Contemporary databases and new directions in HRM in MNCs 9781845441906, 9781845440268

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Volume 25 Number 6 2004

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IJM International Journal of Manpower Contemporary debates and new directions in HRM in MNCs Guest Editors: Michael J. Morley and David G. Collings

An Interdisciplinary Journal: Human Resources Management Labour Economics

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International Journal of Manpower

ISSN 0143-7720 Volume 25 Number 6 2004

Contemporary debates and new directions in HRM in MNCs Guest Editors Michael J. Morley and David G. Collings

Access this journal online __________________________ 483 Editorial advisory board ___________________________ 484 Abstracts and keywords ___________________________ 485 Contemporary debates and new directions in HRM in MNCs: introduction Michael J. Morley and David G. Collings _____________________________

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The cross-national transfer of HRM practices in MNCs: an integrative research model Wenchuan Liu__________________________________________________

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Host country specific factors and the transfer of human resource management practices in multinational companies Barbara Myloni, Anne-Wil K. Harzing and Hafiz Mirza ________________

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Influences on HRM practices in MNCs: a qualitative study in the Australian context Peter McGraw __________________________________________________

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CONTENTS

CONTENTS continued

International performance appraisals: policies, practices and determinants in the case of Chinese multinational companies Jie Shen _______________________________________________________

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Work orientation as an element of national culture and its impact on HRM policy-practice design choices: lessons from Sri Lanka Anil Chandrakumara and Paul Sparrow_____________________________

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About the authors _________________________________ 590

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EDITORIAL ADVISORY BOARD Professor David J. Bartholomew The London School of Economics Professor Derek Bosworth Manchester School of Management, UMIST, UK

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Professor Martin Carnoy School of Education, Stanford University, USA Professor Peter Dawkins Melbourne Institute for Applied Economic and Social Research, Melbourne University, Australia

Professor John Mangan University of Queensland, Brisbane, Australia Professor Stephen L. Mangum Ohio State University, Ohio, USA

Professor Morley Gunderson University of Toronto, Canada

Professor Barrie Pettman International Management Centres, UK, and Founding Editor of International Journal of Manpower

Professor Thomas J. Hyclak Lehigh University, Bethlehem, USA

Professor David Sapsford Management School, Lancaster University, UK

Professor Susan E. Jackson Rutgers University, New Jersey, USA

Professor P.J. Sloane Department of Economics, University of Wales, Swansea

Professor Harish C. Jain McMaster University, Canada Professor Geraint Johnes Management School, Lancaster University, UK Professor Meni Koslowsky Department of Psychology, Bar-Ilan University, Israel

International Journal of Manpower Vol. 25 No. 6, 2004 p. 484 # Emerald Group Publishing Limited 0143-7720

Professor Lord Richard Layard Centre for Economic Performance, London School of Economics, UK

Professor Klaus F. Zimmerman Department of Economics, University of Bonn, Germany

Contemporary debates and new directions in HRM in MNCs: introduction Michael J. Morley and David G. Collings Keywords Human resource management, Multinational companies This paper focuses on the debates about globalisation – its nature and impact – and the significance of multinational companies in the global economy. Introduces the special issue of the International Journal of Manpower, based on selected papers presented at the 7th Conference on International Human Resource Management hosted by the University of Limerick in June 2003, which focused on the issue of HRM and its transferability in such corporations. The MNC is viewed as the vehicle by which dominant HR policies and practices are transported across national boundaries and the papers shed light on the likelihood of, and limits, to this transfer. In order to contextualise the debate, the paper begins by outlining the extent to which human resource management remains a key issue for multinational corporations and, in advance of introducing the five papers in this special issue, summarily charts some of the key research trends emerging in the literature on international human resource management (IHRM). The cross-national transfer of HRM practices in MNCs: an integrative research model Wenchuan Liu Keywords Human resource management, Multinational companies Drawing on a range of literature, this paper develops a theoretical model of the crossnational transfer of HRM practices in multinational corporations (MNCs). This model integrates the significant research on transferability, transfer mechanisms, effects of transfer, and reverse transfer to produce a comprehensive analytical framework. A threefold analysis of transferability is presented to include national, company and HRM practice level. The transfer mechanisms are categorized into direct and indirect methods. The analysis of reverse transfer is not only a complement to the forward transfer but also an important part of the integrated model. The model reflects the complexity of cross-national transfer HRM

practices in MNCs. The propositions presented and suggestions for future research serve to aid further practical studies. Host country specific factors and the transfer of human resource management practices in multinational companies Barbara Myloni, Anne-Wil K. Harzing and Hafiz Mirza Keywords Human resource management, Multinational companies, National cultures, Greece This paper concerns the transfer of human resource management (HRM) practices by multinational companies (MNCs) to their overseas subsidiaries. It investigates how factors originating from the cultural and institutional framework of the host country impact on this transfer. Using data collected from MNC subsidiaries located in Greece and local Greek firms, we examine the degree to which several HRM practices in MNC subsidiaries resemble local practices. Our empirical findings indicate that subsidiaries have adapted their HRM practices to a considerable extent, although some practices are more localised than others. Specifically, practices that do not fit well with Greek culture or are in contrast to employee regulations show a low level of transfer. On the other hand, our interviews revealed that significant cultural changes are underway and that the institutional environment is gradually getting more relaxed, leaving more room to manoeuvre for MNCs. Influences on HRM practices in MNCs: a qualitative study in the Australian context Peter McGraw Keywords Multinational companies, Human resource management, Centralized control, Australia This paper uses data from interviews with HRM managers of the Australian operations of overseas multinational companies to critically question the analytical utility of a number of standard factors that have traditionally been claimed, in the international HRM literature, to influence decisions concerning the appropriate balance between centralization and localization

Abstracts and keywords

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International Journal of Manpower Vol. 25 No. 6, 2004 Abstracts and keywords # Emerald Group Publishing Limited 0143-7720

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in HRM. The variables reviewed are primarily structural: industry sector, strategic role of the subsidiary, administrative heritage and formal organizational structure. The data suggest that the firms modify their formal structures frequently in response to environmental turbulence and have evolved towards structural forms that are radically asymmetrical. Two variables that have received limited academic attention to date but which critically mediate the pattern of intended changes are identified. First, the perception by key actors in subsidiaries of HR competence elsewhere in the MNC network, particularly head office. Second, the propensity of the staff in the subsidiary to lobby politically against changes they did not perceive to be rational. International performance appraisals: policies, practices and determinants in the case of Chinese multinational companies Jie Shen Keywords Human resource management, Performance appraisal, Multinational companies, China Since most literature on international performance appraisal is derived from Western MNCs, it is questionable whether the Western theories are equally powerful when applied to other national contexts. This study develops the Chinese international performance appraisal model by exploring performance appraisal policies and practices and the associated factors in Chinese MNCs. It reveals that Chinese MNCs adopt different approaches towards different groups, particularly different nationalities and managerial status. The Chinese international performance appraisals are a mix of home and local appraisal systems, and a mix of traditional Chinese personnel management and modern Western HRM concepts. Moreover, Chinese international performance appraisal policies and practices are affected by various host-contextual and firm-specific

factors, and there is also an interplay between international performance and other international human resource management activities. Work orientation as an element of national culture and its impact on HRM policy-practice design choices: lessons from Sri Lanka Anil Chandrakumara and Paul Sparrow Keywords National cultures, Developing countries, Sri Lanka, Human resource management This study extends the contention that national culture affects human resource management (HRM) policies and practices and explores meaning and values of work orientation (MVWO) as an element of national culture in predicting HRM policy-practice design choices. The data were obtained in a sample of 487 employees in domestic and foreign-invested firms (FIF) in Sri Lanka. Eight distinct MVWO patterns emerged from the sample. Twenty-six HRM design choices were clustered into four components: planned and open career and empowering system, qualifications and performance based reward system, generic functional perspective of jobperson fit, and job-related competence and rewards. All the four HRM preference practices are influenced by MVWO. The evidence suggests MVWO relativity of HRM design choices in Sri Lankan context. The question of transferability of empowering and performance management to developing countries becomes evident. Moreover, MVWO relativity of HRM design choices is relatively high in FIF, reflecting that the ‘‘type of ownership’’ can have an impact not only on actual HRM practices but also on preferred HRM practices in FIF. The existence of business in the long-run and host government expectations also seem to be important factors in understanding HRM preferences in FIF. Theoretical and practical implications for international HR managers are discussed.

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Contemporary debates and new directions in HRM in MNCs: introduction Michael J. Morley and David G. Collings

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Department of Personnel and Employment Relations, Kemmy Business School, University of Limerick, Castletroy, Limerick, Ireland Keywords Human resource management, Multinational companies Abstract This paper focuses on the debates about globalisation – its nature and impact – and the significance of multinational companies in the global economy. Introduces the special issue of the International Journal of Manpower, based on selected papers presented at the 7th Conference on International Human Resource Management hosted by the University of Limerick in June 2003, which focused on the issue of HRM and its transferability in such corporations. The MNC is viewed as the vehicle by which dominant HR policies and practices are transported across national boundaries and the papers shed light on the likelihood of, and limits, to this transfer. In order to contextualise the debate, the paper begins by outlining the extent to which human resource management remains a key issue for multinational corporations and, in advance of introducing the five papers in this special issue, summarily charts some of the key research trends emerging in the literature on international human resource management (IHRM).

Introduction Debates about globalisation invariably evoke argument, debate, disagreement and, on occasions, violence as witnessed by demonstrations at recent World Trade Organisation gatherings in Seattle, Genoa and elsewhere. Indeed, the exact meaning and significance of the term, along with its intellectual ownership, are contested domains (Clark and Knowles, 2003; Lane, 2000). Proponents of the “radical” globalisation thesis (Hirst and Thompson, 1999) argue that national economies are being overrun by an emerging system of global economic organisation and control where decisions are made at the global level without reference to the nation state. It is argued that this is a reflection of the relatively limited ability of nation states to regulate the activities of these global conglomerates which will, in turn, lead to convergence of national economic policies, economic organisation and management practice towards a single “best” model. Indeed, some studies of large multinational corporations (MNCs) appear to support at least a modified version of this view. For instance, Royle (2000, pp. 210-11), based on his study of McDonald’s in Europe, posits that “although national and EU regulation still have an impact on employment regulation in the fast-food industry, the full impact of such systems is being mediated and undermined by the strategic imperative of powerful company-based employment systems”. He goes on to note that while this suggests increasing divergences within national systems, this is concurrent with increasing convergence across national borders. Convergence which is driven by powerful MNCs which he argues set the agenda in certain sectors. This line of argument would suggest that powerful MNCs can implement standardised employment practices across the globe with little regard for the institutional constraints of the nation states which host their subsidiaries. Ultimately this school predicts convergence on a “lowest common

International Journal of Manpower Vol. 25 No. 6, 2004 pp. 487-499 q Emerald Group Publishing Limited 0143-7720 DOI 10.1108/01437720410560406

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denominator ‘Bleak House’” model of employment relations where “companies fail to invest either in collective relationships or effective individual bases of employee relationships” (Ferner, 2003, p. 100). On the other hand another group of commentators argue against the strong globalisation thesis and posit that the impact of MNCs and foreign direct investment (FDI) flows are overstated. Hirst and Thompson (1999) are key proponents of this school of thought. The kernel of their thesis is that “the present highly internationalized economy is not unprecedented”, rather it is “one of a number of distinct conjunctures or states of the international economy that have existed. . .from the 1860s” (1999, p. 2). They further argue that truly transnational companies are rare and that global trade is concentrated in the Triad of Europe, Japan and North America. The work of Alan Rugman and his colleagues is informative in this regard. He argues that the operations of multinational companies are concentrated within a small number of firms with the largest 500 multinational enterprises (MNEs) accounting for over 90 percent of global stocks of FDI and conducting approximately half of the world’s trade (Rugman, 2000). Rugman also points to a spatial concentration of these MNCs in the triad of the US, the European Union and Japan with some 430 of the top 500 transnational corporations[1] (TNCs) having their head quarters (HQ) within these regions and 80 percent of their sales being concentrated in their home triad region (Rugman, 2000; Rugman and Verbeke, 2004). Whatever one’s view on the nature and impact of globalisation, the enormous significance of multinational companies in the global economy is without question. In Dicken’s (2003, p. 197) words: “more than any other single institution, the transnational corporation. . .has come to be regarded as the primary shaper of the contemporary global economy”. Even allowing for the recent downturn in FDI flows post 9/11 the UNCTAD (2003, p. 14) estimates that there are currently some 64,000 TNCs controlling approximately 870,000 foreign affiliates and employing 53 million people abroad. The global stock owned by these TNCs amounts to US$ 7 billion, while their global sales reached US$ 18 trillion in 2002 (UNCTAD, 2003). Thus, the impact of MNCs is significant and the FDI activities of MNCs are widely considered to be at the very centre of globalisation tendencies (Lane, 2000). In this special issue of the International Journal of Manpower, based on selected papers presented at the 7th Conference on International Human Resource Management hosted by the University of Limerick in June 2003, we focus on the issue of human resource management (HRM) and its transferability in such corporations. The MNC is viewed as the vehicle by which dominant HR policies and practices are transported across national boundaries and our papers shed light on the likelihood of, and limits, to this transfer. In order to contextualise the debate, we begin by outlining the extent to which HRM remains a key issue for MNCs and, in advance of introducing the five papers in this special issue, we summarily chart some of the key research trends emerging in the literature on international human resource management (IHRM). HRM in MNCs: a key concern? The ever-increasing complexity and uncertainty in which MNCs operate creates a unique set of organizational, co-ordination and managerial issues for the managers of MNCs. Not least of these is the management of employees on a global scale. Corporations operating in a variety of national environments are faced with a

bewildering variety of cultural and institutional specificities that make managing in a multinational context especially complex. Dowling and Welch (2004) identify several significant differences between managing human resources in an international context as opposed to a domestic one. First, they argue that there is simply more HR work to be done when operating in an international environment, because the HR function must engage with a number of activities that would not be necessary in a domestic context including international taxation, international relocation and socialisation, host government relations and language translation services. The international context also requires, they suggest, a broader perspective with international HR managers being forced to consider a wide range of variables in their decision-making. Concomitantly, such HR managers may also need to demonstrate a greater involvement in employees’ personal lives. This, they suggest, is particularly significant in relation to employees on global assignment as HR may have a role to play in relocation arrangements, health care arrangements, as well as issues relating to international assignee’s spouse and family. They also point the dynamics of the subsidiaries’ labour market noting that, the workforce mix of parent country nationals, third country nationals and host country nationals will vary, depending on how mature the MNC is. As the multinational matures, the reliance on expatriate employees as position fillers in subsidiaries reduces with the consequence that the HR emphasis for the subsidiary must shift from narrow issues concerned with the management of expatriates to a broader remit incorporating issues concerning host or third country employees who will require a different HR focus. Managing human resources in an international context also brings with it greater risk exposure which concerns not only the increased cost attached to expatriate assignment but also the increased cost of failure in an international environment (Scullion, 2001), factors which make the HR issues pertaining to these issues even more significant and broader external influences which as Dowling and Welch suggest might include pressures from governments and pressure groups that may take more interest in the MNC because of their high profile. Managers of multinational firms are increasingly realising the significance of people management practices in ensuring the profitability and viability of their business operations (Brewster, 2002; Harris et al., 2003; Stroth and Caligiuri, 1998). Issues relating to HRM in MNCs generally fall under the rubric of IHRM which may be viewed as: “the HRM issues and problems arising from the internationalization of business, and the HRM strategies, policies and practices which firms pursue in response to the internationalization of business” (Scullion, 1995, p. 352). While traditionally IHRM research has focused solely on the issue of expatriate management, recent decades have heralded an expanding scope and interest in HRM in MNCs. Commenting on the increasing interest in IHRM Scullion (2001) points to a number of key issues. He points to the increase in internationalisation of small and medium firms. Thus, MNCs are not a homogonous group of companies such as the typical examples of IBM and Ford but rather include a large number of smaller, privately owned firms which operate in a single core business area and have only a small number of subsidiaries. He also points to the significant challenges faced by MNCs in managing the performance of international assignees. A further significant trend, which he identifies, is a move from traditional hierarchical structures in MNCs towards flatter organizational structures and network-based organisations which make the management process less codified and more complex (Boxall and Purcell, 2003,

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chapter, 10). Thus, the issue of HRM is increasingly one which concerns management at all levels of the hierarchy in multinational companies. In the following section we will point to some emerging research themes in HRM in MNCs. Emerging themes in MNCs and HRM research A cursory review of the literature on HRM in MNCs reveals a number of key themes which dominate the current research agenda in the field. In this regard we will point to a number of these streams of research and provide a number of key citations for those who wish to explore the debate more fully. We will also briefly discuss a number of key themes which are particularly relevant to the papers presented in this special issue. We consider the following to be some of the more fruitful research agendas which are currently evident in the study of HRM in MNCs: standardisation vs localisation of HRM practices (Gunnigle et al., 2002; Rosenzweig and Nohria, 1994); the related impact of “the country of origin” on HRM practice in MNCs (Clark et al., 2002; Ferner, 1997; Noorderhaven and Harzing, 2003); the continuing debate about convergence/divergence across nation states (Brewster et al., 2004; Hall and Soskice, 2001; Sorge, 2004); knowledge transfer within MNCs (Edwards, 1998; Minbaeva et al., 2003); cross-border mergers and acquisitions (Child et al., 2001; Stahl et al., 2004); the related theme of managing cross-border strategic alliances (Kabast, 2004; Schuler et al., 2003); emerging themes in international assignment literature, including a decreasing reliance of expatriate assignees and boarder conceptualisation of international assignments (Harzing, 2001; Mendenhall et al., 2001; Scullion and Brewster, 2001); designing and supporting transnational teams (Snell et al., 2002); HR issues in an expanding range of newly industrialising countries (Budhwar and Debrah, 2001; Warner, 2004); and a strategic role for HRM in MNCs (Schuler et al., 1993; Taylor et al., 1996). Space restrictions limit a complete review of all of these themes, we do however, wish to explore a number of themes which we feel are particularly significant in the context of this special issue. In this regard we point to the debates about standardisation versus localisation of HRM practices and the related debates about convergence or divergence in management practices. We then briefly consider the enfolding literature on the diffusion of management practices cross-nationally within MNCs. Finally, we briefly comment on the increasing interest in HRM issue in newly industrialising countries. The first key research theme in the management of HRM in MNCs which we point to, is the debate concerning the extent to which MNCs’ “foreign affiliates (or subsidiaries) act and behave as local firms versus the extent to which their practices resemble those of the parent corporation or some other global standard” (Rosenzweig and Nohria, 1994, p. 229). Indeed, based on their work on patterns of strategic control in multinationals Doz and Prahalad (1986) have argued that responding to a variety of national demands while maintaining a clear and consistent strategy was the single biggest problem facing MNCs. Evans et al. (2002, p. 60) have identified the need to be “simultaneously local and global in scope, [and] of being both centralised and decentralised” as some of the key “contradictions” facing MNCs in the management of their foreign operations. In a similar vein Bartlett and Ghoshal (1998) call for the need for organisations to maintain a “dynamic balance” between globalisation (implementing globally standard practices) and localisation (adapting practices to account for the host environment) if they are to become truly transnational.

