ABSTRACT
A fundamental finding of the current empirical industrial relations (IR) and human resource management (HRM) research is that similar types of firms producing similar types of products adopt different sets of work practices or cultures. This chapter explores that the neoclassical worldview is too narrow to accommodate the possible existence and persistence of inferior work cultures. The significance of the empirics of the IR and HRM literature for economic theory and vice versa is revealed in a simple behavioral model of the firm. To neoclassical theory a set of work practices cannot be deemed superior or relatively efficient if they cannot dominate the more traditional work practices in the market place. Market forces cannot force the adoption of the most efficient methods of organizing work. The market only cares that firms remain competitive, even if this on the basis of relatively inefficient, relatively low wage and non-cooperative systems of industrial relations.
