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of Employment Relations and Human Resources, Griffith Business School Griffith University, 170 Kessels Road, Nathan, QLD 4111, Australia Email: M.Thite@griffith.edu.au; Phone: +61 7 373 57643 Fax: +61 7 3735 7177 Adrian Wilkinson Centre for Work, Organization and Wellbeing, Griffith University, 170 Kessels Road, Nathan, QLD 4111, Australia Email: Adrian.Wilkinson@griffith.edu.au; Phone: +61 7 373 56792; Fax: +61 7 3735 7177 Dhara Shah Department of Employment Relations and Human Resources, Griffith Business School, Griffith University, 170 Kessels Road, Nathan, QLD 4111, Australia Email: firstname.lastname@example.org
* Corresponding Author
ABSTRACT The rapid rise of multinational Corporations (MNCs) from emerging economies has led to greater interest and urgency in developing a better understanding of the deployment and diffusion of managerial strategies from their perspective and without assuming the prevailing Western ethnocentric orthodoxy. This paper develops a conceptual framework of global HR strategies and practices in MNCs from emerging economies across their subsidiaries in both developed and developing markets. Using data from a pilot study of an Indian MNC, it provides insights and guidance into the motives, strategic opportunities and constraints in cross national transfer of HR policies and practices in a multi-polar world.
Key Words: New Multinationals; Emerging Economies; India; Internationalization Strategies; Global HR Strategies.
1. Introduction “In the coming decades, China and India will disrupt workforces, industries, companies, and markets in ways that we can barely begin to imagine” (Engardio, 2008: 23)
Research on MNCs has tended to be focused on those from developed countries establishing subsidiaries either in other developed economies (e.g. U.S. to the UK) or into developing economies (e.g. the U.S.A into Latin America). U.S. firms invested in
Europe from before 1939 but the major push came after World War Two (Ferner, Almond, Clark, Colling, Edwards, Holden, & Muller-Camen, 2004). Japanese MNCs began to locate in advanced economies, particularly in the 1980s. While, there has been a rich stream of MNC research in this area, there has been relatively less research on newer industrialized (e.g. Taiwan, India and South Korea) to the more industrialized economies (Glover & Wilkinson, 2007, p.1438). This is a new era which is often referred to as a ‘new geography of investments’ (UNCTAD, 2004). Whilst most MNCs come from the world’s top five economies, a growing number are from developing and newer industrialized economies. UNCTAD categorizes developing economies into two groups South Korea, Taiwan and Singapore who are newer industrialized and have an established track record as outward investors and those such as India and China that are rapidly developing.
In this paper, we widen the horizon of International HRM to include HRM strategies and practices from emerging economies. The purpose of the paper is to explore
This paper helps identify and analyze ‘the travel of ideas’ (Delbridge. This would in turn assist them to facilitate a smooth ‘travel’ of policies and practices across subsidiaries (Ferner. The paper concludes with a discussion of how our findings relate to existing research and identify directions for future research. The New Multinationals The world investment report from UNCTAD (2010) indicates that although developedcountry transnational corporations (TNCs) account for the bulk of global foreign direct investment (FDI). 2.how HRM strategy of the MNCs in emerging economies is formed and how it operates in practice. This provides managerial insights and guidance into the motives. 1992) between the East and West. developing and transition economies have emerged as significant outward investors accounting for one quarter of global FDI outflows in 2010. Second. 1998. Garrahan & Stewart. in terms of the motive and opportunity behind cross-national transfer of HR policies and practices. we outline the issues relating to emerging MNCs. It uses the data from the pilot study of an Indian multinational company to test the conceptual framework and propositions. First. Such an understanding of corporate management thinking and practice in Asian MNCs helps practitioners understand their own strengths and weaknesses in the new scheme of things and assists them in strategizing accordingly as to how best to influence the top management layers and players. strategic opportunities and constraints in cross national transfer of HR policies and practices. we develop a conceptual framework of global HR strategies and practices in MNCS from emerging economies. the bulk of 4 . 2009).
