Internationalization & HRM Strategies across Subsidiaries in Multinational Corporations from Emerging Economies A Conceptual Framewor Mohan Thite*

* Department of Employment Relations and Human Resources, Griffith Business School Griffith University, 170 essels Road, !athan, "#D $111, %ustralia Email& '()hite*+riffith(edu(au, -hone& ./1 7 070 17/$0 2a3& ./1 7 0701 7177 Adrian Wilkinson 4entre for 5or6, 7r+ani8ation and 5ell9ein+, Griffith University, 170 essels Road, !athan, "#D $111, %ustralia Email& %drian(5il6inson*+riffith(edu(au, -hone& ./1 7 070 1/7:;, 2a3& ./1 7 0701 7177 Dhara Shah Department of Employment Relations and Human Resources, Griffith Business School, Griffith University, 170 essels Road, !athan, "#D $111, %ustralia Email& d(shah*+riffith(edu(au

< 4orrespondin+ %uthor

ABSTRACT )he rapid rise of multinational 4orporations ='!4s> from emer+in+ economies has led to +reater interest and ur+ency in developin+ a 9etter understandin+ of the deployment and diffusion of mana+erial strate+ies from their perspective and ?ithout assumin+ the prevailin+ 5estern ethnocentric orthodo3y( )his paper develops a conceptual frame?or6 of +lo9al HR strate+ies and practices in '!4s from emer+in+ economies across their su9sidiaries in 9oth developed and developin+ mar6ets( Usin+ data from a pilot study of an @ndian '!4, it provides insi+hts and +uidance into the motives, strate+ic opportunities and constraints in cross national transfer of HR policies and practices in a multiApolar ?orld(

ey 5ords& !e? 'ultinationals, Emer+in+ Economies, @ndia, @nternationali8ation Strate+ies, Glo9al HR Strate+ies(

1( Introduction B@n the comin+ decades, 4hina and @ndia ?ill disrupt ?or6forces, industries, companies, and mar6ets in ?ays that ?e can 9arely 9e+in to ima+ineC =En+ardio, ;00D& ;0>

Research on '!4s has tended to 9e focused on those from developed countries esta9lishin+ su9sidiaries either in other developed economies =e(+( U(S( to the U > or into developin+ economies =e(+( the U(S(% into #atin %merica>( U(S( firms invested in

Europe from 9efore 1:0: 9ut the maEor push came after 5orld 5ar )?o =2erner, %lmond, 4lar6, 4ollin+, Ed?ards, Holden, F 'ullerA4amen, ;00$>( Gapanese '!4s 9e+an to locate in advanced economies, particularly in the 1:D0s( 5hile, there has 9een a rich stream of '!4 research in this area, there has 9een relatively less research on ne?er industriali8ed =e(+( )ai?an, @ndia and South orea> to the more industriali8ed economies

=Glover F 5il6inson, ;007, p(1$0D>( )his is a ne? era ?hich is often referred to as a Hne? +eo+raphy of investmentsI =U!4)%D, ;00$>( 5hilst most '!4s come from the ?orldIs top five economies, a +ro?in+ num9er are from developin+ and ne?er industriali8ed economies( U!4)%D cate+ori8es developin+ economies into t?o +roups A South orea, )ai?an and Sin+apore ?ho are ne?er industriali8ed and have an

esta9lished trac6 record as out?ard investors and those such as @ndia and 4hina that are rapidly developin+(

@n this paper, ?e ?iden the hori8on of @nternational HR' to include HR' strate+ies and practices from emer+in+ economies( )he purpose of the paper is to e3plore

ho? HR' strate+y of the '!4s in emer+in+ economies is formed and ho? it operates in practice( 2irst, ?e outline the issues relatin+ to emer+in+ '!4s( Second, ?e develop a conceptual frame?or6 of +lo9al HR strate+ies and practices in '!4S from emer+in+ economies( )his provides mana+erial insi+hts and +uidance into the motives, strate+ic opportunities and constraints in cross national transfer of HR policies and practices( @t uses the data from the pilot study of an @ndian multinational company to test the conceptual frame?or6 and propositions( )he paper concludes ?ith a discussion of ho? our findin+s relate to e3istin+ research and identify directions for future research(

)his paper helps identify and analy8e Hthe travel of ideasI =Del9rid+e, 1::D, Garrahan F Ste?art, 1::;> 9et?een the East and 5est, in terms of the motive and opportunity 9ehind crossAnational transfer of HR policies and practices( Such an understandin+ of corporate mana+ement thin6in+ and practice in %sian '!4s helps practitioners understand their o?n stren+ths and ?ea6nesses in the ne? scheme of thin+s and assists them in strate+i8in+ accordin+ly as to ho? 9est to influence the top mana+ement layers and players( )his ?ould in turn assist them to facilitate a smooth HtravelI of policies and practices across su9sidiaries =2erner, ;00:>(

2. The New Multinationals )he ?orld investment report from U!4)%D =;010> indicates that althou+h developedA country transnational corporations =)!4s> account for the 9ul6 of +lo9al forei+n direct investment =2D@>, developin+ and transition economies have emer+ed as si+nificant out?ard investors accountin+ for one Juarter of +lo9al 2D@ outflo?s in ;010, the 9ul6 of

?hich came from %sia( Similarly, the +ro?th rate of the num9er of )!4s from developin+ countries and transition economies over the past 11 years has e3ceeded that of )!4s from developed countries( %sia dominates the list of 100 lar+est developin+ country )!4s( 2urther, the emer+in+ economies are investin+ heavily in lo?Aincome host countries, +eneratin+ considera9le SouthASouth investment flo?s =U!4)%D, ;007>( @t is anticipated that in the ne? ?orld economy, the 9alance of po?er ?ill shift to the East as 4hina and @ndia continue to evolve as t?o of the most attractive in?ard as ?ell as out?ard 2D@ destination countries(

)he +ro?in+ importance of emer+in+ economies has lead to an upsur+e of strate+y research on the topic =5ri+ht, 2ilatotchev, Hos6isson, F -en+, ;001>( Research on +lo9al HR' has not paid enou+h attention to '!4s from emer+in+ economies despite of all the mana+ement domains, HR' is most sensitive to local conte3t =Rosen8?ei+ F !ohria, 1::$>( Emer+in+ country '!4s tend to 9e smaller in si8e ?ith considera9ly less resources and international e3perience than their counterparts from developed mar6ets( )his limits their a9ility to transfer mana+ement practices across their su9sidiaries =Hussain F Gian, 1:::, #all, 1:D0, 5ells, 1:D0>Guillen and GarciaA4anal, ;00:>( 5hile there is +ro?in+ reco+nition of and research on this conte3tual aspect ?ith respect to some relatively advanced %sian economies, such as Gapan, orea, )ai?an and

