Summary of: Ewards, T. & Kuruvilla, S. (2005). International HRM: National Business Systems, Organizational Politics, and the International Division of Labour in MNCs. International Journal of Human Resource Management, 16(1)

INTERNATIONAL HRM

Strategic human resource management: The RBV suggests that the firm’s human resources can be used to achieve a sustainable competitive advantage. But failures by the HRM policy can turn human resources into a major source of disadvantage. Considering transaction cost economics, the decision to add one or more factory workers on the assembly line might be made using the logic of transaction cost analysis. But maybe not when we talk about skilled workers and probably even less again when we’re talking about workers core to our firm.

Human resource management (HRM) is a field of theory and practice that deals with decisions related to policies and practices, that together help to shape the relationship between the firm and its employees. It is suggested that:

• Human capital can be a source of competitive advantage; and

• HR practices have the most direct influence on the human capital of an organization.

Most conceptual models provide grounds for expecting MNCs to adopt a global element to the way they manage their international workforces to reap the benefits from coordination and integration; consistency and contribution; and learning lessons across operation (transferring knowledge). Another pressure for global HR policies is the country of origin effect (i.e. export the home country style). In contrast, there are also a variety of grounds expecting MNCs to adopt a local element in their HR policies. Decentralization is pressed for by differing national cultures (i.e. multi-culturalism) and national-level regulations and institutions.
 

A variety of authors argue for a middle way, a combination of the global and local pressures. Yet, the tension between integration (consistency of HR practices in the MNC) and differentiation (local adaptation) is determined by a list of endogenous and exogenous factors, so many in fact that the models are difficult to operationalize.
 

There are three significant weaknesses and problems to the existing literature:

1. Inadequate conceptualization of national influences
The weak explanatory power of the precise origins and nature of both global and local effects. Importantly, where there is an attempt to analyze a national system it is often couched in terms of culture.

This can take two forms:

1. Either culture is used in a loose way to capture all aspects of national differences

2. Use is made of a particular typology of culture, such as Hofstede’s.

Apart from the utility for HR policy, perhaps the major problem with these cultural approaches is that they explain relatively little.

An alternative approach is to focus on the key institutions within a nation. Focus on a national business system, which is a set of interlocking structures and institutions in different spheres of economic and social life that combine to create a nationally distinct pattern of organizing economic activity.

One of the weaknesses of this conceptualization is that variations within countries tend to be downplayed.

The national business systems approach, better than the cultural values approach, provides for a focus on how cultures are embedded in wider societal structures, and how these give rise to prevailing norms within a system (i.e. government rules are established at the national level). In this way, prevalent values and attitudes are embedded in national institutional frameworks.
 

2. Over-emphasis on structure and downplaying organizational politics
Many models and empirical studies fail to address the political nature of the global-local issue; it is political in that various groups of organizational actors will seek to either extend or limit the extent of global policies in order to defend or advance their own interests. The balance between global and local pressures is not the result of a one-off, rational calculation by top managers, but rather is something which is contested, over which there is an ongoing struggle, and consequently which shifts over time.

Many different groups within MNCs possess the scope to influence the way that global HR policies are developed and function. Actors at even relatively low levels within multinationals control resources which afford them some power in their relationships with higher levels of management, allowing them to adapt or circumvent corporate level policies. In contrast, actors at corporate HQ level may see global policies as a way of extending their influence and authority within the firm.

Thus, while institutional influences create general tendencies among MNCs, a range of possible courses of action are still feasible and the form these take is influenced by power relations within MNCs.
 

3. Internal division of labor within MNCs
Much of the literature on the global-local issue is not sensitive to the ways in which MNCs organize their processes of production and service provision internationally. Many MNCs have stratified their production processes across borders, carrying out quite distinct functions across countries. Accordingly, MNCs may derive little benefit from developing standard HR policies and are likely to see adaptation to local practices as their preferred option rather than something they submit to reluctantly.

This idea is central to the notion of ‘global commodity/value chains’, which emphasize that many products and services are provided through the coordination of a number of production units across borders with each unit performing a distinct function within the wider process. MNCs choose locations for their various units based on a variety of factors and the relative importance of these factors plays a key role in shaping the employment practices the firm employs for that site.

It is this international division of labor that characterizes some, though not all, MNCs, which leads us to doubt whether the global-local question is always a sensible one to ask. MNCs which carry out quite different aspects of their production or service provision process across their various sites will have little incentive to develop standardized, global policies.

The three aforementioned concepts are inter-dependent:

- National-level institutional configurations and international chains of production are strongly interlinked (i.e. taking advantage of the system in which the MNCs operate).

- The inter-dependencies between organizational politics and national institutional frameworks are also evident. Institutions condition the behavior of actors within MNCs as they do within all organizations, setting limits to what is feasible and attractive, but they do not close off all scope for choice; there remains a degree of ‘space’ for actors within institutional influences.

- The functioning of international chains of operating units within MNCs and the nature of organizational politics are also interdependent. The role that each site plays within the internal division of labor is not determined solely by a rational assessment of those at the HQ but, rather, is strongly contested.