Cultural Difference and Antagonistic Labor Relations: The Case of Manufacturing Firms in Ethiopia

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Abstract

When do cultural differences between managers and employees lead to antagonistic labor relations? Recent work highlights how individuals use culture as a toolkit, allowing them to learn from and eventually bridge cultural divides. However, the specific tools and conditions that enable or derail cultural adjustment remain unclear. This article explores this question by comparing case studies of 16 domestic- and foreign-managed manufacturing firms around Addis Ababa, Ethiopia. Consistent with existing evidence, we observe greater antagonism in firms where managers and employees come from different national backgrounds. However, only five of the eight foreign firms experienced antagonism, and we identify patterns to best explain this variation. We find that managers and employees in all firms signal willingness to build long-term relations, but failure to find agreement around procedural fairness--expectations about how adjustments should proceed--appear to derail attempts to successfully bridge cultural divides. Specifically, antagonism is observed when managers and employees disagree on the role of labor laws in negotiations over working conditions and on when employee feedback should be gathered on working conditions. Harmonious labor relations in transnational firms thus appear to depend at least in part on procedural fairness serving as a basis for managers and employees to jointly bridge cultural differences.

Authors

• James Y. Chu, Stanford University

• Marcel Fafchamps, Stanford University

• David Jonason, Stanford University