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TRANSFERABILITY OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT
Along with the development and trend of globalization, organizations and businesses actively or being forced to operate in an intense and competitive business environment. Since the last few decades, globalization pushes companies to participate in international business. Along with the emergence of liberalization, the integration of production, and the emergence of free trade regions such as the European Union, which allowing businesses to invest in other countries, organizations seek ways to keep competitive. Diverseness is essence in an international business, problem arises when companies try to manage and transfer their business practices across national borders. One of the most important business practices is human resource management (HRM), because HRM helps organizations gain competitive advantages, and helps coordinate and control international operations (Bartlett and Ghosal,
1991). However, transferring HRM practices across nations can be challenging and problematic for multinational companies (MNCs) due to diversification. Therefore successful transfer of HRM practices is critical for MNCs. Understanding factors affecting the transferability of HRM practices across national boundaries thus becomes important for organizations and researchers. This literature review is aimed to explore previous studies on the issue relevant to transfer of International HRM (IHRM) practices across borders, then to gain insights into the research philosophy and methods adopted by these papers.
Factors affecting transference of HRM practices
There existed concerns in relation to the extent of models and practices of human resource management (HRM) that are capable to be transferred across nations. Thus Easterby-Smith, Malina and Yuan (1995) conducted a research to answer this question. Easterby-Smith, Malina and Yuan (1995, 31) used direct comparison of HRM practices in matched companies from China and UK to examine what differences exist within and between these two countries. The data of this study was collected through method of interviews with a cross-section of managers in eight selected companies. The research strategy used was to check gained evidence which based on obtained descriptions of the official system from various
sources, with existed case studies and specific examples. Ethical issues in research was concerned as every company maintained anonymous during the research (Easterby-Smith, Malina and Yuan 1995, 34). This research adopted inductive research approach and qualitative research method. Easterby-Smith, Malina and Yuan (1995, 55) found that the major differences of HRM practices between China and UK are “soft” areas where relationships play a critical role, for instance, the appraisal, reward systems and the process of evaluating potential and the fundamental position of unions towards management. These differences are relevant to cultural factors in the country, for example in China people are concerned about relationships and harmony. This research suggests future researchers to carry out longitudinal studies, and points out its limitations of not being able to monitor changes in companies over time (Easterby-Smith, Malina and Yuan 1995, 56).
Many international, multinational and global firms have obtained good ideas from researchers in improvement of employment relationship, however, based on the study above, it is evident that cultural constraints can cause problems while transferring HRM practices across countries. However, apart from cultural constraints, contextual boundaries also affect transference of HRM practices in different countries. Based on prior theoretical literature, Verburg et al (1999) conducted a research to explain the contextual and cultural constraints that affect the transference of HRM practices between Chinese and Dutch companies. Vergurg et al (1999) also used direct comparison of HRM practices in industrial companies in China and The Netherlands. Data obtained in this research was through questionnaire and interview methods. Quantitative analysis methods were used in this research, such as univariate analysis and multivariate analysis, to analyze the descriptive data (Vergurg et al 1999, 405). As this research was designed based on prior theoretical backgrounds, it can be considered that this study had deductive approach to the research topic. This study supported the evidence found by Easterby-Smith, Malina and Yuan (1995). In addition, it found that: performance appraisal practices are more developed in The Netherlands, whereas in China, employees are provided with promotion opportunities; also, training practices were found to be different in these countries; in addition, organizational cultures were different in China and The Netherlands (Vergurg et al 1999, 406). The limitations of this research include having difficulties in matching samples from two countries; the way to obtain data in two countries were different; and intra-cultural variation in China causing limitation of study findings to the region of inquiry (Vergurg et al 1999, 406).
Based on the argument in above studies, the ‘best HRM practice’ across national boundaries does not seem to exist due to cultural and contextual constraints. However, those two studies adopted comparative research method between China and UK companies, little is known about Chinese multinational companies (MNCs) operating in the UK, and whether factors at institutional levels affect the transference of HRM practices. Thus, Zhang (2003) conducted a research to fill up this literature gap by drawing on a study of Chinese MNCs subsidiaries operating in UK, and how they used advanced environment of UK in the transference of the best HRM practice into their organizations. Zhang (2003) adopted in-depth case studies of six Chinese MNCs operating in the London area between 1997 and
1999 to examine the institutional factors affecting transferability of HRM practices across national boundaries. By interviewing personnel in these companies with open-ended and semi-structured approaches, followed by in-depth personal interview method, and collecting business-related documents, the data of this study were obtained (Zhang 2003, 618). This study found that the adoption of HRM practices in developed country is a way for companies to acquire developed management practice and to be more competitive in international markets. In addition, cultural, regulatory and national differences are constraints in the transference of HRM practices across nations (Zhang 2003, 623-4). Therefore, institutional factors affect the transferability of HRM practices.
