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Institutional and Rational Determinants of Organizational Practices: Human Resource Management in European Firms.

Despite their very different assumptions, both rational and institutional explanations of organizational structure and management practices predict similarity among firms that operate in the same industry within the context of a single country. From a rational perspective, firms pursue economic advantage through decision making and actions guided by unambiguous preferences and bounded rationality. Although one may expect differences between industries, within industries firms will implement organizational practices that promote the maximization of economic goals. Thus, discounting sluggishness in the diffusion of best practices, it would be reasonable to expect that intraindustry management systems are to a large degree uniform.

Although new institutionalism in organizational theory implies a rejection of rational actor models, emphasizing instead the pressures for acquiring and maintaining legitimacy in relation to the environment (see, e.g., DiMaggio, 1983; DiMaggio and Powell, 1983; Powell and DiMaggio, 1991), it shares the broad expectation that uniform pressures will lead to uniform intraindustry structure and organizational practices. Through various mechanisms of coercion, normative regulations, and imitation, organizations sharing the same environment are believed to become structurally similar as they respond to like pressure; that is, they will demonstrate isomorphism. Since these early formulations, a number of theoretical and empirical studies examining isomorphism and diffusion processes have been conducted, most of which have been carried out within discrete organizational fields or sectors.

The two models' predictions diverge radically, however, when the setting is broadened to comprise different countries. While the rational model assumes that organizational practices are universal across national borders, institutionalism is sensitive to the possibility of cross-national institutional differences, which in turn generate significant cross-national differences in managerial systems. Thus, in a recent review of institutional theory, Scott (1995: 135) characterized current work in institutionalism as attentive to variation: "Rather than assuming that all organizations are alike, or when differences are found between organizations situated in varying social and cultural contexts, attempting to understate them or explain them away, current work is more likely to celebrate diversity and seek to account for the reasons why different forms arise." He noted that the resurgence of interest in institutions has created renewed interest in comparative studies that allow researchers to vary institutional contexts: "It is difficult if not impossible to discern the effects of institutions on social structures and behavior if all our cases are embedded in the same or very similar contexts" (Scott, 1995: 146).

The purpose of this paper is to study the impact of institutional determinants on firms' use of human resource management practices, using cross-national analysis. Whereas the broad rational model implies that there will be no cross-national differences beyond those that are ascribable to factors such as varying firm size and differing industries, the institutional model assumes dissimilarities not only in relation to industry differences but also dissimilarities rooted in the idiosyncratic national institutional regimes surrounding firms.

Cross-national dissimilarities in institutional structures are likely to create management practices that vary from country to country, regardless of the fact that management theories are often rapidly disseminated across national borders. Particularly in the human resource management field, the inertia of institutional structures is likely to inhibit the application of new management prescriptions whenever these are seriously at odds with existing legal rules and political conditions. This is due to the fact that human resource management practices are subject to idiosyncratic sets of national regulations as well as sensitive to the scrutiny of labor unions whose strength and attitudes toward management vary. Hence, contrary to what is often postulated in the rationally oriented, prescriptive literature, which assumes high managerial autonomy (e.g., Hall and Goodale, 1986; Fisher, Schoenfeldt, and Shaw, 1993; Dessler, 1997), human resource management is an organizational practice that is particularly sensitive to nationally idiosyncratic institutional pressures. Moreover, different types of human resource management practices may be determined to a considerable degree by the imperative of maintaining external legitimacy through adherence to institutional structures, rules, and norms at the national level - and may vary as a result of dissimilar national contexts. We develop theoretically derived arguments on these differences and test them in an empirical analysis of firms in Germany (that part which formerly constituted West Germany), France, Denmark, Norway, Spain, and the United Kingdom.


Although Jepperson and Meyer (1991) have convincingly argued that systematic differences as to how societies organize power and construct agency create substantial differences within organizational fields, only a few studies of variations between organizational forms and practices at the international level have been reported. One of the earliest is a study conducted by Cole (1989), who analyzed differences in the use of innovative group activities in organizations in Japan, Sweden, and the United States. This study emphasized the influence that environmental actors, such as labor unions, trade associations, and governmental bodies, pose on the adoption and retention of such organizational practices. The diffusion processes proved to be more efficient in Japan than in the other two countries and more efficient in Sweden than in the United States.

A comparative international study of organizational and interorganizational structures was reported by Orru, Biggart, and Hamilton (1991: 387), who took as their point of departure a conception that each society creates a context of fiscal, political, and social institutions that limit and direct the development of "fit organizational forms." They asserted that in East Asia, private businesses operate according to substantively distinct institutional models that contribute to differentially shaping organizational behavior and structure. This conjecture was supported by empirical findings that business organizations in South Korea, Taiwan, and Japan "operate according to different institutional principles and exhibit dissimilar organizational and interorganizational structures that manifest those principles" (Orru, Biggart, and Hamilton, 1991: 363). The authors concluded that company structures and interfirm networks are "strikingly uniform or isomorphic within each economy but different from each of the others - they express the organizing principles of that economy's environment. The institutional principles that shape organizational forms in these three countries do not hamper organizational efficiency, but rather provide a basis for market order and for competitive relations" (Orru, Biggart, and Hamilton, 1991: 363). Hence, these findings support the notion that in different countries, dissimilar organizational forms and practices may prove equally efficient, due to varying cognitive rationality criteria, legislation, and normative structures.

Finally, from a dynamic perspective, one of the mechanisms operating to generate isomorphic forms as found at the intranational level, and thereby also differences at the international level, is the presence of largely isomorphic or at least similar individuals having approximately the same cultural background. Strang and Meyer (1993: 492) argued that the diffusion of institutional patterns will be better understood if the examination of the relational connections among the social entities involved in diffusion processes is supplemented with cultural and cognitive connections. Moreover, they contended that diffusion increases when the actors involved are perceived as being similar, when the diffusing practices are theorized as similar, and when the practices are theorized to be modern.


