This paper draws upon data from an investigation of U.S. and Japanese employment and pay systems. Most studies of high-performance workplace organizations have been concerned with 'internal fit,' focusing on organizational practices within the firm. In this contribution, the emphasis is upon the 'external fit' between high-performance organizations and their wider environments. The conclusion is that the effectiveness of an organizational system critically depends upon the macro-economic and institutional contexts within which it is located. (Reprinted by permission of the publisher.)