Economic Theory and the Challenge of Innovative Work Practices

A fundamental finding of the current empirical industrial relations and human resource management research is that similar types of firms producing similar types of products adopt different sets of work practices or cultures even when working under the same institutional environment. Only a small minority of firms has adopted superior, often more cooperative work cultures. In sharp contrast to neoclassical theory, which predicts the dominance of the more efficient work cultures, a behavioural model of the firm presented here reveals that even under conditions of competitive product markets, firms can produce competitively using either the traditional, less efficient work cultures or the more efficient cooperative work cultures. The superior work cultures need not dominate simply as a consequence of market forces.