Do Industrial Relations Institutions Influence Foreign Direct Investment? Evidence from OECD Nations

The potential impact of industrial relations institutions on economic outcomes has been a key element in analyzing the governing of the global workplace. We present case information and analysis that show that there are trade‐offs between higher levels of economic outcomes and greater equity and employee voice associated with more and deeper labor market institutions. The estimates from the model show the impact of industrial relations system policies within a nation on a country's foreign direct investment (FDI) from other nations for the period 1985 through 2000 using data from nations that are members of the Organisation for Economic Co‐operation and Development (OECD). Examples of the impact of major transformations in national industrial relations systems on FDI for UK and New Zealand also are presented. Our results show that higher levels of industrial relations institutions from the firms’ perspective are usually associated with lower levels of FDI.