& Wilkinson. 1999. have been much less explored (Ferner. Glover & Wilkinson. the balance of power will shift to the East as China and India continue to evolve as two of the most attractive inward as well as outward FDI destination countries. Taiwan and Singapore (Chang & Taylor. Emerging country MNCs tend to be smaller in size with considerably less resources and international experience than their counterparts from developed markets. Chang. Filatotchev. 2007. It is anticipated that in the new world economy. generating considerable South-South investment flows (UNCTAD. Mellahi. Lall. Asia dominates the list of 100 largest developing country TNCs. HRM is most sensitive to local context (Rosenzweig & Nohria. 1983)Guillen and Garcia-Canal. 1999. Further. 2009). the emerging economies are investing heavily in low-income host countries. 2007). Similarly. such as Japan. Research on global HRM has not paid enough attention to MNCs from emerging economies despite of all the management domains. & Mellahi. 2009b. 2007). & Peng. This limits their ability to transfer management practices across their subsidiaries (Hussain & Jian. Chang. 2009). China and India. the two emerging global giants. Hoskisson. 2005). Wells. Wilkinson. While there is growing recognition of and research on this contextual aspect with respect to some relatively advanced Asian economies.which came from Asia. 1994). 1983. The growing importance of emerging economies has lead to an upsurge of strategy research on the topic (Wright. Korea. the growth rate of the number of TNCs from developing countries and transition economies over the past 15 years has exceeded that of TNCs from developed countries. 5 .
Hoenig. 1993. National origin of MNCs is seen as a major 6 .g. Yu. Chow. 2007). Country of Origin Effect on Strategy One of the key challenges facing the MNCs is how to balance between the need for global integration and local adaptation. Hofstede. Ulgado. 1994)) has identified the national origin of firms including its national institutions and culture as the key shapers of HRM practices in the region. 1998.Previous research on MNCs had identified dual pressures for the need to conform to home country (push force) and host country (pull force) institutional environments when adopting HRM strategies and practices (e. 2007). 3. 1994). 1988. & Negandhi. diffusion has to take into account the local cultural and institutional context and the ability and incentive of local managers to implement best practice (see Glover & Wilkinson. Shields. Hillman & Wan. & Wu. 2005. Rosenzweig & Nohria. Bae & Lawler. Wilkinson. While previous comparative research on HRM in the Asia Pacific region (Awasthi. We know very little on how these pressures influence HRM strategies and practices at subsidiary level of MNCs from emerging economies. 2001. these studies do not address how cultural and institutional differences affect the dissemination of HRM strategies and practices by MNCs from emerging economies operating in a developed economy (Chang. A key research question relates to exploring the issues associated with the transfer HR practices across borders within MNCs. Hofstede & Bond. & Wu. 2004. Chow. & Yang.Farley. 1999. & Mellahi. As Martin and Beaumont (1998) comment. 1997.
There is empirical evidence that suggests that almost all MNCs have a trace of their country of origin within them. Lau. 1992). Turban. Contrary to Ohmae’s (1990) view of a borderless world and nationless corporations. p. Japanese multinationals have the characteristic of being strong but with informal centralization and are highly reliant on establishing international networks (Bartlett & Ghoshal. whether the country is high or low on cultural context will also determine the impact of their 7 . multinationals have been typically contrasted with Japanese multinationals in respect of their styles of HRM employed in their subsidiaries (Ferner. It could be subconscious choices which are influenced by the cultural and institutional characteristics of the country of origin of the MNC or it could be transferred through the people who work in the organization (Harzing & Sorge. U. 1999.influence in determining this balance (Ngo. U. 632). 1997). & Lui. cultural and institutional determinants in the country in which firms were located are seen to be salient determinants arising from a firm’s context (Chang & Taylor. 1997). Moreover. multinationals appear to have elaborate systems of control and standardized worldwide systems in place (Ferner. Hu. 2003. Nordhaug. such as Ferner (1997) and Gamble (2003) examined the issues dealing with how MNCs manage their foreign subsidiaries and concluded that the main influence on the MNCs effort to have a degree of control over their subsidiaries was their country of origin (Harzing & Sorge.S. 1992). 2003). their organizational coordination and control practices at the international level tend to be explained by their country of origin. & Ringdal. Researchers. 1998.S. Supporting this view. Harzing and Sorge (2003) state that although multinationals are highly internationalized. Gooderham. 1999).
