This research paper presents and critically discusses on a theoretical level two approaches within comparative political economy that aim at explaining the contemporary diversity of capitalists systems and corporate strategies - the regulation approach, and the varieties of capitalism approach. It does so by comparing the role of institutions and how each theory deals with institutional creation, change and the diffusion of practices across space with new advances in neo-institutional theory. The aim of the paper is to find a coherent combination of research approaches that successfully can combine micro-economic and extra-economic practices (in particular labour-management relations) at the level of the firm to macro-economic and political institutional forms at the level of the national political economy. It does so by pointing at the strengths and weaknesses of the two approaches and by suggesting ways in which to bring them together. Specific attention is given to how the relation between management and employees is strategically defined and implemented in practice. The overall objective is to create a combined approach that can grasp under what conditions multinational corporations are more likely to incorporate, implement and diffuse extensive labour-management relations alongside economic strategies. The paper proposes that the extent to which this happens will depend on three inter-related processes: a) the internalisation of the institutional context into firm organisation, b) the diffusion, adaptation, and imitation of practices and c) through third party pressures. In conclusion the paper raises a number of research questions that can form the basis of empirical research into the role of labour-management relations across and within political economies.