Manufacturing Advantage: Why High-Performance Work Systems Pay off by Eileen

Appelbaum; Thomas Bailey; Peter Berg; Arne L. Kalleberg

Review by: Gloria Harrell-Cook
The Academy of Management Review, Vol. 26, No. 3 (Jul., 2001), pp. 459-462
Published by: Academy of Management
Stable URL: http://www.jstor.org/stable/259189 .
Accessed: 17/01/2015 19:07
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .
http://www.jstor.org/page/info/about/policies/terms.jsp

.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.

Academy of Management is collaborating with JSTOR to digitize, preserve and extend access to The Academy
of Management Review.

http://www.jstor.org

This content downloaded from 147.156.224.113 on Sat, 17 Jan 2015 19:07:59 PM

All use subject to JSTOR Terms and Conditions

459

Book Reviews

2001

new business idea, especially in the case of

start-up firms. The issue of resources is not trivial, and directing entrepreneurs better in this
more tips and by referring them to
area-with
have
expert sources of information-would
made this book more complete.
Despite these minor weaknesses, The Entrepreneurial Mindset can be viewed as a cure for some
of the critical shortcomings in entrepreneurship
and strategy literature and education. On the one
hand, entrepreneurship literature and education
typically emphasize the creative side of starting a
new business, without fully embracing the rigorous steps and analytical thinking involved in converting a creative product or service idea into a
profitable business. The living proof of this ignorance is the failure of numerous dotcom companies. On the other hand, while strategic management education and literature conceptually
emphasize analytical thinking, profitability, and
taking calculated steps, they are far from adequate in providing managers with concrete, powerful, and user-friendly techniques to generate
new business ideas and to enact them. The strategy literature has offered a number of powerful
techniques and frameworks, such as matching internal strengths and weaknesses with external
opportunities and threats (e.g., Andrews, 1976),
Porter's five-forces industry analysis and generic
strategies (Porter, 1980),the VRIO framework (Barney, 1997), and the positioning/activity map (Porter, 1996),but these techniques are not sufficient in
the competitive environment of the twenty-first
century. In fact, most of the techniques involve
analysis at the industry or firm level, whereas firm
capabilities are often created at the functional
level, and an entrepreneurial insight is developed
at the product level. A major contribution of The
Entrepreneurial Mindset is the techniques provided for developing entrepreneurial insight at
the product level-the level at which the entrepreneur and customers connect--as well as the techniques taught for executing an entrepreneurial
agenda that balances rigor and flexibility. Thus,
The Entrepreneurial Mindset is a book I would
definitely consider for teaching both strategic
management and entrepreneurship.

REFERENCES
Andrews, K. 1980. The concept of corporate strategy. Homewood, IL: Irwin.

Barney, J. B. 1997. Gaining and sustaining

advantage. Reading, MA: Addison-Wesley.

competitive

Porter, M. E. 1980. Competitive strategy: Techniques for analyzing industries and competitors. New York: Free Press.
Porter, M. E. 1996. What is strategy?
Review 74(6): 61-78.

Harvard Business

Manufacturing Advantage: Why HighPerformance Work Systems Pay Off, by

Thomas Bailey,
Eileen Appelbaum,
Peter Berg, and Arne L. Kalleberg.
Ithaca, NY: Cornell University Press,
2000.
Reviewed by Gloria Harrell-Cook, Mississippi State
University, Mississippi State, Mississippi.
Manufacturing Advantage is an intensive examination of the effects of high-performance
workplace practices in three industries: steel,
apparel, and medical electronic instruments
and imaging. The study is immensely impresand magnitude.
sive in its comprehensiveness
The authors include multilevel data collection
from both managers and workers from numerous sites in each industry in an attempt to uncover the contents of the "black box" of the highperformance work systems (HPWSs) or human
resources systems-firm performance relationship. Thus, the book provides a valuable contribution to both academics and practitioners, illustrating interesting insights into how sound
contributes
human resources management
value to organizations. The black box has been
the subject of much theoretical speculation, but
in few, if any, previous works have researchers
conducted empirical analyses to support that
speculation.
Eileen Appelbaum, Thomas Bailey, Peter Berg,
and Arne L. Kalleberg draw from Bailey (1993) for
the theoretical underpinnings of their research.
They, like Bailey, posit that it is through the
effective elicitation of discretionary effort that
human resources management will positively
influence firm (or, in this research, plant) performance. In technical terms, discretionary effort is
expected to mediate the relationship between
the human resource management or work system and performance. In order to educe discretionary effort, however, the work system must
contain three essential components: opportunity