We take as our point of departure the so-called strategic human resource management (HRM) model, which is claimed to represent a distinctly rational mode of employee management that is clearly dissimilar to traditional personnel administration (Hendry and Pettigrew, 1990; Nordhaug, 1993). Whereas the latter was forged under conditions that emphasized the virtues of stability and predictability, the HRM model can be viewed as originally deriving from the North American response to the uncertainties generated by a radically increased pace of technological change, knowledge development, rapid market changes (e.g., deregulation), and increasing international competition in the early 1980s (Reich, 1993; Nordhaug, 1994; Pfeffer, 1994). It is a largely prescriptive perspective and may be conceived of as being based on a rational model of efficiency seeking through the creation of an "optimal degree of fit" between the input of human resources and the productive activities of the firm that stem from its business strategy. As Sparrow and Hiltrop (1994: 7) phrased it, in this HRM paradigm, human resources are "to be obtained cheaply, used sparingly, and developed and exploited as fully as possible in accordance with the demands determined by the overall business strategy" (see also Brewster, 1994). To ensure that strategic performance targets are met, Tichy, Fombrun, and Devanna (1984) recommended that human resource managers make systematic use of individual performance appraisal, individual performance-related rewards, and outcomes-monitored training and development.

An additional basic imperative of the strategic HRM model is to simultaneously fulfill the needs and goals of the firm and its employees harmoniously, with "an optimal degree of fit among these four components - the environment, organization, job, and individual" (Hall and Goodale, 1986: 4). The model is essentially unitarist or consensus-oriented and, thus, for example, Walton (1985) viewed the field of human resource management as being composed of policies designed to promote mutuality, that is, mutual goals, mutual influence, respect, rewards, and responsibility.

As the above discussion suggests, the strategic HRM model contains within it an inherent duality between, on the one hand, strong economic, calculative considerations and, on the other, a more humanistic orientation (Sisson, 1994). In a recent review, Legge (1995) distinguished between HRM practices belonging to what she referred to as a "hard" model and practices that constitute a "soft" model (cf. also Storey, 1989). Subsumed under the former are practices that aim at securing a fit between strategy and human resources, while under the latter are practices designed to enhance mutuality and consensus. To grasp the complexity of the field of human resource management as a whole, it is crucial that these two very different perspectives are incorporated.

Calculative HRM. The hard model is rooted in a calculative approach aimed at ensuring that production activities are at all times efficiently supplied with the necessary input of human resources. In these terms, such resources are essentially no different from any other variable economic factor. Associated with this model are a range of efficiency-seeking devices aimed at ensuring that each employee's contribution to the firm is assessed and thereafter rewarded accordingly through individual performance appraisals and individually oriented reward systems. Investment in employee development will also be carefully monitored to evaluate its benefits for the business strategy. Thus, for example, the effectiveness of training is likely to be assessed. Any such calculative approach is dependent on the feasibility of treating each employee as an individual rather than as a member of a collective entity protected by collective bargaining contracts and strong unions. It is reasonable to expect that the adoption of calculative practices requires that management possess substantial autonomy within the firm. In turn, such autonomy requires that its power not be curtailed by strong regulative pressure at the firm level in the form of laws and agreements or by influential labor unions or similar employee bodies (Hakim, 1990; Legge, 1995). This implies the following propositions:

Proposition 1: The stronger the influence of labor representative bodies in firms, the lower the firms' general managerial autonomy.

Proposition 2: The stronger the degree of legislative pressure on firms in the form of labor law and collective agreements, the lower the firms' general managerial autonomy.

Proposition 3: The stronger the general managerial autonomy in firms, the more they will adopt calculative human resource management practices.

Collaborative HRM. The "soft" model represents a collaborative approach to human resource management in that it has a distinctly more developmental or humanistic focus, often based on explicit statements about the value of the employees to the firm and ethical matters related to the employment relation. Rather than being passive inputs, employees are viewed as active partners and core assets, not least in terms of creativity and innovation. Ideally, they are viewed as participants in a project premised on commitment, communication, and collaboration. The collaborative emphasis is hence characterized by efforts to create and communicate a culture of partnership between employer and employee as well as among employees. One important device for achieving such integration is represented by management's attempts to formulate an overarching direction, including a corporate vision, which is communicated to the firm's employees in the form of a mission, goal, or strategy statement. In addition, management will regularly seek to communicate the strategy of the firm via briefings of employees at various positional levels. Underpinning such efforts will be an explicit employee communication policy.

The sources determining the application of collaborative practices are distinctly different from those determining the use of calculative practices. First, there is no reason to suppose that such practices would necessarily be met with resistance by unions or other collective bodies representing the interests of employees. Second, it may be supposed that the introduction and maintenance of such relatively sophisticated human relations devices (cf. Storey, 1989) will to a substantial degree be a function of the role and position of personnel managers and specialists, that is, the opportunity they have to implement practices other than purely operative ones involving legal and regulative matters. Thus, the introduction of collaborative practices is highly dependent on the latitude for novel action enjoyed by personnel departments. The more operatively oriented the role of the personnel function is, the less frequently such practices will be implemented. Stated differently, this role must encompass human-relations issues stretching beyond classic personnel administration and the handling of reactive legal and regulative matters. A minimum amount of freedom of action is necessary if there is to be sufficient space for a communicative and empowerment-directed modus operandi including collaborative practices.

Viewed from an institutional perspective, the role of personnel departments, human resource managers, and personnel experts (the personnel function) is heavily influenced by the specific national institutional environment. One major source of cross-national variation in collaborative practices is the volume and detail of specific legislative regulations of firms' employment practices. In countries where these are considerable, it can be expected that the amount of proactive behavior, in terms of efforts to introduce novel, sophisticated practices by personnel specialists, will be low. In environments where legal expectations are of a more general and diffuse character that permit local, firm-idiosyncratic adjustments, it is reasonable to expect that proactive behavior in the form of innovative collaborative management techniques will be significantly more widespread.

Proposition 4: The more detailed and comprehensive the labor-related regulation of firms, the more operative the role of their personnel function.

Proposition 5: The more operatively oriented the role of the personnel function in firms, the less they will adopt collaborative human resource management practices.

Although the calculative and collaborative approaches constitute two distinct sets of human resource management practices consisting of dissimilar activities and techniques, they should not be conceived of as representing two different ends of a continuum; rather, they are orthogonal (cf. Harrison, 1993).

HRM in European Firms

Since we do not have data to measure national institutional variables directly, we will delineate these through descriptions of the salient institutional characteristics of each of the six countries represented in our study. For each country, we will highlight the influence of labor unions and similar labor representative bodies as well as the strength of the labor legislation at the firm level. We will then assess the magnitude and detail of the regulative pressure firms have to contend with, together with the degree to which the personnel function in firms is operatively oriented. We then use institutional descriptions as a foundation for country-specific predictions of firms' adoption of calculative and collaborative practices, respectively.

