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6.budhwar, Pawan S., and Yaw A. Debrah. Human Resource Management in Developing Countries.
6.budhwar, Pawan S., and Yaw A. Debrah. Human Resource Management in Developing Countries.
INTRODUCTION
DEVELOPING COUNTRIES AND HRM
FACTORS DETERMINING HRM IN DEVELOPING COUNTRIES
DEVELOPING HRM RESEARCH IN DEVELOPING COUNTRIES
CONCLUSION
ENTRY CITATION
INTRODUCTION
Until recent years, the study of human resource management (HRM) in developing
countries was overshadowed by that of international human resource management.
Implicit in the dominance of international human resource management was the
conception that only aspects of HRM in multinational firms (MNCs) in developing
countries were worthy of the attention of researchers. In parallel, this view
downplayed the existence and importance of HRM practices in local (indigenous)
firms in developing countries. This was due to the fact that most local firms were
generally small and micro enterprises often managed by family members and
employing relatives or friends. In such organisations, people management was mainly
informal rather than formal and as such meaningful HRM practices were conspicuous
by their absence (Nguyen and Bryant, 2004). However, with increasing economic
globalisation and its associated international competitiveness, as well as the
privatisation of public enterprises in developing countries, the importance of local
firms in competing in the global economy has come to the fore. With this has come
the realisation of the importance of local firms developing their HRM functions to
give them a competitive edge (Steel, 1992). Moreover, with the emergence of
developing countries such as China and India as important economic powers, it is now
very timely to understand the nature of HRM in developing countries.
In view of these developments, this chapter does three things. First, it explains the
concept of developing countries and highlights the need, in the globalised era, to
understand HRM in these countries. Second, it assesses the conceptual models that
have been employed to explain the dynamics of HRM in developing countries. This
draws on examples from different parts of the world to enlighten us on the main
factors influencing HRM in developing countries. Finally, it highlights the key
challenges facing HRM in developing countries and presents propositions along
which future research that can be conducted to enhance our understanding of the role
and nature of HRM in developing countries.
economies interchangeably for developing countries (for details see Budhwar and
Debrah, 2004, 2005). For the purposes of this chapter, developing countries are the
ones which are in their early growth stages of economic development and are in the
process of industrialising (see Budhwar and Debrah, 2004; Napier and Vu, 1998).
This is an ideal type description as all developing countries are at different stages of
economic development. The term developing countries in this chapter is, thus, used in
a broad generic sense to represent all countries other then advanced industrialised
societies which we refer to as developed countries. We also define HRM in a broad
sense as issues concerned with the management of all employees and employment
relationships in a firm.
In the last two decades or so, scholars (see for example, Jaeger and Kanungo, 1990;
Budhwar and Debrah, 2001a, 2004) have highlighted the dearth of HRM research on
developing countries and have repeatedly called for more research in the area. A
survey of the literature shows that until recent years, only a handful of studies had
been conducted (see, for example, Austin, 1990; Sparrow and Budhwar, 1997;
Budhwar and Debrah, 2001a; Kiggundu et al., 1983; Kanungo, 1995; Warner, 2000),
on HRM in developing countries. This can probably be explained in terms of the lack
of interest of researchers to study HRM issues in poor countries with mainly small
firms having less formal and structured HR systems. Presently, due a number of major
reasons such as the rapidly increasing levels of foreign direct investment (FDI) by
MNCs in developing countries, the increasing numbers of subsidiaries of MNCs in
the developing world, the projection of significant increase in the number of people to
be employed by MNCs in developing countries, the emerging trends of self-initiated
repatriates to developing countries (e.g. to both China and India), the prediction that
many global businesses will be from emerging markets (Deresky, 2008), and the
strong projection that BRIC countries (Brazil, Russia, China and India) would emerge
as the new world economic powers, are all major factors that are likely to lead to
interest in HRM in developing countries. In view of the above, there is now a strong
interest on the part of researchers to understand the pattern of and relevant
management systems for developing countries (see Kiriazov et al., 2000; Budhwar
and Debrah, 2001, 2004; Das, 2002; Klingner and Campos, 2002; Murphy, 2002; Zhu
and Nyland, 2004; Gomez-Samper and Monteferrante, 2005; Debrah and Ofori, 2006;
Hasler et al., 2006; Lynham and Cunningham, 2006).
