The issue of labour flexibility has sparked controversy in Greece. This empirical study sheds light on workplace flexibility in small and medium‐sized enterprises (SMEs) that employ the vast majority of workers in Greece. The study tries to assess the extent to which Greek SMEs resort to external and internal labour flexibility arrangements to cope with increasing competition and the way they react to recent flexibility‐oriented legislation. The survey is based on case studies and draws heavily on face‐to‐face interviews with 16 small proprietors. It is found that SMEs make little use of external flexibility. Rather they rely on internal flexibility, which stems from extensive Webs of informal employee relations. However, the nature of “informality” varies in small enterprises leading them to adopt different modes of absorbing institutional change.
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