As the study of Zhang (2003) adopted the method of case study and a scenario which Chinese MNCs operating in UK, it is needed to also look at the case which UK companies operating in China’s market. Thus, Gamble (2003) conducted a research paper adopting qualitative method of case study of scenario which a British-owned retail firm StoreCo and its transference of HRM practices from UK to China. Qualitative case study method provides researchers an opportunity to explore hypotheses developed in studies that adopt survey-type and it provides ideal ways to investigate the content and reception of transferred practices. In addition, by adopting case study method, researchers can avoid the risk of butterfly collecting (Gamble 2003, 375). Thus Gamble (2003) adopted interview-based in-depth case study method. Moreover, this study includes interviews with shopfloor employees except with managers from higher levels. Gamble (2003, 384) found that cultural and institutional factors and firm-specific practices are the most important and relevant factors in explaining the transfer of HRM practices. However, Gamble (2003) argues that cultural differences does not present as an insurmountable barrier while transferring HRM practices, this argument somehow contrasts with above studies. This study found
that organizational structure and management style can be successfully transferred across borders, due to the important role of expatriate managers who possess communication, tacit and interpersonal skills (Gamble 2003, 385). This study uses deductive approach as explained by the author, that this case study is based on the hypotheses developed in prior studies.
MNCs standardization versus localization
After reviewing many studies above that related to transference of HRM practices and factors affecting the transfer, it is evident that there is not any ‘best practice’ can be used across nations, therefore MNCs must adopt HRM strategies that blend local responsiveness with global integration. Lu and Bjorkman (1997) conducted a study to examine the compatibility between MNC standardization and localization of HRM practices of 65 Sino-Western joint ventures. Five HRM practices such as recruitment, financial compensation, training, performance appraisal and criteria used in selection of managers for promotion are examined to find out the extent to which every practice adheres to MNC practice or local response (Lu and Bjorkman 1997, 615). This research paper adopts deductive approach to examine the research topic, as it has an approach based on existing theory and then it follows by two hypotheses in relation to the research aims and objectives, and then this study designs a research strategy to test these hypotheses (Wilson 2010, 7). This study adopts a combination of qualitative and quantitative methods, as interview and questionnaire techniques were used to gather data, and data was analyzed by correlation coefficient and covariance statistical tests. This study found that various HRM practices have different responses to MNC localization and standardization. In addition, contextual factors like foreign ownership protects MNC-invested units from pressures of localization. However, the reliability of the data in this study might be influenced by respondents in someway (Lu and Bjorkman 1997, 625-6).
Many studies in this literature review focus on countries such as China, UK and The Netherlands to examine the issues relevant to IHRM, very little is known about countries in the Middle East. Namazie (2003) provided valuable information of transferability of HRM practices of joint-ventures in Iran. By using Iran as a case study, Namazie (2003) also examined the factors affecting the globalization and standardization of HRM practices in sampled joint ventures. Case study is an important qualitative method. When a researcher wants to study information in a natural setting and to generate theories from practice, one should adopt case study method, and this method allows the researcher to understand the nature of research process and to gain insights into new topics (Benbasat et al 1987, 370). In addition,
case study method is also appropriate to study contemporary events which manipulation is not required in the research (Gable 1994, 2). Since Namazie (2003)’s objective is to examine a contemporary topic (IHRM) and the author needs to understand the issue in a natural setting, this author adopted case study method with interview and questionnaire as techniques to collect primary data. Through multiple data collection methods, research’s results are convergent and valid (Yin 2013, 78). Namazie (2003, 365) found that, major factors affecting MNC standardization or localization include ownership and control of critical resources, as well as the compatibility of national culture and differences of socio-cultural, and mutual trust and respect between partners, and the compatibility of management styles of the international joint ventures.