Sin+apore =4han+ F )aylor, 1:::, 4han+, 'ellahi, F 5il6inson, ;00:9, 4han+, 5il6inson, F 'ellahi, ;007, Glover F 5il6inson, ;007>, the t?o emer+in+ +lo9al +iants, 4hina and @ndia, have 9een much less e3plored =2erner, ;00:>(

-revious research on '!4s had identified dual pressures for the need to conform to home country =push force> and host country =pull force> institutional environments ?hen adoptin+ HR' strate+ies and practices =e(+(2arley, Hoeni+, F Kan+, ;00$, Hillman F 5an, ;001, Rosen8?ei+ F !ohria, 1::$>( 5e 6no? very little on ho? these pressures influence HR' strate+ies and practices at su9sidiary level of '!4s from emer+in+ economies( 5hile previous comparative research on HR' in the %sia -acific re+ion =%?asthi, 4ho?, F 5u, ;001, Bae F #a?ler, 1::D, 4ho?, Shields, F 5u, 1:::, Hofstede, 1::0, 1::7, Hofstede F Bond, 1:DD, Ul+ado, Ku, F !e+andhi, 1::$>> has identified the national ori+in of firms includin+ its national institutions and culture as the 6ey shapers of HR' practices in the re+ion, these studies do not address ho? cultural and institutional differences affect the dissemination of HR' strate+ies and practices 9y '!4s from emer+in+ economies operatin+ in a developed economy =4han+, 5il6inson, F 'ellahi, ;007>(

% 6ey research Juestion relates to e3plorin+ the issues associated ?ith the transfer HR practices across 9orders ?ithin '!4s( %s 'artin and Beaumont =1::D> comment, diffusion has to ta6e into account the local cultural and institutional conte3t and the a9ility and incentive of local mana+ers to implement 9est practice =see Glover F 5il6inson, ;007>(

3. Countr o! "ri#in $!!ect on Strate# 7ne of the 6ey challen+es facin+ the '!4s is ho? to 9alance 9et?een the need for +lo9al inte+ration and local adaptation( !ational ori+in of '!4s is seen as a maEor

influence in determinin+ this 9alance =!+o, )ur9an, #au, F #ui, 1::D, p( /0;>( 4ontrary to 7hmaeIs =1::0> vie? of a 9orderless ?orld and nationless corporations, cultural and institutional determinants in the country in ?hich firms ?ere located are seen to 9e salient determinants arisin+ from a firmIs conte3t =4han+ F )aylor, 1:::, Gooderham, !ordhau+, F Rin+dal, 1:::>( Researchers, such as 2erner =1::7> and Gam9le =;000> e3amined the issues dealin+ ?ith ho? '!4s mana+e their forei+n su9sidiaries and concluded that the main influence on the '!4s effort to have a de+ree of control over their su9sidiaries ?as their country of ori+in =Har8in+ F Sor+e, ;000, Hu, 1::;>( Supportin+ this vie?, Har8in+ and Sor+e =;000> state that althou+h multinationals are hi+hly internationali8ed, their or+ani8ational coordination and control practices at the international level tend to 9e e3plained 9y their country of ori+in(

)here is empirical evidence that su++ests that almost all '!4s have a trace of their country of ori+in ?ithin them( @t could 9e su9conscious choices ?hich are influenced 9y the cultural and institutional characteristics of the country of ori+in of the '!4 or it could 9e transferred throu+h the people ?ho ?or6 in the or+ani8ation =Har8in+ F Sor+e, ;000>( U(S( multinationals have 9een typically contrasted ?ith Gapanese multinationals in respect of their styles of HR' employed in their su9sidiaries =2erner, 1::7>( Gapanese multinationals have the characteristic of 9ein+ stron+ 9ut ?ith informal centrali8ation and are hi+hly reliant on esta9lishin+ international net?or6s =Bartlett F Ghoshal, 1::;>( U(S( multinationals appear to have ela9orate systems of control and standardi8ed ?orld?ide systems in place =2erner, 1::7>( 'oreover, ?hether the country is hi+h or lo? on cultural conte3t ?ill also determine the impact of their

country of ori+in on the @HR' practices( )his ?or6 dra?s on the ?or6 of Hall =1:7/> and his distinction 9et?een situations ?here thin+s are less e3plicit ?here the conte3t e3erts more influence =hi+h conte3t> and those that are much more e3plicit ?here the conte3t is less of an influence =lo? conte3t>( 5estern countries are seen as +enerally lo? on cultural conte3t ?hereas Eastern countries are mainly seen as hi+h on cultural conte3t =Hofstede, 1:D$>( )he interplay 9et?een national and or+ani8ational culture is a si+nificant factor in the success of +lo9al mer+ers, acJuisitions and alliances =)hite, ;00$>(

%s stated 9efore, Bthere is relatively little research on the internationali8ation of emer+in+ economy firms either into other emer+in+ economies or into developed economiesC =5ri+ht, 2ilatotchev, Hos6isson, F -en+, ;001, p(;1>( )he strate+y literature on emer+in+ economies predominantly use institutional theory follo?ed 9y resourceA 9ased theory, transaction cost theory and a+ency theory as conceptual perspectives =Hos6isson, Eden, #au, F 5ri+ht, ;000>( '!4s from emer+in+ economies enter developed economies for He3plorationI and other emer+in+ economies for

He3ploitationI=5ri+ht, 2ilatotchev, Hos6isson, F -en+, ;001>( 5hile in the past Gapan and orea internationali8ed throu+h +reenfield e3pansion, foundin+ their o?n

su9sidiaries that miti+ated cultural clashes, 4hina and @ndia are e3pandin+ mainly throu+h acJuisitions in 5estern countries =Hofstede, ;007>( 'oreover, their internationali8ation is very rapid and different from that of the conventional 5estern '!4s and erst?hile developin+ country '!4s ='atthe?s F Lander, ;007>( )hey also

tend to use e3portin+ and 2D@ as com9ined and simultaneous strate+y, rather than 9ein+ distant alternatives =4ontractor, umar, F undu, ;007>(