Lau. 1984). While in the past Japan and Korea internationalized through greenfield expansion. The interplay between national and organizational culture is a significant factor in the success of global mergers.country of origin on the IHRM practices. founding their own subsidiaries that mitigated cultural clashes. 2004). Eden. 2007).25). 2007). their internationalization is very rapid and different from that of the conventional Western MNCs and erstwhile developing country MNCs (Matthews & Zander. 2005). Filatotchev. The strategy literature on emerging economies predominantly use institutional theory followed by resourcebased theory. acquisitions and alliances (Thite. 2005. As stated before. Hoskisson. Moreover. 2000). They also 8 . Filatotchev. MNCs from emerging economies enter developed economies for ‘exploration’ and other emerging economies for ‘exploitation’(Wright. transaction cost theory and agency theory as conceptual perspectives (Hoskisson. This work draws on the work of Hall (1976) and his distinction between situations where things are less explicit where the context exerts more influence (high context) and those that are much more explicit where the context is less of an influence (low context). China and India are expanding mainly through acquisitions in Western countries (Hofstede. Western countries are seen as generally low on cultural context whereas Eastern countries are mainly seen as high on cultural context (Hofstede. & Peng. p. & Wright. & Peng. Hoskisson. “there is relatively little research on the internationalization of emerging economy firms either into other emerging economies or into developed economies” (Wright.
engineers and natural resources (Engardio.e. Kumar. Although in absolute terms the MNCs from emerging economies are not very large. 9 . 4.tend to use exporting and FDI as combined and simultaneous strategy. decision making and control on subsidiaries can be noticeably different as compared to their counterparts in developed markets due to national culture and economic differences (Hofstede. 2007). Correspondingly within the MNCs from the emerging economies. 2007). Kumar. Besides being small. they are gaining importance and many companies are now globally diversified. p. Arndt. particularly the HRM systems to be used in its overseas affiliates” (Taylor.966). & Kundu. most of the emerging market MNCs are in their early stage of internationalization with limited international experience (Contractor. i.. 1996. & Napier. rather than being distant alternatives (Contractor. 2007). 2006). Conceptual Framework This paper deals with strategic international human resource management (SIHRM) that explicitly links HRM with the strategic management processes of the MNCs in emerging economies and emphasizes coordination or congruence among the various HRM practices. It focuses on SIHRM orientation. organizational culture. the “general philosophy or approach taken by top management of the MNC in the design of its overall IHRM system. The key advantages for these MNCs are access to the most dynamic growth markets in the world with a vast pool of low cost resources like production workers. & Kundu. & Geri. Beechler.
If the degree of integration between the headquarters and the subsidiary is high 10 . to suit the markets they are serving (Rose & Kumar. combining both push force for control from headquarters and pull factors for conformity to host country. (1996). Lau and Liu (1998) found strong support for the hypothesis that country of origin influences the firm’s HRM practices. 2002). 2005). Turban.1. ‘there is a growing consensus that a key differentiator between the corporate winners and losers in the 21 st century will be the effectiveness of the human organization’ and it is particularly critical in the emerging markets (Strategic Direction. Influencing factors: Research shows that control and coordination mechanisms and diffusion of management practices in an MNC are subject to several external and internal influencing factors (see Figure 1). American and European HRM systems influence and are influenced by East Asian HRM systems (Chew & Zhu. 4. Sparrow. 2007). 2007). Similarly. Empirical studies on the diffusion of HRM practices by MNCs across their subsidiaries indicate that they predominantly adopt hybrid methods.According to Taylor et al. not just from home to host countries. & Harris. Global. Edwards & Rothbard (2000) contrast different approaches to the transfer of employment practices in MNCs and argue for an integrated approach that focuses on interrelationships between markets and institutions on the one hand and the material interests of actors on the other. In the context of IHRM. national and internal pressures play a role in influencing HR strategic recipes and delivery mechanisms (Brewster. Taylor et al. Ngo.’s (1996) model of IHRM considers that the transfer of HRM policies and practices ‘can go in any direction’.