This content downloaded from 147.156.224.113 on Sat, 17 Jan 2015 19:07:59 PM

All use subject to JSTOR Terms and Conditions

460

Academy of Management

to participate, incentives, and skills. These are

the three independent variables that compose
the HPWS used in the study. Discretionary effort
is that contribution of effort above and beyond
what is called for in the job description, according to the authors. In this research the authors
view it as the opportunity for nonmanagerial
employees to exert that extraordinary effort
through participation in shop floor problem
solving and decision making.
Appelbaum and her colleagues further contends that such a work system could have a
positive impact on worker outcomes, proposing
that, in addition to increasing worker wages, the
HPWS would increase worker trust and intrinsic
rewards and that trust and intrinsic rewards
would mediate positive relationships between
the HPWS and organizational commitment and
job satisfaction. They also expect the HPWS to
decrease workplace stress-an expectation contrary to some previous theoretical arguments.
The empirical analyses in the book are preceded by a history of each industry, in which
traditional work organization and the move of
some plants in the industries to a participatory
work system are detailed. In the steel and apparel industries, this change in work organization meant a move away from the principles of
scientific management-long
thought to be the
a system of
most efficient way to organize-to
group or teamwork involving problem solving
and decision making. The evolution of participatory work organization in each industry was a
response to changing competitive pressures, especially globalization and the internationalization of markets. Indeed, in the steel and apparel
industries, where cheap imports and dumping of
foreign-made steel were threatening firm viability, it was a seen as a fight for the very survival
of the business.
The empirical analyses provide evidence that
the institution of HPWSs did indeed have a positive effect on the competitiveness of the adopting firms, increasing efficiency but also providing for greater firm capacity for responsiveness
to their consumers, for customization of product
and delivery to suit customer needs, and for
high-quality production. In their discussion the
authors argue that HPWSs, because of their very
nature, also could increase productivity by inof the individual
creasing the effectiveness
worker and providing new opportunities for organizational learning. The increase in individ-

Review

July

ual effectiveness derives from the contribution

of discretionary effort, while enhanced organizational learning is a result of the high levels of
both inter- and extra-group communication required by a participatory work system.
of the analyses is
While the extensiveness
laudable, it also precludes the detailing of results in this review. However, although the outcomes varied somewhat for each industry, in
general, Appelbaum et al. found support for
their hypothesized effects, providing the most
compelling evidence to date that HPWSs do
make a positive difference for both the organization and the workers. The authors refer to this
as the "win-win outcomes for plants and workers.
The authors comprehensively address the potential weaknesses of their research and caveats of their findings, which I do not detail here.
Indeed, given the quality and magnitude of the
study, it is difficult to describe the work as anything other than outstanding research that contributes greatly to the understanding of a rmachdebated topic in organizational science. There
are a few issues, however, that beg comment.
The first of these is the issue of discretionary
effort. I found it very disappointing, given the
prominent role that discretionary effort plays in
the theory development of this work, that contribution of discretionary effort was not measured
or, if measured, was not included in the empirical analysis. Therefore, while it played a mediating role in the model, since it was not included
in the analysis, the reader can only assume that
it was discretionary effort through which the
HPWS had its effect on plant outcomes. Although the omission of this variable is unfortunate, there is sound theory to support the assumption that discretionary effort does indeed
play the mediating role, given the characteristics of the HPWS.
The authors explain that work reorganization
was undertaken by managers as an effort to
improve firm performance, in keeping with the
strategic human resources management or systems perspective. The objective, then, was in
contrast to the objective of such initiatives undertaken previously in U.S. history, where work
reorganization was instituted in the interest of
worker welfare and satisfaction. While management intent in this research was clearly in the
interest of improving performance, worker perceptions of the changes in human resource prac-