%lthou+h in a9solute terms the '!4s from emer+in+ economies are not very lar+e, they are +ainin+ importance and many companies are no? +lo9ally diversified( )he 6ey advanta+es for these '!4s are access to the most dynamic +ro?th mar6ets in the ?orld ?ith a vast pool of lo? cost resources li6e production ?or6ers, en+ineers and natural resources =En+ardio, %rndt, F Geri, ;00/>( Besides 9ein+ small, most of the emer+in+ mar6et '!4s are in their early sta+e of internationali8ation ?ith limited international e3perience =4ontractor, umar, F undu, ;007>( 4orrespondin+ly ?ithin

the '!4s from the emer+in+ economies, or+ani8ational culture, decision ma6in+ and control on su9sidiaries can 9e noticea9ly different as compared to their counterparts in developed mar6ets due to national culture and economic differences =Hofstede, ;007>(

%. Conce&tual 'ra(ework )his paper deals ?ith strate+ic international human resource mana+ement =S@HR'> that e3plicitly lin6s HR' ?ith the strate+ic mana+ement processes of the '!4s in emer+in+ economies and emphasi8es coordination or con+ruence amon+ the various HR' practices( @t focuses on S@HR' orientation, i(e(, the B+eneral philosophy or approach ta6en 9y top mana+ement of the '!4 in the desi+n of its overall @HR' system, particularly the HR' systems to 9e used in its overseas affiliatesC =)aylor, Beechler, F !apier, 1::/, p(://>(

%ccordin+ to )aylor et al( =1::/>, Hthere is a +ro?in+ consensus that a 6ey differentiator 9et?een the corporate ?inners and losers in the ;1 st century ?ill 9e the effectiveness of the human or+ani8ationI and it is particularly critical in the emer+in+ mar6ets =Strate+ic Direction, ;007>( @n the conte3t of @HR', !+o, )ur9an, #au and #iu =1::D> found stron+ support for the hypothesis that country of ori+in influences the firmIs HR' practices( )aylor et al(Is =1::/> model of @HR' considers that the transfer of HR' policies and practices Hcan +o in any directionI, not Eust from home to host countries( Similarly, %merican and European HR' systems influence and are influenced 9y East %sian HR' systems =4he? F Lhu, ;00;>( Empirical studies on the diffusion of HR' practices 9y '!4s across their su9sidiaries indicate that they predominantly adopt hy9rid methods, com9inin+ 9oth push force for control from headJuarters and pull factors for conformity to host country, to suit the mar6ets they are servin+ =Rose F umar,

;007>( Glo9al, national and internal pressures play a role in influencin+ HR strate+ic recipes and delivery mechanisms =Bre?ster, Sparro?, F Harris, ;001>( Ed?ards F Roth9ard =;000> contrast different approaches to the transfer of employment practices in '!4s and ar+ue for an inte+rated approach that focuses on interrelationships 9et?een mar6ets and institutions on the one hand and the material interests of actors on the other(

4.1. Influencing factors: Research sho?s that control and coordination mechanisms and diffusion of mana+ement practices in an '!4 are su9Eect to several e3ternal and internal influencin+ factors =see 2i+ure 1>( @f the de+ree of inte+ration 9et?een the headJuarters and the su9sidiary is hi+h

10

it reJuires hi+her levels of control and coordination =)aylor, Beechler, F !apier, 1::/>( 5ith re+ard to e3ternal influencin+ factors, the '!4s from emer+in+ economies face a Bdou9le hurdleC of lia9ility of forei+nness and lia9ility of country of ori+in ?ith perceived poor +lo9al ima+e of their home country =4han+ F )aylor, 1:::, 4han+, 'ellahi, F 5il6inson, ;00:a, En+ardio, %rndt, F Geri, ;00/, 2erner, 1::7, 2erner, %lmond, F 4ollin+, ;001, Smith F 'eis6ins, 1::1>( )hese constraints are further accentuated 9y lia9ilities of smallness and ne?ness =4ontractor, umar, F undu, ;007>( %s Guillen and GarciaM4anal =;00:> note, they also need to deal ?ith the lia9ility and competitive disadvanta+e that stems from 9ein+ latecomers lac6in+ the resources and capa9ilities of esta9lished '!4s from the most advanced countries( 2urthermore, the de+ree and level of inte+ration 9et?een headJuarters and su9sidiaries ?ill also influence the multinationals( Similarly, ?ith re+ard to internal influencin+ factors, the strate+ic frame?or6 of the '!4, or+ani8ational culture, leadership, decision ma6in+ and dele+ation of authority can 9e considera9ly different in '!4s from emer+in+ economies than their counterparts in developed mar6ets due to national cultural, economic and political differences =Hofstede, ;007>( -roposition1& '!4s from emer+in+ economies adopt control and coordination mechanisms 9ecause of the dou9le hurdle they face of Hlia9ility of forei+nnessI and Hlia9ility of country of ori+inI(

4.2. Control of subsidiaries in developed markets: '!4s e3ercise a de+ree of control over their su9sidiaries to ensure their resources and efforts are directed to?ards attainin+ the main o9Eectives of the '!4 =4han+ F )aylor,

11

1:::>( 4ontrol refers to the processes 9y ?hich an '!4 ensures that their su9sidiaries operate in a particular ?ay as determined 9y the headJuarters in order to achieve or+ani8ational +oals =4han+ F )aylor, 1:::>( %ccordin+ to Har8in+ and Sor+e =;000>, corporate control Bcomprises of all the mechanisms instituted to tie the operations and decisions ?ithin and across components into a lar+er ?hole and esta9lish coherence of meanin+ and purpose ?ithin the lar+er enterpriseC =p(1:0>( 5e adopt the Har8in+Is =1:::> typolo+y that su++ests t?o dimensional classification 9et?een direct =personal F impersonal> and indirect =personal F impersonal> control( 4omplementary to the a9ove typolo+y is )aylor et al(Is =1::/> classification of adaptive or polycentric approach vs( e3portive or ethnocentric approach to mana+ement control of su9sidiaries(

Unli6e developed country '!4s en+a+in+ in Hfor?ard diffusionI of superior home country practices into developin+ country su9sidiaries, emer+in+ economy '!4s utili8e the 6no?led+e +ained in operatin+ in developed mar6ets to transfer 9est practices across the entire or+ani8ation =Lhan+, )sui, Son+, #i, F Gia, ;00D>( )hey are e3pected to adopt an BadaptiveC or BpolycentricC approach to mana+ement in developed country su9sidiaries =Ed?ards F Roth9ard, ;000, aye F )aylor, 1::7>( @n terms of HR

strate+y, this could mean lo? internal consistency ?ith the rest of the firm and hi+h e3ternal consistency ?ith the e3ternal environment( %ccordin+ly, HR practices may include hirin+ host country mana+ers ?ith local 6no?led+e and transfer of practices B9othC ?ays, dependin+ on ?hich is seen as ?or6in+ 9etter(