2007). Ferner. Ferner. Smith & Meiskins. 1997.2. 11 . Mellahi. the strategic framework of the MNC. Kumar. These constraints are further accentuated by liabilities of smallness and newness (Contractor.it requires higher levels of control and coordination (Taylor. organizational culture. & Colling. & Wilkinson. 2007). 2009a. the MNCs from emerging economies face a “double hurdle” of liability of foreignness and liability of country of origin with perceived poor global image of their home country (Chang & Taylor. With regard to external influencing factors. decision making and delegation of authority can be considerably different in MNCs from emerging economies than their counterparts in developed markets due to national cultural. Control of subsidiaries in developed markets: MNCs exercise a degree of control over their subsidiaries to ensure their resources and efforts are directed towards attaining the main objectives of the MNC (Chang & Taylor. 2005. & Geri. Beechler. Chang. As Guillen and Garcia–Canal (2009) note. with regard to internal influencing factors. 1996). the degree and level of integration between headquarters and subsidiaries will also influence the multinationals. Furthermore. Almond. 2006. 1995). & Napier. & Kundu. leadership. 1999. Proposition1: MNCs from emerging economies adopt control and coordination mechanisms because of the double hurdle they face of ‘liability of foreignness’ and ‘liability of country of origin’. Arndt. Similarly. 4. they also need to deal with the liability and competitive disadvantage that stems from being latecomers lacking the resources and capabilities of established MNCs from the most advanced countries. Engardio. economic and political differences (Hofstede.
1999). In terms of HR strategy. 2000.’s (1996) classification of adaptive or polycentric approach vs. We adopt the Harzing’s (1999) typology that suggests two dimensional classification between direct (personal & impersonal) and indirect (personal & impersonal) control. Accordingly. corporate control “comprises of all the mechanisms instituted to tie the operations and decisions within and across components into a larger whole and establish coherence of meaning and purpose within the larger enterprise” (p. Song. They are expected to adopt an “adaptive” or “polycentric” approach to management in developed country subsidiaries (Edwards & Rothbard. According to Harzing and Sorge (2003). Control refers to the processes by which an MNC ensures that their subsidiaries operate in a particular way as determined by the headquarters in order to achieve organizational goals (Chang & Taylor. Tsui. 1997). exportive or ethnocentric approach to management control of subsidiaries. this could mean low internal consistency with the rest of the firm and high external consistency with the external environment. Complementary to the above typology is Taylor et al. & Jia. Kaye & Taylor.1999). Unlike developed country MNCs engaging in ‘forward diffusion’ of superior home country practices into developing country subsidiaries. Li. 2008). emerging economy MNCs utilize the knowledge gained in operating in developed markets to transfer best practices across the entire organization (Zhang.190). depending on which is seen as working better. HR practices may include hiring host country managers with local knowledge and transfer of practices “both” ways. 12 .
2001. Shen. 2006). Scullion. to achieve high internal consistency. 2000. we hypothesize that MNCs from emerging economies entering other emerging markets may follow their counterparts in developed markets by adopting an ethnocentric approach.Proposition 2: MNCs from emerging economies adopt a predominantly ‘adaptive’ or ‘polycentric’ approach to manage their subsidiaries in developed markets. 2000. Some authors have noted that MNCs are more likely to adopt an adaptive or polycentric approach in developed countries than lesser-developed countries due to the greater availability of managerial skills in developed countries (Bazeley & Richards. the authors have begun collecting data from a number of Indian MNCs by interviewing senior managers in their 13 . 2007).3. The other reason identified is the limited availability of management and technical skills in some countries (Delios & Bjorkman. Insert Figure 1 about here In order to provide an initial test of the conceptual framework. Proposition 3: MNCs from emerging economies adopt predominantly an ‘exportive’ or ‘ethnocentric’ approach to managing their subsidiaries in other emerging markets. Figure-1 presents a diagrammatic representation of the conceptual framework. They attempt wholesale transfer of the parent firm’s HRM systems to their subsidiaries. Control of subsidiaries in emerging markets: Due to the paucity of empirical literature in this area. 1994). 4. Richards. especially with regard to their core competencies (Pudelko & Harzing.