Thus, in recent years, a body of research evidence has attempted to illuminate this debate. On balance the literature would suggest that while the country of origin (Ferner, 1997) of MNCs is significant in informing the HR effort in foreign subsidiaries once they expand abroad, subsidiaries are generally constrained by the institutions of the host environment in implementing globally standardised practices. For example, in their study of HRM practices in six European countries (United Kingdom, Ireland, France, Denmark, Germany and Sweden) Gunnigle et al. (2002) compared how MNC subsidiaries of different nationalities adapted their HRM policies to account for the host environment. In their study they compared the European and US MNCs operating in these six countries. They found that while both European and US firms localised their practices to account for local institutional constraints, the level of localisation in the US firms was lower. In other words, American firms operating in the European context were more likely to implement globally standardised HRM policies and practices than their European counterparts. Thus, there was a discernable difference in HRM practice between the US and European firms, although the level of difference varied in different host environments. They pointed to the degree of institutional constraint in the host environment, the economic dominance of the country of origin as well as the free market ideology dominant in the US as significant in explaining this variation. In a similar vein Gooderham et al. (1999) point to the significance of adapting practices to acquire legitimacy from government, the law, labour unions and other actors in the host environment. Geppert and his colleagues also pointed to differences in the change management strategies pursued by organisations of different nationalities, with the host environment also emerging as a significant mediating factor (Geppert et al., 2003). Indeed, based on this research Geppert et al. (2003, p. 833) postulate: “the more globalized the strategies and structures of an MNC are, the more it allows for and relies on national specifics to play a key role in its global subsidiaries”. In other words truly global firms not only acknowledge the need for adaptation of policies in different subsidiary operations, they actually appear to plan for it. Thus, the literature would appear to highlight some country of origin variations in HRM practice but also points to the significance of adapting practice to account for local institutional constraints, thus illustrating the pertinence of the management mantra of “think global act local”. A theme closely related to the standardisation/localisation debate is the extent to which management practices are converging or diverging across nation states. Indeed, this has been a long standing debate in the management literature. A key underlying consideration in this debate is the extent to which the impact of globalisation is facilitating the convergence of national business systems and the homogenisation of the modus operandi of multinational corroborations (MNCs) operating in the global economy (Ferner, 2000). This debate is primarily grounded in institutional theory which has been widely used in studying the diffusion and adoption of organizational practices among organisations (Kostova and Roth, 2002). Institutional theorists predict convergence in organizational practices as technological innovations mean that organisations catch up on best practice and differences perpetuated by the geographic isolation of business are minimised (Kerr et al., 1973). A number of recent studies reject the isomorphism thesis, finding that available research data suggest that national differences in relation to business forms and management practice pertain. From a theoretical point of view the writings of the culturist school (Hoftstede, 2001) and the

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national business systems approach (Hall and Soskice, 2001; Whitley, 1999) have been significant. In illuminating the debate on the continuing divergence of cross-national management practice, we can point to a number of significant studies. For instance, Gunnigle et al.’s (2002) study referred to above, found a clear variation between HRM practice in firms of different national origin (Gooderham et al., 1999). In a similar vein Harzing and Sorge (2003) found that while internationalisation strategy was more closely related to industry and size than other variables, the country of origin of firms was significant in explaining differences in control mechanisms utilised by firms. Thus, there was continued divergence in control mechanisms utilised in firms of different national origin and they argue that on balance, divergence remains in place. Geppert and his colleagues also pointed to differences in the change management strategies pursued by organisations of different nationalities (Geppert et al., 2003). Thus, on balance the literature suggests that management practices continue to be charcterised by continuing divergence across national borders (Brewster et al., 2004; Harzing and Sorge, 2003). Given the increasing standardisation of technological equipment, production processes and concurrent shortening of product life cycles, organisations are increasingly turning to the unique contribution provided to organisations by their human resources as a source of competitive advantage (Wright et al., 2001). While under traditional expatriate focused structures information and innovation flowed from the centre out, organisations operating in an increasing global climate require structures and systems whereby all units concurrently receive and provide information (Roberts et al., 1998). This is consistent with a growing realisation that MNCs are exposed to new opportunities and ideas in subsidiary operations, thus potentially increasing their innovative capacity. As Minbaeva et al. (2003, p. 587) have argued: “the competitive advantage that MNCs enjoy is contingent on their ability to facilitate and manage intersubsidary transfer of knowledge”. Further it is not the original knowledge that is the key element in the knowledge transfer process, but rather the extent to which the receiver acquires and utilises potentially useful knowledge in their operation that is key (Minbaeva et al., 2003). In this regard, Rogers (1995) has identified four key elements of the impact on the transfer of innovations within MNCs. These are: (1) the innovation itself; (2) the communication channels through which the innovation is transmitted; (3) a temporal dimension which track the adoption of the innovation over time; and (4) the social system in which the individual adopters exist. Whether this knowledge flows from HQ to subsidiary which is termed forward diffusion, from subsidiary to the HQ, which is termed reverse diffusion, or possibly in both directions which is termed flow diffusion (Edwards, 1998) the challenge for MNCs is to codify this knowledge and ensure that its strategic benefit to the organisation is realised. This is a particularly interesting and timely avenue of research in the area of HRM in MNCs. Finally, we point to an increasing interest in international and comparative studies of HRM in a broadening range of countries. This can be explained in part by the changing contours of FDI location in the global economy. While traditionally FDI flows have been concentrated in developed countries, recent years have heralded a shift in FDI location toward new destinations such as the EU ascension countries particularly

in Central and Eastern European (CEE) countries with countries such as India and China also identified as “hot spots” for inward FDI in the period 2004-2007 by the UNCTAD (2004) (Lane, 2000). In an attempt to highlight some of the challenges arising from operating in newly developing countries we consider the example of CEE. Specifically we identify some of the challenges facing Western MNCs operating there. Western MNC operating in these post-Communist economies are faced with a number of challenges additional to those faced in operating in culturally and institutionally proximate contexts. While the fall of the Berlin wall in 1989 brought with it great expectations of political and economic revolution for the economies of the Soviet block, it appears that much of this expectation was in retrospect wishful thinking (Martin, 2000). In fact research suggests that some citizens of these countries preferred the old communist system to the new reformed one (Luthans et al., 1997). This finding has implications for HRM in these counties. Kiriazov et al. (2000) have argued that employees in these countries are attached to characteristics of the old centralised economy such as job security, guaranteed pay, and highly structured jobs. Other employees long for the benefits of nepotism and elements of the black market which characterised the command economy. Western MNCs which wish to set-up in these countries are likely to find resistance to introducing performance related pay, as employees, particularly older ones are accustomed to a collectivist culture which supported guaranteed wages and bonuses. These companies are also likely to find lower levels of motivation among employees as they have witnessed a large number of business failures among newly investing MNCs, and thus they are likely to view new ventures sceptically. This combined with a tradition of periodic job changes as a means of gaining pay rises and promotion in these states may limit levels of motivation among employees (Kiriazov et al., 2000). On the other hand, however, it is important to note that MNCs have been facilitated in introducing innovative HRM practices by the absence of a string trade union presence on the shop floor (Martin, 2000; Martin and Cristescu-Martin, 2003). A further development which will significantly impact MNCs operating in these countries in the future is the accession of a number of them to the EU in 2004. This is likely to have a significant impact on the HRM and IR landscape in these countries in the future. Indeed, with some notable exceptions, there is a paucity of extant research on HRM issues in developing countries, and indeed as some of the papers in this special issue demonstrate, this is likely to be an area of considerable research activity in the future.

The contributions in this special issue The five selected contributions to this special issue span both theoretical and empirical and, in a variety of ways, offer insights into the likelihood of, and limits to, the transferability of HRM in MNCs. Our first paper focuses on the development of a theoretical model of the cross-national transfer of HRM practices in MNCs. Our next two papers present data concerning the transfer of such practices in two host country contexts, namely Greece and Australia. Our final two papers also take as their specific focus the transfer issue, one focusing on the issue of performance appraisal as a explicit HR activity, the other focusing on employee values and the consequences of these deeply held culturally derived values for the viability of the transfer of the HRM as the product of thinking in “developed” economies to “developing” economies.

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Our first paper by Wenchuan Liu draws on the extant literature to develop a theoretical model of the cross-national transfer of HRM practices in MNCs. The author suggests that a critical challenge in a globalising world is the development of a set of supporting institutions, policies and transfer mechanisms that can foster the transfer of best management practices, something which, he suggests, provides an important theoretical and practical rationale for research on the cross-national transfer of HRM practices in MNCs. Reflecting the complexity of the process of the transnational transfer of HRM practices in MNCs, it is suggested that transferability is not only influenced by national and company level factors but also by the knowledge and innovation characteristics of the HRM practice transferred. National level factors at play in this process are explicated here through the combined lenses of nation cultural distance and national institutional distance, both of which are viewed as complementary in order to bring into sharper focus the key national level factors. Similarly, with respect to the transfer mechanisms that are available, Liu draws attention to both direct and indirect transfer mechanisms. The model of cross-national transfer of HRM practices in MNC advanced postulates a high degree of interconnectedness between the transferability, the transfer mechanisms, the effects of the transfer and the forward and reverse flows and serves to connect several streams of ongoing research in this field. Our second paper by Barbara Myloni, Anne-Wil Harzing and Hafiz Mirza, drawing upon data collected from MNCs subsidiaries and indigenous firms operating in Greece, focuses on the extent to which the MNC subsidiaries have localised their practices in the HRM domain when operating in the Greek context. Noting that failure to adapt HRM practices to a host-country’s culture may lead to negative consequences that inhibit a subsidiary’s performance, the authors pose the question “What happens when MNCs want to transfer some of the HRM practices overseas, especially in cases when the assumptions that underlie such practices do not fit with the cultures of the recipient host-countries?” In addressing this issue, that authors advance a combined cultural and institutional framework of several hypotheses on the effect of host country factors on HRM transfer which are set down and tested. The results point to a combination of standardisation and localisation in HRM with certain HRM practices being more localised and affected by the host country’s cultural context and institutional environment and other practices being more likely to be standardised throughout the MNC and demonstrating a higher level of conformity to the headquarters practices. Our third paper in this issue by Peter McGraw of Macquarie University focuses on the balance between localisation and centralisation in HRM among overseas MNCs operating in Australia. The author suggests that the balance between localisation and centralisation is important for a number of reasons including the proper conceptualisation of overall patterns of HRM in countries with high concentrations of overseas MNCs and the likelihood of the global diffusion of certain management practices. Here McGraw argues that the relatively high percentage of Australians employed by overseas MNCs, combined with the propensity of these MNCs to be trend setters with respect to HR reforms and innovations demands academic attention so that we may better understand both role of the MNC subsidiary and likely influences on the HR policies and practices pursued. As with the situation in our previous paper on MNCs in Greece, there also appears to be a dearth of research on MNCs in Australia. Qualitative interview data from 15 managers in MNC subsidiaries are used here to

unearth dominant individual sense-making and to highlight deficiencies in established theoretical frameworks and typologies. The data point to structural contingencies such as industry and strategy being less analytically useful when trying to understand the nature of HRM in MNC subsidiaries. Similarly administrative heritage was also seen to be decreasing in significance as a result of the pace of change in the business environment and the volume of takeovers, mergers and acquisitions. Concomitantly two variables that have received limited attention to-date, namely the perception by key actors in subsidiaries of HR competence elsewhere in the MNC network and the propensity of HR and line managers in the subsidiary to engage in political lobbying against change imposed upon them by other parts of the MNC network, emerge as potentially important mediators of the pattern of intended change. Our fourth paper takes as its focus performance appraisal policies and practices in Chinese MNCs. Here Jie Shen of the University of South Australia points to a relatively low research emphasis on international performance appraisal in comparison with other aspects of IHRM such as international selection and intercultural adjustment. Where it does exist, the literature points to an emphasis on the appraisal of expatriate employees rather than considering all employees including PCNs, HCNs and TCNs. He argues that international performance appraisal may represent a mechanism for controlling international managers behaviour and may be linked to an MNCs international performance. While performance appraisal may be complex, appraisal in the international context, he acknowledges, is doubly so as there may be a significant lack of context appreciation on the part of the appraiser. Drawing upon empirical data from Chinese MNCs, here Shen focuses on three interrelated questions, namely: what criteria are used by the MNC to appraise performance? How is international performance appraisal implemented by the MNC? And what factors are associated with an MNCs international performance appraisal policies and practices? In advance of presenting data gathered from ten leading Chinese MNCs, Shen provides us with a number of insights into developments in this field prior to and since the commencement of national economic reforms in China in the late 1970s including the “guanxi” or relationship dependant nature of appraisal. The data presented here suggest that Chinese international performance appraisal systems have particularly Chinese characteristics that distinguish them from there US and European counterparts. Chinese MNCs take a segmented approach to appraisal employing different performance approaches for managers of different grades and nationalities. The emphasis is rather squarely on determining the appropriate level of compensation and does not appear to have a strong developmental focus. In terms of criteria emphasised, the data from these Chinese MNCs suggest that industriousness, diligence, positive attitudes and compliance with the firm’s regulations are to the fore in appraisal deliberations. While it is argued that when compared with indigenous Chinese firms, Chinese MNCs are more progressive in terms of adopting modern “western” HRM concepts, the MNCs continue to more closely resemble domestic firms than western MNCs. Our final paper in this special issue of the International Journal of Manpower by Anil Chandrakumara and Paul Sparrow draws upon data from Sri Lanka to explore work values and work orientations as an element of national culture in predicting the HRM policy and practices pursued. In exploring this connection, the authors seek to make an advance in assisting international HR managers to adjust HRM policies to

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match employees’ expectations. The authors advance the case for investigation in Sri Lanka on the basis that much research to-date has concentrated on differences across developed economies or between newly industrialised economies, with comparatively little being offered by way of advancing our understanding of HRM in developing economies where employees values may differ dramatically from those held by employees in more developed economies. Following from a description of Sri Lanka in context, the authors turn to the impact of value orientations on HRM preferences and practices. Meaning and values of work orientation (MVWO) is operationalised as encompassing three interconnected areas, namely work definition, work centrality and norms concerning work, work ethics and beliefs and work values. Then utilising data gathered from domestic firm and foreign owned MNCs operating in Sri Lanka, the authors explore which MVWO manifest themselves and whether they influence HRM choices made. The data reveal eight distinct MVWO patterns and four HRM clusters which in turn were seen to be influenced by the MVWO patterns. In this way the authors argue that a better understanding of HRM policy-practice design choices may be gained by understanding in a more concrete way the work values, work orientations and work preferences of the workforce. Note 1. We use the terms MNC and TNCs and transnational enterprise interchangeable in this paper. References Bartlett, C.A. and Ghoshal, S. (1998), Managing Across Borders: The Transnational Solution, 2nd ed., Harvard Business School Press, Boston, MA. Boxall, P. and Purcell, J. (2003), Strategy and Human Resource Management, Basingstoke, Palgrave. Brewster, C. (2002), “Human resource practices in multinational companies”, in Gannon, M.J. and Newman, K.L. (Eds), The Blackwell Handbook of Cross Cultural Management, Blackwell, Oxford. Brewster, C., Mayrhofer, W. and Morley, M. (Eds) (2004), Human Resource Management in Europe: Evidence of Convergence?, Butterworth-Heinemann, Oxford. Budhwar, P. and Debrah, Y. (Eds) (2001), HRM in Developing Countries, Routledge, London. Clark, I., Colling, T., Almond, P., Gunnigle, P., Morley, M., Peters, R. and Portillo, M. (2002), “Multinationals in Europe 2001-2: home country, host country and sector effects in the context of crisis”, Industrial Relations Journal, Vol. 33 No. 5, pp. 446-64. Child, J., Faulkner, D. and Pitkethly, R. (2001), The Management of International Acquisitions, Oxford University Press, Oxford. Clark, T. and Knowles, L.L. (2003), “Global myopia: globalization theory in international business”, Journal of International Management, Vol. 9, pp. 361-72. Dicken, P. (2003), Global Shift: Reshaping the Global Economic Map in the 21st Century, 4th ed., Sage, London. Dowling, P.J. and Welch, D.E. (2004), International Human Resource Management: Managing People in a Multinational Context, 4th ed., Thompson, London. Doz, Y. and Prahalad, C.K. (1986), “Controlled variety: a challenge for human resource management in the MNC”, Human Resource Management, Vol. 25 No. 1, pp. 55-71.

Edwards, T. (1998), “Multinationals, labour management and the process of reverse diffusion: a case study”, International Journal of Human Resource Management, Vol. 9 No. 4, pp. 710-31. Evans, P., Pucik, V. and Barsoux, J.L. (2002), The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill/Irwin, New York, NY. Ferner, A. (1997), “Country of origin effects and HRM in multinational corporations”, Human Resource Management, Vol. 7 No. 1, pp. 19-37. Ferner, A. (2000), “The embeddedness of US multinational companies in the US business system: implications for HR/IR”, Occasional papers number 61, De Montfort University Business School, Leicester. Ferner, A. (2003), “Foreign multinationals and industrial relations innovation in Britain”, in Edwards, P. (Ed.), Industrial Relations: Theory and Practice, 2nd ed., Blackwell, Oxford, pp. 81-104. Geppert, M., Matten, D. and Williams, K. (2003), “Change management in MNCs: how global convergence intertwines with national diversity”, Human Relations, Vol. 56 No. 7, pp. 807-38. Gooderham, P., Nordhaug, O. and Ringdal, K. (1999), “Institutional and rational determinants of organisation practices: human resource management in European firms”, Administrative Science Quarterly, Vol. 44, pp. 507-31. Gunnigle, P., Murphy, K.M., Cleveland, J., Heraty, N. and Morley, M. (2002), “Localisation in human resource management: comparing American and European multinational corporations”, Advances in International Management, Vol. 14, pp. 259-84. Hall, P.A. and Soskice, D. (Eds) (2001), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford University Press, Oxford. Harris, H., Brewster, C. and Sparrow, P. (2003), International Human Resource Management, CIPD, London. Harzing, A.W. (2001), “Of bears, bumble-bees and spiders: the role of expatriates in controlling foreign subsidiaries”, Journal of World Business, Vol. 36 No. 4, pp. 366-79. Harzing, A.W. and Sorge, A. (2003), “The relative impact of country of origin and universal contingencies on internationalization strategies and corporate control in multinational enterprises: worldwide and European perspectives”, Organizational Studies, Vol. 24 No. 2, pp. 187-214. Hirst, P. and Thompson, G. (1999), Globalisation in Question, 2nd ed., Polity, Cambridge, MA. Hoftstede, G.H. (2001), Culture’s Consequences, International Differences in Work Related Values, 2nd ed., Sage, Beverly Hills, CA. Kabast, R. (2004), “Human resource management for international joint ventures: expatriation and selective control”, International Journal of Human Resource Management, Vol. 15 No. 1, pp. 1-16. Kerr, C., Dunlop, J.T., Harbison, F.H. and Myers, C.A. (1973), Industrialism and Industrial Management, Penguin, Harmondsworth. Kiriazov, D., Sullivan, S.E. and Tu, H.S. (2000), “Business success in Eastern Europe: understanding and customizing HRM”, Business Horizons, Vol. 43 No. 1, pp. 39-43. Kostova, T. and Roth, K. (2002), “Adoption of an organisational practice by subsidiaries of multinational corporations: institutional and relational effects”, Academy of Management Review, Vol. 45 No. 1, pp. 215-34. Lane, C. (2000), “Globalization and the German model of capitalism-erosion or survival?”, British Journal of Sociology, Vol. 51 No. 2, pp. 207-34.

