They also assessed how MNCs would affect the governance of labor related standards and practices of MNCs could be transferred from countries of origin to host and the extent in which labor related practices of MNCs could be traced to the characterstics of the national business system from which they originated. Diffusion of labor standards from countries of origin to host was examined using a cross country analysis of MNCs operating in Africa. They used dataset from UNIDO's Africa Investor Survey, data collected in 2010 where more than 1300 firms were used from 19 countries.
Findings.
The authors founded that multinational firms that originate from countries with more rights of association and collective bargain paid significantly higher wages than MNCs originating from countries with restrictive rights of association and collective bargain. They also found consistent results when they used unions role in wage bargaining as a proxy for labor standards in the origin countries, thus MNCs originating from countries that had strong bargain power in wages paid significantly higher wages.
Significance of the Study.
It contributed to existing Foreign Direct Investment (FDI) literature in two ways namely, it provided evidence contrary to the convergence theory which states that economic integration induces countries to adopt common standards across firms (Berger, 1996). They provided suggestive evidence that high level of economic integration via FDI need not necessarily lead to convergence in labor standards and practices may differ across firms depending on where the MNCs are headquartered. Besides that, it contributed to debate by demontsrtaing that competition for FDI in developing countries should not necessarily result in weaker labor standards in host countries. It also provided important policy implications for governments in host countries in terms of better practices and labor standards, corporate governance, NGOs that work to safeguard better labor standards.