2009).headquarters and subsidiaries in both developed and developing markets.23). IT services. 5. & Bhattacharya. As a result. pharmaceuticals. seven Indian multinationals featured in Global Fortune 500 and twenty in Boston Consulting Group’s BCG 100 new Global Challengers (Sirkin. The services sector constituted 38% of Indian FDI stock in 2006 mainly in IT. India’s outward flow of FDI rose sharply from $2 billion to $14 billion (UNCTAD. p. 2007). Over 70% of them prefer complete control over their overseas ventures. As the data collection is still underway. in 2008. mainly to protect their firm specific advantages and also due to the relaxation of government policy restriction on Indian equity participation (Pradhan. we provide a brief overview of Indian MNCs as representatives of emerging economy MNCs so as to provide some context for our work. 2008). multinational corporations that derive their advantage from service rather than technological 14 . engineering goods and natural-resource-based manufacturing firms (Ramamurti & Singh. communications and software. 2008. Indian multinationals are largely private owned and cover a wide range of sectors in energy-related areas (mainly oil and gas). The Indian firms are showing a clear preference for overseas acquisition as an entry strategy largely in North America and Europe. The Indian multinationals seem to “represent a new breed of multinationals that build their competitive advantage in novel ways. Indian Multinationals Between 2004 and 2007. we report the findings from a pilot study conducted at one Indian MNC. Hemerling. Before reporting these findings.
that MNCs from emerging economies choose an adaptive or polycentric approach to manage their subsidiaries in developed markets. In line with Proposition 3. Since then. the very nature of Indian outward FDI has undergone fundamental changes and is now characterized by a large number of professionally run firms in the services sector investing mostly in developed countries.6). this was predominantly an exportive or ethnocentric approach that involved wholesale transfer of parent firm’s systems. discussed before. Pradhan (2007) believes that the motivators for Indian firms to expand overseas. The implications of the same will be discussed in the pilot study described below. 2011). 15 . policies and personnel. the approach has been mixed. raw materials.innovations and manufacturing MNCs that straddle a low-cost and medium technology position” (Jonsson. This is more to do with shifting investment patterns and markets than managerial choice. With respect to their entry into other developing markets. particularly into the developed markets include the need to acquire new technologies. 2008. opting for greenfield investments in joint ventures (Thite & Dasgupta. Prior to the liberalization of the Indian economy in 1991. skills and expertise and also to leverage on their trade-supporting infrastructure overseas. p. a small group of largesized family owned Indian firms invested mostly in neighboring developing countries. This supports Proposition 2.
It is publicly listed on the Mumbai and New York Stock Exchange.S. including manufacturing. North America. Mexico and Belgium.A. China and Malaysia. and software products. U. Between late 2007 and early 2009. Europe (21%) and the Asia Pacific region (20%). Business Process Outsourcing (BPO).000 professionals. retail and transportation. healthcare. telecommunications. referred to here as Alpha Services. The company has been consciously trying to reduce its dependence on any one particular region and has been aggressively diversifying to other regions. namely. It has fullfledged development centers in India. Pilot Study of an Indian Multinational As part of a larger research project that focuses on Indian multinationals as representatives of emerging economy MNCs. Alpha serves a wide range of industry segments. insurance. Alpha Services is one of the top five Indian consulting and IT services companies with a turnover of about US$ 2. we conducted in-depth. the Middle East and the Asia Pacific region and serves over 570 global companies. Egypt. banking and finance. It operates in three business segments.5 billion from its operations in over 44 countries that employ around 45. Its vision is to be one of the five most valuable global integrated IT services and BPO companies in the next few years.A and UK. Its recent overseas acquisitions include some niche IT services companies in the U. IT services. Germany. Europe. Alpha Services has development centers in India. Its overseas revenue mainly comes from North America (59%). the authors conducted a pilot study of a large Indian IT multinational company. It has 100% subsidiaries in China.6. infrastructure.S. semi-structured interviews with 19 senior managers of the company at three locations – its headquarters 16 .