In response to the increasing interest in developing countries a number of major
journals have devoted special issues to the area (see, for example, Special Issues of
Journal of International Business Studies, 2001, 32 (1); Academy of Management
Journal, 2000, 43, (3); Academy of Management Executive, May 2001). Also, some
dedicated volumes under the Global HRM Series have been developed which
analyse various aspects of HRM in different developing countries around the globe.
For example, Budhwar's (2004a) volume focuses on the HR in the Asia-Pacific
region, Budhwar and Mellahi (2006) cover people management issues in the MiddleEast region, Kamoche et al. (2004) examine HRM in the African context, and Elvira
and Davila (2005) reveal the diverse nature of HRM in Latin America. More recently,
some journals (e.g., International Journal of HRM, 2005, 2007 and Employee
Relations, 2007) have devoted special issues to the analysis of HRM in specific
regions in the developing world. Similarly, some academic journals have organised
special issues for specific countries such as China and India (e.g., International
Journal of HRM, 2002; Human Resource Management, 2009).
Another reason for the interest in HRM in developing countries is the fact that the
majority of the world's population live in developing countries and the projection is
that, amongst the top ten nations which will have greatest population increase in the
next five decades, nine are developing countries (US being the only developed
country) (DNA, 2006). Also, developing countries act as: 1) significant buyers'; 2)
important suppliers' of different resources (both natural and human) to industrialised
nations; 3) competitors' to developed countries with lower labour costs; 4) strategic
regional centres for expansion of MNCs; 5) production sites for MNCs; and 6)
capital users, i.e. from private creditors such as international banks, FDI, and
foreign aid (for more details see Budhwar and Debrah, 2004a; Kanungo, 2000; Napier
and Vu, 1998).
Due to globalisation and related factors, the movement of people around the globe has
increased significantly. In 2006 alone, close to 200 million people lived outside the
country of their origin (BBC, 2006). This and the above mentioned facts highlight the
great extent to which both developed and developing countries have now become
interdependent on each other. This is also evident from the creation of various
economic international trading blocs and growth triangles (Debrah et al., 2000).
Growth triangle is a type of regional or sub-regional economic cooperation and
integration which makes it possible for complementarities in factor endowments of
three or more countries to be tapped for trade and investment purposes. Itisessentially
a form of strategic alliance which relies on the exploitation of the principles of
comparative advantage to attract FDI for the production of exports (Waldron, 1997).
The expansion of the European Union has allowed the free movement of people from
the less developed member states to developed countries like the UK. This, however,
has created new challenges regarding how to manage such culturally diverse people.
In such circumstances it is important to realise that the state-of-the-art management
practices and techniques which are dictated by unique configurations of different
cultural and institutional factors, evolved in the context of Western cultural values,
cannot be uncritically adopted in developing countries or to manage efficiently people
moving from them to developed nations (Mendonca, 2000). Therefore, there is now a
more pressing need to research and highlight what kind of HR policies and practices
are relevant for developing countries.
From a theoretical perspective, the field of HRM has reached a stage where we now
have reliable information about the nature of HRM systems in developed nations.
However, we are still looking for answers to a number of big questions regarding the
field of HRM in the context of developing countries. Some of the primary questions
in this regard are: to what extent are HRM systems of developed and developing
nations converging or diverging? What is unique about HRM in developing countries?
To what extent can MNCs successfully transfer best practice HRM systems to their
subsidiaries in these contexts? What are the main factors and variables which
significantly determine HRM policies and practices of firms operating in developing
countries? What are the appropriate frameworks, methodologies and approaches for
conducting HRM research in developing countries? Answers to such questions will
contribute to the development of HRM theories and relevant policies and practices in
developing countries (Budhwar and Debrah, 2004). This is particularly imperative in
view of the fact that most developing countries have liberalised their economies and
opened their doors to foreign investors. Moreover, focusing on developing nations
would add a new impetus to HRM research and allow researchers to go beyond the
in Korea, Confucian values have found their way into management, for example,
Guanxi', face and renqing' are some of the means of regulating interpersonal
relationships in Chinese organisations. Although it is evident that there are some
differences in the management practices in the three East Asian countries some
traditional cultures have similar, if not the same, impacts on management in all three
countries.