This content downloaded from 147.156.224.113 on Sat, 17 Jan 2015 19:07:59 PM

All use subject to JSTOR Terms and Conditions

2001

Book Reviews

tices may also have had an impact on the workto contribute discretionary
ers' willingness
effort.
Opportunity to participate implies that the organization trusts and values the input of the
employee and that the worker is seen as a resource rather than a commodity. To the worker,
being valued and trusted are important and satisfying benefits granted by the employer. Further, many of the incentives included in this
analysis (e.g., employment security, promotion
opportunities, assistance with work-family issues, and increased wages) are very strong indicators (whether intentional or not) of the organization's concern for and commitment to the
welfare of the employee. Employers, through
provision of these scarce incentives (in today's
work world), may actually be seen by employees
as benefactors. Blau's (1963) concept of social
obligation shows that it is quite plausible (perhaps made more likely because of diminishing
existence of the traditional psychological contract) that human resource practices perceived
by employees to be of high value will elicit from
those employees the desire to enjoy the continued benefit of such practices. Such continued
benefit is dependent upon their continued employment with the employer, and continued employment is dependent on the contribution that
employees make to the organization. Therefore,
it is in the employees' best interests to perform
and contribute in such a manner as to ensure
the continuation of these benefits-in
short, to
contribute greater or discretionary effort.
Further, social reciprocity norms have been
posited to facilitate the attainment of commitment and behavior consistent with that commitment (Howard, 1995). Reciprocity has been suggested to be a ubiquitous and powerful social
convention (Webley & Lea, 1993), as well as an
antecedent of positive organizational behaviors
(Brief & Motowidlo, 1986). Intuitively, it seems
clear that social obligation will be engendered
through the perception of the organization as a
benefactor to whom some degree of allegiance
and loyalty, in the form of performance and contribution, is owed. The greater the perceived
commitment of the "benefactor" organization to
the employee, the stronger the influence of reciprocity norms is on employees to provide discretionary effort. So, in addition to the opportunity to contribute greater effort, employees may
be psychologically compelled by factors inher-

461

ent to incentives to contribute their discretionary effort.

A second thought-provoking
issue arises
when reading Manufacturing Advantage. The
researchers gathered data about the time period
during which the HPWSs went into effect in the
organization, yet this information was not utilized in the analyses, nor was it reported in the
discussion. In Griffin's (1991) research, significant improvements in performance due to work
redesign were not recognized until four years
after the reorganization was undertaken. Depending on the amount of time between institution of HPWSs and data collection, then, would it
not be possible that even greater effects on performance might have been forthcoming in these
industries? If so, the argument to management
to adopt innovative work reorganization and
HPWSs as an alternative to more economically
destructive cost-cutting measures (or moving
production offshore), as discussed by the authors in the last chapter of the book, may be
even more compelling.
A final notion, and tangential to the above, is
the fact (discussed by the authors) that in spite
of improved competitiveness
in the steel and
apparel industries, the positive effects of HPWSs
may not be sufficient to ensure the viability of
these industries in the United States. Cost cutting, through moving production to less developed countries, has numerous and not necessarily positive implications for the U.S. economy. As
noted above, the authors call for greater consideration by managers of more innovative and
less economically negative approaches to improve competitiveness. They also call for macroeconomic and institutional pressures to ininto such consideration.
duce managers
the
discussion
of exactly what negaHowever,
tive implications might be expected because of
failure to pursue these apmanagement
proaches is limited. If, indeed, there are serious
repercussions of moving most of manufacturing
abroad to take advantage of lower wages (and
less constraining legal environments), then the
argument against such actions could only be
made more compelling by definitively addressing what those negative implications might be.
If action is to be taken by any party-whether
or institutionsmanagement,
government,
those compelling arguments need to be put
forth. These authors have done a fine job of
initiating that process.

