Research in IHRM

in Theories and Empirical

Recent developments described as a
field in
was
management (IHRM) focused on
resource
international
human multinational companies
decades ago, on
Vedry two research
majority of marketing and
IHRM was one
development. The
the infancy stage of and international
production
international this field had been
highly visible activities
such as bulk of research in
business. Also, the
of the least studied areas in international
rather than an
international perspective. A further
from an American
conducted by US researchers
normative limitations
IHRM literature
suffered from the conceptual and
critique suggested that the
research, and was not very useful identifying
in
characteristic of much domestic personnel management
has led to a
that the rapid pace of globalization
the actual HR practices of MNCS. Pucik (1992) argued that the
as leading to changes in the
content of HRM, and suggested
more strategic role for HRM as well
There
international HRM is increasingly being recognized.
need for a systematic approach to studying the
inte rnational HRM over the past decade, including
has been a rapid development of the field of
indicator of the
theoretical work in the area. One significant
development of more sophisticated
of research on the IHRM strategies and
growing importance of IHRM is the rapidly growing body
America.
practices of MNCs taking place outside North
interest in international HRM over the last
decade have been
The main reasons for the growth of
outlined by Scullion (2001):

increased the number and

1. The rapid growth of internationalization and global competition has
of human resources.
significance of MNCs in recent years and resulted in the increased mobility
2. The effective management of human resources is increasingly being recognized as a major
determinant of success or failure in international business and it has been argued that the success of
global business depends most importantly on the quality of management in the MNC.

3. Underperformance or failure in international assignments continues to be costly, both in human and

financial terms, and research suggests that the indirect costs of poor performance in international
assignments such as damage to foreign customer relations may be particularly costly.

4. The implementation of global strategies is frequently constrained by shortages of international

management talent, which constrain corporate efforts to expand abroad.

5. International HRM issues becoming increasingly important

are
in a wider range of organizations partly
due to the rapid growth of small and medium sized
enterprise (SME) internationalization in recent years.
Research suggests that theories of internationalization that have been developed from research in larger
MNCs do not adequately explain the approaches used in smaller firms.

6. The movement away from more traditional hierarchical organizational structures towards the
network MNC organization has been facilitated by the development of networks of personal
relationships and horizontal communication channels, and it has been argued that HR plays a more
significant role in network organizations.

CATG1oSSLS-
8 oots2
 and

a more significant role in implementation

is growing evidence
that HR strategy plays environment,
many
7 Finally, there that in a rapidly globalizing it
international firm. It has
been suggested them and
control in the to pursue than how to implement
which strategies with structura
MNCs have less
difficulty determining transnational strategy
has less to do
or
that the success
of any global
cultures.
has been argued different organizational
with developing
often radically
innovations than
Internationalization

Adler and Ghadar's phases of

Vernon distinguishes
on Vernon's
life cycle theory (1966).
model (1990) is based focuses on the product,
Adler and Ghadar's ("high tech)
international product
life cycle. The first phase second phase
functional area. The
three phases in the role as a
an important not only at
research and development
(R&D) playing penetrating markets,
developing and
concentrates on control. In
management
marketing and
internationalization')
(growth and R&D to
therefore shifts from implementing cost
abroad. The focus
home but also made to lower prices by
efforts are
('maturity'), intense
the third and final phase
control measures.
after the Second
the product life cycle shortly
of
Ghadar, the average length it is as short as 5
months.
According to Adler and for some products
3-5 years;
Nowadays this is must increasingly
be
World War was 15-20 years. in Vernon's life cycle
areas of emphasis in
is that the various a fourth phase
An important implication as sufficient
reason to suggest
Ghadar saw this and
Adler and
dealt with simultaneously. penetrate markets)
differentiation (as a way
to develop and
which the company
must achieve the authors then
phase
introduced a fourth
Having
to achieve cost control). form the main
integration (as a way and human resource management
a model in
which cultural aspects and
to develop largely on strategic
proceed which concentrate