There is also still a strong influence of British colonial traditions in India and Nepal in
the form of numerous legislation and red-tape ridden bureaucratic system. Again, in
common with other African countries the provisions of labour laws are not seriously
implemented and, moreover, the uncooperative and disruptive nature of unions
reduces the efficiency of organisations. However, all this is now challenged and is
slowly changing due to the pressures created by the liberalisation of the economy and
increased global competition.
Apart from the above, other institutions (for example, trade unions, legal systems and
employers associations) are important aspects of national factors (in Budhwar and
associates context model) which are known to significantly influence HRM in
different cross-national contexts. With the changes in the economic systems of
developing countries and changes in the role of the government we are witnessing
changes in HRM policies and practices in different national settings. In most cases,
the scanty available evidence suggests that the role of governments has shifted from
an interventionist (where it used to develop centralised HR framework for
organisations to follow), to an abstentionist role, giving organisations a free hand over
HRM matters, albeit within a legal framework in many developing countries such as
in Egypt, Algeria, Turkey, Morocco, Saudi Arabia and Iran. For example, in Algeria,
HRM departments have been asked by the government to change from being a purely
administrative function to developing effective HRM systems to help firms compete
at home and abroad. As a result, HRM departments are asked to undergo radical
changes to grapple with the new challenges of the market driven economy. However,
given the lack of HRM skills in most developing countries HR managers have been
muddling through, often relying on trial and error to cope with the impact of market
liberalisation and severe international competition (see Mellahi and Budhwar, 2006).
Many developing countries whose human resources do not possess key skills and
capabilities (mainly due to less developed educational and vocational institutions) are
experiencing difficulties in the employment of qualified locals (for example in many
Middle-East countries such as Kuwait, Saudi Arabia, Qatar, UAE and Oman). But
governments in such countries are putting pressure on private sector firms to employ
more locals (Mellahi, 2006). In particular, a trend is emerging in the UAE
(Emiratisation) and in Oman (Omanisation) where a strong emphasis is placed on
recruiting locals (see Rees et al., 2007; Al-Hamadi et al., 2007). Given the top down
nature of these policies, private firms view government policies to employ locals as
unrealistic and that they undermine their ability to compete. Further, while past HRM
practices in the private sector in these countries, such as free hand to hire and fire,
and compensation based purely on financial rewards, were designed to manage a
foreign workforce with minimum rights (for example in Qatar and Saudi Arabia),
these practices are not attuned to the needs of local workers who are protected by
government legislation and have high demands and expectations from their employers
(for more details see Mellahi and Budhwar, 2006).
At another level, both political and legal framework in different developing countries
influence HRM policies and practices in their own unique way. For example, China
allows the existence of only one national union which functions strictly according to
the wishes of the communist party. But, in India there are many local, regional and
national unions which generally function in an adversarial way (see Saini and
Budhwar, 2004).
Apart from the above-mentioned national culture and national institutions, the
dynamic business environment is also known to influence HRM in developing
countries. For example, Debrah and Budhwar (2004) argue that in many developing
countries, to enhance international competitiveness in the globalised era has become a
national priority. As a result, economic liberalisation, deregulation and privatisation
feature prominently in many developing countries restructuring programmes. The
economic liberalisation and restructuring in developing countries brought on by
globalisation have in turn initiated changes in HRM policies and practices (as is the
case in most sub-Saharan African countries). For example, there is clear evidence of
the near demise of permanent employment in both public and private sectors in
many developing countries. In particular, we are witnessing the rise of the insecure
workforce' and the disappearance of the standard forms of employment (see, for
example, Mbaku, 1999).
Research undertaken by Mellahi and Budhwar (2006) also reveals the significant role
of a country's historical context in the developments of specific HRM models. For
example, in the case of Iran, the Islamic revolution has contributed significantly in
shaping its HRM practices by moving from merit and competence based criteria in
selecting and rewarding employees to putting more emphasis on ideological
orientation and personal trust and loyalty (also see Namazie and Tayeb, 2006).
Similarly, in North African countries (such as Morocco, Algeria and Tunisia), the
impact of the Frenchcol onialismon HRM policies is clearly evident, in particular the
predominance of French language as a criterion for entry to professional jobs and for
career advancement. In addition to the above factors, national wealth, composition of
workforce, trade unions, employment legislations (as discussed above), all combine
together to createa unique country or region specific HRM model. For instance, the
Middle-East has some of the richest countries in the world (such as the UAE and
Qatar) and some of the poorest countries in the world (for example, Yemen).
