This chapter discusses how different institutional environments and associated collaborative types of labour management practices (LMPs) at firm level improve firm performance in European countries. The European 'social model' suggests that the existence of a collaborative approach to companies' relations with employees has historic political origins. The chapter reviews literature on the link between institutional settings and LMPs and develop a theoretical framework to analyses relationships in different national institutional environments. It also develops hypotheses for evaluating relationships between LMPs and institutional settings. The chapter shows that resolving the inherent employer-employee conflict of interest by adopting optimal LMPs at organizational level corresponding to the national institutional setting is efficient and ultimately can be welfare-improving. It also describes the data used and the scaling procedures employed in order to create LMP measures. The chapter has tested the theoretically derived hypothesis (H1) that collaborative forms of LMPs are more likely to enhance the labour extraction process and firm performance than calculative alternatives.