Employment relations in SMEs: Market‐driven or customer‐shaped?

The changing environment within which SMEs are operating is examined by reference to detailed case studies of three medium‐sized firms (one in the pharmaceutical sector and two in engineering). Following the development of a framework for analysis the cases are discussed to illustrate the direct and indirect ways in which pressures in the network of business relationships affect the management of employment relations. Particular attention is given to the effects of these pressures on management structure, work organisation and human resources policies and practices. Far from enjoying greater discretion following the decline in institutional arrangements and labour market deregulation, managers in SMEs find themselves constrained in new ways. It is argued that employment relations in these firms is shaped strongly by specific customer requirements exercised through the supply chain rather than being driven by broad market forces.