The organizational and geographical boundaries of the firm: Focus on labour as a major stakeholder

This paper aims to analyse the organizational and geographical (by nation-states) boundaries of the firm and their impact on labour and to develop a theoretical framework in which firms’ boundaries are analysed from the point of view of labour as a main stakeholder in the firm.

The paper considers the boundaries in terms of: perspectives (legal/proprietary, responsibility and control); stakeholders (shareholders and managers as well as labour, governments and suppliers) and dimensions (organization of production, geographical/by nation-state and sectoral). The paper analyses various organizational forms of production in terms of control (over labour process and brand), responsibility for labour employed across the value chain and labour bargaining power. The firm is seen in the context of labour as main stakeholder and of strategic control versus the property rights view of the firm. The paper contains references to some real-life cases which support the arguments developed at the theoretical level.

In terms of organizational boundaries, the paper analyses hybrid forms of firm organization and their implications for the position of labour. In the context of geographical boundaries, conclusions are drawn on the impact of transnational corporations (TNCs)’ direct activities on labour. Changes in organizational and geographical boundaries are seen as strategic moves that lead to the fragmentation of labour and to the weakening of its bargaining position. There is an analysis of the role of nation-state regulatory regimes in creating opportunities for TNCs’ advantages towards labour. The basic pillars of this theoretical approach are emphasis on labour as a main stakeholder as well as one of the main actors towards whom firms develop strategies and who, in turn, develops countervailing strategies; and the assignation of responsibility for labour over that part of the value chain – which could be the whole of it – over which the firm exercises strategic control.

More case study work would further support the arguments in the paper and lead to refinements of the theory.

For labour, cross-country strategies are developed, and it is argued that the principal firm should take responsibility for the labour force on the basis of the “control” perspective rather than the “legal/proprietary” one. At the macro level, it could be argued for policies that lead to more homogeneous regulatory regimes across countries and in particular within the EU. There are implications for the strategies of trade unions within and across countries. There is also a call for overcoming academic disciplinary boundaries in research specifically those between economics, business strategy and sociology of labour and industrial relations.

The work puts labour at the forefront of analysis in the boundaries of the firm. It develops a theoretical framework for this analysis and for its policy implications including policies by trade unions.