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Luthans, F., Patrick, R.R. and Luthans, B.C. (1997), “Doing business in central and Eastern Europe: political, economic and cultural diversity”, Business Horizons, pp. 9-16. Martin, R. (2000), Transforming Management in Central and Eastern Europe, Oxford University Press, Oxford. Martin, R. and Cristescu-Martin, A. (2003), “Employment relations in Central and Eastern European 2002: towards EU accession”, Industrial Relations Journal, Vol. 34 No. 5, pp. 498-509. Mendenhall, M.E., Ku¨hlmann, T.M. and Stal, G.K. (Eds) (2001), Developing Global Business Leaders: Policies, Processes and Innovations, Quorum Books, Westport, CT. Minbaeva, D., Pedersen, T., Bjo¨rkman, I., Fey, C.F. and Park, H.J. (2003), “MNC knowledge transfer, subsidiary absorptive capacity, and HRM”, Journal of International Business Studies, Vol. 34 No. 6, pp. 586-99. Noorderhaven, N.G. and Harzing, A.W. (2003), “The ‘country-of-origin effect’ in multinational corporations: sources, mechanisms and moderating conditions”, Management International Review, Vol. 43 No. 2, pp. 47-66. Roberts, K., Ernst Kossek, E. and Ozeki, C. (1998), “Managing the global workforce: challenges and strategies”, Academy of Management Executive, Vol. 12 No. 4, pp. 93-106. Rogers, E. (1995), Diffusion of Innovation, Free press, New York, NY. Rosenzweig, P.M. and Nohria, N. (1994), “Influences in human resource management practices in multinational corporations”, Journal of International Business Studies, Vol. 25 No. 2, pp. 229-42. Royle, T. (2000), Working for McDonald’s in Europe: The Unequal Struggle, Routledge, London. Rugman, A. (2000), The End of Globalization, Random House, London. Rugman, A.M. and Verbeke, A. (2004), “A perspective on regional and global strategies of multinational enterprises”, Journal of International Business Studies, Vol. 35 No. 1, pp. 3-18. Schuler, R.S., Dowling, P. and DeCieri, H. (1993), “An integrative framework of strategic international human resource management”, International Journal of Human Resource Management, Vol. 4, pp. 717-64. Schuler, R.S., Jackson, S.E. and Luo, Y. (2003), Managing Human Resources in Cross-Border Alliances, Routledge, London. Scullion, H. (1995), “International human resource management”, in Storey, J. (Ed.), Human Resource Management: a Critical Text, Routledge, London. Scullion, H. (2001), “International human resource management”, in Storey, J. (Ed.), Human Resource Management: A Critical Text, 2nd ed., Thompson, London. Scullion, H. and Brewster, C. (2001), “Managing expatriates: messages from Europe”, Journal of World Business, Vol. 36 No. 4, pp. 346-65. Sorge, A. (2004), “Cross national differences in human resources and organisations”, in Harzing, A.W. and van Ruysseveldt, J. (Eds), International Human Resource Management, 2nd ed., Sage, London. Snell, S., Snow, C., Davidson, S. and Hambrick, D. (2002), “Designing and supporting transnational teams: the human resource agenda”, in Mendenhall, M. and Oddu, G. (Eds), Readings and Cases in International Human Resource Management, South-Western Publishing, Cincinnati, OH. Stahl, G.K., Pucik, V., Evans, P. and Mendenhall, M.E. (2004), “Human resource management in cross-border mergers and acquisitions”, in Harzing, A.W. and van Ruysseveldt, J. (Eds), International Human Resource Management, 2nd ed., Sage, London.

Stroth, L.K. and Caligiuri, P.M. (1998), “Increasing global competitiveness through effective people management”, Journal of World Business, Vol. 33 No. 1, pp. 1-16. Taylor, S., Beechler, S. and Napier, N. (1996), “Toward an integrative model of strategic international human resource management”, Academy of Management Review, Vol. 21 No. 4, pp. 959-85. UNCTAD (2003), World Investment Report 2003: FDI Policies for Development: National and International Perspectives, UNCTAD, Geneva. UNCTAD (2004), Prospects for FDI flows, transnational corporation strategies and promotion policies: 2004-2007, GIPA Research note 1, UNCTAD, Geneva. Warner (2004), “Human resource management in China revisited: introduction”, International Journal of Human Resource Management, Vol. 15 No. 4-5, pp. 617-34. Whitley, R. (1999), Divergent Capitalisms: The Social Structuring and Change of Business Systems, Oxford University Press, Oxford. Wright, P.M., Dunford, B. and Snell, S.A. (2001), “Human resources and the resource based view of the firm”, Journal of Management, Vol. 27 No. 6, pp. 701-21. Further reading Garnaut, R. and Song, L. (Eds) (2004), China’s Third Economic Transformation: The Rise of the Private Economy, Routledge, Curzon, London. Naughton, B. (1995), Growing Out of the Plan: Chinese Economic Reform 1978-93, Cambridge University Press, Cambridge, MA. UNCTAD (2002), World Investment Report 2002: Promoting Linkages, UNCTAD, Geneva. About the Guest Editors Michael J. Morley is Senior Lecturer in the Department of Personnel and Employment Relations at the University of Limerick. His current research interests include International Human Resource Management, Intercultural Transitional Adjustment and HRM in MNCs. E-mail [email protected] David G. Collings is a member of the Human Resource Management Research Group at the University of Limerick. His current research interests include International Human Resource Management with a particular focus on staffing issues and industrial relations in MNCs. E-mail [email protected]

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Wenchuan Liu HRM Research Centre, Kemmy Business School, University of Limerick, Limerick, Ireland Keywords Human resource management, Multinational companies Abstract Drawing on a range of literature, this paper develops a theoretical model of the cross-national transfer of HRM practices in multinational corporations (MNCs). This model integrates the significant research on transferability, transfer mechanisms, effects of transfer, and reverse transfer to produce a comprehensive analytical framework. A three-fold analysis of transferability is presented to include national, company and HRM practice level. The transfer mechanisms are categorized into direct and indirect methods. The analysis of reverse transfer is not only a complement to the forward transfer but also an important part of the integrated model. The model reflects the complexity of cross-national transfer HRM practices in MNCs. The propositions presented and suggestions for future research serve to aid further practical studies.

International Journal of Manpower Vol. 25 No. 6, 2004 pp. 500-517 q Emerald Group Publishing Limited 0143-7720 DOI 10.1108/01437720410560415

Introduction Multinational corporations (MNCs) are of particular importance to international comparative management research (Fenton-O’Creevy and Gooderham, 2003) because of their increasingly important role in the global economy (Porter, 1986; Prahalad and Doz, 1987; Rosenzweig and Singh, 1991). The MNC is a powerful vehicle for the transfer of not only the capital and other production functions but also managerial and technical knowledge across nations (Tayeb, 1998). The effectiveness of human resource management (HRM) has been seen as the key to the success of MNCs in the 21st century (Bartlett and Ghoshal, 1994, 1995; Pucik, 1992). The ability to effectively transfer HRM practices which have been proven efficient at parent companies to MNCs’ overseas subsidiaries is a key characteristic of the successful MNC (Nohria and Ghoshal, 1997) and “a matter of considerable practical importance for managers in MNCs” (Fenton-O’Creevy and Gooderham, 2003, p. 2). This transferability can also form a kind of special competitive capability for an MNC that may be difficult for competitors to imitate (Flood et al., 2003). The subsidiaries of an MNC, when selecting their HRM practices, usually faces two options: adopting locally designed practices or acceptance of practices originating with the parent company. The MNC can sustain its isomorphism through exercising HRM practices of the parent company in all subsidiaries (Flood et al., 2003). Taylor et al. (1996) identify three generic strategic international HRM (SIHRM) orientations: adaptive, exportive and integrative. Adaptive orientation means that MNCs create HRM systems for subsidiaries that reflect the local environments. The firm that adopts an exportive orientation seeks to transfer HRM practices that are seen as successful in the parent company to its subsidiaries. MNCs with an integrative SIHRM orientation attempt to transfer the best practices throughout the organisation. The MNC’s

international strategy, multi-domestic or global, together with top management beliefs lead to its international HRM orientation (Taylor et al., 1996). An MNC with the exportive orientation will face a number of practical questions to transfer its parent-company-of-origin HRM practices. Fenton-O’Creevy (2003) proposed a focal question: “In what circumstances, by what processes and with what effects are HR/IR practices and routines transferred from (an) MNC parent company to subsidiary?” (2003, p. 47). In line with Fenton-O’Creevy’s research agenda and question, this paper identifies a series of research questions: What factors influence the transfer of HRM practices in MNCs? What are the transfer mechanisms? How best can we evaluate the effects of transfer of HRM practices? How can we understand the reverse transfer process? While some questions have been partly explored by different researchers, a comprehensive research framework has not yet been formed. Drawing on recent research, this paper attempts to bridge the gap by contributing an integrative and comprehensive research model, which will be helpful to future researchers. First I identify and analyse factors that influence the cross-national transferability of HRM practices from three levels: national, company, and HRM practice level. I then focus on transfer mechanisms. The effects of transfer and the reverse transfer process will be then analysed. A model of cross-national transfer of HRM practices in MNCs is presented next. Finally, I discuss the implications and contributions of the model as well as some issues for future research. Transferability Transferability is defined in this paper as the ability to transfer HRM practices originated from the parent company to its subsidiaries. It is influenced not only by factors at national and company levels but also by the knowledge and innovation characteristics of the HRM practice transferred. National level factors The general idea that national level factors exert effects on organisation and human behaviour has been extensively accepted (Beechler and Yang, 1994; Flood et al., 2003; Hennart and Larimo, 1998; Kostova, 1999; Temple, 1999). Scholars have conceptualised and measured country-level effects by examining characteristics of national environments that can discriminate between countries and can explain the cross-country variance in organisational behaviour. Two means to characterize national environments have become the most commonly used. Using Hofstede’s (1980) classification of culture, Kogut and Singh (1988) formed a cultural distance index that has become the proxy of choice for national differences (Barkema et al., 1996; Hennart and Larimo, 1998; Li et al., 2001). The institutional distance (Kostova, 1997, 1999), based on institutional theory (Scott, 1995), which refers to the extent of dissimilarity between host and home institutions, provides an alternative explanation. I argue that national institutional distance and cultural distance are complementary concepts. Neither of them captures the full spectrum of national differences of HRM practices. It is, hence, the combination of both national, cultural and institutional distance that offers the most comprehensive assessment of the national environment. National cultural distance. Hofstede (1980) defines culture as the collective mental programming of people who live in a particular society. Furthermore, Hofstede (1980) developed a score (index) to represent each of four cultural dimensions for each of the

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50 countries he studied. Later a fifth cultural dimension was also identified (Hofstede and Bond, 1988). The five cultural dimensions are: power distance, uncertainty avoidance, individualism, masculinity, and Confucianism/dynamism. Although Hofstede’s research has been criticized, for example, on the methodology employed (Tayeb, 1996), sample selected from a single company, over-simplification of five cultural dimensions, and on the importance of these dimensions (Gooderham and Nordhaug, 2003), his research has gained significant attention (Adler, 1995; Beechler and Yang, 1994; Flood et al., 2003; Harrison, 1992; Warner, 1993, 1997; Zhang, 2003). Similar to Hofstede’s cultural dimensions, Trompenaars (1993) and Trompenaars and Hampden-Turner (1997), identified five bipolar dimensions with concern to interpersonal relationship and work-related values as follows. (1) universalism vs particularism; (2) communitarism vs individualism; (3) neutral vs emotional; (4) specific vs diffuse; and (5) achievement vs ascription. These studies should alert managers to some of the cultural considerations which they should be aware of in managing in different countries. For example, companies from universalism cultures entering China must recognize that relationships matter and take time to develop. Different national cultures exert their separate influences on human behaviour, thus forming different HRM practices according to cultural environments. Lau et al. (1997) and Harrison (1992) have studied job performance and management control systems in the context of national culture and found there are management practice differences between different national cultures. Adler (1995), Harrison (1992) and Lau et al. (1997) found that national culture had an impact on different HRM practices. Because of major national culture differences between the homogeneous and collectively oriented eastern countries and heterogeneous and individually oriented western countries (Hofstede, 1983; Nakane, 1970), it is extremely difficult, if not impossible, to transfer some practices between two countries with different national cultures (Beechler and Yang, 1994). Ramamoorthy and Carroll (1998) argue that there could potentially be incompatibilities between implementing an individualistic HRM system in a collectivist culture and vice versa. National cultural distance (Kogut and Singh, 1988), presumably measuring the extent to which different cultures are similar or different, has gained broader acceptance in the international business literature and has been applied to most business administration disciplines. Cultural distance has been used a key variable in HRM (Shenkar, 2001). In this paper, national cultural distance is employed to analyse the transferability of HRM practices in MNCs. It is proposed that lesser the national cultural distance, easier the transfer of HRM practices from the parent company to its overseas subsidiary. National institutional distance. Institutional theory (Scott, 1995) indicates that, in order to survive, organisations must conform to the rules and belief systems prevailing in the environment (DiMaggio and Powell, 1983; Meyer and Rowan, 1977), because institutional isomorphism, both structural and procedural, will earn the organisation

legitimacy (Dacin, 1997; Deephouse, 1996; Suchman, 1995). MNCs operating in different countries within multiple institutional environments are typically under diverse pressures. Some of those pressures in host and home institutional environments are testified to exert fundamental influences on HRM practices (Rosenzweig and Singh, 1991; Zaheer, 1995). There is substantial evidence that firms in different types of economies react differently to similar challenges (Knetter, 1989). Social, economic, and political factors constitute an institutional structure of a particular environment which provides firms with advantages for engaging in specific types of activities there. Companies can perform efficiently if they receive the institutional support. The institutions are not distributed evenly across nations. Based on Scott (1995), Kostova (1997) developed a new construct, institutional distance, the extent of similarity or dissimilarity between the regulatory, cognitive, and normative institutions of two countries. Kostova (1997, 1999) proposed that the larger the institutional distance, the more difficult it is for MNCs to establish legitimacy in the host country. In other words, a large institutional distance triggers the conflicting demands for external legitimacy in the host country and internal consistency within the MNC system (Xu and Shenkar, 2002). Balancing these conflicting demands has been a key challenge for MNCs (Bartlett and Ghoshal, 1989; Westney, 1993). The specific institutions could become barriers to adopt policies and practices that come from another institutional system. So, one proposition is that the larger the national institutional distance between host and home country, the more difficult the transfer of HRM practices to the foreign subsidiary. Company-level factors Theoretical approaches to analyse transferability at company level exist in two main categories: organisational culture and resource dependence. Organisational culture is, to some extent, influenced by the national culture but varies, sometimes significantly, in different companies even if they are located in the same national cultural environment (Li and Liu, 2002). Based on the organisational culture theory, the compatibility of organisational cultures is recognised as an important factor to influence the transfer of management practices (Kostova, 1999; Taylor et al., 1996). The resource dependence approach (Aldrich, 1976; Pfeffer and Salancik, 1978) rests on the assumption that an organisation is unable to generate all of the resources which it needs to survive and is therefore dependent on other actors. Applying the resource dependence approach to MNCs, researchers have argued that because subsidiaries rely on their parent company for resources, they are dependent to varying degrees on the parent company. Ghoshal and Nohria (1989) argue that the greater the dependence of the parent company on the resources controlled by its subsidiaries, the more likely the parent company will attempt to exercise control over these subsidiaries. In this paper, the resource dependence approach will be employed to analyse transferability of HRM practices in MNCs from the strategic role of subsidiaries and the structure of MNCs. Strategic role of subsidiary. Gupta and Govindarajan (1991) developed a typology of the different strategic roles of subsidiaries to depict knowledge flows within MNCs. The authors distinguish between outflows, flows of resource from the subsidiary to the parent company, and inflows, resources flowing into the subsidiary from outside, especially from the parent company. As resources flows between a subsidiary and the

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parent company increase, the need for control will increase (Pfeffer and Salancik, 1978). At the same time, the greater the reliance of the parent company on the subsidiary, the greater will be the power of the subsidiary. On the basis of Gupta and Govindarajan’s (1991) typology, Taylor et al. (1996) posit a link between the strategic roles which subsidiaries adopt and the management of human resources. They argue that the strategic choice of MNCs, that is, the strategic roles of subsidiaries, will be reflected in the HRM practices of subsidiaries. Therefore, Beechler and Yang (1994) hypothesized that an MNC is likely to attempt to exert country-of-origin influence to the greatest degree on subsidiaries which are more resource dependent on the parent company, so as to transfer its HRM practices. The proposition is thus that the transfer of HRM practices to a subsidiary with high strategic role will be easier than to a subsidiary with low strategic role. Ferner and Edwards (1995) define strategic nature of resource subsidiaries possess as “their ability to generate profits, their control of special skills, and their role as intermediaries with key decision-makers in the local environment” (1995, p. 237). Beechler and Yang (1994) identify three factors in determining the dependence of the MNC on its overseas subsidiaries: (1) the importance of the resource, the extent to which the MNC requires it for continued operation and survival; (2) the extent to which the subsidiary has discretion over the resource’s allocation and use; and (3) the extent to which there are alternatives for the needed resource to which the MNC has access. Temple (1999) argues that a subsidiary involved in research and development will be of considerable strategic importance to the MNC which benefits from its activities. In contrast, subsidiaries which have purely sales operations, servicing only the local market are likely to be of less strategic interest to the parent company. MNC’s structure. Bartlett and Ghoshal (1989) have identified appropriate organisational structures related to the typology of the strategies of MNCs: multidomestic, international, global and transnational structures. Different organisational structures serve different strategies. Multidomestic depicts that subsidiaries meet local needs and conform to local legislative and market conditions. The organisational structure of the multidomestic firm is decentralised and the subsidiaries are relatively independent of MNCs’ resource. An MNC following an international strategy does not pursue complete global consistency or local responsiveness, but attends to both, by transferring knowledge and expertise across borders. The structure of an MNC pursuing an international strategy is co-ordinated, where subsidiaries have the freedom to adapt products to local conditions, whilst at the same time being dependent on the parent company in terms of new products and ideas. The global strategy is characterised by the pursuit of global efficiency and consistency. The structure of an MNC with a global strategy is centralised and subsidiaries are highly resource dependent on the parent company. The structure to fit transnational strategy needs to be very flexible and it is described as an integrated network which links the major parts of the company together. Resources in this kind of MNCs are neither centralised nor decentralised.

On the basis of these descriptions, it can be argued that the multidomestic MNC is least likely to attempt to transfer its HRM practices to its subsidiaries because they are autonomous and relatively independent of the resource of the parent company. And the ability and the necessity to transfer HRM practices to subsidiaries are limited. The opposite can be said of global MNCs. Hence, it can be proposed that the multidomestic structure of MNCs is mostly likely to inhibit the transfer of HRM practices from the parent company to its overseas subsidiaries, whereas the global structure is most likely to promote it and the transferability in international and transnational companies lies in between. The structure of an MNC can also be seen as a differentiated network (Nohria and Ghoshal, 1997). Highly centralised, stratified networks use coercive pressure on its members to achieve conformity of practices, resulting in the transfer of HRM practices (Mizruchi, 1993). On the other hand, the network relationship and resource equivalence that exist between subsidiaries could lead to structural equivalence (Burt, 1987). That is, an actor can perceive concordance with comparing other members in an organisational network (DiMaggio and Powell, 1983). In this view, two actors related to the same set of third parties are likely to exhibit similarity in behavior. So, we can hypothesise that if a subsidiary has adopted a certain HRM practice from the parent company, its transfer to another subsidiary could become easier due to the structural equivalence in an MNC. Compatibility of organisational cultures. A widely accepted definition of organisational culture is a set of values shared collectively among organisational members (Chatman and Jehn, 1994; O’Reilly et al., 1991). The values can be grouped into seven dimensions: innovation, stability, respect for people, outcome orientation, detail orientation, team orientation, and aggressiveness. Some companies are marked by very strong cultures, so strong that “you either buy into their norms or get out” (Peters and Waterman, 1982, p. 77), while the organisational cultures in other companies are weak. The compatibility of the organisational cultures of two organisations involved in the transfer will affect the transfer of practices (Kedia and Bhagat, 1988). Studies have shown that successful Japanese MNCs, for example, often choose to set up their subsidiaries in American rural areas or depressed locations (Yang, 1992). In addition to economic factors, one important reason for the rural choice is the perception that rural Americans have values more similar to those of the Japanese in terms of such organisational culture dimensions as team orientation, outcome orientation, work values, etc., thus making it easier for Japanese companies to transfer their home-country HRM practices to overseas subsidiaries (Beechler and Yang, 1994). Kostova (1999) suggested that comparability of two organisational cultures can have practice-specific effects on the transfer of practices. Any HRM practice is rooted in its some deep value assumptions. When the values implied by particular HRM practices and the values underlying the culture of an organisation are compatible, it will be easier for employees at the subsidiary to understand and accept HRM practice from the parent company. However, it will be difficult for employees of the subsidiary to understand and accept an HRM practice transferred if the values underlying the practice to the parent company and subsidiary are incompatible. For example, it will be more difficult to transfer a compensation system based on personal performance to a company with a higher team orientation than to one with low team orientation.

