Union avoidance and foreign direct investment in the USA

The USA is not only the largest foreign direct investor country in the world, it is also host to the largest inflow of foreign direct investment (FDI) in the world. Although recent analyses have shown that multinational companies have invested less in countries with higher levels of union membership and contract coverage, more centralized negotiation structures and more restrictive workplace regulations, no similar analysis has been made of the influence of these factors on FDI in the USA. Also lacking in the literature is any analysis of the extent to which foreign‐owned affiliates have engaged in union avoidance in the USA as part of their investment and human resource management/labor relations strategies. This study first focuses on the estimated effects of the relatively low union penetration and decentralized negotiation structure of the USA on FDI in the USA. Second, the precipitous decline in union coverage of foreign subsidiaries in the USA over the last two decades is analyzed. The results of both inquiries strongly support the proposition that foreign multinationals have given substantial weight to union avoidance preferences as part of their FDI strategies.