Localization in the Age of Globalization: Institutional Duality and Labor Governance
Structures in China’s Foreign-Invested Enterprises
The closing chapter of the Twentieth Century had featured two prominent themes: the
worldwide collapse of state socialism and the accelerating trend of economic globalization. While
most countries continue to experience the profound impacts of these transformations, few have
been involved in both as deeply and directly as China. Since the inception of its economic reform in
the late 1970s, China has not only made significant progress in transitioning toward a market
economy, but has also become a vital component of the new global economic system.
Existing literature on China tends to focus on the emergence of market institutions, and
much less attention has been paid to the penetration of global capitalism brought about by foreign
direct investment and a growing sector of foreign-invested enterprises (FIEs hereafter). Among the
few exceptions, Guthrie’s study (1999) highlights how China’s domestic firms adopt Western-style
employment practices by mimicking their foreign-invested peers, thereby implying that FIEs
themselves embody managerial models popular in their home countries. In contrast, Lee’s (1995)
comparative case study documents the harsh labor practices in a Hong Kong-invested plant in south
China, practices that bear little resemblance to those in its headquarter. These studies raise
interesting questions regarding how labor relations are structured in Chinese FIEs and in particular,
to what extent they reproduce characteristics of those in the investors’ home countries and to what
extent they represent strategic adaptations to the host country’s local environment.
Extending the neoinstitutional theory of organizations (Powell & DiMaggio 1991), we take a
step to fill this lacuna by examining FIEs’ adoptions of four organizational structures: the trade
union, the workers’ congress, the suggestion system, and formal grievance procedures. We refer to
them as “labor governance structures” because they are all intended (at least formally) to promote
workers’ rights and participation and to alleviate the tension and conflict between labor and
Convention