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As thus, the transferability of HRM practices from the parent company to the subsidiary will be positively associated with the degree of compatibility of two organisational cultures embedded in the two units. HRM practice level factors Although there are some differences between domestic and international HRM practices, Dowling and Schuler (1990) argue that the most important HRM practices in MNCs involve staffing and selection, assessment and compensation, training and development, and industrial relations and employee participation. Rather than differentiating HRM practices one by one, this section, following Flood et al.’s (2003) research, focuses the analysis of the transferability on two general characteristics of HRM practices: innovation and knowledge. Innovation characteristics of HRM practices. According to Rogers (1995, p. 11), an innovation is “an idea, practice or object that is perceived as new by an individual or other unit of adoption”. It matters little whether or not an idea is objectively new as measured by the lapse of time since its first use or discovery. The perceived newness of the idea for the individual determines his or her reaction to it. “If the idea seems new to the individual, it is an innovation” (Rogers, 1995, p. 11). The innovation characteristics affect the transfer of innovation (Wejnert, 2002). A successful organizational practice in the arena of HRM practiced and demonstrated in the parent company, when transferred into a subsidiary, can be considered to be an innovation (Flood and Ramamoorthy, 2002; Flood et al., 2003). Two couples of innovation characteristics are identified to affect the transfer of innovation: public vs private consequences and benefit vs costs. The public consequence of transfer of HRM practices often concerned is the change of company welfare policy. Accordingly, the private sequence of transfer of such HRM practices is linked to the change of individual employee’s income and living level. Direct and indirect costs of the transfer of an innovation often inhibit its transfer (Wejnert, 2002). Direct costs are typically clear and are relative to the economic situation of a company while indirect costs are not often clearly identifiable. Indirect costs may also be non-monetary (Gerwin, 1988), such as transfer time or social influences. Therefore, it is proposed that if the public and private consequences of a practice transfer are of benefit, the transfer will be easier than that considered as high cost to transfer and without public and private consequences. Knowledge characteristics of HRM practices. Flood et al. (2003) pointed out that a specific HR practice is not only embedded in written documents but resides in the routines, practices, norms and values of the organisation. They also argue that an HRM practice involves features of three types of knowledge: human, social and structured knowledge identified by De Long and Fahey (2000). Each of these types of knowledge includes both tacit and explicit components varying in terms of causal ambiguity. This causal ambiguity is in itself a barrier to the effective transfer of an HRM practice across borders. Polanyi (1985) makes a distinction between tacit knowledge and explicit knowledge. Tacit knowledge is personal, context-specific, and therefore hard to formalize and communicate. Explicit or “codified” knowledge, on the other hand, refers to knowledge that is transmittable in formal, systemic language. As Polanyi (1985) has pointed out, knowledge is often highly personal in nature, difficult to communicate, highly specialised and not always easily transferred. In addition to the tacit and

explicit components of knowledge, an HRM practice could include simple and complex elements, and independent and systemic components of knowledge (Flood et al., 2003). Complex knowledge evokes more causal uncertainties, and, therefore, the amount of factual information required to completely and accurately convey such types of knowledge is greater than would be the case with simple types of knowledge. Simple knowledge can be captured with little information and is, therefore, relatively easy to transfer. Knowledge that is independent can be described by itself, whereas knowledge that is systemic must be described in relation to a body of knowledge existing in the transferring organisation. The knowledge involved in the transfer is likely to be complex, tacit and systemic, so it will be more difficult to transfer and absorb (Bhagat et al., 2002). Therefore, it is proposed that if an HRM practice is perceived as explicit, simple and independent, its transfer from the parent company to its subsidiary will be easier than that involved in tacit, complex, and systematic components.

Transfer mechanism Owing to the complexity of transfer process, the transfer mechanisms whereby HRM practices are transferred to different international sites within MNCs have not been studied completely clear. However, a significant body of international management scholars have contributed much to relative literature, either from theoretical or from empirical research. Harzing (1999), using extensive data from over 100 MNCs with headquarters in nine different countries and subsidiaries located in 22 nations, made an in-depth analysis of the control mechanisms of MNCs. Her study demonstrates that the control mechanisms of MNCs towards their subsidiaries vary according to the characteristics of their headquarters such as the country of origin and strategy. The author explains that the features of subsidiaries, including age, size, role and function, also affect the control mechanisms of MNCs. The empirical evidence of her research shows that expatriates play an essential role in controlling foreign subsidiaries and facilitating the transfer of practices. Ferner and Edwards (1995) identified the types of relations between different parts of MNCs: authority relations, resource-dependent power relations, exchange relations, and cultural relations. The authors consider the four types as channels of influences through which practices can be transferred within MNCs. O’Donnell (2000) lists a variety of mechanisms that are used to facilitate the transfer. Among these are the transfer through rules, programmes, procedures as well as expatriates. Similarly, drawing on the work of some researchers (Coller, 1996; Ferner and Edwards, 1995; Marginson et al., 1995), Temple (1999) identified four mechanisms which can facilitate the transfer of HRM practices: HRM guidelines and structures, the international transfer of managers, socialisation mechanisms and best practice schemes. In this section, I argue that the transfer mechanisms identified by former researchers can be categorised into two types in terms of the implementation process of transfer: direct and indirect transfer mechanisms. The two mechanisms are complementary rather than substitutable.

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Direct transfer mechanisms Direct transfer mechanisms mean that subsidiaries are asked to comply a set of HRM polices from the parent company through which the MNCs achieve their control over subsidiaries. Ferner and Edwards (1995) posit that this issuing of HRM guidelines and rules by the parent company is based on authority relations between the parent company and subsidiaries, particularly when they are backed up by formal systems of management control with reward and penalty systems. The authors also demonstrated the importance of authority relations through the example of a chemicals MNC. Another example of exercising direct transfer mechanisms is IBM in which the international guidelines of personnel issues are laid down to subsidiaries. The advantage of direct transfer mechanisms lies in the speed of transfer. The MNC with stronger resource control over its subsidiaries could find them more efficient. However, the disadvantage of direct transfer mechanisms is obvious. As discussed earlier, the compulsory transfer will face strong objection from employees of subsidiaries if those HRM polices are recognised to damage their benefits. For instance, the subsidiary could refuse a new method of compensation if employees consider that the new method will lead to the reduction in their income. Indirect transfer mechanisms Contrary to direct mechanisms, indirect transfer mechanisms implement the transfer of HRM practices to the subsidiaries through attaching the HRM practice to some carriers. The carriers generally include organisational culture and expatriates from the parent company. Some HRM practices have links with the reinforcement of the company way or the way of doing things. In order to enforce the effects of integration of organisational culture, MNCs could train employees of subsidiaries to recognise the corporate culture. During the training process, the HRM practices attached to the culture carrier are also transferred. Coller (1996, p. 164) described how his case study company utilised international training course to promote the transfer of practices: they are “not only a method of improving managerial skills or an implicit and unstated requirement for pursuing a professional career within the firm, but also a means of teaching the ‘company way’ and a forum for exchanging experiences that may be later applied in local plants.” In this situation, organisational culture of the MNC becomes a carrier on which HRM practices are transferred to subsidiaries. Since organisational culture comprises several levels from surface traditions, rituals, and norms up to deeply planted corporate values and philosophy, I argue that the HRM practices that can be transferred through indirect mechanism must be compatible with cultural values. With respect to expatriates, the movement of managers, either HRM managers or professionals, from the parent company to subsidiaries can serve to aid in the dissemination of HRM practices which the expatriates are familiar with. Harris and Holden (2001, p. 85) argue that “expatriates managers have a considerable role as interpreters and implementers of HR and business strategy”. Cerdin (2003, p. 49) argues that “information technology can relay HRM knowledge to subsidiaries, such as HRM guidelines available on an intranet network, but it can not transfer know-how”. So it is often left up to expatriates to put into full and efficient practice the knowledge acquired at parent companies and demonstrate and transfer know-how. The author

further points out that through his or her knowledge, the expatriate can be “a carrier of HRM practices” (Cerdin, 2003, p. 49). I also argue that expatriates are willing to be the carriers of the transfer of HRM practices because they prefer those practices of the parent company which they are rather familiar with. In the model of role expatriates in the international diffusion of HR practices, Cerdin (2003, p. 52) proposes that “the higher the number of expatriates in a subsidiary, the stronger the role of expatriates in the diffusion of HRM practices”. The number of expatriates is influenced by the ownership history of an MNC and the phase of its internationalisation. The effects of expatriates being a carrier of HRM practices are also influenced by the characteristics of expatriates in terms of their understanding of HRM practices of the parent company. That is, the carriers must have a ready knowledge and experience of the parent company’s HRM practices. Therefore, as Harzing (1999) and Wolf (1994) have pointed out, the functions of expatriates are not only filling of positions where no qualified local candidates are available, but also transferring knowledge and practices to subsidiaries.

Effects of transfer The transfer of an HRM practice to subsidiaries is generally expected to be institutionalised so as to impact subsidiaries’ performance positively. Through the institutionalisation of HRM practices, an MNC creates imperatives for conformity in order to gain legitimacy (Scott, 2001). As the number of subsidiaries adopting the same practice increases, such a practice is institutionalised in the whole MNC (Guler et al., 2002) and it will form its special competitive capacity. Tolbert and Zucker (1996) suggested three basic stages of institutionalising a practice: pre-institutionalization, semi-institutionalization, and full-institutionalization. At the first stage, the key feature is habituation, where an organisation adopts a set of structures or solutions to a specific set of problems and formalization of these arrangements into policies and procedures. In the semi-institutionalization stage, the practice has been fairly diffused, but not stable. Only up to the last stage, full-institutionalization, has the practice become “taken for granted by members of a social group as efficacious and necessary” (Tolbert and Zucker, 1996, p. 179). Similar to Tolbert and Zucker ’s research, Kostova’s (1999) differentiates the implementation and internalisation as two different degrees of institutionalisation, which Fenton-O’Creevy (2003, p. 46) explicitly explained as “the distinction between ceremonial or purely formal adoption of a practice and more substantive adoption”. Kostova (1999) emphasised that implementation is a necessary condition for internalisation and the former does not automatically result in the latter. Internalisation is, according to Kostova (1999), the state when a practice becomes infused with value, that is, when the employees consider the practice to be part of their organisational identity. Much of the literature on HRM suggests the importance of HRM practices in achieving commitment, satisfaction and motivation. Such practices are only likely to be effective to the extent that they are infused with value for managers and employees. Therefore, only when the practice is implemented formally and is also internalised by the employees of subsidiaries will it become an institutionalised organisation practice with strategic importance (Kostova, 1999). And then the practices originated in the parent company will become a source of organisational identity and competitive advantage.

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Reverse transfer Until now, the analysis has been focused only on the transfer of HRM practices from the parent company to subsidiaries, which is termed by Edwards (1998) as forward diffusion. Reverse transfer refers to the transfer of practices in the opposite direction, when a practice originated in an overseas subsidiary is imported from the parent company. Reverse transfer is thought of as “strict reverse diffusion” by Edwards (1998, p. 696). The diffusion to all units, not only the parent company but also other subsidiaries, is termed as “flow diffusion” (Edwards, 1998, p. 696) and reverse transfer is a subset of this. Temple (1999, p. 57) posits a definition of “the learning effects” in terms of “the reverse diffusion of subsidiary practices to the MNC’s home country operations or the diffusion of subsidiary practices throughout the MNC through the process of multi-directional diffusion”. In the field of HRM and industrial relations, the concept of reverse transfer is important because it has the potential of affect the bulk of a company’s employees who tend to be concentrated within the MNC’s home country (Ferner and Varul, 2000). There is scant literature on the transfer of HRM practices from the subsidiaries to the parent company. As discussed in Liu’s (2003) review, most research has placed emphasis on “Japanese ways” (Dedoussis, 1995; Koike, 1984; Purcell et al., 1999) and the one-way transfer orientation from developed countries, such as Japan and the USA, where headquarters are located, to other developed and developing countries ( Joshi, 2001). Edwards’ (1998) explorative research on reverse transfer partly fills the gap. Edwards (1998) and Ferner and Varul (2000) have examined the characteristics which could encourage the transfer from subsidiaries to the parent company. It was found that many of the characteristics are comparable to those which promote the opposite transfer and include such structural factors as the degree of product integration internationally and the existence of worldwide product divisions. Edwards (1998) argued that the reverse transfer is more likely to be found in the MNCs with the following characteristics: an international business strategy based on realizing synergies between sites, a global structure, the geographical dispersion of activities, maturity, growth through acquisition and the existence of international management structures in the personnel field. The model On the basis of the above analysis, I put forward a research model shown in Figure 1. This model represents a theoretical research framework and integrates substantial amount of studies, especially those of Kostova (1999), Temple (1999), Taylor et al. (1996), Fenton-O’Creevy (2003), Cerdin (2003) and Flood et al. (2003). This model is consistent with the research questions previously identified in the introduction section which have further developed Fenton-O’Creevy’s (2003) focal question. From the model we can notice that those research perspectives of transferability, transfer mechanisms, effects, forward and reverse transfer are not separated but interrelated. The research model developed here reflects the complexity of the process of transnational transfer of HRM practices in MNCs. Discussion An MNC can choose integrative HRM, which means that all subsidiaries adopt same HRM practices, or differentiated HRM that different subsidiaries can adopt different

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Figure 1. Model of the cross-national transfer of HRM practices in MNCs

HRM practices. The choice is important for the MNCs (Schuler et al., 1993). While differentiated HRM can be less costly because there is less centralizing work for the parent company, less monitoring, and less international transfer of knowledge, it will lead to a looser and less integrated organisation. On the contrary, integrative HRM accomplished through the inter-transfer of HRM practices between the parent company and subsidiaries will allow for standardization and international learning (Brewster, 2002). A critical challenge in a globalising world is to develop a set of supporting institutions, policies as well as transfer mechanisms that can foster the transfer of best management practices. The research on the cross-national transfer of HRM practices in MNCs is therefore of considerable theoretical and practical significance. Various authors have urged international management scholars to pay more attention to HRM practices of MNCs and research in the field of transfer is often claimed to lack an integrative perspective (Flood et al., 2003; Ghoshal and Westney, 1993). This paper therefore plays an integrative role in combing different fields of this research issue, which constitutes its contribution. The theoretical model presented here represents an attempt to integrate the study of cross-national transfer of HRM practices in MNCs and to serve as a basis for future research with a comprehensive conceptual and theoretical framework. The model in this paper is much better compared to alternative models that would have been developed from a single research perspective such as transfer mechanisms, transfer effects, or expatriates. Simplifying a complex research question could be neglecting the interrelation and interaction between different contexts. Applying the integrative approach will, therefore, allow a more comprehensive inquiry into the examination of the complex question. Another contribution of this paper comes from its research methods. The framework advanced includes multi-level analysis variables in the context of transferability: national, company and HRM practice level factors. Multi-level analysis

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supplies us with general understanding. This is distinct from earlier research. Furthermore, this model looks at the effects of transfer, either implementation or internalisation, as the dependent variables. The influence factors and transfer mechanisms can be conceived of as independent variables. This can then be thought as an multi-variable input-output research model. The theoretical contributions of this paper are to convergence-divergence theory and international management. In contrast to the assumptions of the convergence theory, this paper argues that globalisation does not lead to the wonderland of a bordless world (Ohmae, 1991) where capital, knowledge and other resources move freely around the globe, because of the costly and complex transfer of some practices. With regard to the international management perspective, the argument between institutional and cultural distance is well reconciled in this paper. They are complementary rather than replaceable. While the model and propositions developed in this paper provide theoretical and empirical guidelines, there still will be some practical issues I hope to point out here. Firstly, the transfer of an HRM system (Flood et al., 2003; Huselid, 1995) could improve an MNC’s competence than that of an individual HRM component such as compensation or training practice. If it is a green-field unit, the transfer of an HRM system could be feasible, while if in an acquisition unit, transferring individual HRM practice should be more suitable. Secondly, in the comparative case research, sample selection is critical. The methods suggested include comparison of large numbers of MNCs (Harzing, 1999), several MNCs with several subsidiaries located different countries (for instance, Zhang, 2003), or an MNC with a number of subsidiaries (Kostova and Roth, 2002). Thirdly, combination of the qualitative and quantitative approach should be a better method for this model. A qualitative approach may be of great value while a quantitative one might provide a useful complement (Fenton-O’Creevy, 2003). For example, the qualitative method can be employed to explore the transfer mechanisms and the quantitative one can be used to analyse the extent of adoption. This research model is not without limitations. The complex transfer issue is impossible to be completely explained by any one simplified representation. This model established on the basis of present research will inevitable evolve to a newer one with the development of theories. Ignoring the transfer between subsidiaries in this model could be another limitation. The transfer of HRM practices in MNCs could occur in all directions, thus forming the diffusion of some practices. The author argues here that the transfer between subsidiaries could be less important than that between the parent company and subsidiaries. The transfer process could be first from a subsidiary to the parent company and then from the parent company to other subsidiaries. References Adler, N. (1995), International Dimensions of Organisational Behavior, 2nd ed., PWS-Kent, Boston, MA. Aldrich, H. (1976), “Resource dependency and intraorganizational relations”, Administration and Society, Vol. 7, pp. 419-54. Barkema, H.G., Bell, J.H. and Pennings, J.M. (1996), “Foreign entry, cultural barriers, and propositions”, Journal of International Business studies, Vol. 17, pp. 1-26.

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Warner, M. (1997), “Introduction: HRM in greater China”, The International Journal of Human Resource Management, Vol. 8 No. 5, pp. 865-8. Wejnert, B. (2002), “Integrating models of diffusion of innovations: a conceptual framework”, Annual Review Sociology, Vol. 28, pp. 297-326. Westney, D.E. (1993), “Institutionalization theory and the multinational corporations”, in Ghoshal, S. and Westney, D.E. (Eds), Organisational Theory and Multinational Corporations, St. Martin’s Press, New York, NY. Wolf, J. (1994), International Personal Management, Gabler, Wiesbaden. Xu, D. and Shenkar, O. (2002), “Institutional distance and the multinational enterprise”, Academy of Management Review, Vol. 27 No. 4, pp. 608-18. Yang, J.Z. (1992), “Organisational and environmental impact on the use of Japanese-style HRM policies in Japanese firms in the US”, The International Executive, Vol. 4, pp. 321-43. Zaheer, S. (1995), “Overcoming the liability of foreignness”, Academy of Management Journal, Vol. 38, pp. 341-63. Zhang, M. (2003), “Transferring human resource management across national boundaries: the case of Chinese multinational companies in the UK”, Employee Relations, Vol. 25 No. 6, pp. 613-26. Further reading Edwards, T., Rees, C. and Coller, X. (1999), “Structure, politics and the diffusion of employment practices in multinationals”, European Journal of Industrial Relations, Vol. 5 No. 3, pp. 286-306. Gooderham, P. and Nordhaug, O. (2002), “Are cultural differences in Europe on the decline?”, European Business Forum, Vol. 8, pp. 48-53. Ouchi, W. (1981), Theory Z: How American Business Can Meet the Japanese Challenge, Addison-Wesley, Reading, MA. Powell, A. and DiMaggio, P. (1991), The New Institutionalism in Organisational Analysis, University of Chicago Press, Chicago, IL. Pucik, V. and Hatvany, N. (1983), “Management practices in Japan and their impact on business strategy”, in Lamb, R. (Ed.), Advances in Strategic Management, Vol. 1, JAI Press, Greenwich, pp. 103-32.