These various factors in different countries, understandably, result in different
approaches to HRM. On this issue, Benson and Al Arkoubi (2006) report that in
Morocco it is rare for small and medium size organisations to invest in formal
training. While this is partly due to the fact that managers are not convinced or
perhaps do not value the possible impact of HRM on improving organisational
performance, there is some evidence that organisation can hardly afford the cost of
conducting such training. This is not the case in other countries in the region, such as
the UAE, where training and development of locals is extensive.
In addition to the issue of varying impact of wealth disparity on HRD, the structure
and composition of the labour market also yield different HRM systems. For instance,
because of the small size of indigenous population, GCC countries (Gulf Co-operation
Council) require an extensive use of foreign labour to develop their infrastructure and
manage their economies. As a result, the structure of the labour market in GCC
countries is markedly different from the rest of the Middle-East. While unemployment
is high in both GCC countries and other Middle Eastern countries, the causes
underpinning unemployment are different in GCC countries from those causing
unemployment in other Middle Eastern countries. In Algeria, Egypt, Morocco, and
Tunisia unemployment is caused by lack of jobs in the labour market to absorb the
high number of young people entering the job market. In GCC countries, however,
unemployment is caused by local people shunning socially undesirable jobs (see, for
example, Mellahi, 2006). Finally, while most Middle Eastern countries provide
workers with the right to form and join trade unions, in GCCs countries trade unions
are not allowed (this is probably due to GCCs high dependence on foreign workers
from Asia), although a new form of work associations emerged in the early 2000s.
However, the role of these associations is often limited to dealing with abuse of
foreign workers such as delay in payments of salaries and arbitrary deportation (for
more details see Mellahi and Budhwar, 2006).
The above discussion highlights the impact of a number of factors and variables on
HRM in developing countries. However, the main challenge facing HRM scholars in
developing countries is how to delineate the impact of different factors and variables
on HRM in each country. In order to take the field further and guide researchers to
conduct meaningful research in future, in the next section we identify some of the key
challenges facing HRM in developing countries and put forward some future research
directions for HRM researchers in developing countries. Dealing with the same
should result in the development of both appropriate HRM theory and practice
suitable for developing countries.
This is necessary because commentators (such as Kanungo and Jaeger, 1990) caution
against the attempts by both researchers and practitioners to try to blindly adopt the
western HRM models, approaches, measures or scales in the developing countries
context. As a result of possible differences due to a combination of factors between
developed and developing nations and issues related to concept equivalence (amongst
others), adoption of western HRM constructs to developing countries will not be
sensible. To get a real picture of HRM scenario in developing countries there is then a
need to:
Finally, future research needs to examine the extent to which HRM practices in firms
operating in developing countries are contributing to improving organisational
performance. Also, future research should accentuate the dominant perspective (i.e.,
best practice, contingency or configurational) within this field in the developing
countries context.
CONCLUSION
We have made an attempt in this chapter to provide an overview of the scenario of
HRM in developing countries and developed a number of propositions for future
research. We believe that findings derived from research carried out with these
propositions should help to take the field further. Nevertheless, in the absence of
research culture, conducting research in the developing countries is more challenging
in getting access, getting quality data (because many people are reluctant to
participate in questionnaire surveys), adopting valid and reliable measures and scales,
getting funding from Western funding bodies to conduct research in developing
countries, publishing such research in top tier management journals and so on.
However, considering the rapid pace with which MNCs are entering these countries
and the growing economic power of some developing countries, it has now become an
imperative for scholars to research and reveal to the world the relevant HRM systems
for firms operating in these nations. We hope that the information provided in this
chapter will be useful to both researchers and practitioners who have an interest in
developing countries.
Further Readings
Entry Citation:
Budhwar, Pawan S., and Yaw A. Debrah. "Human Resource Management in
Developing Countries." The SAGE Handbook of Human Resource Management.
2009. SAGE Publications. 15 Apr. 2010. <http://www.sageereference.com/hdbk_humanresourcemgmt/Article_n23.html>.
Chapter DOI: 10.4135/978-1-8570-2149-3.n23