1;

-roposition ;& '!4s from emer+in+ economies adopt a predominantly HadaptiveI or HpolycentricI approach to mana+e their su9sidiaries in developed mar6ets(

4.3. Control of subsidiaries in emerging markets: Due to the paucity of empirical literature in this area, ?e hypothesi8e that '!4s from emer+in+ economies enterin+ other emer+in+ mar6ets may follo? their counterparts in developed mar6ets 9y adoptin+ an ethnocentric approach( )hey attempt ?holesale transfer of the parent firmIs HR' systems to their su9sidiaries, especially ?ith re+ard to their core competencies =-udel6o F Har8in+, ;007>, to achieve hi+h internal consistency( )he other reason identified is the limited availa9ility of mana+ement and technical s6ills in some countries =Delios F BEor6man, ;000, Scullion, 1::$>( Some authors have noted that '!4s are more li6ely to adopt an adaptive or polycentric approach in developed countries than lesserAdeveloped countries due to the +reater availa9ility of mana+erial s6ills in developed countries =Ba8eley F Richards, ;000, Richards, ;001, Shen, ;00/>(

-roposition 0& '!4s from emer+in+ economies adopt predominantly an He3portiveI or HethnocentricI approach to mana+in+ their su9sidiaries in other emer+in+ mar6ets(

2i+ureA1 presents a dia+rammatic representation of the conceptual frame?or6( @nsert 2i+ure 1 a9out here @n order to provide an initial test of the conceptual frame?or6, the authors have 9e+un collectin+ data from a num9er of @ndian '!4s 9y intervie?in+ senior mana+ers in their 10

headJuarters and su9sidiaries in 9oth developed and developin+ mar6ets( %s the data collection is still under?ay, ?e report the findin+s from a pilot study conducted at one @ndian '!4( Before reportin+ these findin+s, ?e provide a 9rief overvie? of @ndian '!4s as representatives of emer+in+ economy '!4s so as to provide some conte3t for our ?or6(

). Indian Multinationals Bet?een ;00$ and ;007, @ndiaIs out?ard flo? of 2D@ rose sharply from N; 9illion to N1$ 9illion =U!4)%D, ;00D>( %s a result, in ;00D, seven @ndian multinationals featured in Glo9al 2ortune 100 and t?enty in Boston 4onsultin+ GroupIs B4G 100 ne? Glo9al 4hallen+ers =Sir6in, Hemerlin+, F Bhattacharya, ;00D, p(;0>( )he services sector constituted 0DO of @ndian 2D@ stoc6 in ;00/ mainly in @), communications and soft?are( @ndian multinationals are lar+ely private o?ned and cover a ?ide ran+e of sectors in ener+yArelated areas =mainly oil and +as>, @) services, pharmaceuticals, en+ineerin+ +oods and naturalAresourceA9ased manufacturin+ firms =Ramamurti F Sin+h, ;00:>( )he @ndian firms are sho?in+ a clear preference for overseas acJuisition as an entry strate+y lar+ely in !orth %merica and Europe( 7ver 70O of them prefer complete control over their overseas ventures, mainly to protect their firm specific advanta+es and also due to the rela3ation of +overnment policy restriction on @ndian eJuity participation =-radhan, ;007>( )he @ndian multinationals seem to Brepresent a ne? 9reed of multinationals that 9uild their competitive advanta+e in novel ?ays, multinational corporations that derive their advanta+e from service rather than technolo+ical

1$

innovations and manufacturin+ '!4s that straddle a lo?Acost and medium technolo+y positionC =Gonsson, ;00D, p(/>(

-radhan =;007> 9elieves that the motivators for @ndian firms to e3pand overseas, particularly into the developed mar6ets include the need to acJuire ne? technolo+ies, ra? materials, s6ills and e3pertise and also to levera+e on their tradeAsupportin+ infrastructure overseas( )his supports -roposition ;, discussed 9efore, that '!4s from emer+in+ economies choose an adaptive or polycentric approach to mana+e their su9sidiaries in developed mar6ets(

5ith respect to their entry into other developin+ mar6ets, the approach has 9een mi3ed( )his is more to do ?ith shiftin+ investment patterns and mar6ets than mana+erial choice( -rior to the li9erali8ation of the @ndian economy in 1::1, a small +roup of lar+eA si8ed family o?ned @ndian firms invested mostly in nei+h9orin+ developin+ countries, optin+ for +reenfield investments in Eoint ventures =)hite F Das+upta, ;011>( @n line ?ith -roposition 0, this ?as predominantly an e3portive or ethnocentric approach that involved ?holesale transfer of parent firmIs systems, policies and personnel( Since then, the very nature of @ndian out?ard 2D@ has under+one fundamental chan+es and is no? characteri8ed 9y a lar+e num9er of professionally run firms in the services sector investin+ mostly in developed countries( )he implications of the same ?ill 9e discussed in the pilot study descri9ed 9elo?(

11

*. +ilot Stud o! an Indian Multinational %s part of a lar+er research proEect that focuses on @ndian multinationals as representatives of emer+in+ economy '!4s, the authors conducted a pilot study of a lar+e @ndian @) multinational company, referred to here as %lpha Services( %lpha Services is one of the top five @ndian consultin+ and @) services companies ?ith a turnover of a9out USN ;(1 9illion from its operations in over $$ countries that employ around $1,000 professionals( @t operates in three 9usiness se+ments, namely, @) services, Business -rocess 7utsourcin+ =B-7>, and soft?are products( %lpha serves a ?ide ran+e of industry se+ments, includin+ manufacturin+, 9an6in+ and finance, insurance, telecommunications, infrastructure, healthcare, retail and transportation( @t is pu9licly listed on the 'um9ai and !e? Kor6 Stoc6 E3chan+e( @ts vision is to 9e one of the five most valua9le +lo9al inte+rated @) services and B-7 companies in the ne3t fe? years( %lpha Services has development centers in @ndia, !orth %merica, Europe, the 'iddle East and the %sia -acific re+ion and serves over 170 +lo9al companies( @ts overseas revenue mainly comes from !orth %merica =1:O>, Europe =;1O> and the %sia -acific re+ion =;0O>( )he company has 9een consciously tryin+ to reduce its dependence on any one particular re+ion and has 9een a++ressively diversifyin+ to other re+ions( @t has fullA fled+ed development centers in @ndia, U(S(%, Germany, 4hina and 'alaysia( @t has 100O su9sidiaries in 4hina, E+ypt, 'e3ico and Bel+ium( @ts recent overseas acJuisitions include some niche @) services companies in the U(S(% and U (