5 business account managers managing key clients in Australia and the HR Head of the Asia Pacific region based in Singapore and the country head. All the interviews were conducted face to face except for two telephone interviews. implement and review strategic policies and priorities on a regular basis. The results from the thematic analysis of the interview data from this study are described below.1. The interviewees included 5 human resource (HR) managers and 3 business heads at the headquarters. Organizational Structure & Systems: At the apex of this organization lies the Leadership Council. subsidiary office in Melbourne. China (representing a developing market). It is charged with the responsibility to formulate.in India. consisting of around 45 top leaders from business and support functions. The choice of locations provided a three dimensional perspective of the company’s global operations from the stand point of headquarters where strategy is formally formulated and reviewed and subsidiaries in both developed and developing markets where it is intended to be implemented. The interview protocol consisted of a semi-structured questionnaire to probe various aspects of a company’s internationalization strategies. HR head and 3 business managers in China. Each interview typically lasted an hour and was taped and later transcribed. control and coordination mechanisms and staffing practices including talent attraction and retention strategies and corporate culture. 6. In most cases. Australia (representing a developed market) and in Shanghai. the questionnaire was circulated prior to the interviews to enable the interviewees to prepare in advance. At 17 .
According to the Global Head of HR. ‘metrics are the most common communication tool at Alpha’. The same performance metrics are supposed to be applied to every employee and position at every location. namely better. consisting of Vertical Business Units (VBUs) and Regional Business Units (RBUs). These metrics mirror the ones followed at its key U. larger. Its organizational structure and systems are supposed to be underpinned by its philosophy of enabling leadership with its core concepts of ‘full life cycle business’ (FLCB) and ‘full life cycle leaders’ (FLCL).-based client which is world renowned for its management systems. Alpha believes that it is in the ‘business of building and developing leaders faster than the competition’. The company claims to take its metrics driven 18 . Alpha is said to espouse a philosophy of encouraging employees to “think like CEOs” whereby every employee is encouraged to consider himself/herself as the chief executive officer (CEO) of the particular task that they perform and the people whom it affects as their investors in the business. process and product against specific outcome measures. such as people. The approach to leadership at Alpha is exemplified by the motto “every Alphaite (employee) is a leader”. The metrics assess the performance of each employee on specified built measures. faster.the heart of Alpha’s organizational structure lie the Customer Facing Units (CFUs).S. cheaper and steadier (repeatable). The CFUs are charged with the entire spectrum of customer relationship management and in the process are supported by Horizontal Competency Units (HCUs) that provide the backing of appropriate resources.
Alpha is also keen to ensure that every key stakeholder in the company. it was apparent that the organization had a decentralized approach. Its corporate leadership center is geared to groom present and future leaders in the organization’s corporate values. The center’s mission is to spread the organizational culture to every unit. When asked about the influence of national culture or country of origin on the company’s growth and thinking. throughout its global operations. there will surely be the subtle influence of Indian culture”. including managers. In the interviews with managers in its subsidiaries. customers and suppliers. all the HR managers and business heads interviewed at the headquarters asserted that it did not have any influence on the organizational culture or the way they operate. but as pointedly noted by a senior manager at the Australian subsidiary “considering that almost 85% of the workforce is Indian. get the same “One Alpha Experience” (organizational culture).business approach beyond organizational boundaries by involving customers and suppliers as part of its “eco-system. employees.” According to corporate managers. 19 . codified in a manual. Senior managers from all over the world are given weeklong induction training at the company’s headquarters in India to attend a focused leadership immersion program spearheaded by the top management team. The heads of every business unit managed and took decisions regarding their business units with only major decisions taken at the headquarters.