Germany. In Germany, wages and working hours are the exclusive territory of the labor unions in a system of regional, industrywide bargaining. Although unionization in German worklife has dropped considerably since the 1970s, and in 1994 was down to 30 percent, over 90 percent of the workforce is covered by collective bargaining agreements (Economist, 1997; see also Scholz, 1996). In addition, attention should be drawn to the elaborate German system of co-determination, which is regulated at the plant level by the Works Constitution Act of 1972 and at the enterprise level by the Works Constitution Act of 1952, which was extended in 1976 (cf. Hollingsworth, 1997). As a consequence of this legislation, employers need to maintain positive relations with the works councils. These are powerful, employee-elected bodies that are legally entitled to co-determination, consultation, and access to important information, and hence restrict the degree of managerial autonomy (Wachter and Stengelhofen, 1995; Scholz, 1996).

The generally substantial size of German personnel departments is primarily a response to the detailed legal rights enjoyed by the works councils, which at any time can demand written information on any aspect of personnel policy and veto changes in working hours, training agreements, recruitment of personnel, and disciplinary procedures (Bennett, 1997). The role of the personnel department is in general largely restricted to providing such information and to ensuring that the firm is not in breach of any of the numerous regulations that constitute national employment law and agreements. Hence, the primary task of the personnel department is to engineer highly formalized and standardized procedures as well as to supervise and implement the comprehensive collective bargaining agreements with the unions. Thus, in the case of Germany, personnel managers and departments have to cope with the burden of a comprehensive and detailed legislative regime, which in turn leads to a highly operative focus that is expected to inhibit the use of collaborative practices.

It is this narrow, operative focus, Wachter and Stengelhofen (1995) argued, that largely prevents any large-scale adoption of more recent international human resource management practices in Germany. As they pointed out, a German parallel to or a direct translation of the term human resource management does not even exist. This is not to say that various calculative techniques associated with the rational HRM model are completely absent, but their potential use has invariably been subject to the critical eye of the works councils (Lane, 1994; Marginson and Sisson, 1994). In large measure, these councils have also sought to preserve the strong traditions of social welfare that have characterized employers' treatment of their human resources. Thus, for example, numerical flexibility is largely alien to the German context. Firms seeking such flexibility have tended to shift labor-intensive operations to foreign locations, with 25 percent of manufacturing companies having relocated production abroad in the period between 1993 and 1996 (Financial Times, 1996b).

Given that German worklife is characterized by powerful labor representative bodies and strong work legislation, and the personnel function has to deal with detailed and comprehensive regulations and is therefore highly operatively oriented, low scores on both calculative and collaborative practices can be expected:

Hypothesis 1: German firms are expected to exhibit low scores on the adoption of calculative human resource management practices.

Hypothesis 2: German firms are expected to exhibit low scores on the adoption of collaborative human resource management practices.

France. Brunstein (1995) characterized French firms as hierarchical and Tayloristic with elitist "grandes ecoles" educated managements. Similarly, van der Klink and Mulder (1995) and Lane (1994) described French companies as being based on the principle of control with power concentrated at the top. According to these writers, a consequence of the strong managerial autonomy is a general lack of trust between employer and employees. Managers seem to be reluctant to grant employees access to information about the production process and managerial matters, since asymmetric information is a precondition for maintaining power. This lack of trust and mutuality is exacerbated by the role of the labor union movement, not least the communist-oriented CGT, which has traditionally been in strong opposition to corporate management (Slomp, 1995).

Although French unions have little influence over corporate management, they do have a substantial impact on the work of the personnel function. Despite the fact that unionization is currently only slightly higher than 10 percent in France, collective bargaining agreements are extended by law to nonunionized workers. This has meant that resources that might have been used by personnel departments to develop collaborative practices are concentrated on overseeing a complex and detailed system of wage bargaining that is carefully scrutinized by antagonistic unions (Brunstein, 1995). Hence, the personnel department has been obliged to have a high level of legal expertise.

An additional factor that constrains French personnel departments in developing collaborative practices is that they are also charged with the important task of maintaining good relations with the Inspection du Travail, a public body that rigorously checks that companies are not contravening employment legislation, particularly with regard to the use of temporary labor (Financial Times, 1996a).

Finally, the function of the personnel department as a means of coping with the legislative context peculiar to France is particularly pronounced in the area of training. Whereas the rational HRM model assumes that training is driven by the firm's inherent needs for increased competence and flexibility through employee development, in the case of France it is difficult to overlook the impact of the legal arrangements that oblige firms to annually invest a sum equivalent to at least 1.2 percent of their wage bill so as not to be punished financially through the tax legislation. As Brunstein (1995) pointed out, in practice this has often resulted in firms preferring to hand over the economic monitoring of their training obligation to the Fonds d'Assurance to ensure that they remain within the boundaries of the law (see also Jenkins and van der Wijk, 1996).

In conclusion, because union power is limited to collective bargaining, management in French firms is able to pursue a tradition of autonomous, non-consultative decision making. Because personnel departments are exposed to comprehensive and detailed legal regulations combined with a distrustful union movement, however, their scope for human resource management innovations has been limited. This leads to the following hypotheses:

Hypothesis 3: French firms are expected to exhibit high scores on the adoption of calculative human resource management practices.

Hypothesis 4: French firms are expected to exhibit low scores on the adoption of collaborative human resource management practices.

Denmark and Norway. Strong managerial autonomy has never been a feature of Danish employment (Kristensen, 1992; Bevort, Pedersen, and Sundbo, 1995), in large part because the labor union movement, with delegates firmly entrenched even in relatively small enterprises (Slomp, 1995), has been too powerful to permit this. Instead, Denmark is distinguished by a closely linked institutional system of cooperation and negotiation (Bevort, Pedersen, and Sundbo, 1995). Changes in employment practices are subject to bipartite agreements, with the state functioning both as a mediator and a guarantor.

A recent survey conducted among European companies through the Euronet-Cranfield research program and covering the period 1991-1995, indicates no significant changes in the balance of power between unions and management in Danish firms. The 23 percent of firms reporting a decrease in local union influence are outweighed by the 77 percent either reporting an increase or no change (Nordhaug, 1997). The stability of the labor union influence in the Norwegian system appears to be even more entrenched than that of the Danish, with only 8 percent of the Norwegian firms reporting any decrease in local union influence in the period 1991-1995 (Nordhaug, 1997).