Bet?een late ;007 and early ;00:, ?e conducted inAdepth, semiAstructured intervie?s ?ith 1: senior mana+ers of the company at three locations M its headJuarters

1/

in @ndia, su9sidiary office in 'el9ourne, %ustralia =representin+ a developed mar6et> and in Shan+hai, 4hina =representin+ a developin+ mar6et>( )he intervie?ees included 1 human resource =HR> mana+ers and 0 9usiness heads at the headJuarters, 1 9usiness account mana+ers mana+in+ 6ey clients in %ustralia and the HR Head of the %sia -acific re+ion 9ased in Sin+apore and the country head, HR head and 0 9usiness mana+ers in 4hina( %ll the intervie?s ?ere conducted face to face e3cept for t?o telephone intervie?s( )he choice of locations provided a three dimensional perspective of the companyIs +lo9al operations from the stand point of headJuarters ?here strate+y is formally formulated and revie?ed and su9sidiaries in 9oth developed and developin+ mar6ets ?here it is intended to 9e implemented(

)he intervie? protocol consisted of a semiAstructured Juestionnaire to pro9e various aspects of a companyIs internationali8ation strate+ies, control and coordination mechanisms and staffin+ practices includin+ talent attraction and retention strate+ies and corporate culture( @n most cases, the Juestionnaire ?as circulated prior to the intervie?s to ena9le the intervie?ees to prepare in advance( Each intervie? typically lasted an hour and ?as taped and later transcri9ed( )he results from the thematic analysis of the intervie? data from this study are descri9ed 9elo?(

6.1. Organizational tructure ! "stems: %t the ape3 of this or+ani8ation lies the #eadership 4ouncil, consistin+ of around $1 top leaders from 9usiness and support functions( @t is char+ed ?ith the responsi9ility to formulate, implement and revie? strate+ic policies and priorities on a re+ular 9asis( %t 17

the heart of %lphaIs or+ani8ational structure lie the 4ustomer 2acin+ Units =42Us>, consistin+ of Pertical Business Units =PBUs> and Re+ional Business Units =RBUs>( )he 42Us are char+ed ?ith the entire spectrum of customer relationship mana+ement and in the process are supported 9y Hori8ontal 4ompetency Units =H4Us> that provide the 9ac6in+ of appropriate resources(

)he approach to leadership at %lpha is e3emplified 9y the motto Bevery %lphaite =employee> is a leaderC( %lpha 9elieves that it is in the H9usiness of 9uildin+ and developin+ leaders faster than the competitionI( @ts or+ani8ational structure and systems are supposed to 9e underpinned 9y its philosophy of ena9lin+ leadership ?ith its core concepts of Hfull life cycle 9usinessI =2#4B> and Hfull life cycle leadersI =2#4#>( %lpha is said to espouse a philosophy of encoura+in+ employees to Bthin6 li6e 4E7sC ?here9y every employee is encoura+ed to consider himselfQherself as the chief e3ecutive officer =4E7> of the particular tas6 that they perform and the people ?hom it affects as their investors in the 9usiness(

)he same performance metrics are supposed to 9e applied to every employee and position at every location( )he metrics assess the performance of each employee on specified 9uilt measures, such as people, process and product a+ainst specific outcome measures, namely 9etter, lar+er, faster, cheaper and steadier =repeata9le>( )hese metrics mirror the ones follo?ed at its 6ey U(S(A9ased client ?hich is ?orld reno?ned for its mana+ement systems( %ccordin+ to the Glo9al Head of HR, Hmetrics are the most common communication tool at %lphaI( )he company claims to ta6e its metrics driven

1D

9usiness approach 9eyond or+ani8ational 9oundaries 9y involvin+ customers and suppliers as part of its BecoAsystem(C %ccordin+ to corporate mana+ers, %lpha is also 6een to ensure that every 6ey sta6eholder in the company, includin+ mana+ers, employees, customers and suppliers, +et the same B7ne %lpha E3perienceC =or+ani8ational culture>, codified in a manual, throu+hout its +lo9al operations( @ts corporate leadership center is +eared to +room present and future leaders in the or+ani8ationIs corporate values( )he centerIs mission is to spread the or+ani8ational culture to every unit( Senior mana+ers from all over the ?orld are +iven ?ee6lon+ induction trainin+ at the companyIs headJuarters in @ndia to attend a focused leadership immersion pro+ram spearheaded 9y the top mana+ement team(

@n the intervie?s ?ith mana+ers in its su9sidiaries, it ?as apparent that the or+ani8ation had a decentrali8ed approach( )he heads of every 9usiness unit mana+ed and too6 decisions re+ardin+ their 9usiness units ?ith only maEor decisions ta6en at the headJuarters( 5hen as6ed a9out the influence of national culture or country of ori+in on the companyIs +ro?th and thin6in+, all the HR mana+ers and 9usiness heads intervie?ed at the headJuarters asserted that it did not have any influence on the or+ani8ational culture or the ?ay they operate, 9ut as pointedly noted 9y a senior mana+er at the %ustralian su9sidiary Bconsiderin+ that almost D1O of the ?or6force is @ndian, there ?ill surely 9e the su9tle influence of @ndian cultureC(

1:

6.2. International #usiness trategies: %lpha has 9een seen as an am9itious and entrepreneurial or+ani8ation throu+hout its history( 2or e3ample, %lpha understood in the late 1::0s that it needed to move 9eyond the esta9lished developed mar6ets in the U(S(% and Europe and enter other emer+in+ mar6ets, such as the 'iddle East and 4hina ?here it ?as an early entrant alon+ ?ith other @ndian @) firms( Similarly, in midA1::0s, ?hen enterprise resource plannin+ =ER-> ?as identified as a potential hi+h +ro?th area in the @) industry, %lpha decided to enter this emer+in+ field to e3ploit the opportunities ahead of its competitors( )his paved the ?ay for the +lo9al leadership position that %lpha is said to enEoy today in ERimplementation, particularly, in the telecommunications sector( %s the Head of %lphaIs 4hina operations proudly pronounced Bit is a perfect stormA entrepreneurship, vision and e3cellent domain tradition that have made %lpha ?hat it is todayC(