Alpha is no exception to this trend but there has been a conscious effort to change this mindset over the years according to the managers interviewed. the company has reached a critical mass to scale the next level 20 . For example.6. Alpha decided to enter this emerging field to exploit the opportunities ahead of its competitors. Similarly.3. particularly. such as the Middle East and China where it was an early entrant along with other Indian IT firms.000 employees spread over 40 countries. Alpha’s global HR Head believes that with over 45. Alpha understood in the late 1990s that it needed to move beyond the established developed markets in the U. 6. in mid-1990s. International Business Strategies: Alpha has been seen as an ambitious and entrepreneurial organization throughout its history. particularly in the developed world from their inception. when enterprise resource planning (ERP) was identified as a potential high growth area in the IT industry. Global Staffing & HR Systems: Most of the Indian IT companies have operated in international markets. As the Head of Alpha’s China operations proudly pronounced “it is a perfect storm. they have remained largely local –that is as an Indian company (as reflected in the composition of their top management pool and managerial staffing).2.S. In terms of strategic and operational policy making. For example.A and Europe and enter other emerging markets. vision and excellent domain tradition that have made Alpha what it is today”. in the telecommunications sector. This paved the way for the global leadership position that Alpha is said to enjoy today in ERP implementation.entrepreneurship.
50% of entry level positions and 90% in its non-English speaking geographies. Alpha being an Indian company. The desire of Alpha to localize its workforce is reinforced by the statement from Alpha’s Head of HR in China that “Alpha wants to be a Chinese company in China but provide the same global experience to clients. Alpha strives to staff locally at least 20% of all positions in all of its overseas operations. From the interviews it was recognized that the recruitment and selection process. the policies and procedures were very strongly suited to the Indian environment. such as China. Accordingly. As a policy. This sentiment was echoed by the Global Head of HR who agreed that subsidiaries in developed markets needed more flexibility in determining the remuneration structure of managerial staff to attract and retain talent. at both these subsidiaries are still overwhelmingly staffed by expatriates from its Indian headquarters. 21 .in becoming a truly global company. where possible. no matter where the operations are carried out”. The Business Head in the Australian subsidiary stated that “when I started 5 years ago. today nearly 98% of Alpha’s workforce in China is staffed locally while in Australia it is nearly 50%. Now the company has more adapted to Australia but not fully suited to the Australian environment as an Australian company”. But the senior management positions. career management and performance management were similar across the global operations with the flexibility to accommodate local laws and HR trends and practices. from country head to project managers.
7. 22 . This highlights the constraints that the MNCs from emerging economies face of the ‘liability of foreignness’ and ‘liability of country of origin’. While the company was pleased with its employer brand in China where Indian IT companies are held in high esteem for their quality standards and offshoring business process efficiency. as pointed out before. their global management team is still predominantly Indian but increasingly their systems and to some extent their management mindset are becoming global. Despite attempts to localize their workforce in different geographies. Managerial Relevance Our pilot study of an Indian MNC offers some interesting insights into the way MNCs from emerging economies strategize and manage their operations in different parts of the world.The main talent management issue or challenge identified was brand value or recognition of the company across the world. offshore and near-shore locational strategies. While Western MNCs have traditionally taken their domestic strengths ‘outward’ to the rest of the world. the Australian managers generally believed that the global image of the company needed to be strengthened as a high quality services provider. mainly via setting up 100% subsidiaries or acquisitions. the Indian MNCs in the services sector have typically grown first in the developed markets by leveraging on their skills and domain expertise and have pioneered the art of global offshoring services delivery model using a combination of onshore. which was one of the major concerns identified by the HR managers. they have spread their global network. Most of their overseas growth has occurred in the last decade and in a very short span of time.
Despite its desire to localize its management team in Australia. Indian IT companies still have problems recruiting talent at higher levels due to poor perception of their employer brand. Similarly. Alpha’s management of its subsidiary in China does not reflect ‘exportive or ethnocentric’ approach to managing subsidiaries in developing markets. However.S.With regard to Proposition 1. our case study illustrates that Indian MNCs do face multiple hurdles in furthering their internationalization strategies. and UK markets. Alpha’s managers seem to indicate that unlike the U. client and making it a central part of its performance management system is a clear sign of an ‘adaptive approach’ in managing subsidiaries in developed markets. alpha’s adoption of performance metrics from its key U. For example. forced to send expats from India. with regard to proposition 2. Alpha seems to be unable to attract the best local talent and therefore. 8. its corporate control and coordination mechanisms are influenced by the multiple hurdles that it faces as an MNC from an emerging economy. along with other top Indian IT companies. has pioneered the art of global offshoring business process and the global services delivery model indicating a two way exchange of best practices. significant differences remain in the way in which 23 .S. Accordingly. Conclusion Despite the increasing trend towards the globalization of trade and commerce and crossnational convergence arising from it. Alpha. as stated in proposition 3. At the same time. they are unfamiliar with the cultural and business environment in China and therefore. despite their growing global reputation. would prefer to leave it to the locals to manage the China operations with only broad corporate oversight.