The institutionalized local pattern of cooperation has resulted in relatively informal employer-employee relations at the firm level, but this collaborative approach must not be confused with commitment, in the sense that individual employees uncritically identify with the aims of the firm and view their personal and professional competence development as being at one with these aims. On the contrary, there is still considerable identification with the worker collective, particularly among low-level male employees. In other words, there remains engrained in Danish as well as Norwegian worklife an assumption of divergent and conflicting interests between employer and employees at the firm-level and, therefore, an ongoing resistance to calculative practices.

In a comparison of the legislative environment for worklife in Denmark and Norway, Graver (1995) observed that in both countries there is a strong and pronounced framework intended to ensure that conflicts are resolved at the firm level. Labor unions are legally entitled to be consulted on issues relating to major structural changes, such as downsizing, outsourcing, and potential mergers. Graver (1995) concluded that there is a distinct Scandinavian model of employment law that is sufficiently general to permit personnel departments to experiment with and implement human resource management practices of the collaborative type. Concomitantly, the law preserves the rights of labor unions to withdraw their cooperation in the case of disagreement with the management. As Borgen (1995)indicated, the sense of security granted by the national framework of government-guaranteed agreements makes it possible for labor unions to involve themselves in the development of collaborative, firm-level solutions designed to contribute to enhanced functional flexibility (Simensen and Isaksen, 1995; Gooderham and Nordhaug, 1997).

In summary, in Denmark and Norway, labor unions generally both possess and exert considerable influence on the management of firms. Together with the fact that individual rights of employees are strongly protected by laws and agreements, this means that the general autonomy of management is significantly restricted. At the same time, the legislative framework is so general that personnel departments are not burdened with having to oversee the mass of detail that their German and French counterparts have to deal with. Consequently, the personnel function has the opportunity to innovate in terms of collaborative practices:

Hypothesis 5: Danish and Norwegian firms are expected to exhibit low scores on the adoption of calculative human resource management practices.

Hypothesis 6: Danish and Norwegian firms are expected to exhibit high scores on the adoption of collaborative human resource management practices.

Spain. In their account of the human resource management field in Spain, Florez-Saborido, Gonzales-Rendon, and Alcaide-Castro (1995) pointed to the authoritarian legacy of the Franco regime (1939-1975), during which there was an absence of free labor unions and a wide scope for lawful dismissal. With Spain's change to democratic government, the major focus of personnel management was on the reduction of labor conflict, which resulted in a series of agreements on procedural rules governing the contents of collective bargaining in the first half of the 1980s. Nevertheless, institutional structures still remain weak, thereby granting management great autonomy (Lucio, 1992).

Although the unions in Spain have increased their influence since 1975, the degree of influence over managerial decisions enjoyed by Scandinavian unions or German unions and works councils remains much greater. Moreover, the bargaining effectiveness of unions varies widely between provinces and regions, in large part because of their relatively poor financial and organizational resources (Lucio, 1992). The main focus of the two big labor federations, the UGT and the Workers' Commissions, has been on limiting changes to the rules governing employers' liability to redundancy costs. But their general weakness has simply resulted in employers side-stepping the legislation to achieve numerical flexibility by negotiating individual employment contracts. Hence, in 1996 only 4.1 percent of all new employment contracts were for full-time permanent jobs, bringing the total of all wage earners in temporary employment to more than one-third (Financial Times, 1997). Furthermore, it must be expected that Spanish employers, essentially conservative and paternalistic and uninhibited by union influence, will have a particular propensity for adopting calculative human resource management practices.

With regard to collaborative practices, a comprehensive and detailed regulative pressure on Spanish firms in the field of human resource management has evolved during the 1980s and 1990s as a response to the many variations of employment contracts. As noted by Florez-Saborido, Gonzales-Rendon, and Alcaide-Castro (1995: 240), "this wide range of contractual arrangements generated a complex system, in which clear, common rules did not exist .... The government followed a gradualist type strategy in introducing greater contractual freedom, but the process also produced unnecessary administrative complexity and legal insecurity for the employer." In addition to this operational constraint, the personnel function in Spanish firms has also historically been underdeveloped and generally has had no other function than to serve relatively autocratic managements. Hence, personnel practices in Spain have exhibited a reactive and highly operatively oriented character, with specialist personnel departments in possession of scarce resources and limited status. As Baruel (1996) noted, Spanish firms have substantially disregarded novel developments within the human resource management field, meaning that collaborative practices can be expected to be rare.

As indicated, Spain is characterized by weak labor unions without any significant influence on worklife and by a substantial managerial autonomy. At the same time, the personnel function has traditionally been highly operatively oriented, lacking the opportunity to introduce collaborative human resource management practices.

Hypothesis 7: Spanish firms are expected to exhibit high scores on the adoption of calculative human resource management practices.

Hypothesis 8: Spanish firms are expected to exhibit low scores on the adoption of collaborative human resource management practices.

The United Kingdom. The United Kingdom is unique in the European context in that during the 1980s its employment legislation was subject to radical changes. Most notably, this legislation includes the Employment Acts of 1980, 1982, 1988, and 1990 and the Trade Union Act of 1984, which impose severe civil penalties. Together, these acts curbed the unions' right to recognition, outlawed the closed shop and secondary picketing, and narrowed the freedom of unions to call strikes, for instance, by requiring that a secret ballot of the members be called first. The result was a considerable increase in general managerial autonomy (Edwards et al., 1992).

At the same time, union membership dropped from more than half of the workforce in 1979 to less than a third in 1995 (Economist, 1996), and, more significantly, the proportion of workers covered by collective bargaining declined from 75 percent in 1980 to 45 percent in 1994 (Economist, 1997). The continuing ebb in the power of unions is clearly indicated by the finding that 38 percent of British firms in 1994 reported a decrease in local union influence (Nordhaug, 1997). These changes in union power have provided "wide scope for managerial innovation in employment and labour strategies" (Rubery and Wilkinson, 1994: 11), thereby paving the way for the introduction of calculative practices (Hendry and Pettigrew, 1990).