6.3. $lobal taffing ! %& "stems: 'ost of the @ndian @) companies have operated in international mar6ets, particularly in the developed ?orld from their inception( @n terms of strate+ic and operational policy ma6in+, they have remained lar+ely local Mthat is as an @ndian company =as reflected in the composition of their top mana+ement pool and mana+erial staffin+>( %lpha is no e3ception to this trend 9ut there has 9een a conscious effort to chan+e this mindset over the years accordin+ to the mana+ers intervie?ed(

2or e3ample, %lphaIs +lo9al HR Head 9elieves that ?ith over $1,000 employees spread over $0 countries, the company has reached a critical mass to scale the ne3t level

;0

in 9ecomin+ a truly +lo9al company( )he desire of %lpha to locali8e its ?or6force is reinforced 9y the statement from %lphaIs Head of HR in 4hina that B%lpha ?ants to 9e a 4hinese company in 4hina 9ut provide the same +lo9al e3perience to clients, no matter ?here the operations are carried outC( %s a policy, %lpha strives to staff locally at least ;0O of all positions in all of its overseas operations, 10O of entry level positions and :0O in its nonAEn+lish spea6in+ +eo+raphies, such as 4hina, ?here possi9le( %ccordin+ly, today nearly :DO of %lphaIs ?or6force in 4hina is staffed locally ?hile in %ustralia it is nearly 10O( But the senior mana+ement positions, from country head to proEect mana+ers, at 9oth these su9sidiaries are still over?helmin+ly staffed 9y e3patriates from its @ndian headJuarters(

2rom the intervie?s it ?as reco+ni8ed that the recruitment and selection process, career mana+ement and performance mana+ement ?ere similar across the +lo9al operations ?ith the fle3i9ility to accommodate local la?s and HR trends and practices( )he Business Head in the %ustralian su9sidiary stated that B?hen @ started 1 years a+o, %lpha 9ein+ an @ndian company, the policies and procedures ?ere very stron+ly suited to the @ndian environment( !o? the company has more adapted to %ustralia 9ut not fully suited to the %ustralian environment as an %ustralian companyC( )his sentiment ?as echoed 9y the Glo9al Head of HR ?ho a+reed that su9sidiaries in developed mar6ets needed more fle3i9ility in determinin+ the remuneration structure of mana+erial staff to attract and retain talent(

;1

)he main talent mana+ement issue or challen+e identified ?as 9rand value or reco+nition of the company across the ?orld, ?hich ?as one of the maEor concerns identified 9y the HR mana+ers( 5hile the company ?as pleased ?ith its employer 9rand in 4hina ?here @ndian @) companies are held in hi+h esteem for their Juality standards and offshorin+ 9usiness process efficiency, the %ustralian mana+ers +enerally 9elieved that the +lo9al ima+e of the company needed to 9e stren+thened as a hi+h Juality services provider( )his hi+hli+hts the constraints that the '!4s from emer+in+ economies face of the Hlia9ility of forei+nnessI and Hlia9ility of country of ori+inI, as pointed out 9efore(

,. Mana#erial Rele-ance 7ur pilot study of an @ndian '!4 offers some interestin+ insi+hts into the ?ay '!4s from emer+in+ economies strate+i8e and mana+e their operations in different parts of the ?orld( 5hile 5estern '!4s have traditionally ta6en their domestic stren+ths Hout?ardI to the rest of the ?orld, the @ndian '!4s in the services sector have typically +ro?n first in the developed mar6ets 9y levera+in+ on their s6ills and domain e3pertise and have pioneered the art of +lo9al offshorin+ services delivery model usin+ a com9ination of onshore, offshore and nearAshore locational strate+ies( 'ost of their overseas +ro?th has occurred in the last decade and in a very short span of time, they have spread their +lo9al net?or6, mainly via settin+ up 100O su9sidiaries or acJuisitions( Despite attempts to locali8e their ?or6force in different +eo+raphies, their +lo9al mana+ement team is still predominantly @ndian 9ut increasin+ly their systems and to some e3tent their mana+ement mindset are 9ecomin+ +lo9al(

;;

5ith re+ard to -roposition 1, our case study illustrates that @ndian '!4s do face multiple hurdles in furtherin+ their internationali8ation strate+ies( 2or e3ample, despite their +ro?in+ +lo9al reputation, @ndian @) companies still have pro9lems recruitin+ talent at hi+her levels due to poor perception of their employer 9rand( Despite its desire to locali8e its mana+ement team in %ustralia, %lpha seems to 9e una9le to attract the 9est local talent and therefore, forced to send e3pats from @ndia( %ccordin+ly, its corporate control and coordination mechanisms are influenced 9y the multiple hurdles that it faces as an '!4 from an emer+in+ economy( Similarly, ?ith re+ard to proposition ;, alphaIs adoption of performance metrics from its 6ey U(S( client and ma6in+ it a central part of its performance mana+ement system is a clear si+n of an Hadaptive approachI in mana+in+ su9sidiaries in developed mar6ets( %t the same time, %lpha, alon+ ?ith other top @ndian @) companies, has pioneered the art of +lo9al offshorin+ 9usiness process and the +lo9al services delivery model indicatin+ a t?o ?ay e3chan+e of 9est practices( Ho?ever, %lphaIs mana+ement of its su9sidiary in 4hina does not reflect He3portive or ethnocentricI approach to mana+in+ su9sidiaries in developin+ mar6ets, as stated in proposition 0( mana+ers seem to indicate that unli6e the U(S( and U %lphaIs

mar6ets, they are unfamiliar ?ith

the cultural and 9usiness environment in 4hina and therefore, ?ould prefer to leave it to the locals to mana+e the 4hina operations ?ith only 9road corporate oversi+ht(

.. Conclusion Despite the increasin+ trend to?ards the +lo9ali8ation of trade and commerce and crossA national conver+ence arisin+ from it, si+nificant differences remain in the ?ay in ?hich

;0

different countries or+ani8e 9usiness activities and more specifically, the mana+ement of employees =Bre?ster, Sparro?, F Harris, ;001, 2erner, 1::7>( )he cultural values frame?or6 pioneered 9y Hofstede =1:D0> demonstrates the limitations of universalistic models of @HR' that emphasi8e oneA9estA?ay( Even thou+h some have contested the emphasis placed on national culture in international mana+ement at the cost of or+ani8ational differences =Eric6sen F Dyer, ;001, Gerhart F 2an+, ;001>, the importance of country of ori+in is a consistent theme in the research in this area =Har8in+ F Sor+e, ;000>(