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Host country specific factors and the transfer of human resource management practices in multinational companies Barbara Myloni Athens University of Economics and Business, Strategy and Entrepreneurship Laboratory, Athens, Greece

Anne-Wil K. Harzing The University of Melbourne, Victoria, Australia

Hafiz Mirza Bradford University School of Management, Bradford, UK Keywords Human resource management, Multinational companies, National cultures, Greece Abstract This paper concerns the transfer of human resource management (HRM) practices by multinational companies (MNCs) to their overseas subsidiaries. It investigates how factors originating from the cultural and institutional framework of the host country impact on this transfer. Using data collected from MNC subsidiaries located in Greece and local Greek firms, we examine the degree to which several HRM practices in MNC subsidiaries resemble local practices. Our empirical findings indicate that subsidiaries have adapted their HRM practices to a considerable extent, although some practices are more localised than others. Specifically, practices that do not fit well with Greek culture or are in contrast to employee regulations show a low level of transfer. On the other hand, our interviews revealed that significant cultural changes are underway and that the institutional environment is gradually getting more relaxed, leaving more room to manoeuvre for MNCs.

International Journal of Manpower Vol. 25 No. 6, 2004 pp. 518-534 q Emerald Group Publishing Limited 0143-7720 DOI 10.1108/01437720410560424

Introduction During the last few decades, companies have been confronted with an increasingly competitive environment. Forces facilitating globalisation, such as the liberalisation of international trade, the international integration of production, research and marketing by major MNCs, as well as the emergence of major economic regions like the European Union, have enabled companies to invest overseas to gain or maintain competitive advantage. It has been argued that human assets are an emerging source of competitive advantage for MNCs (Bartlett and Ghoshal, 1991; Schuler and Rogovsky, 1998). HRM is evolving from being just a support function to one of strategic importance (Teagarden and Von Glinow, 1997). Bartlett and Ghoshal (1991) have argued that human resource management (HRM) policies and practices are becoming crucial because they can act as mechanisms for co-ordination and control of international operations. Values and HR systems help to shape organisational culture and the people who operate within and influence that culture; and MNCs therefore attempt to transfer their HRM practices abroad. On the other hand, it has also been argued that HRM constitutes a major constraint when MNCs try to implement global strategies (Adler and Bartholomew, 1992). This is mainly due to the complexities

involved in employing and managing people from disparate national and cultural backgrounds. HRM can be seen as part of the overall strategy of the firm. In this respect, Perlmutter (1969) indicates that an MNC has three strategic choices: ethnocentric, polycentric and global. However, such a simple typology does not give clear-cut answers when it comes to the transfer of HRM practices abroad. Other factors, usually external ones, such as the host country environment, limit the MNC’s freedom to choose among the above strategies. In practice, MNCs are more likely to use a hybrid strategy and, as Tayeb (1998) puts it, opt for the strategy that fits best with each subsidiary’s local conditions. In this way, a company that has subsidiaries in many foreign countries may adopt an ethnocentric strategy for some of them and a polycentric or even a global one for others. Furthermore, as many authors have argued, such a typology treats management practices in terms of an overall orientation, which may overlook an MNC’s internal differentiation (Rosenzweig and Nohria, 1994). According to this view, a company is an organisation composed of many differentiated practices. Some of them may be more sensitive to pressures of local adaptation, while others may be more prone to internal consistency. Similarly, in the same subsidiary, some management practices might closely follow the parent company ones, while others may more resemble those of the host country. In addition, there could be yet other practices that follow a global standard. A major issue, and one of the central questions in the MNC literature, is the extent to which subsidiaries act and behave as local firms – local isomorphism – as opposed to the extent to which their practices resemble those of the parent company or some other global standard – internal consistency (Jain et al., 1998; Rosenzweig and Nohria, 1994). More specifically, HRM practices in an MNC “are shaped by the interplay of opposing pressures for internal consistency and for isomorphism with the local institutional environment [. . .]” (Rosenzweig and Nohria, 1994, p. 230). Recent research that has focused on MNC subsidiaries and HRM has already shed light on some of the factors that affect MNCs’ choices regarding localisation vs internal consistency of HRM practices (Bae et al., 1998; Beechler and Yang, 1994; Guest and Hoque, 1996; Newman and Nollen, 1996; Ngo et al., 1998; Rosenzweig and Nohria, 1994). This paper will contribute to this debate by examining the way in which factors originating from the cultural and institutional framework of a host country impact on HRM transfer. According to Clark et al. (1999), only 10.5 percent of the papers they reviewed in comparative and international HRM used both cultural and institutional theories to explain their research findings, while around 41 percent did not provide any explanation at all. In order to describe and explain cross-national differences adequately, we need to use both approaches to capture a wide range of influences on HRM transfer Our second major contribution to the debate is our choice of host country. Greece constitutes an interesting case since little research has focused on investigating management issues in the Greek context, partly because there is a dearth of empirical research in management on recently industrialised countries in general. Such countries often face distinct problems and unique challenges that require specific attention and the development of a specific body of knowledge. Although Greece can no longer be considered a developing country, it retains some characteristics in common with such countries, especially those related to the socio-economic and cultural environment. Factors such as the tension between old and new cultural values

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and institutional volatility characterise the Greek environment. Such issues are of particular importance for MNCs that operate in these countries. It can be argued that the cultural and institutional environment becomes even more crucial for HRM transfer to host countries that are in a transitional state. The next section will provide the theoretical underpinnings of this study. Based on previous research that has focused on cultural and institutional perspectives, we develop specific hypotheses to test the effect of host country factors on HRM transfer. This is followed by an outline of the Greek cultural and institutional framework. After a description of the study’s methodology and sample characteristics, we present our empirical results and provide a discussion of the main findings. The paper concludes by addressing the limitations of our study, as well as implications for management research and practice. Host country specific factors and HRM transfer Recent research has revealed that companies in different countries differ with respect to their HRM practices and policies (Ferner, 1997). It has also been noted that transferring HR policies and practices to different countries can be quite problematic (Bae et al., 1998; Hofstede, 1980; Kovach, 1994; Rosenweig and Nohria, 1994; Yuen and Kee, 1993). Some of the major obstacles are closely related to the host country’s cultural and institutional environment. Although the dominance of American management theory has led to the belief in universal management practices that can be applied anywhere, research has shown that managerial attitudes, values and behaviours differ across national cultures. There is no single best way to manage an organisation, since – among other factors – differences in national cultures sometimes require differences in management practices. Several management writers have adopted a cultural perspective on organisations (Hofstede, 1980; Jackson, 2002; Laurent, 1983; Trompenaars, 1993). Central to this approach is that societies/countries are different from each other and that this distinctiveness is reflected in the way that organisations are managed. Management and organisation cannot be isolated from their particular cultural environment. As with most management practices, HRM practices are based on cultural beliefs that reflect the basic assumptions and values of the national culture in which organisations are embedded. This leads to the question of what happens when MNCs want to transfer some of their HRM practices overseas, especially in cases when the assumptions that underlie such practices do not fit with the cultures of the recipient host-countries. Failure to adapt HRM practices to a host-country’s culture can lead to negative consequences that inhibit a subsidiary’s performance. Existing research provides evidence that MNCs adapt to a certain degree to national cultures in which they operate (Beechler and Yang 1994; Schuler and Rogovsky, 1998; Tayeb, 1998). In addition, subsidiaries that are managed consistently with national cultural expectations have been found to perform better compared to subsidiaries that are managed otherwise (Newman and Nollen, 1996). The above discussion notwithstanding, cultural values are not the only determinants of individual behaviour that subsequently affects management practices. People’s behaviour can also be partly explained in terms of social structures that act as a guide or constraints on individuals, through their roles and

positions within institutions and the functions of these institutions within the entire social system (Fay, 1996; Lukes, 1973). Research by institutional theorists over the past two decades has focused on the impact of social forces on organisational structure and behaviour. The basic argument is that social institutions influence company practices in a systematic way, resulting in structures and processes that reflect national patterns (Sorge, 1995; Whitley, 1992). Empirical research has examined how institutional systems shape organisations, as a function of their location in the environment, their size, structural position etc. (Scott, 1995). With regard to the transfer of management practices to host countries, the extent to which firms are able to transfer country of origin practices depends on host country national business systems and their institutions, which can either facilitate or inhibit the transfer (Ferner, 1994, 1997). In a permissive institutional framework with few formal institutions, MNCs are less constrained in introducing country of origin practices. In contrast, where institutions are cohesive, integrated and have generated a distinctive business system, it is more likely that MNCs will have to adapt to the local practice (Gooderham et al., 1999). Host country legal regulations represent a strong environmental pressure on MNC subsidiaries (Schuler et al., 1993; Taylor et al., 1996); and the legal environment in which the MNC subsidiary is embedded can constrain the transfer of HRM practices from its parent (Beechler and Yang, 1994). Therefore, we hypothesise that: H1. Because of strong and distinctive cultural and institutional forces in the host environment HRM practices in MNC subsidiaries located in Greece will resemble local practices. One of the strongest influences by local institutions comes from labour unions. Rosenzweig and Nohria (1994) argue that if a union represents subsidiary employees, subsidiary HRM practices may be very close to those of local firms. In unionised firms, even if managers believe that parent HRM practices would be beneficial they may be unable to implement them because of potential conflict with union rules or employee attitudes (Beechler and Yang, 1994). We therefore propose that: H2. The level of transfer of HRM practices will be lower in subsidiaries with local union representation. At the same time, although Rosenzweig and Nohria (1994) found that MNC subsidiaries tend, in general, to adjust to local HRM practices, most of them were not forced to do so. They tend to comply with local practices in order to gain legitimacy and acceptance (Gooderham et al., 1999). Therefore, “isomorphism” which is one of the key concepts of new institutionalism, may not always exert coercive pressure on MNC subsidiaries. A subsidiary that relies heavily on host country organisations in terms of technological and managerial expertise, as well as on local suppliers, is likely to be affected by these actors in terms of its HRM practices, especially if the subsidiary wants to acquire or maintain a preferred employer status (Hannon et al., 1995; Rosenzweig and Nohria, 1994). This leads to: H3. The level of transfer of HRM practices will be negatively related to the degree of the subsidiary’s interaction with host country organisations. At this point it is important to note that we examine the transfer of individual HRM practices, not the overall degree of HRM transfer. Each of the factors affecting HRM

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transfer has differing degrees of impact on the transfer of individual practices (Bae et al., 1998). Thus, the degree of cultural impact on HRM practices differs according to the specific practice, subsequently affecting their level of transfer (Lu and Bjorkman, 1997; Rosenzweig and Nohria, 1994). In the same way, practices that are not compatible with local regulations, that are highly visible or affect a large number of local employees show a low degree of transfer (Rosenzweig and Nohria, 1994). Therefore, as Lu and Bjorkman (1997) also acknowledge, there is a need to describe and analyse each HRM practice separately rather than, as in most international HRM research to date, using an aggregate measure of HRM practices. However, a review of research that differentiated among HRM practices shows that there are large contradictions as to which practices are more easily transferred and which are not (EIRR, 2000; Lu and Bjorkman, 1997; Weber et al., 1998). As one of the main aims of this study is to provide additional evidence on this issue, we do not propose a directional hypothesis. Therefore, we expect that: H4. HRM practices are subject to different degrees of transfer. The following section discusses how the cultural environment has had an impact on the management of organisations in Greece and presents research findings on Greek human resources management. In addition, it gives an outline of the institutional environment and industrial relations framework and their link with HRM. Management in Greece: links with culture and institutions Several studies during the 1980s and early 1990s (Bourantas and Papadakis, 1996; Bourantas et al., 1990; Papadakis, 1993) reveal that Greek management is characterised by a concentration of power and control in the hands of top management, which in the majority of companies consists of the owners and their relatives. Strong family bonds, one of the main characteristics of Greek culture, have affected the way that companies are organised and managed (Georgas, 1993). The majority of firms in Greece are small and family owned, where the manager – who is usually the owner – makes most of the decisions and is reluctant to delegate authority to his subordinates for fear of losing his power. Since companies operate in essence as an extended family, there is an unwillingness to let anyone run them except for family members. The prevailing idea is that people cannot be trusted unless they belong to one’s extended family, which can include close friends as well as relatives. According to an analysis by Triandis and Vassiliou (1972), quoted in Georgas (1993), Greeks showed a high degree of protection, support and devotion to their in-group, while being hostile and competitive with members outside of it. Moreover, there is a strict hierarchy and younger members are expected to show respect to the elder ones and accept their authority. This is in line with Hofstede’s (1980) findings, according to which Greece scored quite high on the power distance and collectivism scale. These cultural traits explain to an extent the “small, family-owned firm” phenomenon in Greece. HRM has had a late development in Greece. A 1986 survey revealed that only 9 percent of Greek companies with more than 100 employees had an HR department and only 11 percent had a detailed HR planning policy, as opposed to 52 percent of foreign subsidiaries (Kristantonis, 1998). During the past 20 years, a few studies (Ball, 1992; Papalexandris 1991, 1992) have revealed that the use of systematic HR practices is lower in Greek firms compared to foreign subsidiaries, comprising the following

characteristics: recruitment is less formalised and highly subjective, selection is centralised and often relies on friends and/or family members, while the use of advertisements or university sources is rather limited. Academic qualifications are important but not always a prerequisite, there is an emphasis on previous experience, whereas references and recommendations play a very significant role. Compensation is largely determined at the national/industry level. Promotion is often from inside the company and is mainly based on family ties, seniority or political connections. Performance appraisal is a delicate issue. Personal likes and dislikes make it difficult for the appraisal system to be based on objective criteria, whereas external environmental uncertainty complicates target setting. Owing to close personal relations, supervisors are reluctant to reveal appraisal information to employees for fear of creating tension, while appraisal results are not often taken into consideration for identifying development needs. More recent research has shown that the effects of national culture on HRM in Greece are quite prominent (Myloni et al., 2004). HR practices in Greek firms, such as planning, recruitment and performance appraisal are to a great extent in accordance with the cultural values of Greek society. For about 40 years, industrial relations in Greece were governed by law and characterised by a centralised collective bargaining system where the state could intervene, imposing income policies and banning strike activity (Kristantonis, 1998). Owing to the highly political roles of the unions and significant governmental intervention, collective bargaining was often characterised by industrial conflicts. This has led to a rather hostile relationship among employees, employers and the state, and created an anti-capitalist union attitude (Kristantonis, 1998). However, since 1990 there have been significant changes towards independence of collective bargaining from the state and new legislation, which mainly aims at promoting flexibility in the labour market. At the same time, there has been a significant decline in the number of unions to almost half of the figure registered in the 1980s, currently being around 2,300. Union density was estimated at 25 percent in 1995, 12 percent lower than 1985, and unions are reported to have lost one-fourth of their membership – with the exception of some sectors, such as public firms and banks (Kristantonis, 1998). Nevertheless, Karantinos et al. (2000) argue that the operation of the labour market is still governed by relatively inflexible rules and regulations that limit their effectiveness. One of the main reasons behind the reluctant use of such measures is the fact that the transition to more flexible conditions was not a natural development in the case of Greece. It did not happen because employers pressed for it, nor was it a result of governmental initiative. It happened because Greece had to update and harmonise its institutional framework according to that of other, more developed European countries. Therefore, it may be some time before legislation has a real impact and such practices become a substantial part of Greek employee relations. Methodology Data collection and sample Using a survey method, we collected data from HR managers of Greek firms and MNC subsidiaries. A questionnaire, based on previous work by Schuler and Jackson (1987), as well as the Price Waterhouse/Cranfield project (Brewster and Hegewisch, 1994), was developed to assess the various components of a firm’s HRM system. This was translated to Greek, back translated into English and pre-tested in a pilot study.

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The questions focused on HRM practices with respect to managerial employees only. Since HRM practices often differ between occupational groups (Bae et al., 1998), we chose to focus on a relatively narrow category of jobs to limit the need to repeat the questions for different categories, which would have made the questionnaire too long and complicated. As a consequence, our results may reveal less adaptation at this level, since research indicates that HRM practices in MNC subsidiaries are more localised for lower hierarchical levels (Lu and Bjorkman, 1997). Questionnaires were either completed during interviews or sent by post and completed in the absence of the researcher. We followed this mixed approach in order to ensure an acceptable number of replies, since mail surveys have a record of low response rates (Harzing, 1997). The respondents also provided qualitative data on the firm’s HRM practices during the interviews. All questionnaires were addressed to Human Resource Managers of subsidiaries of MNCs located in Greece, as well as to their equivalents in Greek companies. Since the population of MNCs located in Greece is rather moderate (around 150 subsidiaries of over 50 employees at the time of the survey), MNC subsidiaries were chosen regardless of industry, ownership type or size, in order to be able to have adequate numbers to generate meaningful statistical results. Greek companies were consequently selected in order to match the industry structure of the subsidiaries’ sample. Our data collection process took place over a three-month period, between March and May 2000. In total, from the 269 companies we approached, 150 MNCs subsidiaries and 119 Greek companies, 135 participated in our study, representing a 50 percent response rate. We received a total of 82 questionnaires from foreign subsidiaries, while data about HRM in Greek companies were collected from 53 local firms. A large number of parent countries were included in our sample, although 75 percent of the MNCs involved were headquartered in the US, UK, Germany, France and the Netherlands. Greenfield sites represent 80 percent of the sample, while the rest are acquisitions. In both MNC subsidiaries and Greek firms, there is an equal representation of manufacturing and services sectors, with the largest number of responses coming from firms operating in the following sectors: chemical/pharmaceuticals, electronics, food/beverages, banks and hotels. The majority of both MNC subsidiaries and Greek firms have more than 200 employees, although Greek firms show a larger average size. Differences in size between the two samples are statistically significant. However, this selection was made on purpose as we decided to target companies that were large enough to have an HRM department and developed HR strategy. Therefore, our sample is only representative of the large Greek firms and not the total population. There are no statistically significant differences between responding and non-responding companies in terms of parent country, industry and size. Measures Several items were used to measure the dependent variables, which capture aspects of HRM practices, such as selection and recruitment, compensation, and performance appraisal. Respondents were asked to describe how closely these items matched their organizations’ current HRM practices, in most of the cases on a seven-point Likert scale. Respondents were also asked to answer a specific question concerning the degree of transfer that took place in each of these different groups of HRM practices. Moreover, following Hannon et al. (1995) and Rosenzweig and Nohria (1994),

the questionnaire included questions on the degree of subsidiary’s interaction with host country organisations and union representation, as well as control variables such as industry, age and size. All measures are reproduced in the Appendix. Results and discussion In order to test H1, we initially examined the respondents’ responses concerning the degree of adaptation of different groups of HRM practices to local practices. Means scores, as presented in Table I, show a considerable degree of adaptation. Interestingly, compensation practices show a higher level of adaptation, whereas the mean for performance appraisal practices indicates a higher level of transfer. Therefore, both H1 and H4 are initially supported. A descriptive analysis of the use of specific selection/recruitment, compensation and performance appraisal practices in MNC subsidiaries and Greek firms allows for a clearer picture of HRM transfer. The analysis points to several differences and similarities. Table II presents those differences that were found statistically significant, while Table III presents HRM practices that were applied to a similar degree in both MNC subsidiaries and local firms.