Not only did the changes in the United Kingdom effect an erosion of the bargaining power of labor unions and a concomitant increase in managerial autonomy (Edwards et al., 1992), they also provided the impetus for a shift in the role of personnel departments in British firms. Throughout the postwar period, but particularly in the 1970s and early 1980s, personnel specialists had, with some success, emphasized their role as industrial relations experts (Legge, 1995). With the demise of this role, personnel departments have been under pressure to develop a broader range of professional services, which in large part has included the various techniques associated with the collaborative approach. To a large extent, they have reacted by seeking to preserve their credibility by attempting to become facilitators preoccupied with issues related to training and development, internal communication, and integration of business strategy and human resource management (Marchington et al., 1994). Indeed, as reported by Poole and Mansfield (1992; see also Mabey and lies, 1996), novel, innovative human resource management practices have been widely endorsed in many British companies. Hence, it is reasonable to predict that they will demonstrate high scores on the adoption of collaborative practices.

In summary, British firms generally are confronted with neither detailed regulative pressures nor labor unions with any significant influence on management. This and the tendency to replace traditional industrial relations approaches with innovative human resource management activities make it reasonable to expect a high adoption rate of both calculative and collaborative practices.

Hypothesis 9: British firms are expected to exhibit high scores on the adoption of calculative human resource management practices.

Hypothesis 10: British firms are expected to exhibit high scores on the adoption of collaborative human resource management practices.

Industrial embeddedness. From the rational perspective, both the calculative and collaborative human resource management practices would be regarded as a set of tools deliberately designed to maximize the performance of employees in relation to the firm's goals. The need to apply such tools would be expected to vary according to market conditions and technological demands, which may be broadly indicated by the industry in which the firm operates. Institutional theory also assumes that industries develop along particular trajectories characterized by distinct economic and organizational dynamics that distinguish them from other industries (Hollingsworth, Schmitter, and Streeck, 1993). On this basis, it is reasonable to expect variations across industries in the adoption of HRM practices:

Hypothesis 11: Firms' adoption of calculative human resource management practices will vary across industries.

Hypothesis 12: Firms' adoption of collaborative human resource management practices will vary across industries.

Firm size. As Scott (1998) noted, most studies of the relation between organizational size and structure indicate that size, in terms of the number of employees, tends to influence the methods used for controlling and coordinating employees. On the one hand, the evidence suggests that the larger the size of the organization, the more standardized are human resource management procedures, such as selection and advancement (Pugh and Hickson, 1976). On the other hand, it indicates that the larger the organization, the less centralization (Kalleberg et al., 1996). This seeming paradox may be explained by the need of large organizations to decentralize much of the decision making while at the same time having to define through clear performance standards the scope of discretion for decision making. It could also be argued that, in general, economies of scale positively influence the opportunities for specialization and professionalization of the personnel function in firms, thereby opening them up for the adoption of more sophisticated and labor-demanding practices. Additionally, due to their scale and need to decentralize, larger firms face greater problems than small ones when it comes to creating commitment and integration among employees. This necessitates the use of collaborative human resource management practices, since direct communication on a day-to-day basis between top management and employees becomes increasingly difficult with increased size.

Hypothesis 13: The larger the firm, the more frequently calculative practices will be applied.

Hypothesis 14: The larger the firm, the more frequently collaborative practices will be applied.



The data we use are derived from the Euronet-Cranfield data set, which comprises the results of identical surveys of firms in European Union (EU) and European Free Trade Association (EFTA) countries. The overall strategy was to mail appropriately translated questionnaires to personnel managers in representative national samples of firms with more than 100 employees. Problems in ensuring that the selection and interpretation of topic areas were not biased by one country's approach, as well as problems related to the translation of concepts and questions, were largely overcome by close collaboration between business schools located in each country (for a detailed description, see Brewster et al., 1996).

Completed questionnaires were returned to the responsible business school in each country for initial coding before being forwarded to the project's secretariat in the United Kingdom. The latest survey, which is used in this paper, was conducted in 1995-1996. For analytical reasons, we excluded countries for which the effective sample size was below 100 firms, along with countries in which a deviant sampling procedure involving potential systematic biases had been employed. Finally, we selected countries that covered different regions of Western Europe, including both northern and southern countries as well as the United Kingdom. These considerations provided us with a sample embracing firms in the six countries listed earlier. Although the response rate for the individual countries is relatively low, mostly between 25 and 35 percent, analyses suggest that statistical representativeness has not been impaired (cf. Brewster et al., 1994; Gooderham, Kvitastein, and Nordhaug, 1996, for a detailed description).

Since the central issue in this paper is that of country-specific, institutional determinants of organizational practices, we chose to exclude from the sample all firms that are foreign subsidiaries. The rationale behind this is that their human resource management practices may have been developed under different institutional conditions than those of the host country and are therefore to varying degrees cultural transplants (Gooderham, Nordhaug, and Ringdal, 1998).

Scaling Procedure

To develop the scales for calculative and collaborative practices, we used Mokken's nonparametric latent trait model for unidimensional scaling (Mokken and Lewis, 1982; Sjitsma, Debets, and Molenaar, 1990). A Mokken scale may be seen as a generalization of both the Guttman scale and classical test theory. It adopts the idea of cumulativeness inherent in Guttman's approach, and, in addition, the probabilistic nature of Mokken's model allows for nonperfect response patterns. In classical test theory, measures of reliability, such as Cronbach's alpha, are central. Reliability is a desirable property of a scale, but its utility rests on the assumption of unidimensionality. This assumption may only be tested by external procedures such as a factor analysis. Mokken's approach is an attempt to develop a set of not too restrictive assumptions and an internal scaling criterion that ensures a unidimensional scale. This is an important advantage, especially for dichotomous items that do not satisfy the assumption of interval scale items in factor analysis. The risk related to factor analysis for 0-1 items increases with skewed distributions.

Item response theory (IRT) explains the observed responses by assuming a latent continuum on which both cases and items are located. The probability of a scale score of 1 depends on the latent true score for the subject (case) and characteristics of the item, such as its difficulty. A Mokken scale is nonparametric in the sense that the item characteristic curve does not have to have a special form as long as it is monotonously nondecreasing. This makes the model very flexible but also implies that neither the subject nor the item parameters may be estimated directly. It has been shown, however, that the unweighted sum of item scores is monotonously related to the latent true score (Sjitsma, Debets, and Molenaar, 1990: 176). This means that the Mokken model only provides estimates of scale scores at an ordinal level, whereas parametric IRT models allow for direct estimation of the true scores, but the heavy assumptions of the latter models limit their applicability.