In short, they
link Vernon's phases,
focus of attention.
human r e s o u r c e management.
structural to culture and
issues,

culture
The influence of
cultural background of a country or region
the
and Ghadar (1990), the impact of
According to Adler
They identify these phases
as:
phase to the next.
differs from one

market and export;

domestic: focus on home
transfer of learning;
international: focus on local responsiveness and
low cost and price competition;
multinational: focus on global strategy,
local responsiveness and global
integration.
global: focus on both
from
hardly plays a phase (domestic). Management operates
role in the first
The cultural component cultures. The attitude
an ethnocentric perspective and can afford to ignore the influence of foreign
We allow you to buy our
towards foreign buyers -which is a somewhat arrogant one - is the following:
differences of
(international) the cultural
and Ghadar). By contrast, in the second phase
product (Adler external relations. From the polycentric
when entering into
each foreign market are highly important match
will concentrate on finding a good
marketing and production
perspective, product design, That is why
relevant fore ign market segment.
between the product and the preferences
and style of the
production is often transferred to the relevant country and/or region
 that
such an extent
the product must be globalized to
(multinational) up with price
During the third phase as a way of keeping
players' emphasizes a lower cost price
competition with other 'global exploitation of cost
with the
emphasizing cultural sensitivity than
competition. This has
less to do with factors in each country and/or region,
differences between production
advantages arising from price that a certain internal
important
of economies of scale. It is, however,
and with the exploitation within the global
awareness develops of
or
the various cultural differences (cultural diversity)
sensitivity
concern.

and low prices on the world

Finally there is the fourth phase (global). In addition to cost advantages
This quality is
markets, the products and services must at the same time meet standards of high quality.
of the
expressed in the adaptation of the product to the tastes, preferences and/or specifications
individual markets and market niches. Adler and Ghadar describe this as follows:

Successful corporations understand their potential clients' needs, quickly translate them into products
and services, produce those products and services on a least-possible-cost basis, and deliver them back to

the client in a culturally appropriate and timelyfashion.

cultural sensitivity becomes crucial, not only internally but externally as well. Fllowing figure ilustrates
the relative importance of the cultural component and the direction of the interaction between
organization and environment in the various phases.

Phase IV
Phase Phasell Phase Ill

1
Location of cross-cultural interaction

Phases and areas of focus in HRM

environment
Starting from the idea of a link between the phases of internationalization, the (market)
HRM
and the influence of culture, Adler and Ghadar go on to sketch the appropriate
policies/instruments and the skills required of the managers involved for the various different phases.
Table 1 illustrates their theory. For clarity's sake, we have added the terms used by Bartlett and Ghoshal

to the table.

Phase I. In this phase we can scarcely speak of international human resource management in any real
sense. There may be incidental brief visits to foreign agents/sales offices or a short assignment on a
 the most
and technical competence of the manager in question
are
project basis, in which product
important factors.

Phase Il. International human resource management becomes manifest in this phase as managers are
and financial
assigned to posts in foreign markets to provide general management, technical expertise
of the product and
control. The various markets require a differentiated approach and adaptation
business methods to local circumstances. In addition to technical competence, then, selection criteria
Sucn as language skills, cross-cultural adaptability and sensitivity are also important. Since

frequently recruited
understanding of local circumstances is a requirement, host-country nationals are

for management positions in the area of sales, marketing and personnel.

Phase I1. As it is highly important that integration and cost advantages are exploited world wide, the
selection in this phase focuses on recruiting the best managers for international positions, regardless of
their country of origin. Developing a management corps in which all the members share the same

organizational values and norms is one of human resource management's most important tasks. After
all, this will contribute to achieving the goal of integration, regardless of the fact that the company is
operating in different geographical markets and its managers come from different countries.
Management development, careers counseling and periodic transfer to a different assignment (every 3-
5 years) are the spearheads of phase ll human resource management.