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Selection and recruitment Our results indicate that Greek firms use less standardised selection methods, prefer internal recruitment and make more use of references and recommendations than MNC subsidiaries. This is in line with the high levels of family/in-group orientation of the Greek culture, that leads Greek firms to show a preference for recruiting people they

Degree of adaptation of HRM practices Compensation Selection Performance appraisal

Min

Max

Mean

Standard deviation

1 1 1

6 6 6

3.69 3.48 2.84

1.38 1.26 1.39

Table I. Degree of adaptation of HRM practices in MNC subsidiaries

Greek firms

Subsidiaries

Sig. ( p)

Selection/recruitment Use of Interviews Use of CV data Importance of recommendations

Less Less More

More More Less

0.062 0.048 0.080

Compensation National/industry level determines basic pay Importance of employee training level Importance of employee experience Importance of employee seniority

More More More More

Less Less Less Less

0.036 0.042 0.060 0.000

Performance appraisal Written performance appraisal reports Performance appraisal by employee himself/herself Performance appraisal by employee’s subordinates Performance appraisal favouritism

Less Less Less More

More More More Less

0.042 0.000 0.060 0.006

Table II. Significant differences between Greek firms and MNC subsidiaries

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Table III. Similarities between Greek firms and MNC subsidiaries

Greek firms

Subsidiaries

Selection/recruitment Use of assessment centres/group interviews Use of psychometric tests Use of references Internal recruitment Selection by informal qualifications

Low Low High Moderate Moderate

Low Low High Moderate Moderate

Compensation Company level determines basic pay Individual level determines basic pay Profit-sharing, share options Importance of group objectives Importance of individual performance Temporary contracts

High Moderate Low Moderate High Low

High Moderate Low Moderate High Low

Performance appraisal Personal interview with supervisor Performance appraisal by employee’s peers Results evaluation rather than process Better performance rather than career development

High Low High High

High Low High High

already know and trust and base their selection on less objective criteria than MNC subsidiaries (Myloni et al., 2004). However, it is worth mentioning that interviews and CVs play a very important role in employee selection in Greek firms, used in 85 percent of the firms, while references are used in only 55 percent of the firms. Interviews with HR managers revealed that recommendations and social networking are not so important as they used to be. Moreover, the preference that Greek firms show for internal recruitment and informal qualifications criteria is moderate rather than high (Table III). Such findings may hint at a slow move towards the use of more objective selection criteria by Greek firms. At the same time, the low percentage of MNC subsidiaries that use standardised methods such as assessment centres, group interviews and psychometric tests as opposed to their considerable use of references and recommendations (even though significantly less than Greek firms), as well as their preference for internal recruitment and informal qualifications criteria, might indicate that MNC subsidiaries have adapted their selection methods to local cultural norms to some extent. Compensation Differences were found with regard to the level at which basic pay is determined. Although Greek companies still rely heavily on national and/or industry collective agreements, company level determination is gaining importance. The picture is not the same for MNC subsidiaries. Basic pay is determined mainly at the company and individual level, although we did not find any significant differences with Greek firms. National agreements are seldom used by MNC subsidiaries compared to Greek firms. These results may reflect changes towards a more flexible legislative framework that leaves some room to manoeuvre for MNCs. Achievement of group objectives and individual performance were found to be the two most important dimensions in deciding salary levels for both Greek firms and MNC subsidiaries. Although traditional

characteristics, such as employee training level and experience, as well as seniority, are still considered more important in Greek firms than in MNC subsidiaries, their level of importance is clearly diminishing. On the other hand, collective agreements support seniority and this is in contrast to performance-related compensation practice that many MNCs want to introduce. At the same time, seniority is also considered to be important in labour law for deciding the level of certain employee benefits. The offer of share options is quite limited in both firm categories, since the stock market is not very developed in Greece and most firms depend largely on bank finance. Furthermore, the stock market is quite unstable and, as one of the HR managers characteristically put it, “one cannot depend on such an insecure source for employees’ pay. The majority of employees in Greece prefer immediate payment and do not want to count on shares that can be cashed in the long term”. Some subsidiaries are able to give share options which are traded in foreign stock markets, but this only prevails for a few top executive positions. Culture as well as tax regulations affect the transfer of fringe benefits. A subsidiary HR manager of a French MNC said: “French law does not impose high taxes on some of the bonuses as Greek law does, so there is no point in transferring them to the Greek subsidiary”. Results also show that the percentage of temporary contracts is quite low in both firm categories. HR managers reported that headquarters found it problematic to introduce flexible contracts, as fixed/part-time contracts are not common in Greece. As one of the interviewees pointed out “everybody wants to have a permanent contract, this is traditional practice in Greece”. However, the majority of our interviewees emphasised the fact that the legal framework in Greece is gradually becoming less complex and more flexible. They also recognised that the relationship between unions and employers is less tense and that both parties have been engaged in a constructive social dialogue in order to promote good will and find solutions that will bring mutual benefit. In addition, managers agree that young employees are not so much interested in collective agreements and permanent employment, but prefer performance-related pay. Performance appraisal As shown in Table II, written reports are used much more in MNC subsidiaries than Greek firms. Results also show that personal interviews between supervisor and employee are highly used in both Greek firms and MNC subsidiaries and the employee’s supervisor is clearly the person responsible for appraisal in both cases. However, employees, their peers or their subordinates are less likely to participate in performance appraisal in Greek firms than in MNC subsidiaries. Performance appraisal appears to be in a state of development in Greek firms and currently based on more subjective criteria, which is in line with the high levels of family/in-group orientation and power distance that characterise Greek culture (Myloni et al., 2004). Our findings indicate that MNCs have effectuated a considerable degree of transfer of their performance appraisal practices to their subsidiaries. On the other hand, it is worth pointing out that it is not so common for peers and subordinates to participate in the performance appraisal process, even in MNC subsidiaries. In addition, almost none of the subsidiaries implemented the 360-degree performance appraisal, although the majority of their headquarters make use of this practice. HR managers reported that the practice faced strong resistance,

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especially in unionised subsidiaries. They noted that employees were not ready to accept this kind of appraisal and that it would take some time before it could be applied. Furthermore, Table III indicates that both firm categories use performance appraisal for promotion purposes rather than career development, and evaluate results rather than processes. This could be due to the low levels of performance and future orientation of Greek culture (Myloni et al., 2004). The previous discussion shows that in general MNCs adapt to local conditions up to a certain extent, depending on the nature of the particular HRM practice. Specifically, we find certain practices that are very difficult or even impossible to transfer to the present Greek environment. Some of these practices, such as specific selection procedures or the 360-degree appraisal, are not in line with cultural norms; in a similar vein compensation practices such as fringe benefits, temporary contracts etc., are in contrast to labour regulations. Results are in line with previous research by Weber et al. (1998) for selection practices, and Lu and Bjorkman (1997), Rosenzweig and Nohria (1994), and Verburg et al. (1999) for performance appraisal and compensation practices. We therefore found support for the argument that, due to cultural and institutional forces, HRM practices in MNC subsidiaries located in Greece will resemble local norms to some extent, and that different HRM practices are subject to different degrees of transfer. Turning to our second hypothesis, we find a significant negative relationship between employee union membership and HRM transfer for compensation (Spearman’s rho: 2 0.176, p ¼ 0:062; one-tailed) and performance appraisal (Spearman’s rho: 2 0.244, p ¼ 0:016; one-tailed), but not for selection. Such findings could imply that some compensation and performance appraisal practices are subject to unionisation forces and institutional pressures to a greater degree than selection practices. Furthermore, our data supported the argument that the level of transfer of HRM practices will be negatively related to the degree of the subsidiary’s interaction with host country organisations. Correlations for HRM transfer of selection (Spearman’s rho: 2 0.196, p ¼ 0:040; one-tailed), compensation (Spearman’s rho: 2 0.215, p ¼ 0:028; one-tailed) and performance appraisal (Spearman’s rho: 2 0.207, p ¼ 0:033; one-tailed) practices were significant. These findings suggest that MNC subsidiaries are influenced by the management practices of local organisations with which they interact.

Culture and institutional interactions with control variables Industry Bivariate analysis showed that the banking sector had the lowest level of HRM transfer in the services industry, something that was also confirmed by our interview findings. Banks are very localised because of the competitiveness of the local market and dynamic nature of the sector as increasing numbers of mergers and acquisitions take place. Banks are also characterised by very strong unions. According to another interviewee, bank unionism is a major hurdle for the transfer of some HR practices, something that has led some MNCs to abandon setting up subsidiaries in Greece. However, it is worth mentioning that sectoral influences on HRM transfer are still present once the unionisation factor is accounted for.

Age Bivariate analysis also showed that older MNC subsidiaries had a lower level of HRM transfer compared to “middle-aged” ones. Indeed, most of the HR managers in older subsidiaries admitted that culture was a problem mainly because of the mentality and way of thinking of the majority of employees who have been working in the same company for many years. In such cases, people are very difficult to change because change represents a move away from a familiar situation, their comfort zone. One HR manager said that the subsidiary provided “an excellent working environment, employees were friends above all and showed high loyalty for the company”. The parent company found it very hard to transfer some of its HRM practices, particularly those related to performance appraisal. Under such circumstances an objective system of appraising employees, using face-to-face interviews and peers’ views was viewed with great distrust. Another possible reason why older MNC subsidiaries showed a lower level of transfer is the fact that at the time they were established the Greek institutional environment was very strict. Complicated labour law and extensive bureaucratic controls restricted their freedom to introduce some practices. Size Our quantitative results showed that the transfer of performance appraisal practices was significantly higher in small subsidiaries (chi-square: 9.156, p ¼ 0:027; two-tailed), while selection practices were mostly transferred in both small and medium-sized (200-500 employees) subsidiaries (chi-square: 7.040, p ¼ 0:075; two-tailed). Furthermore, the transfer of compensation practices was lower in large subsidiaries, though not significantly so. Finally, we found larger subsidiaries to be more likely to use traditional local practices, such as taking into account employee seniority, when deciding salary levels or relying on national/industry agreements in order to determine basic pay. At the same time, small subsidiaries are much less likely to recognise collective bargaining. The implication of such findings is that HRM practices will generally be more difficult to transfer in large subsidiaries. This is in line with previous arguments (Gooderham et al., 1999) that large firms should/do adopt more socially responsible HRM practices, as they have more visibility and are under more pressure to gain legitimacy and acceptance. Conclusions and implications The aim of this paper was to investigate how factors originating from the host country’s cultural and institutional framework and environment impact on the transfer of HRM practices to MNC subsidiaries located in Greece. Results indicate that certain cultural and institutional forces lead MNCs to adapt practices conforming to local norms up to a point. At the same time, they point to a considerable degree of HRM transfer, something that results in the use of hybrid HRM practices. As we have discussed, examining the level of transfer of HRM practices as one block without distinguishing between individual groups of practices obscures important differences. Our findings support the argument that certain HRM practices are more localised and affected by the host country’s cultural and institutional environment, while other practices are more likely to be integrated throughout the MNC and show a higher level of conformity to the headquarters’ practices.

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In terms of its limitations, the present research suffers from using HR managers as the sole respondent for companies in the sample. Although the “key-informant approach” is widely used (De Cieri and Dowling, 1999), it runs the risk of common method variance (Philips, 1981). The use of multiple respondents (other managers and employees at both headquarters and subsidiary level) would serve to validate the reports of HR managers, but such an approach was not practically feasible. However, the statistical tests – such as Harman’s one-factor test (Podsakoff and Organ, 1986) – that we undertook to assess the presence of common method variance in our results indicated that this issue is not likely to be a major concern in our study. A further limitation is that we focused on HRM practices used only for white-collar employees; hence blue-collar workers were not included. Our decision in this respect was driven by the fact that it was not possible to collect information about all employees. However, as already mentioned, we would expect that HRM transfer in MNC subsidiaries would be less prominent at lower levels. This research contributes to the field of international HRM in that it uses both cultural and institutional factors in order to examine HRM transfer. The study shows that using only one framework may not be adequate to identify the multiple influences on the transfer of HRM practices. In addition, the investigation of transfer of HRM practices to the Greek context makes an important addition to the field, since research in this area is limited. Our study has indicated that there are some signs of change in both cultural values and the institutional framework in Greece. There is a noticeable move towards more objective criteria in both employee selection and compensation. Performance related pay is a much more important determinant of employee basic pay than seniority. Employees give more importance to fairness and have become more individualistic. HR managers in both MNC subsidiaries and Greek firms revealed that the younger generation, as well as those who have studied and worked abroad, are more flexible and willing to change, innovate and initiate/accept new practices. Similarly, the once heavy regulated environment has become more relaxed and thus there is more flexibility and room to manoeuvre for MNC subsidiaries. It seems that HRM in Greece is in a state of development and potentially fundamental change. Such observations can be of considerable importance to management practice. They imply that although the Greek cultural/institutional framework might inhibit a wholesale transfer of HRM practices, it is possible for MNCs to transfer some HRM practices. Our results could be particularly helpful to MNCs when making important decisions about which practices are more easily transferred into the Greek socio-cultural context and which practices have to be adapted to some degree. At the same time, the changing environment hints towards a need for constant research and evaluation of which practices are best suited to a specific socio-cultural context at any given time. References Adler, N.J. and Bartholomew, S. (1992), “Managing globally competent people”, The Academy of Management Executive, Vol. 6 No. 3, pp. 52-65. Bae, J., Chen, S. and Lawler, J.J. (1998), “Variations in human resource management in Asian countries: MNC home-country and host-country effects”, The International Journal of Human Resource Management, Vol. 9 No. 4, pp. 653-70.

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Schuler, R.S. and Rogovsky, N. (1998), “Understanding compensation practice variations across firms. The impact of national culture”, Journal of International Business Studies, Vol. 29 No. 1, pp. 159-77. Schuler, R.S., Dowling, P.J. and De Cieri, H. (1993), “An integrated framework of strategic international human resource management”, The International Journal of Human Resource Management, Vol. 4 No. 3, pp. 717-64. Scott, R.W. (1995), Institutions and Organizations, Sage, Beverly Hills, CA. Sorge, A. (1995), “Cross national differences in personnel and organisation”, in Harzing, A.W.K. and Van Ruysseveldt, J. (Eds), International Human Resource Management, Sage, London, pp. 99-123. Tayeb, M.H. (1998), “Transfer of HRM practices across cultures: an American company in Scotland”, International Journal of HRM, Vol. 9 No. 2, pp. 332-58. Taylor, S., Beechler, S. and Napier, N. (1996), “Toward an integrative model of strategic international human resource management”, Academy of Management Review, Vol. 21 No. 4, pp. 959-85. Teagarden, M.B. and Von Glinow, M.A. (1997), “Human resource management in cross-cultural contexts: emic practices versus etic philosophies”, Management International Review, Vol. 37 No. 1, pp. 7-20. Trompenaars, F. (1993), Riding the Waves of Culture: Understanding Cultural Diversity in Business, Nicholas Braeley Publishing, London. Verburg, R.M., Drenth, P.J.D., Koopman, P.L., Van Muijen, J.J. and Wang, Z. (1999), “Managing human resources across cultures: a comparative analysis of practices in industrial enterprises in China and The Netherlands”, The International Journal of Human Resource Management, Vol. 10 No. 3, pp. 391-410. Weber, W., Kabst, R. and Gramley, C. (1998), “Human resource policies in European organisations: country vs company-specific antecedents”, paper presented at the 6th Conference on International Human Resource Management, Paderborn, 22-28 June. Whitley, R. (1992), European Business Systems. Firms and Markets in Their National Contexts, Sage, London. Yuen, E.C. and Kee, H.T. (1993), “Headquarters, host-culture and organizational influences on HRM policies and practices”, Management International Review, Vol. 33 No. 4. Further reading Jain, H.C. (1983), “Cross-cultural management of human resources and the multinational corporation”, Indian Journal of Industrial Relations, Vol. 19, pp. 101-13. Appendix Level of HRM transfer Selection/compensation/performance appraisal practices are similar to those of the parent company as opposed to the local company practice (three items, seven-point Likert scale; similar to parent – similar to local).

Selection and recruitment (1) Selection methods used (application forms, assessment centres, psychometric tests, interviews, CV data, references, group interviews).

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(2) Low / high importance of recommendation and/or personal acquaintance with the potential candidate (seven-point Likert scale; not important – very important). (3) Internal / external recruitment (seven-point Likert scale; largely internally – largely externally). (4) Selection criteria based on informal qualifications (seven-point Likert scale; not at all – very much).

534 Compensation (1) Level of basic pay determination (national/industry, company, individual). (2) Importance of several items on decisions relating to salary levels: achievement of group objectives, individual performance, employee age, seniority, training level and experience (five-point Likert scale; of very little importance – of outmost importance). (3) Variable pay components (profit-shares, share options, bonuses). (4) Percentage of temporary contracts. Performance appraisal (1) Method(s) used in appraising employee performance (personal interview between supervisor-subordinate, informal/non-written feedback, written reports). (2) People who participate in employee performance appraisal (supervisor, employee himself/herself, peers, subordinates). (3) Extent to which favouritism influences performance appraisal (seven-point Likert scale; not at all – very much). (4) Process / results evaluation (seven-point Likert scale; process – results). (5) Primary objective of employee performance appraisal (seven-point Likert scale; performance improvement – career development). Subsidiary interaction with host country organisations (1) The degree of the subsidiary’s reliance on local technological and managerial expertise. (2) The degree of strength of the relationship the subsidiary has with local suppliers. Union representation Proportion of employees who are members of a trade union.

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Influences on HRM practices in MNCs: a qualitative study in the Australian context Peter McGraw

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Macquarie University, New South Wales, Australia Keywords Multinational companies, Human resource management, Centralized control, Australia Abstract This paper uses data from interviews with HRM managers of the Australian operations of overseas multinational companies to critically question the analytical utility of a number of standard factors that have traditionally been claimed, in the international HRM literature, to influence decisions concerning the appropriate balance between centralization and localization in HRM. The variables reviewed are primarily structural: industry sector, strategic role of the subsidiary, administrative heritage and formal organizational structure. The data suggest that the firms modify their formal structures frequently in response to environmental turbulence and have evolved towards structural forms that are radically asymmetrical. Two variables that have received limited academic attention to date but which critically mediate the pattern of intended changes are identified. First, the perception by key actors in subsidiaries of HR competence elsewhere in the MNC network, particularly head office. Second, the propensity of the staff in the subsidiary to lobby politically against changes they did not perceive to be rational.

Introduction This paper is focused around a central issue relating to the management of HR in multinational companies (MNCs) – the appropriate balance between centralization and localization and the factors that influence decisions concerning this trade-off. This issue is significant not only for understanding HRM practices in MNCs themselves but also for properly conceptualizing overall patterns of HRM in countries with high concentrations of overseas MNCs. This paper uses qualitative data from a wider, mixed method, project examining HR practices in overseas MNC operating in Australia. The data come from interviews with HR managers of local subsidiaries of overseas owned MNCs. The genesis of the paper lay in frequent unsolicited, critical, comments made by respondents when asked about decisions to centralize or localize using extant frameworks derived from the academic literature on this question. The major conclusions of this study are that many of the existing themes, particularly those based in the structural paradigm have less relevance in today’s dynamic environment than previously. Moreover, as noted in a recent study from the UK (Ferner et al., 2003), decision-making in MNCs is highly political and leads to structural outcomes that are subject to much temporal fluctuation. The paper begins by outlining the importance of MNC subsidiaries in global terms and for Australia in particular. Key factors from the academic literature on MNCs and IHRM that are claimed to impact decisions to centralise or localise are then presented to inform the discussion of later findings. The methodology of the study is outlined followed by a discussion of the main empirical findings and the implications of these for conceptualising MNCs. Finally, conclusions are drawn and limitations of the study were noted.