This content downloaded from 147.156.224.113 on Sat, 17 Jan 2015 19:07:59 PM

All use subject to JSTOR Terms and Conditions

462

Academy of Management Review

In conclusion, the work of Appelbaum, Bailey,

Berg, and Kalleberg takes research in the area
of human resources management and HPWSs to
a higher level. The information is well researched and well presented. The book is interesting and insightful reading, which should appeal to both academics and practitioners. I have
already recommended it as a must read to people in both categories.

REFERENCES
Bailey, T. 1993. Organizational innovation in the apparel
industry. Industrial Relations, 32: 30-48.
Blau, P. M. 1963. Critical remarks on Weber's theory of authority. American Political Science Review, 57: 305-316.
Brief, A. P., & Motowidlo, S. J. 1986. Prosocial organizational
behaviors. Academy of Management Review, 11: 710725.
Griffin, R. W. 1991. Effects of work redesign on employee
perceptions, attitudes, and behavior: A long-term investigation. Academy of Management Journal, 34: 425-435.
Howard, D. J. 1995. "Chaining" the use of influence strategies
for producing compliance behavior. Journal of Social
Behavior and Personality, 10: 169-185.
Webley, P., & Lea, S. E. 1993. The partial unacceptability of
money in repayment for neighborly help. Human Relations, 46: 65-76.

Multinationals As Flagship Firms, by

Alan M. Rugman and Joseph R. D'Cruz.
Oxford: Oxford University Press, 2000.
Reviewed by Timothy M. Devinney, Australian Graduate School of Management, Sydney, Australia.
In Multinationals
As Flagship Firms Rugman
a framework they have
and D'Cruz encapsulate
been developing
for most of the last decade. As
a general integration of this work, the book is a
fine addition to the literature and serves to provide the reader interested in this research with a
one-stop shop."
The authors offer their approach as an alternative to the more familiar five-forces model of
Porter. In their framework-known
as the "five
partners model"-they
posit the development
of
clusters of "flagship firms" that operate with a
tight network of partners-made
up of key suppliers, key customers,
and selected
competia nonbusiness
tors-and
infrastructure
(e.g.,
universities,
and so forth). The
governments,

July

model is, for the most part, descriptive and involves the integration of a number of theoriesmainly network theory, the resource-based theory
of the firm, and transaction cost economics-to
buttress the structure. The framework is illustrated with a host of well-developed cases studies
spanning a number of different industries.
Just as Porter attempted to "managerialize"
industrial organization, one can say that Rugman and D'Cruz are doing a bit of the same with
the loose collection of theories that attempt to
explain the complex structures we see operating
around multinational enterprises (MNE). In this
sense I would not view the flagship firm model
as an alternative to Porter but, rather, another
useful toolkit for trying to understand, in a consistent manner, how specific industries and subgroupings within industries are structured. As is
rightly pointed out in the book, Porter's theory
loses validity when one tries to stretch it to accommodate the microlevel strategic concerns of
firms. But Rugman and D'Cruz's approach also
suffers when used to address issues that do not
fit conveniently into the structure. This is not a
criticism of their thesis as incorrect; rather, the
book does not complete the theoretical circle.
Hence, we should view its publication as a midpoint in the development of the theory. Perhaps
it will spark additional work to fill in the gaps
and push the authors' ideas further.
We can see where there are gaps in the flagship firm approach by analyzing how the development of Microsoft would be dealt with. According to the theory, the f flagship firm is in a
strategic leadership position, maintaining responsibility for the development and operation
of the network. We could, quite easily, see how
such an approach might fit with our understanding of the operations of Microsoft. However, if we
go back to the 1980s, the flagship firm would
have been IBM, with Microsoft as one of the "key
suppliers"-whereas
today IBM would be one of
the "key customers." At some point in the 1980s,
this market changed, and the power positionthe center of gravity, so to speak-flipped
to
Microsoft's favor. This is a critical issue for the
theory. Like many approaches, it serves as an
excellent description of a static position but
strains to accommodate complex dynamic evolution. Certainly, a story could be told that somehow
makes the Microsoft story fit the theory, but Rugman and D'Cruz's framework has yet to be ex-

This content downloaded from 147.156.224.113 on Sat, 17 Jan 2015 19:07:59 PM

All use subject to JSTOR Terms and Conditions