7ur conceptual frame?or6 adopts a 9road approach 9y e3aminin+ the 6ey factors, such as cultural differences, institutional differences, or+ani8ational differences and the interplay 9et?een them =Schuler, Budh?ar, F 2lor6o?s6i, ;00;>( %ny study on '!4s from emer+in+ mar6ets also needs to ta6e into account sectoral varia9les =4ollin+ F 4lar6, ;00;> in different industry se+ments, such as @) services and manufacturin+( 2or e3ample, @ndian '!4s in the service sector Htend to +ain the positive 9enefits of internationali8ation sooner than manufacturin+ companiesI =4ontractor, umar, F

undu, ;007, p($01>( 7ur research frame?or6 adds value to @HR' research 9y +ivin+ HeJual ?ei+ht to 9oth the su9sidiary level and to corporate headJuarters ?ithin a firmI =2erner, ;00:>(

@ncreasin+ investment 9y emer+in+ economies in developed as ?ell as emer+in+ mar6ets, particularly via mer+ers and acJuisitions means that there is a +reater need for mana+ement practitioners to understand the ?ays in ?hich '!4s from emer+in+

;$

economies strate+i8e and act in diffusin+ and coordinatin+ mana+ement practices( 2or too lon+, international HR mana+ement literature and practice have 9een em9edded in 5estern thin6in+ and concepts ?ith little crossApollination =5ri+ht, Snell, F Dyer, ;001, p(D7/> and an over emphasis on e3patriate mana+ement, reflectin+ the ethnocentric 9ias of !orth %merican scholars =Schuler, Budh?ar, F 2lor6o?s6i, ;00;>( @t is clear that the universal or U(S( model does not have applica9ility to the emer+in+ '!4s( @f the East 9ecomes, in popular Ear+on, the ne? 5est ?e need to develop ne?er models to aid the understandin+ of ho? %sian '!4s, particularly from 4hina and @ndia, are +oin+ to e3ercise corporate control in an increasin+ly multiApolar ?orld =-udel6o F Har8in+, ;007, p(110>(

@n the ;1st century 6no?led+e economy ?here services and creative industries dominate the economic landscape that is tiltin+ more to?ards developin+ and transition economies, the theories and practices applica9le to 5estern '!4s that monopoli8ed the ;0th century industrial economy are slo?ly 9ut steadily +ivin+ ?ay to ne? economic and mana+ement paradi+ms( %ccordin+ly, ree3aminin+ the mana+ement approaches and practices of '!4s from ne?er industriali8ed and developin+ economies such as @ndia is li6ely to remain a 6ey research issue for the ne3t decade, +iven the speed of economic development and the increasin+ influence and num9ers employed 9y such companies(

Acknowled#e(ents/ )his study ?as funded 9y a +rant from the SHR' 2oundation, U(S(%( Ho?ever, the interpretations, conclusions and recommendations are those of the authors and do not necessarily represent the vie?s of the SHR' 2oundation(

;1

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;/

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;7

multinational enterprises& 5orld?ide and European perspectives( Organization tudies( ;$=;>& 1D7( Hillman, %(, F 5an, 5( -( =;001>( )he Determinants of '!E Su9sidiariesS -olitical Strate+ies& Evidence of @nsitutional Duality( )ournal Of International #usiness tudies( 0/=0>& 0;;A0$0( Hofstede, G( =1:D0>( Culture;s Conse/uences( #ondon& Sa+e( Hofstede, G( =1:D$>( Culture<s Conse/uences: International 2ifferences in 4ork=&elated .alues( Beverly Hills, 4% Sa+e -u9lications( Hofstede, G( =1::0>( 4ultural 4onstraints in 'ana+ement )heories( *cadem" of +anagement &evie,( 7=1>& D1A:1( Hofstede, G( =1::7>( '(e *rc(imedes effect. 4orking at t(e interface of cultures: 1> lives in social science( #ondon& Routled+e( Hofstede, G( =;007>( %sian mana+ement in the ;1st century( *sia ?acific )ournal of +anagement( ;$=$>& $11A$;0( Hofstede, G(, F Bond, '( H( =1:DD>( )he 4onfucius connection& 2rom cultural roots to economic +ro?th( Organisational 2"namics( 1/=$>& 1A;1( Hos6isson, R(, Eden, #(, #au, 4(A'(, F 5ri+ht, '( =;000>( Strate+y in emer+in+ economies,( *cadem" of +anagement )ournal( $0& ;$:A;/7( Hu, K( S( =1::;>( Glo9al or stateless corporations are national firms ?ith international operations( California +anagement &evie,3 107A1;/, Hussain, %(, F Gian, 4( =1:::>( 4han+es in 4hinaIs industrial landscape and their implications( International tudies of +anagement ! Organization( ;:=0>& 1A;0( Gonsson, S( =;00D>( Indian multinational corporations: 5o,=cost3 (ig(=tec( or bot(@ ( 7stersund, S?eden& S?edish @nstitute for Gro?th -olicy Studies( aye, '(, F )aylor, 5( G( =1::7>( E3patriate culture shoc6 in 4hina& a study in the BeiEin+ hotel industry( )ournal of +anagerial ?s"c(olog"( 1;=D>& $:/( #all, S( =1:D0>( '(e ne, multinationals: '(e spread of t(ird ,orld enterprises( 4hichester& 5iley( 'artin, G(, F Beaumont, -( =1::D>( Diffusin+ S9est practiceS in multinational firms& prospects, practice and contestation( International )ournal of %uman &esource +anagement( :=$>& /71A/:1( 'atthe?s, G( %(, F Lander, @( =;007>( )he international entrepreneurial dynamics of accelerated internationali8ation( )ournal of International #usiness tudies( 0D=0>& 0D7A$00( !+o, H(AK(, )ur9an, D(, #au, 4(A'(, F #ui, S(AK( =1::D>( Human resource practices and firm performance of multinational corporations& influences of country of ori+in( '(e International )ournal of %uman &esource +anagement( :=$>& /0;A/1;( 7hmae, ( =1::0>( '(e borderless ,orld: ?o,er ! strateg" in t(e interlinked econom"( #ondon& 4ollins( -radhan, G( -( =;007>( $ro,t( of Indian multinationals in t(e ,orld econom": Implications for development( '-R% -aper !o( 1;0/0, !e? Delhi& @nstitute for Studies in @ndustrial Development( -udel6o, '(, F Har8in+, %( =;007>( 4ountryAofAori+in, locali8ation, or dominance effectR %n empirical investi+ation of HR' practices in forei+n su9sidiaries( %uman &esource +anagement( $/=$>& 101A11:(