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The global influence of MNCs and MNCs in the Australian economy and labour market MNCs are commonly identified as the main agents in the internationalisation of business (Ferner, 1994; Phatak, 1989; Rugman, 1999) and key actors in the wider processes “globalisation” (Child, 2000). The claim that MNCs constitute the engine of globalisation is supported by data reporting that both foreign direct investments by MNCs, and cross-border trade within MNCs, have increased dramatically in the last decade. According to a recent review, more than half of the first tranche of world trade is now shipments inside the same company or, in other words, not trade as traditionally defined (James, 1999). The United Nations Committee on Trade and Development, estimates that the value of international production from the approximately 63,000 MNCs and their 690,000 subsidiaries in 1998 was in excess of $US 11 trillion (UNCTAD, 1999, 2000). This compares with world trade in 1998 of $US 7 trillion, which illustrates that international production by MNCs, has surpassed world trade as “the dominant international dynamic” (Mathews, 2002, p. 22). Furthermore, it has been estimated that 20 per cent of the workforce in developed economies are directly employed by MNCs with up to 40 per cent working for their suppliers (Ruigrok and Van Tulder, 1995). All of these data highlight the point that an understanding of the management practices of MNCs is vital for an informed conceptualisation of contemporary management practice generally. In the case of Australia this is particularly relevant given the high level of overseas MNCs operating in the country and their importance in innovating and leading change to the landscape of Australian HRM. In relation to ownership, the first Australian Workplace Industrial Relations (AWIRS 90) (Callus et al., 1991) indicated that 28 per cent of workplaces had some foreign ownership and 15 per cent of workplaces (with over 20 employees) were wholly foreign owned. A total of 15 per cent of all workplaces in the survey had overseas head offices. Whilst this is a relatively small number of companies it disguises their influence, which can be better estimated by the size of these organisation – they employed 27 per cent of the workers in the survey. According to AWIRS 95, the percentage of private sector workplaces with some degree of foreign ownership had stayed constant at 28 per cent. Similarly, the percentage that were wholly foreign owned had remained stable, with only a slight increase to 17 per cent. However in the 1995 survey “private sector workplaces that were partly foreign owned employed 38 per cent of the employees in the private sector part of the survey population, while those that were (wholly) foreign owned employed 23 per cent of this population” (Morehead et al., 1997, p. 66). By 1995, the percentage of workplaces with head offices outside Australia had also increased slightly to 18 per cent (Morehead et al., 1997, pp. 66)[1]. Historically, the role that MNCs have played in introducing innovations in HRM into Australia has been well documented (Gardner and Palmer, 1997, Wright, 1995). Some of these practices have included Scientific Management, more strategic and planned approaches to the recruitment selection and maintenance of workforces, job re-design, computerisation, just in time production techniques, formal grievance handling procedures and quality initiatives. Practices claimed by Wright (1995) to have been employed at a higher frequency in MNC subsidiaries than locals firms have included training, joint consultation, communication procedures, decentralisation of bargaining and high commitment work practices aimed at removing sources of worker

discontent and at the same time reducing employee interest in union membership. The trend of MNCs to employ sophisticated work practices at higher rates than local companies continues today as revealed in a recent analysis of survey data relating to HRM practices in MNC subsidiaries in Australia (McGraw and Harley, 2003). In summary, the high percentage of Australian workers employed by overseas MNCs and the ongoing propensity of MNC subsidiaries to set the pace in HR reform and innovation means that any proper academic understanding of HRM in Australia must be informed by an understanding of the role of MNC subsidiaries and how their HR policies and practices are shaped. Moreover, from a practical point of view, HR managers struggle daily with the issues raised by working in complex, multi-centred organisations such as MNCs. This is particularly true when it comes to finding the appropriate balance between centralised and standardised HR practices within the company on the one hand and diversified practices in response to local needs on the other (Bartlett and Ghoshal, 1989). Centalisation and localisation in MNCs MNCs have been defined as “enterprises that have a network of wholly or partially (jointly with one or more foreign partners) owned producing, marketing or R&D affiliates located in a number of countries” (Phatak, 1989). The competitive strength of the MNC is largely based on a degree of cross-border integration based on specialization, interchange and scale. As Kobrin (1991) has argued, integrated MNCs gain competitive advantage from comparative advantage (based on different national resource advantages), the bargaining strength and flexibility of an international network and economies of scale, scope and learning. In many respects subsidiaries in an integrated MNC network subsidiaries are often incomplete economic entities because their value is related to and dependent upon other parts of the network (Kobrin, 1991). However, levels of integration within MNCs can vary substantially. Traditional reasons advanced for these variations include industry (Porter, 1986), markets (Doz and Prahalad, 1986; Ghoshal and Nohria, 1993) and administrative heritage (Bartlett and Ghoshal, 1989). Also relevant here are factors such as the strategic role of the subsidiary (Bartlett and Ghoshal, 1989; Jarrillo and Martinez, 1990). In the HRM domain, arguments for centralization revolve around the need for common systems to facilitate capabilities, knowledge and information flows as well as people throughout the network. Thus core HR assets such as recruitment, training and compensation and performance systems which are consistent not only facilitate integration but also leverage capability (Rosenweig and Nohria, 1994). Other factors that can impact the level of integration are those that traditionally impose diversity upon organizational practice within MNCs. Foremost amongst these is the fact that MNCs operate in multiple external environments with widely varying social, economic, political and legislative institutional pressures which impose a force for localisation. In the HRM domain, factors such as the diverse nationalities of employees and thus diverse cultural orientations, different regulatory environments relating to labour markets, problems of communication resulting from geographic dispersion and the varying strategic goal orientations of different operating units all have a countervailing influence against integration. A final variable that has been hypothesized to influence the level of centralization of HRM, as well as other management practices, within MNCs subsidiaries is the country of origin of the parent.

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Substantial research into this by Anthony Ferner and his collaborators (Ferner, 1997, 2000; Ferner and Quintanilla, 1998; Ferner et al., 2001, 2003) has pointed out varying tendencies to centralize associated with country origin with, for example, US MNCs are much more likely to centralize and formalize HRM practices than European MNCs. In summary, understanding HRM practices in MNCs is vital for understanding the global diffusion of management practice. The central research problem in studying HRM in MNC subsidiaries, from both a practical and a theoretical perspective, is the issue of centralisation versus localisation. This is reflected in studies from many academic perspectives which have examined local responsiveness and global integration in MNCs. Some studies have focused on factors which are external to the organisation, such as industry sector and markets, whereas others have examined factors internal to the organisation such as strategy, structure, corporate culture, management style, administrative heritage, political processes and country of origin effects. Notwithstanding this substantial and growing presence of MNCs in Australia noted earlier, the HRM practices of MNC subsidiaries in Australia are an under-researched, with only a handful of studies focused directly on this topic. Taken together these studies suggest some notable differences between the HR practices of local companies with those of MNC subsidiaries and some interesting patterns relating to country of origin (McGraw and Harley, 2003; Rodwell and Teo, 1999; Walsh, 2001). However, these studies were all quantitative in method, and whilst revealing interesting patterns in the data, do not reveal much of the nuance relating to why HRM in MNCs should be different to those of local firms or much about the complex dynamics of decision-making in complex, multi-centred organizations such as MNCs. Moreover, the quantitative analyses in these studies typically only tests propositions derived from extant theory and does not seek to question or go beyond these. This study begins to address the paucity of qualitative data relating to the HR practices of overseas MNCs operating in Australia by reporting data from a small qualitative study. The data challenge some of the theoretical orthodoxy that has come to be accepted in the study of HR practices in MNC. The remainder of this paper will outline in more detail a number of specific factors that have been claimed to influence subsidiary HR practices within MNC subsidiaries. It will assess the adequacy of some of these approaches in the light of the interview data collected for this study and identify gaps in the theory which are suggested by these data Methods The data for this study were gathered as part of a larger study which employed both quantitative and qualitative methods. This paper reports only the qualitative data. The data were collected during semi-structured interviews with senior HR managers (either country heads or heads of functions) from the Australian branches of overseas MNCs. Altogether 15 managers were interviewed. Respondents were from a variety of industry sectors including: investment banking, manufacturing, pharmaceuticals, defence, health care and business services and represented MNCs from a number of countries including the USA, UK, France, Netherlands, Switzerland and Germany. The sample was primarily one of convenience using the researcher’s access to key personnel and introductions from previous respondents.

Interviewees were asked to respond to an interview schedule inviting them to rate the degree of centralization and localization in all major HR functions and also to comment on the rationale for and contingent factors influencing their choice. In addition participants were encouraged to reflect their own perceptions of major issues impacting subsidiary-parent relations over HR issues. This paper uses data only from participant commentaries which were extensive and often frank and critical. These commentaries were content analysed and coded (Easterby-Smith et al., 1991) then related back to the original themes in the interview schedule. As such the data highlights the sense making of the individuals (Weick, 1995) and is used to highlight deficiencies in establishes theoretical frameworks and typologies and suggest ways in which these may be augmented or amended. Industry sector Porter (1986) in his work on different patterns of international competition noted that some industries are multidomestic and tend to compete nationally, whereas others are organised more globally and compete at the international level. Examples of the former would include clothing, footwear, retailing and distribution, whereas the latter would include electronics, transportation equipment and cars. With regard to HR, multidomestics would be expected to conform more to local norms, whereas global organisations would be expected to have higher levels of internal HR integration as a reflection of their need to move people, products and information around more from country to country. As already noted HR practices in MNCs in general tend to be more locally isomorphic than internally consistent. However variation across industries was tested by Rosenweig and Nohria (1994) who found no significant support for the distinction in a survey of 249 foreign MNCs operating in the USA. Whilst the majority of industries examined as part of this study would tend more towards global integration, no significantly different responses were noted from any of the interviewees with regard to a direct question on industry influences. Even the health care, business services and pharmaceutical companies, which at first appeared to operate like multidomestics, had many mechanisms for internal coordination of HR matters, particularly those related to managers. Generally, respondents typically referred to the need for higher levels of internal integration in order to become more competitive in response to globalisation and the requirement of coordination for the purpose of internal efficiency. All respondents referred to regular informal discussions with other subsidiaries in the region, as well as head offices, and several had formal positions chairing or coordinating international HR teams aimed at speeding up diffusion of HR practice around “core” elements such as performance management and learning and development. In view of these findings it might be timely to question the ongoing utility of the multidomestic-global dichotomy. Perhaps in light of the emergence of divisionalised MNC structures, that will be discussed later, along with intensified global patterns of competition and better communications systems it is becoming increasingly difficult to identify MNC subsidiaries that operate in pure multidomestic form (Mathews, 2002). This is parallel to the argument that it is also harder today to find industries that are only domestic and compete only in one market without reference of any kind to others. In other words globalisation has made redundant the notion that any company, other than the most parochial, can operate only with reference to its domestic market.

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Moreover, even for a function such as HR, which is heavily oriented towards local circumstances, there is an increasing reference within MNCs towards central policy. Strategic role of the subsidiary Subsidiaries of MNCs represent one part of a complex inter-organizational network, but not all subsidiaries play similar roles. Some subsidiaries are far more important than others in relation to the whole organisation. For example size, turnover, market position and functional role will all determine the amount of power a particular subsidiary wields within the overall organisation. Typologies of MNC roles have been developed (Bartlett and Ghoshal, 1989; Jarrillo and Martinez, 1990) which outline these roles. If a subsidiary follows an autonomous strategy it is likely to carry out the majority of its functions independently of the parent organisation. On the other hand, if it follows a receptive strategy its functions will tend to be highly regulated by and integrated with the rest of the organisation. Alternatively, the subsidiary may follow an active strategy wherein its activities are carried out with some autonomy from the parent but within a coordinated framework. In relation to HR this can mean that the organisation may have low levels of integration with parent policies and practice but high local responsiveness, the reverse or a combined approach. Research evidence for this pattern has been noted in one study conducted of MNC subsidiaries conducted in Taiwan (Hannon et al., 1995). Evidence from this study indicates that, in relation to HR, the strategic importance of the subsidiary is substantially mediated by other factors, particularly political factors. All respondents noted that Australia was a very small market for their organisations. Nonetheless, in terms of accepting HR practices determined by head office all claimed to be highly activist. Indeed several commented on how the Australian offices were (in)famous within their corporate structures for having a voice out of all proportion to their size and campaigning vigorously to reject practices that did not suit their needs. Respondents from the Investment Banking sector, in particular, were highly critical of head office HR policies and rejoiced in their feisty reputation. Comments such as “They know we won’t take s***”, “We are still in the process of educating them”, “Unlike some of the other (bigger) countries we will kick up a stink if they ask us to do something that is silly”, and even “We’ve got rid of the Brits and the French and now we’re educating the Dutch” were all comments freely aired. All interviewees in this research commented on their high frequency of negotiation of HR policy with head office and all noted a differentiated acceptance of policy. Two key dimensions that emerged in all interviews were the perceptions of HR competence in other parts of the organisation and the negotiated nature of the relationship with head office. One respondent, when looking at the typology of subsidiary roles discussed above, commented: There’s something of everything in there. On some issues we are here and on others we are there. Overall we’ll give input if we know about decisions and upcoming policies. But it depends a lot on the issue. And whether or not we get listened to is another matter.

And commenting on his reluctance to attend regional coordination meetings with much bigger subsidiaries

. . . my perception that we have a better link in Australia than there is in much of the off-shore stuff. I do think that it’s patting ourselves on the back, but I think that um. . .there’s more synergy and more integration. We are at places in HR in Australia where they’re still talking about trying to get overseas. Particularly in Asia, you know, where they talk about being business partners. They talk about the desire to have relationships with the business heads and the business. . .well we’ve got them. So, there’s no value added to us in going. . . you know, we go over there. . . I can hear myself saying, you know what’s all this about, we already do it.

Another commented: You have to be practical in interpreting policy. For example headcounts, we’ve had edicts about hiring freezes when I needed to replace someone critical. So I found someone and brought them on part time (four days a week) for a while until things settled down. You have to learn how to break the rules otherwise you couldn’t run the business. . .I know all the people in head office and they know me. . .I know which rules I can break and which ones I can’t.

In conclusion whilst the power position of the subsidiary is critical to the amount of control wielded from head office, it is clearly mediated by personal relationships, negotiation ability, the national culture of the subsidiary and perceived competence of HR elsewhere in the organisation, including head office. Subsidiaries prepared to negotiate more tenaciously for a degree of autonomy may compensate for their relative lack of power from other sources. Interestingly, although HR competence has been mentioned as an influence variable in earlier theoretical work from the resource dependency perspective, notably Taylor et al. (1996) it usually only refers to HR competence in the organisation as an undifferentiated entity. What is clear from this study is that from the subsidiary perspective HR competence is regarded as a differentiated within the organisation. Moreover, this is clearly a factor mediating the degree of control a subsidiary is prepared to accept voluntarily from other parts of the organisation. Administrative heritage Bartlett and Ghoshal (1989) have identified a typology of international business strategy, operations and organizational structures which relates approximately to the period when a firm became an international organisation and which have pre-disposed such organisations to structural problems in today’s marketplaces as a result of their different “administrative heritages”. These “administrative heritages” are also broadly matched with a European, American and Japanese type of multinational organisation, although there are notable exceptions to this in each type. A striking feature of the companies in this study was the amount of internal structural change they were experiencing. Only one, family owned, company in the study had not been impacted by a merger, takeover or acquisition in the previous five years. Several companies had been through multiple cycles of merger or takeover activity and had completely changed their identity. In the most extreme case some employees of one bank had been through five changes of ownership in five years. What was striking about comments in relation to administrative heritage was the need to integrate remnants of previous heritages from the old organisations and to overlay new identities. As an example one respondent commented:

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If we think about X, they invented (product mentioned), and these two names are the people who actually founded the companies. The same with Y, he founded (Company named). . .Z you know, founded (Z company named). I mean we had A and B too, but they’ve been hived off now, because of um. . .basically, market dominance. You then had a position where a company like C, existed for um. . .120 years before (DEF – the respondents conglomerate parent) decided to get out of mainstream aerospace. So, DEF then really got outside of domestic USA business to international, by acquiring C and then four years later acquiring X. So they acquired two entirely different cultures. Which in turn didn’t fit the culture of DEF. And I think our challenge to-day is, what is the DEF culture that we’re trying to build.

Whist these organisations carry many aspects of their history around with them the overwhelming reference point for identity today is the present or the future. Coping with ambiguity, which is a natural bi-product of rapid change, has been largely addressed by structural means, which are dealt with in the next section. The national character of parent companies was also commented on extensively here but this too will be addressed later in the paper in the section on country of origin effects. Organisation structure There are many ways in which firms organise their international activities (Deresky, 2000). Most large companies use either international divisions or integrated global structures based around product, function or geography. Many larger MNCs combine elements of all of these into either differentiated or formal matrix structures. Current trends in MNC management appear to be towards product-based global structures or transnational matrix approaches (James, 1999). The companies in this study reflected a diverse range of organizational structures but all reflected some elements of matrix structure based on product and region. What was striking from the analysis was the amount of dissatisfaction with organizational structures. All respondents except one (who had the simplest structure) commented negatively on the ambiguity generated by matrix structures. Moreover, a degree of cynical humour was evident. I only just received a rather important communication to-day on a major meeting that’s going on overseas about er. . . musical chairs at senior management level with a couple of chairs moved but all the same mob in different positions. And reading between the. . .there’s more communication to come – but reading between the lines, um. . .they’re um. . .it looks like they’re going to limit the region, because subsidiaries are back in fashion again, back in vogue and country managers are going to have a bit more autonomy – whereas they had previously regionalised it all and had the regions controlling everything. If you hang around long enough, you see every method.

Or more earnest criticism I think where they haven’t got their act together yet – and it’ll evolve, it’s just early days – to my way of thinking, they have not adequately defined what I would . . . well I keep on using the term . . . the corporate envelope. They don’t understand yet, what it is that they ought to be centralising, what it is that should be mandated from the centre. And what freedom to act you should have at the business . . . or um . . . or region, or local level. Those things haven’t . . . are not clear.