The primary scaling criterion is Loevinger's H-coefficient of homogeneity. This is defined as: [H.sub.ij] = 1 - ([F.sub.ij]/[E.sub.ij]), where [F.sub.ij] is the sum of observed errors according to the Guttman scale model (i.e., the observed number of respondents who give a negative response to the "easier" item and a positive response to the more "difficult" item), and [E.sub.ij] is the expected number of errors, assuming that the responses to the items are independent across persons and that the marginals are fixed (Molenaar et al., 1994). In the same way, the scalability of a single item with respect to the other items is defined by Hi, and the scalability of the total scale is measured by H. A set of items constitutes a scale if all [H.sub.ij] [greater than] 0, and if every item coefficient of scalability, [H.sub.i], is larger than a constant c, set to at least .30. All [H.sub.i] and the H should be significantly greater than zero according to a given level of significance. The total scale ought to have an H-value of at least .30 to form a weak scale. H-values between .40 and .50 indicate average scales, and values above .50 indicate strong scales. The item analysis was done by means of the computer program MSP (Sjitsma, Debets, and Molenaar, 1990; Molenaar et al., 1994).


Operationalization and measurement. The calculative scale (CALC) was constructed using ten items: Individual performance appraisals at the managerial level (item ca1), at the professional/technical (nonmanagerial)level (item ca2), at the clerical level (item ca3), and at the manual level of employment (item ca4); individual reward systems (merit pay/performance-related pay) at the managerial level (item ca5), at the professional/technical (nonmanagerial) level (item ca6), at the clerical level (item ca7), and at the manual level (item ca8); and formal evaluation of the effectiveness of personnel training immediately after the training has taken place (item ca9) and evaluation some months after training (item ca10).

The collaborative scale (COLL) was constructed on the basis of six dichotomous items: a written mission statement (item col); formal briefings about the company's strategy at the managerial level (item co2), the professional/technical (nonmanagerial) level (item co3), the clerical level (item co4), and the manual level (item co5); and a written policy for communication with employees (item co6).

Table 1 shows all items, ordered by sample difficulties, that is, by their means. As all items are dichotomous (0-1), the means reflect the proportion of firms employing the practice in question. The cumulative nature of the items in table 1 is evident. The rarest or "most difficult" calculative practices are individual rewards, whereas performance appraisals are more common. Furthermore, the ordering of individual rewards is also evident. They are most frequently used for managers (41 percent), and less frequently for professionals (38 percent), clerical employees (32 percent), and manual employees (27 percent). In other words, we expect firms using individual rewards for manual employees to be higher on the latent dimension than firms that only apply individual rewards for managers. Furthermore, the cumulative nature of the scale implies that we expect firms that apply individual rewards to workers also to apply such rewards to professionals and managers.

The items on performance appraisals also display a cumulative pattern. Performance appraisals for managers and professionals are the most common calculative practices (62 percent). The rarest in this group is performance appraisals for manual employees (43 percent). This hierarchy is also apparent for relevant items of collaborative practices. Strategy briefings are almost always given to managers (94 percent), less frequently to professionals (62 percent), clerical employees (42 percent), and manual workers (35 percent). The cumulative nature of the scale implies that we expect firms that adopt a "difficult" item, such as strategy briefings for manual workers, will also do this for clerical employees, professionals, and managers. The above ordering of the items appears to be reasonable and clearly indicates that the Mokken scaling model may be used. If the cumulativeness among the items described above fails to be empirically observed, the H-coefficient for the scale will suffer, and in the worst scenario, no scale may be formed that satisfies the scaling criterion of H [greater than] .30.


To construct the scale, we entered all the items into the Mokken Scaling Program (MSP) using the program's "Search" option (Molenaar et al., 1994) with the criterion that the H-coefficient for each item and item pair has to exceed .30. This resulted in the two separate scales in table 1 accepting all items. The main output of the MSP is the H-statistics, which measure the scalability of each item, as well as that of the total scales. H [greater than] .50 indicates a strong scale, and both our scales virtually satisfy this criterion, with H = .49 for CALC and H = .57 for COLL, although item Ca10 on the CALC scale and items Col and Co2 on the COLL scale have lower H-values than the other items.

The last three columns report the reliability analysis. Cronbach's alpha is satisfactory for both scales, well above .70. The average interitem correlations are also satisfactory: .37 for the CALC scale and .30 for the COLL scale. The column showing the multiple correlation coefficients does give some reason for concern with respect to the COLL scale. The items Col, Co2, and Co3 share smaller common variance with the set than the other items. Thus, although there seem to be points that can be improved, especially concerning the COLL scale, the two scales perform reasonably well and clearly exceed the minimum criteria of scalability and reliability.

Multiple Regression Analyses

The descriptive statistics and the Pearson correlations among the variables included in the regression analyses are shown in table 2. The CALC scale is a simple sum of the 10 dichotomous items, ranging from a minimum of 0 to a maximum [TABULAR DATA FOR TABLE 2 OMITTED] of 10, with a mean of 4.70. The COLL scale is the sum of the six items and varies from 0 to a maximum of 6, with a mean of 3.75. These scales are the two dependent variables in our regression analysis. The main regressor is country (national embeddedness). In the regression analysis this categorical regressor is represented by a set of five design variables, with the United Kingdom as the reference category. Lnsize, the natural logarithm of firm size, is the only continuous regressor. Industry is our second categorical regressor and is represented by five design variables in the regression analysis, with manufacturing as the reference category.

Table 3 reports the results from the multiple regression analysis. The model explains about 34 percent of the variance in the CALC scale. The remaining two R-square coefficients show the marginal effect of national embeddedness (country) and the combined effect of country and firm size. The marginal effect of country is .22, that is, the design variables for country add 22 percent to the total variance explained by the model. Country and firm size together account for most of the explained variation (31 out of 34 percent). The design variables for industrial embeddedness contribute only modestly to the amount of variance explained by the model.

When interpreting the country coefficients it is important to remember that the United Kingdom is the reference category. In fact, the regression constant may be interpreted as the predicted value on the CALC scale for British firms when the remaining regressors are set to zero. The coefficients for France and Spain are close to zero and are not statistically significant. This means that French and Spanish firms resemble British firms with respect to scores on the CALC scale, controlling for industry and firm size. Thus, as expected, the adoption of calculative HRM practices is quite [TABULAR DATA FOR TABLE 3 OMITTED] similar in these three countries. The coefficients for Germany, Norway, and Denmark are all negative and statistically significant. This indicates, as predicted, that firms in these three countries make less frequent use of calculative HRM practices than do firms in the United Kingdom.

