This concept was developed by the German political scientist, Wolfgang Streeck. It refers to institutions that constrain employer behaviour, and which may initially be resisted as a consequence, but which generate beneficial consequences for business in the longer term. Streeck's initial example was the system of codetermination in Germany, which inhibits employer freedom to restructure businesses and requires them to share information and consult with worker representatives. The effect of this restriction, Streeck argues, has been to encourage the development of a long-term cooperative relationship between German employers and their employees, which in turn has provided the basis for competition on the basis of quality enhancement and high value-added and allowed German manufacturing to thrive in world markets. Other institutions that might function as beneficial constraints are minimum wage laws, training levies, and union recognition procedures. [See coordinated market economy, shock-effect, and works council.]
Subjects: Human Resource Management.