Phase IV. A major issue for international HRM in this phase is how the company is to satisfy the
requirements of global integration and national responsiveness. We can find traces of both phase Il
and phase lul here. The large measure of cultural diversity becomes manifest both in the markets to be
covered and in the organization itself. The real art is to view this cultural diversity as an opportunity
rather than as a problem, which has to be solved. One example is to increase creativity and flexibility by
being able to maintain a variety of perspectives, an important approach for solving problems and
encouraging innovation. International HRM focuses on offering promising managers the opportunity to
Brow so that an environment for continuous learning will be created throughout the entire organization.
The degree to which such human resource management can be given concrete expression determines
the success or failure of the (phase IV) corporation.
 De Cieri and Dowling model
HRM which
strategic international
Schuler et al. (1993) presented an integrative framework of
tension between the
needs for global co-
there is a fundamental
highlighted the fact that for MNCs In addition to the strategic MNC
ordination (integration) and
local responsiveness (differentiation).
factors (e.g. MNC structure,
MNC strategy,
framework showed endogenous
components, the
factors (e.g. industry characteristics, country-regional
international entry mode) and exogenous
characteristics, inter-organizational relationships).
since the Schuler et al. (1993)
De Cieri and Dowling (1999) draw on developments in theory and research
review of international HRM research
study to develop a revised framework (see Figure 2). Their recent
Hurman Resource Management
trends identifies a relatively new research area, 'Strategic International
(SIHRM). It considers the HRM issues and activities that result from, and impact on, the strategic
activities and international concerns of multinätionals.

IHRM activities in MNCs

In their revised framework De Cieri and Dowling (1999) highlight the fact that
are influenced by both endogeneous and exogenous factors. Figure 2, MNCs operate in the
As shown in

context of worldwide conditions, including the exogenous contexts

of industry, nation, region and inter
and
organizational networks and alliances. An example is the removal of internal trade barriers
integration of national barriers in the EU which have led to a new range of inter-organizational
relationships. Exogenous factors exert direct influence on endogenous factors, Strategic Human
Resource Management (SHRM) strategy and practices as well as on multinational concerns and goals.

Integrative framework of strategic HRM in multinational enterprises

Exogenous factors

Industry characteristics Country-regional MNC concerns

characteristics Inter-organizational networks and goals

Strategic HRM
Competitiveness
Endogenous factors
HR function Efficiency
MNC structure Balance of global
-

Structure of international operations strategy integration and

Intra-organizational networks local
HR practices
-Mechanisms of co-ordination
responsiveness
Organizational & industry life cycle Flexibility
International entry mode

MNC strategy
Corporate-level strategy
- Business-level strategy

Experience in managing international

operations
Headquarters international orientation Figure 2
 As indicated in Figure 2, endogenous factors are shown in the order of most tangible' to most
intangible'. Multinational structure refers to both the structure of international operations and to intra-
organizational networks and mechanisms of co-ordination. The life cycle stage of the firm and the
industry in which it operates are important influences for SHRM in multinationals as are international
entry modes and levels of firm strategy. The most intangible endogeneous factors are experience in
internatipnal business and headquarters' international orientation. Following developments in the
literature and the integration of resource-based perspectives, the model suggests that there are
reciprocal relationships between endogeneous factors, SHRM and multinational concerns and goals as
indicated in Figure 2. Effective SHRM is expected to assist the firm to achieve
its goals and objectives.
This position is supported by the emerging body of SHRM iterature that examines the
relationships
between endogeneous characteristics, SHRM strategy and practices and competitive
advantage or firm
performance. However, while some research has suggested that MNCs will gain by utilizing and
integrating appropriate SHRM strategy and practices to enhance firm performance, there remain
inconclusive evidence and important questions about the nature of this relationship.
The revised framework
developed by De Cieri and Dowling seeks to assist in the cross-fertilization of
ideas to further develop
theory and empirical research in strategic HRM in multinational firms. One of
the main strengths of the framework is that it is based on an expanded multidisciplinary base
drawing
on new theoretical developments in HRM, strategic
management in international business. AS a result it
has been argued that
theory building in IHRM has advanced to a second phase.