The effect of Lnsize (firm size) is positive and statistically significant, implying that the larger the firm, the more frequent the adoption of calculative HRM practices. The R-square statistic measuring the marginal effect of firm size also indicates that it is the second most important regressor in the model. Industrial embeddedness indicates very small interindustry differences, however, when measured against the manufacturing industry. There is a slight tendency toward less adoption of calculative practices in construction and personal services industries, respectively. Otherwise there are no statistically significant effects.

The last two columns in table 3 show the results of regressing the COLL scale on our regressors. Whereas the model explains 34 percent of the variance in the CALC scale, it explains only 14 percent of the variance in the COLL scale. One reason for this is that firm size has no effect on the adoption of collaborative practices, whereas it has a substantial impact on firms' adoption of calculative practices. Moreover, the marginal effects of the country regressors are also much smaller. An additional technical factor that might contribute to the discrepancy in the explained variance is the much smaller variance in the COLL scale, indicating that there is less to be explained in this scale than in the CALC scale. It is also possible that the items we have at hand are better able to tap the adoption of calculative practices than collaborative ones. In theoretical terms, this may indicate that future research may require better measures and operationalizations.

Results for the COLL scale show that the national embeddedness of firms (country) represents a powerful explanatory variable. Most of the explained variance can be traced to the impact of this variable, and there are significant and substantial differences between firms in the United Kingdom and firms in all of the remaining countries. German and French firms exhibit the largest dissimilarities when compared with British firms. For these, together with Spanish firms, the effects of national embeddedness are negative in relation to the collaborative practices, whereas the opposite is true for Denmark and Norway. Hence, our predictions are supported.

As with the CALC scale, the COLL scale also indicates only very small interindustry differences. There is a slight tendency toward less adoption of collaborative practices within construction and personal services industries in relation to manufacturing industries. Otherwise there are no statistically significant effects. The effect of firm size is positive but small, and only significant at the .10 level. Consequently, our prediction about a positive relationship between size and adoption of collaborative practices receives only weak support.

Our findings related to national differences in human resource management practices are displayed in table 4, which shows the raw and the adjusted means on the CALC and the COLL scales for the firms in each country. The adjusted means are based on the regression model in table 3, with controls for firm size and industrial embeddedness. The countries are ranked by the means on the CALC scale. The differences between the raw and adjusted scores are minor, and we will only comment on the latter. British firms show the highest score on the adoption of calculative practices, closely followed by French and Spanish firms. German firms are in the middle, and the firms in Denmark and Norway exhibit the lowest scores on the adoption of calculative HRM practices. In contrast, Danish and Norwegian firms top the list when it comes to the adoption of collaborative HRM practices, followed by British firms, Spanish firms, French firms, and German firms.

Figure 1 is a visual presentation of these differences in HRM practices. The contours of four distinct HRM regimes are visible: British firms have high scores on both types of HRM practices, French and Spanish firms have high scores on calculative practices and medium scores on collaborative practices, German firms exhibit below-average scores on both practices, whereas Danish and Norwegian firms have low scores on calculative practices but high scores on collaborative practices.
Table 4

Means on the CALC and COLL Scales by Country (N = 1462)(*)

                     CALC                         COLL
               Means     Adjusted means     Means     Adjusted means

England         6.33           6.14          3.98           3.97
France          6.07           6.06          3.22           3.18
Spain           5.97           5.91          3.40           3.40
Germany         4.23           4.03          2.79           2.75
Norway          2.31           2.61          4.87           4.92
Denmark         2.21           2.52          4.18           4.23

* Means are the raw (arithmetic) means of the scales; the adjusted
means are predicted means from the regression model in table 3,
adjusted for the control variables. The countries are ranked by
the CALC means.


As we have demonstrated, the British regime appears to be unique in that both collaborative and calculative practices are widespread. This contrasts with Norway and Denmark, in which the regimes appear to be first and foremost collaborative projects. At the other extreme from the United Kingdom is the German regime, which appears to be relatively unreceptive to international developments within personnel management in general and collaborative practices in particular. Finally, there seems to be a specifically Latin variant of human resource management practices, since French and Spanish firms form a distinct cluster in the analysis.

On the basis of our findings, the major thrust of an institutional critique of the rationally grounded strategic HRM model is twofold. First, this model assumes a much greater degree of organizational and managerial autonomy than is the case for most firms, regardless of national setting. In other words, the critique questions the implicit assumption that management actually possesses sufficient freedom to develop human resource management practices according to the specific economic or strategic interests of the firm. Second, it questions the assumption of employer-employee unanimity. This may vary across different institutional settings, in large part according to the strength and behavior of labor unions. Instead of regarding firms' choice of personnel practices as primarily reflecting rational choices, proponents of the institutional perspective view them as stemming from firms' attempts to acquire legitimacy in relation to the government and other public bodies, the law, industry associations, labor unions, other firms, or the broader political culture (Edelman, 1990; Powell and DiMaggio, 1991). Stated differently, changes in practice are first and foremost conceived of as responses to demands and pressures generated within firms' external institutional environments (Sutton et al., 1994). Thus, at the cross-national level one must expect variations in human resource management practices insofar as dissimilar legal regulations and political structures exist. By extension, national differences in the role, status, and position of the personnel function can also be expected because of institutional dissimilarities, even among countries that are relatively similar in cultural terms (see, e.g., Dobbin et al., 1993).

Our findings also highlight the shortcomings of rational organizational theory by revealing the need to incorporate country-specific, institutional factors in studies of patterns of organizational practices in general and human resource management practices in particular. The analysis indicates that the national institutional embeddedness of firms plays a far more important role in shaping human resource management practices than does their industrial embeddedness. Firm size was shown to have a substantial effect on the adoption of calculative practices, hence partly supporting rational theory, which emphasizes the role of the varying objective demands faced by firms.