For example. Even though some have contested the emphasis placed on national culture in international management at the cost of organizational differences (Ericksen & Dyer. & Kundu. Ferner. Indian MNCs in the service sector ‘tend to gain the positive benefits of internationalization sooner than manufacturing companies’ (Contractor. 2002) in different industry segments. Kumar. the management of employees (Brewster. the importance of country of origin is a consistent theme in the research in this area (Harzing & Sorge. 1997). 2009). The cultural values framework pioneered by Hofstede (1980) demonstrates the limitations of universalistic models of IHRM that emphasize one-best-way. such as IT services and manufacturing. Increasing investment by emerging economies in developed as well as emerging markets. & Florkowski. 2003). particularly via mergers and acquisitions means that there is a greater need for management practitioners to understand the ways in which MNCs from emerging 24 . Budhwar. p. Gerhart & Fang. Our research framework adds value to IHRM research by giving ‘equal weight to both the subsidiary level and to corporate headquarters within a firm’ (Ferner. organizational differences and the interplay between them (Schuler. & Harris. 2007. Any study on MNCs from emerging markets also needs to take into account sectoral variables (Colling & Clark. institutional differences. 2005. such as cultural differences.different countries organize business activities and more specifically. 2005). 2005.401). 2002). Our conceptual framework adopts a broad approach by examining the key factors. Sparrow.
reexamining the management approaches and practices of MNCs from newer industrialized and developing economies such as India is likely to remain a key research issue for the next decade. Accordingly. & Florkowski. international HR management literature and practice have been embedded in Western thinking and concepts with little cross-pollination (Wright. However.A. conclusions and recommendations are those of the authors and do not necessarily represent the views of the SHRM Foundation. the new West we need to develop newer models to aid the understanding of how Asian MNCs. For too long. In the 21st century knowledge economy where services and creative industries dominate the economic landscape that is tilting more towards developing and transition economies. the interpretations. Acknowledgements: This study was funded by a grant from the SHRM Foundation.S. p. 2005. If the East becomes. in popular jargon. 25 . reflecting the ethnocentric bias of North American scholars (Schuler.S. & Dyer.economies strategize and act in diffusing and coordinating management practices.553). U. given the speed of economic development and the increasing influence and numbers employed by such companies. 2002). the theories and practices applicable to Western MNCs that monopolized the 20th century industrial economy are slowly but steadily giving way to new economic and management paradigms. p. particularly from China and India. It is clear that the universal or U. Snell. model does not have applicability to the emerging MNCs. are going to exercise corporate control in an increasingly multi-polar world (Pudelko & Harzing. Budhwar.876) and an over emphasis on expatriate management. 2007.
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Host Country Factors (Perceived relative strength of home & host country mgt. corporate. Home Country Factors (Economic strength.Headquarters’ diffusion capacity 6.Subsidiaries’ absorptive capacity 7.Importance of subsidiaries to MNCs bottom line & strategy 4.Strategic framework (business. legal framework. M&A …) 5.Figure 1: Diffusion of Global HR Strategies & Practices across Subsidiaries in a Multinational Corporation from an Emerging Economy External Influencing Factors 1. practices. national culture …) Global HR Strategies & Practices Direct Personal Impersonal Personal Internal Influencing Factors 1. ability & choice of expatriate managers Indirect Impersonal 2.Subsidiaries’ resource dependency on the headquarters 8.Organizational culture/ leadership 3. cooperative) 2. level of integration between headquarters & subsidiaries …) Attract Develop Retain Domestic Operations Subsidiaries in developed countries Subsidiaries in developing countries Adaptive Hypotheses Exportive 31 . international. Environmental factors (openness of business systems. institutions …) 3.Mode of subsidiary set-up (Greenfield. global image. Industry-specific Factors (Degree of product integration.Availability.
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