;D

Ramamurti, R(, F Sin+h, G( P( =;00:>( @ndian multinationals& Generic internationali8ation strate+ies @n R( Ramamurti F G( P( Sin+hs =Eds(>, 1merging multinationals from emerging markets& 4am9rid+e University -ress( Richards, '( =;001>( U(S( 'ultinational staffin+ practices and implications for su9sidiary performance in the U and )hailand( '(underbird International #usiness &evie,( $0=;>& ;;1A;0D( Rose, R( 4(, F umar, !( =;007>( )he transfer of GapaneseAstyle HR' to su9sidiaries a9road( Cross Cultural +anagement( 1$=0>& ;$0A;10( Rosen8?ei+, -(, F !ohria, !( =1::$>( @nfluences of human resource mana+ement practices in multinational firms( )ournal of International #usiness tudies( ;0=;>& ;;:A;1;( Schuler, R( S(, Budh?ar, -(, F 2lor6o?s6i, G( 5( =;00;>( @nternational Human Resource 'ana+ement, Revie? and 4ritiJue( '(e International )ournal of +anagement &evie,( $=1>& $1A70( Scullion, H( =1::$>( Staffin+ policies and strate+ic control in British multinationals( International tudies of +anagement ! Organization( ;$=0>& D/A101( Shen, G( =;00/>( 2actors affectin+ international staffin+ in 4hinese multinationals ='!Es>( International )ournal. of %uman &esource +anagement 17=;>& ;:1A011( Sir6in, H( #(, Hemerlin+, G( 5(, F Bhattacharya, %( ( =;00D>( $lobalit": Competing ,it( ever"one from ever",(ere for ever"t(ing( #ondon& Headline( Smith, 4(, F 'eis6ins, -( =1::1>( System, Society and Dominance Effects in 4rossA !ational 7r+anisational %nalysis( 4ork3 1mplo"ment and ociet"( :=;>& ;$1A00D( Strate+ic Direction( =;007>( 'raining for success in emerging markets )aylor, S(, Beechler, S(, F !apier, !( =1::/>( )o?ard an inte+rative model of strate+ic international human resource mana+ement( *cadem" of +anagement. '(e *cadem" of +anagement &evie,( ;1=$>& :1:A:D1( )hite, '( =;00$>( +anaging ?eople in t(e -e, 1conom": 'argeted %& ?ractices t(at ?ersuade ?eople to Anlock t(eir Bno,ledge ?o,er( !e? Delhi , )housand 7a6s, 4alif& Response Boo6s( )hite, '(, F Das+upta, B( =;011>( @ndian multinationals overseas& )rac6in+ their +lo9al footprints @n -( Budh?ar F P( Parmas =Eds(>, 2oing #usiness in India =pp(;10A ;/1>( %9in+don, 7T& Routled+e( Ul+ado, 2( '(, Ku, 4(A'(, F !e+andhi, %( R( =1::$>( 'ultinational enterprises from %sian developin+ countries& 'ana+ement and or+anisational characteristics( International #usiness &evie,( 0=;>& 1;0A11/( U!4)%D( =;00$>( 4orld Investment &eport 2CC4: '(e (ift 'o,ards ervices. !e? Kor6& United !ations( United !ations 4onference on )rade and Development U!4)%D( =;00/>( 4orld Investment &eport 2CC6: 92I from developing and transition economies: Implications for development& United !ations 4onference on )rade and Development U!4)%D( =;007>( 4orld Investment &eport 2CCD: 'ransnational corporations3 e6tractive industries and development. !e? Kor6& United !ations( United !ations 4onference on )rade and Development U!4)%D( =;00D>( 4orld Investment &eport 2CC>: 'ransnational corporations and t(e infrastructure c(allenge. !e? Kor6& United !ations( United !ations 4onference on )rade and Development

;:

U!4)%D( =;010>( 4orld Investment &eport 2C1C: Investing in a lo,=carbon econom". !e? Kor6& United !ations( United !ations 4onference on )rade and Development 5ells, #( )( =1:D0>( '(ird ,orld multinationals: '(e rise of foreign investment from developing countries( 4am9rid+e, '%& )he '@) -ress( 5ri+ht, '(, 2ilatotchev, @(, Hos6isson, R( E(, F -en+, '( 5( =;001>( Guest EditorsS @ntroduction, Strate+y research in emer+in+ economies& 4hallen+in+ the conventional ?isdom( )ournal of +anagement tudies( $;=1>& 1A00( 5ri+ht, -( '(, Snell, S( %(, F Dyer, #( =;001>( !e? models of strate+ic HR' in +lo9al conte3t( '(e International )ournal of %uman &esource +anagement( 1/=/>& D71A DD1( Lhan+, %( K(, )sui, %( S(, Son+, #( G(, #i, 4(, F Gia, #( =;00D>( Ho? do @ trust theeR )he employeeAor+ani8ation relationship, supervisory support, and middle mana+er trust in the or+ani8ation( %uman &esource +anagement( $7=1>& 111A10;(

00

'i#ure 4/ Di!!usion o! 0lo1al 2R Strate#ies 3 +ractices across Su1sidiaries in a Multinational Cor&oration !ro( an $(er#in# $cono(

E3ternal @nfluencin+ 2actors 1( Home 4ountry 2actors

=Economic stren+th, +lo9al ima+e, national culture U>

0lo1al 2R Strate#ies 3 +ractices Direct

-ersonal @mpersonal -ersonal

@nternal @nfluencin+ 2actors

1(Strate+ic frame?or6 =9usiness, corporate, international, coA operative> ;(7r+ani8ational cultureQ leadership 0(@mportance of su9sidiaries to '!4s 9ottom line F strate+y $('ode of su9sidiary setAup =Greenfield, 'F% U> 1(HeadJuartersI diffusion capacity /(Su9sidiariesI a9sorptive capacity 7(Su9sidiariesI resource dependency on the headJuarters D(%vaila9ility, a9ility F choice of e3patriate mana+ers

@ndirect
@mpersonal

;( Host 4ountry 2actors

=-erceived relative stren+th of home F host country m+t( practices, Environmental factors =openness of 9usiness systems, le+al frame?or6, institutions U>

0( @ndustryAspecific 2actors
=De+ree of product inte+ration, level of inte+ration 9et?een headJuarters F su9sidiaries U>

%ttract

Develop

Retain

Domestic 7perations

Su9sidiaries in developed countries

Su9sidiaries in developin+ countries

%daptive Hypotheses

E3portive

01