Although our findings are strongly supportive of institutional theory, we have also drawn attention to a lacuna that is widespread in much of its literature. Whereas the phenomenon of mimetic processes across firms diffusing management practices and organizational design has been extensively covered, relatively little attention has been devoted to national institutional barriers to such imitation processes. In the context of our study, this is epitomized by specific national features in the form of inert regulative and political structures that play a paramount role by inhibiting or preventing the adoption of novel and "modern" management practices. Furthermore, this inhibition often occurs in spite of the fact that many of these practices are highly recommended in the influential North American prescriptive management literature and, moreover, are frequently imported, advocated, and proffered in the marketplace by business consulting firms operating throughout Europe. Indeed, the fundamental point made in this paper is that under varying regulative and political conditions, firms are likely to implement divergent organizational practices and forms. Our study reveals that there are significant cross-national variations in the adoption of typically novel or "modern" human resource management practices, even when the focus is limited to countries that are not very distant from one another in cultural terms. This is commensurate with the arguments of Hollingsworth (1997: 265-266), who contended that societies' modes of economic governance and management practices are highly path dependent and system specific and that "there are serious limitations in the extent to which a society may mimic the forms of economic governance and performance of other societies."

An important implication of our findings is that institutionalists' preoccupation with mimetic processes leading to isomorphism, coupled with a general underestimation of the importance of institutional obstacles to diffusion processes that clearly exist in some countries while not in others, is a limitation that must be overcome if institutionalism is to be fruitfully applied in studies of comparative international management and organization. The challenge is to be able to explain diffusion of management techniques within restricted organizational fields in each country while at the same time being able to explain nationally embedded barriers to such diffusion processes across countries. Stated differently, mechanisms that are central to institutionalism may, on the one hand, create a significant amount of isomorphism within organization fields and to some degree also within nations, while, on the other hand, contributing to the generation of a lack of isomorphism across firms in different nations through forces such as legal regulations and political processes. One major conclusion is thus that studies conducted at different analytical levels seem to require dissimilar theories due to the fact that dissimilar combinations of institutional mechanisms act as determinants of organizational practices at different levels. In a comparative, cross-national perspective, both regulative and power-related structures seem to be paramount in explaining the complexity and multitude of international variations in organizational forms and practices, while cognitive processes of imitation seem to be key factors in shaping the specific organizational practices that dominate within each organizational field and country. Consequently, it is imperative to put a stronger emphasis on regulative and political elements, while continuing to emphasize the fruitful contributions made in understanding cognitive processes. An important part of this effort will be to bring the internal organization of firms and, more specifically, local power-relations back into institutional analyses. Finally, with respect to human resource management, there are powerful institutional barriers that hamper the large-scale international diffusion of particular practices. It appears that management practices that are less institutionally contentious, such as collaborative practices, are more easily disseminated across nations.

The study reported here indicates the need for two types of research efforts. One is to extend cross-national studies to include not only the diffusion of and variations in human resource management practices but also more general management practices so as to compare these and gain greater understanding of the effects of different national contexts. Second, there is a need to collect data in different countries that make it possible to measure the impact of concrete institutional conditions more directly and accurately than has been feasible in the context of this study. Given that we were able to indicate effects of institutional contexts, it is likely that further empirical studies applying more direct measurements would reveal causal patterns that can more fully explain both successful and unsuccessful attempts to transfer management practices across national borders and, hence, expand the scope of institutional organization theory.

We are grateful for valuable comments from Stephen R. Barley, Olav A. Kvitastein, and three anonymous ASQ reviewers as well as for the financial support of the Norwegian Research Council and the Ministry of Labor in Norway. Our names are listed in alphabetical order.


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Paul N. Gooderham [coauthor, "Institutional and Rational Determinants of Organizational Practices: Human Resource Management in European Firms"] is a professor at the Department of Strategy and Management, Norwegian School of Economics and Business Administration, Breiviken 2, 5035 Bergen, Norway (e-mail: His current research interests include international management, career studies, human resource management, and organization theory. Recent publications include "Analysis of Competence Needs in Firms: Rational and Institutional Determinants," with Erik Doving and Odd Nordhaug (Current Topics in Management, 3: 175-189); "Numerical Flexibility in Norwegian and British Firms: Competitive Pressure and Institutional Embeddedness," with Odd Nordhaug (Employee Relations, 19: 568-580); "The Second-Rate Second Chance? A Comparison of the Fates of Mature Graduates in the Labour Market in England and Norway," with Mark Dale (International Journal of Lifelong Education, 14: 3-21); and "Trends in Employer Funded Training as an Indicator of Changes in Employment," with Kjell Hines (Adult Education Quarterly, 45: 213-226). He received his Dr. Polit. in sociology from the University of Trondheim.

Odd Nordhaug [coauthor, "Institutional and Rational Determinants of Organizational Practices: Human Resource Management in European Firms"] is the dean of the School of Business Administration and a professor in administrative science at the Department of Strategy and Management, Norwegian School of Economics and Business Administration, Breiviken 2, 5035 Bergen, Norway (e-mail: He received his Dr. Philos. in sociology from the University of Oslo, and current research interests include organization theory, human resource analysis, and international management and organization. Recent publications include Human Capital in Organizations (Oxford University Press, 1994); "Numerical Flexibility in Norwegian and British Firms: Competitive Pressure and Institutional Embeddedness," with Paul N. Gooderham (Employee Relations, 19: 568-580); "Competence Specificities: A Classificatory Framework" (International Studies of Management and Organization, 28: 8-29); "Analysis of Competence Needs in Firms: Rational and Institutional Determinants," with Erik Doving and Paul N. Gooderham (Current Topics in Management, 3: 175-189); and "Optimal Investment Committee Sizes. Do Too Many (or Too Few) Cooks Spoil the Broth?" with Ole Gjolberg (Journal of Portfolio Management, 22: 147-161).

Hyosun Kim [coauthor, "The Circulation of Corporate Control: Selection of Functional Backgrounds of New CEOs in Large U.S. Manufacturing Firms, 1981-1992"] is a doctoral candidate in organization studies at the Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA 02139 (e-mail: Her research interests include managerial succession, comparative corporate governance, and managing diversity, especially in the context of multinational companies. Her dissertation examines how the Japanese corporate governance system affects the CEO change process in Japanese firms. She received her M.A. in industrial and organizational psychology from Seoul National University.
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Author:Gooderham, Paul N.; Nordhaug, Odd; Ringdal, Kristen
Publication:Administrative Science Quarterly
Geographic Code:1USA
Date:Sep 1, 1999
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