Chapter 3

Chapter 3
THE
ORGANIZATIONAL
CONTEXT
Chapter 3
For use with International Human Resource Management 7e ISBN-10: 1473719026
By Peter J. Dowling, Marion Festing, and Allen D. Engle, Sr. © Cengage Learning
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Chapter 3
THE ORGANIZATIONAL
CONTEXT START
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▪ Objectives return to this table

of contents.
▪ Introduction
▪ Standardization and localization of HRM practices
▪ c
Factors driving standardization
▪ Factors driving localization
▪ The path to global status
▪ Control mechanisms
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Vocabulary (1 of 2)
▪ host country, parent country, third country, PCNs, HCNs, TCNs
▪ local staff, corporate culture
▪ agents of socialization
▪ international boundary spanners
▪ intrinsic and extrinsic rewards
▪ institutionalism perspective
▪ centralized set-up
▪ country-of-origin, host country, and home country effects
▪ reverse diffusion
▪ local responsiveness
▪ global standardization and localization
▪ SOEs, WOSs
▪ Six Sigma quality control
▪ IJV = international joint venture
▪ global innovator, local innovator
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▪ transnational model
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Vocabulary (2 of 2)
▪ integrated player, implementer
▪ export oriented approach vs. integrative management orientation
▪ corporate immune system
▪ knowledge-sharing hostility, knowledge hoarding
▪ person and non-person oriented coordination
▪ born globals, product/service-based global vs. area-based structure
▪ MNE structures:
export, sales subsidiary, international division, global product/area
division, matrix, mixed, heterarchy, N-form, transnational, network
firm, multinational, network
▪ meta-nationals (M-N) = global tournament:
with sensing, magnet, and marketing/production units
▪ greenfield building approach, chaebols = Korean conglomerates
▪ bamboo network/family firm
▪ structural-formal vs. cultural-informal control
▪ clan = social control
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▪ social capital, mother-daughter structure
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Objectives
We learn about:
1. Issues of standardization and localization
2. Structural responses to international growth
3. Control and coordination mechanisms,
including cultural control
4. The effect of responses on
HRM approaches and activities
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Introduction
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Figure 3.1
Management demands of international growth
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Standardization and
localization of HRM practices
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Why globally standardize HRM?
Consistency
Transparency
Alignment
of a geographically fragmented workforce

around common principles
objectives
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Why locally responsive HRM?
To respect cultural values
local traditions
legislation
government policies
education systems
regarding HRM and work practices
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Figure 3.2
Balancing the standardization and localization of HRM in MNEs
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Factors driving standardization
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MNEs that standardize
▪ Pursue multinational or transnational
corporate strategies
▪ Supported by corresponding organizational

structures
▪ Reinforced by a shared
worldwide corporate culture
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Factors driving localization
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Localization factors include:
▪ Cultural environment
more social context → more complete balance of
extrinsic & intrinsic rewards
more individual → more extrinsic rewards
or fast changing
personal & social contexts
▪ Institutional environment (country-of-origin & HC)

▪ Mode of operation abroad
▪ Subsidiary role: e.g., global innovator,
integrated player, implementer
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Figure 3.3
Institutional effects on MNEs
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Table 3.1
Examples of the impact of the cultural and institutional context on HRM practices
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Table 3.2
Gupta and Govindarajan’s four generic subsidiary roles
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The path to global status
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Organizational structures
typically change due to
▪ Strain imposed by growth and geographical spread
▪ Need for improved coordination and control across
business units
▪ Constraints imposed by host-government
regulations on ownership and equity
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Figure 3.4
Stages of internationalization
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Figure 3.5
Export department structure
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Figure 3.6
Sales subsidiary structure
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Figure 3.7
International division structure
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Two major MNE issues of structure
▪ Extent to which key decisions are made
at PC headquarters or at subsidiary units
(centralization vs. decentralization)
▪ Type of control exerted by parent over the

subsidiary unit
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Figure 3.8A
Global product division structure
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Figure 3.8B
Global area division structure
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Figure 3.9
Global matrix structure
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Internationally, matrix is difficult
▪ Dual reporting can cause conflict and confusion
▪ Many communication channels can create
information logjams
▪ Overlapping responsibilities can produce
- turf battles
- loss of accountability
▪ Distance, language, time, and culture barriers
make it difficult for managers to resolve conflicts
and clarify confusion
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Matrix requires managers who
▪ know the business in general
▪ have good interpersonal skills
▪ can deal with ambiguities of
responsibility and authority
▪ have training for presenting ideas in groups
HR planning in matrix MNEs is more critical

than in traditional organizations.
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Beyond the matrix org. structures
▪ The Heterarchy
MNEs have different kinds of centers apart from
‘headquarters’
▪ The Transnational
resources and responsibilities are
interdependent across national boundaries
▪ The Network
subsidiaries are nodes, loosely coupled political
systems
At this stage, there is less hierarchy and no
structure is considered inherently superior.
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Figure 3.10
The networked organization
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5 dimensions of networked MNEs
1. Decision-making authority is delegated to
appropriate units and levels
2. Key functions are dispersed geographically across
units in different countries
3. Organizational levels are delayered
4. Formal procedures are less bureaucratic
5. Work, responsibility, and authority are
differentiated across the networked subsidiaries
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Beyond networks: meta-nationals
Meta-nationals have 3 types of units:
1. Sensing units
Uncover widely dispersed engineering & market insights
2. Magnet units
Attract and create business plan to convert innovations
into products and services
3. Marketing and production units
Market and produce adaptations of these
products and services around the world
Think:
A M-N is a global tournament played at 3 levels
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HR’s place in structural forms
Three ways HR develops with international growth:
1. Centralized HR firms
large and well-resourced;
typically product-based or matrix structures
2. Decentralized HR firms
small group, mostly for senior mgmt. at corp. HQ;
mostly product- or regional-based structures
3. Transition HR firms
medium-sized corp. HR with small staff at HQ;
decentralized, product-based structure
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Different countries, different paths
▪ European MNEs: ‘mother-daughter’ →
global with product/area divisions or matrix structure
▪ Swedish MNEs: Tend to adopt mixture of
mother-daughter and product divisions
▪ Nordic MNEs: may prefer matrix structure
▪ United States MNEs: limited success with matrix
▪ Japanese MNEs: similar to US, but evolve more
slowly, possibly not changing structure
▪ Not much information yet on
Chinese and Indian MNEs
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Control mechanisms
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Figure 3.11
Control strategies for multinational firms
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Chapter 3 - IHRM

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Chapter 3 - IHRM

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▪ Objectives return to this table

of a geographically fragmented workforce

regarding HRM and work practices

▪ Supported by corresponding organizational

▪ Institutional environment (country-of-origin & HC)

▪ Type of control exerted by parent over the

HR planning in matrix MNEs is more critical

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