Looking at the economic development and importance of German companies in Europe, one might expect that an important aspect of a good economic performance is a well‐functioning HR system. Although a number of scholars claim this, the empirical evidence seems to point to the opposite. Several comparative studies have found that HRM in German companies is less strategically integrated and proactive than that of comparable firms in other countries. This article argues that the empirical results reported fail to grasp the essence of HRM in German firms. This lacuna is partly due to the co‐determination structure. HRM in large German firms has to be evaluated within the co‐determination structure, with the Betriebsrat (works council) being an important actor. For German firms co‐determination might even be a strategic resource. By examining this issue within such a framework, a more favourable picture of HR integration in German firms emerges.
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