depend more on tight local labour market conditions and/or demanding collective agreements and labour laws, than on individual firms' upgrading strategies.…”

Enlarging the Varieties of Capitalism: The Emergence of Dependent Market Economies in East Central Europe

“…77 the transnational corporations are on the top of the institutional hierarchy, the national suppliers are highly dependent on the tncs for the continuation of their work, 78 and the practices brought into the region by the tncs are subsequently introduced by domestically owned corporations. 77 Czaban andhenderson 2003, 185. 78 pavlinek 2004. this fits the general picture that foreign direct investment is not only important in regards to ownership issues, but also to the region's whole institutional setup.…”