Two common themes mentioned by all respondents were the almost constant change to structures in attempts to balance centralization and localization and the lack of organizational symmetry across different parts of the organization. For example, one

organization, at the time of interview had just collapsed its regional structure to two elements: the USA and the rest of the world. However, by the time of writing (12 months later), this decision had been rescinded and a major element of the company’s business had been spun off into a separate entity. Moreover, there was almost no symmetry in the way HR was serviced for different product lines and the Australian HR head had simultaneous local, regional and global HR responsibilities for different products within the business. In large part the perception of Australian subsidiaries was there was a lack of understanding in head office of HR issues in the Australian subsidiaries and this was reflected in part in the structures put in place to manage these. This must be offset against the fast pace of change to structure noted in most organisations. As on respondent commented, “You’re only getting a snap shot today – come back in two weeks and the picture will have changed again.” In conclusion, the perceived inadequacy of structure and the fast pace of change was even more reason in the minds of most respondents to use negotiation methods discussed earlier, both formal and informal, to find a middle way that allowed the subsidiary the necessary degree of independence to function efficiently. Conclusion and limitations As noted at the beginning of this paper, the understanding of effective management of HR in MNCs is an issue of critical importance to both scholars of management and HR practitioners. At the heart of this complex area lies the question of the appropriate balance between local autonomy and centralised efficiency. Our lack of adequate understanding of this is, in part, due to the complex interplay of structuring variables, which makes it a difficult area to research. In this paper, several of the major approaches to studying the area have been reviewed. Empirical work, where it exists has been summarised and the results of a qualitative study have been outlined. On the evidence of this data it appears that industry and strategy are becoming less analytically useful to use when seeking to understand the nature of HR in MNC subsidiaries at least given their presentation in traditional frameworks. In the case of strategy, this is particularly true since, despite repeated exhortation to the contrary, HR is often poorly aligned to international business strategy in the majority of cases (Dowling et al., 1999). Moreover, the opportunities for global interconnectedness are being exploited by many organizations even those in traditionally multidomestic industries and also in relation to core HR systems which have been traditionally more locally than organizationally isomorphic but are now more likely to be globally co-ordinated or at least monitored. Administrative heritage, whilst possibly still influential at some deep level appears to be less determistic in patterning contemporary structures and behaviours as a result of the discontinuity imposed by the volume of takeovers, mergers and acquisitions as well as the relentless pace of change dictated by competitive pressure in the international business environment. Changes to organizational structures are now perceived almost as a constant by HR managers in MNC subsidiaries. However, respondents in this paper report organizational structures that are radically asymmetrical and almost never stable. Moreover, it would appear that structural changes are also mediated by the political lobbying by key managers from subsidiaries, both HR and line. This is particularly the case when they disagree with

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the direction of change being imposed upon them by other parts of the MNC network. This in turn is mediated by perceptions of competence from local managers of the competence of others in the wider MNC network who would seek to impose change upon them. Also relevant here is the extent to which local managers perceive managers from overseas to understand local circumstances. The limitations of this study stem mainly from the fact that the data are qualitative, based on a small sample and taken from one country only. However, the conclusions mirror those of a larger study from the UK (Ferner et al., 2003) which suggest that the finding are more widely generalisable and worthy of further, larger scale work to investigate them further. Note 1. There are contradictory figures provided on foreign ownership in AWIRS 1 (Callus et al., 1991, pp. 27-8) and AWIRS 2 (Morehead et al., 1997, pp. 65-6). AWIRS 1 reports overseas head offices at 5 per cent, whereas AWIRS 2 claims the 1990 (AWIRS 1) figure as 15 per cent. There are also inconsistencies in the percentage of foreign ownership. In this paper the 1997 figures have been taken to be correct. References Bartlett, C. and Ghoshal, S. (1989), Managing Across Borders, Hutchinson, Boston, MA. Callus, R., Morehead, A., Cully, M. and Buchanan, J. (1991), Industrial Relations At Work, Commonwealth Department of Industrial Relations, AGPS, Canberra. Child, J. (2000), “Theorizing about organization cross-nationally”, in Cheng, J.L. and Peterson, R.B. (Eds), Advances in International Comparative Management, Vol. 13, JAI Press, Stamford, CT, pp. 27-75. Deresky, H. (2000), International Management: Managing Across Borders and Cultures, 3rd ed., Prentice-Hall, Englewood Cliffs, NJ. Dowling, P.J., Schuler, R.S. and Welch, D.E. (1999), International Human Resource Management, 3rd ed., South-Western, Cincinnatti, OH. Doz, Y. and Prahalad, C.K. (1986), “Controlled variety: a challenge for human resource management in the MNC”, Human Resource Management, Vol. 25 No. 1, pp. 55-71. Easterby-Smith, M., Thorpe, R. et al. (1991), Management Research: An Introduction, Sage, London. Ferner, A. (1994), “Multinational companies and human resource management”, Human Resource Management Journal, Vol. 4 No. 3, pp. 79-102. Ferner, A. (1997), “Country of origin effects and HRM in multinational companies”, Human Resource Management Journal, Vol. 7 No. 1, pp. 19-37. Ferner, A., Quintanilla, J. (1998), “Multinationals, national business systems and HRM: the enduring influence of national identity or a process of Anglo-Saxonisation”, International Journal of Human Resource Management, Vol. 9 No. 4, pp. 710-31. Ferner, A., Almond, P. et al., (2003) “The dynamics of central control and subsidiary autonomy in the management of human resources: case study evidence from US MNCs in the UK”, Organization Studies, Vol. 25 No. 2, pp. 327-56. Ferner, A., Quintanilla, J. et al. (2001), “Country of origin effects, host country effects and the management of HR in multinationals: German companies in Britain and Spain”, Journal of World Business, Vol. 36 No. 2, pp. 107-27.

Gardner, G. and Palmer, J. (1997), Employment Relations: Industrial Relations and Human Resource Management in Australia, 2nd ed., Macmillan, South Melbourne. Ghoshal, S. and Nohria, N. (1993), “Horses for courses: organisational forms for multinational corporations”, Strategic Management Journal, Vol. 14, pp. 23-35. Hannon, J.M., Huang, I.C. and Jaw, C.B. (1995), “International human resource strategy and its determinants: the case of subsidiaries in Taiwan”, Journal of International Business Studies, Vol. 26 No. 3, pp. 531-44. James, D. (1999), “Globalisation: Australia’s second chance”, Business Review Weekly, pp. 69-75, September 24. Jarrillo, J.C. and Martinez, J.I. (1990), “Different roles for subsidiaries: the case of multinational corporations in Spain”, Strategic Management Journal, Vol. 11 No. 7, pp. 501-12. Kobrin, S.J. (1991), “An empirical analysis of the determinants of global integration”, Strategic Management Journal, Vol. 12 No. 5, pp. 17-31. Mathews, J. (2002), Dragon Multinational: A New Model for Global Growth, Oxford University Press, Oxford. McGraw, P. and Harley, B. (2003), “Global or Local? Industrial relations and human resource management practices in Australian and overseas owned workplaces”, Journal of Industrial Relations, Vol. 45 No. 1, pp. 1-26. Morehead, A., Steele, M., Alexander, M., Stephen, K. and Linton, D. (1997), Changes at Work: The 1995 Australian Workplace Industrial Relations Survey, Longman, Sydney. Phatak, A. (1989), International Dimensions of Management, PWS-Kent Publishing Company, MA. Porter, M. (1986), “Changing patterns of international competition”, California Management Review, Vol. 28 No. 2, pp. 9-40. Rodwell, J. and Teo, S. (1999), “The value of employment relations in multinationals: finding the right balance”, International Business Review, Vol. 8 No. 3, pp. 309-21. Rosenweig, P.M. and Nohria, N. (1994), “Influences on human resource management practices in multinational corporations”, Journal of International Business Studies, Vol. 25 No. 2, pp. 229-42. Rugman, A.M. (1999), “Multinational enterprises and the end of global strategy”, Proceedings of Australia-New Zealand International Business Academy Conference, UNSW, Sydney, 30 September-2 October. Ruigrok, W. and Van Tulder, R. (1995), The Logic of International Restructuring, Routledge, London and New York, NY. Taylor, S., Beechler, S. and Napier, N. (1996), “Towards an integrative model of strategic international human resource management”, Academy of Management Review, Vol. 21 No. 4, pp. 959-85. UNCTAD (1999), “World Investment Report 1999: foreign direct investment and the challenge of development”, paper presented at United Nations Conference on Trade and Development, New York and Geneva. UNCTAD (2000), “World Investment Report 2000: cross-border mergers and acquisitions and development”, paper presented at United Nations Conference on Trade and Development, New York and Geneva. Walsh, J. (2001), “Human resource management in foreign-owned wokplaces: evidence from Australia”, International Journal of Human Resource Management, Vol. 12 No. 3, pp. 425-44.

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Weick, K. (1995), Sense Making in Organizations, Sage, Thousand Oaks, CA. Wright, C. (1995), The Management of Labour: A history of Australian Employers, Melbourne University Press, Melbourne. Further reading Beaumont, P., Cressey, P. and Jakobsen, P. (1991), “Key industrial relations: West German subsidiaries in Britain”, Employee Relations, Vol. 12 No. 6, pp. 3-7. Birkinshaw, J. and Hood, N. (1998), “Multinational subsidiary evolution: capability and charter change in foreign-owned subsidiary companies”, Academy of Management Review, Vol. 23 No. 4, pp. 773-95. Guest, D. and Hoque, K. (1996), “National ownership and HR practices in UK greenfield sites”, Human Resource Management Journal, Vol. 6 No. 4, pp. 50-74. Malnight, T.W. (2001), “Emerging structural patterns within multinational corporations: toward process-based structures”, Academy of Management Journal, Vol. 44 No. 6, pp. 1187-210.

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International performance appraisals Policies, practices and determinants in the case of Chinese multinational companies

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Jie Shen University of South Australia, Adelaide, Australia Keywords Human resource management, Performance appraisal, Multinational companies, China Abstract Since most literature on international performance appraisal is derived from Western MNCs, it is questionable whether the Western theories are equally powerful when applied to other national contexts. This study develops the Chinese international performance appraisal model by exploring performance appraisal policies and practices and the associated factors in Chinese MNCs. It reveals that Chinese MNCs adopt different approaches towards different groups, particularly different nationalities and managerial status. The Chinese international performance appraisals are a mix of home and local appraisal systems, and a mix of traditional Chinese personnel management and modern Western HRM concepts. Moreover, Chinese international performance appraisal policies and practices are affected by various host-contextual and firm-specific factors, and there is also an interplay between international performance and other international human resource management activities.

1. Introduction Dowling et al. (1999) state that international performance management is a strategic HRM process that enables the MNC to evaluate and continuously improve individual, subsidiary unit and corporate performance against clearly defined, pre-set objectives that are directly linked to international strategy. Performance appraisal is considered as one of several key elements of performance management. Cardy and Dobbins (1994) define performance appraisal as the process of identifying, observing, measuring and developing human resources in organisations. International performance appraisal has been a subject that attracts considerable attention from both academics and practitioners, as it is closely linked to MNCs’ international performance. While the expatriate is on assignment, the individual performance must be appraised. Given the cost of an expatriate and the important role they perform it would be anticipated that MNCs monitor and record their performance rather rigorously (Brewster, 1988; Brewster and Scullion, 1997; Dowling et al., 1999). Moreover, an MNC appraises not only parent-country nationals (PCNs), but also host-country nationals (HCNs) and third-country nationals (TCNs). Provided the design of the international performance appraisal is appropriate, it tends to have a positive effect on company performance (Sparrow et al., 1994). Janssens (1994) argues that international performance appraisal is a way of controlling international managers’ behaviour and international operations in general. International The author would like to thank the two anonymous reviewers for their useful comments in the development of this paper.

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performance appraisal is an important process for influencing both the extrinsic and intrinsic motivations of employees and their attitudes towards companies, that is, increasing employees perceptions and understanding of job tasks and subsequently their job satisfaction. A performance appraisal is also important to employees in material terms (Logger and Vinke, 1995, p. 261) and it guides managerial career development, future promotion decisions and compensation adjustments (Schuler et al., 2002). While past research has examined issues from selection to effective cross-cultural adjustment, relatively little emphasis has been placed on international performance appraisal. As a result, the primary theoretical basis for expatriate performance appraisal comes from the literature on domestic US performance appraisals (Gregersen et al., 1996, p. 712). Also, there appears to be almost universal agreement on the importance of international performance appraisal, there is, however, a lack of consensus on what is the best practice of international performance appraisal due to the complexity of international practices relating particularly to diversified operating host environment and firm-specific factors. Brewster (1988) argues that the appraisal at an international level is extremely complex because there is no obviously correct way to assess the performance of someone operating far away in circumstances not fully understood by the appraiser. Evaluation of expatriate performance is complex due to the interaction of the variables involved. Factors in the environment, such as differences in societal, legal, economic, technical and physical demands and variables associated with task and the personality of the individual, make it difficult to isolate job-related factors, set performance standards and devise procedures (Dowling et al., 1994; Gregersen et al., 1996). Peterson et al. (1996) emphasise that for the expatriate assignment, MNCs need to evaluate dimensions of performance, which are not specifically job-related, such as cross-cultural interpersonal qualities, sensitivity to foreign norms, laws and customs, adaptability to uncertain and unpredictable conditions and the host location’s integration with other MNC units. International performance evaluation involves a complex range of issues, such as the following. . The financial results are not always a good yardstick for measuring the actual contribution. . Complications arise when a “long distance” assessment takes place. Even with access to management information systems, the staff involved at headquarters may have difficulty forming a precise image of the circumstances in which the various subsidiaries have had to operate to achieve their results. Consequently, the context of performance may be lost. . Other constraints affect the implementation of international performance appraisals including the reliability of data obtained from subsidiaries and the volatility of the international environment and market differences. For example, the market development in foreign subsidiaries may be generally slower and more difficult to achieve than at home (Dowling et al., 1994; Logger and Vinke, 1995; Logger et al., 1995; Paauwe and Dewe, 1995). In exploring a MNC’s international performance appraisal system, three issues appear to be important. They are:

(1) What criteria are used by the MNC to appraise the performance of its employees? (2) How is international performance appraisal implemented by the MNC? (3) What factors are associated with an MNC’s international performance appraisal policies and practices?

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In the following sections, this paper will discuss these three issues by drawing upon the existing literature and examining the empirical data in the Chinese context.

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2. Performance appraisal criteria According to Gregersen et al. (1996) and Dowling et al. (1999), performance appraisal criteria should include the following three major aspects (1) Hard goals are objective, quantifiable, and can be directly measured as return-on-investment (ROI), market share, and so on. (2) Soft goals tend to be relationship- or trait-based, such as leadership style or interpersonal skills. (3) Contextual goals attempt to take into consideration factors that result from the situation in which performance occurs. Logger and Vinke (1995) propose more detailed criteria of appraisal and state that a combination of criteria may be used, depending on the employee’s job description, and detailed criteria are sometimes less strictly applied. While the performance appraisals of expatriates who are assigned for special technical projects and short-term stays tend to be operational and task-focused, evaluations of the expatriate managers tend to be more strategic, more related to the operation of the entire unit and the other locations (Evans, 1986; Selmer and de Leon, 1997). Paauwe and Dewe (1995) suggest that criteria of assessment should be accessible, easy to understand, equitable and motivating for every manager, regardless of nationality and cultural background. Hossain and Davis (1989) see technical ability, management skill, cultural empathy, adaptability and flexibility, diplomatic skill and language aptitude as the criteria of assessment in the case of expatriates. According to Janssens (1994), considering the tension between local responsiveness and internal consistency, the evaluation of international managers may differ according to three criteria: local, home and worldwide standards. The choice of parent company standards will be a reflection of the importance of internal consistency within the MNC, and multiple performance criteria have been recommended to reduce bias and to acknowledge the multi-dimensional nature of the MNC environment. In addition, Paauwe and Dewe (1995) emphasise that MNCs need to appraise the performance of both employees and the operation as a whole. Moreover, “the consequences of (long-term) global decisions for subsidiary management must be taken into consideration for performance evaluation” (Dowling et al., 1999, p. 120). If a firm emphasises the short-term profitability, its subsidiaries may try to meet the targets at the cost of damaging inter-subsidiary relations, employee relations and the relations with local governments. As a result, the corporate interests may be damaged in the long run, in the most times after expatriates return homes. In another situation the MNC sets up an overseas subsidiary in order to tie up the competitor’s resources in a particular market. “The balance sheet of this particular subsidiary might be

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continually in the red” (Pucik, 1985, p. 430). Under this circumstance, the MNC ought to be flexible in choosing a criteria to appraise its overseas operations. 3. Conduct of performance appraisals Brewster (1988) found that half of European MNCs had no formal appraisal systems for expatriates. Because international performance appraisal is more complex than that of domestic operations, more time is needed to achieve results in subsidiaries than is customary in a domestic market. The literature suggests a link between performance expectations and expatriate failure rates, in that company expectations of high performance may contribute to failure. To ease the acculturation process and avoid costly mistakes, expatriates should be exempted from active management duties in the first six months of arrival in a foreign country (Harrari and Zeira, 1978). Tung (1984) found that US multinationals generally do not allow the expatriates sufficient time to adapt to the foreign environment; hence the individual may be labeled as a misfit too soon. Japanese companies do not expect peak performance from expatriates until the third year of assignment. Hamill (1987) speculates that British companies also have lower performance expectations than American firms. Welch (1994) argues that the outcomes of effective expatriate management include lessening the incidence of expatriate failure and improving expatriate performance during the overseas assignment. One way to overcome the dilemma of cultural adaptation is to use host-country nationals to assist in devising a suitable appraisal system and to advise on the conduct of the appraisal in the subsidiary (Dowling et al., 1999). However, Logger and Vinke (1995, p. 261) state that a manager who is used to guiding and supervising a group through involvement and participation could receive a negative appraisal in a local culture if local management is called in to give their opinion. In such a circumstance, an ex-expatriate would be needed to put the situation right. This argument is echoed by Black et al. (1992, p. 719) who state that the ideal appraisal team would seek a balance of raters from both the host and home country. Dowling et al. (1994) suggest that in addition to data on the results of the foreign subsidiary, the appropriate regional general manager can also evaluate the subsidiary’s chief executives using an appraisal form that is similar to that used to evaluate domestic-based senior managers. This method allows the MNC to collect appraisal data that is more comparable across subsidiaries so that promotion and transfer decisions may be made more objectively. However, this personal appraisal data must also be considered in the context of the constraints facing strategic-level appraisal of foreign subsidiaries. An important aspect of an effective performance management system is the provision of timely and appropriate feedback from the evaluation process. Regular feedback is an important aspect in terms of meeting targets and revising goals, as well as assisting in the motivation of work effort (Dowling et al., 1999). Lindholm (1999) argues that the use of performance feedback assists employees in reducing job errors and minimizing the risks of learning through trial and error. Fair performance evaluations and frequent performance feedback constitute an important predictor of job satisfaction at the workplace and contribute significantly to the personal growth. As for performance appraisals for different nationals within MNCs, MNCs should have cultural sensitivity as international performance appraisal confronts the issue of cultural applicability (Adler, 1991; Dowling et al., 1994). For example, in some Asian

countries, such as China and Japan, feedback is normally not given in order to “save face” and group meetings are often held in appraisal processes in order to achieve group harmony. This kind of Asian culture is strikingly different from Western individualism cultures (Dowling et al., 1994; Shen, 2003a). According to Dowling et al. (1994), US MNCs have often used the same appraisal form for HCNs and TCNs as for the domestic employees. This practice has drawbacks as HCN and TCN employees may not understand the appraisal system and the domestic staff may not understand the appraisal results. Therefore, Dowling et al. (1994) suggest that MNCs devise a corporate-wide (global) appraisal approach but allows for modifications to suit cultural differences. Administration consistency and cultural empathy can be achieved through instant feedback, coaching, accountability-based performance appraisals, development feedback and HR plan. 4. Factors affecting international performance appraisals Brewster (1988) found that there were clear national and industrial differences in international performance appraisals and these differences are caused by various variables. The appraisal of expatriate performance requires an understanding of variables that influence an expatriate’s success or failure in a foreign assignment. Lindholm (1999) further states that the practice of evaluating and giving feedback on performance is likely to be adapted to the host culture. The need for some modifications to performance appraisal systems depends on the culture in which the MNC subsidiary operates. Dowling et al. (1994) argue that MNCs need to determine if performance problems are due to management failure or to environmental constraints. The task variables should not be evaluated in isolation from the subsidiary environment context. Also, firm-specific factors, for instance, a firm’s strategy, affect international performance appraisal. In particular, to pursue a competitive global strategy, an MNC is likely to focus on global performance rather than the subsidiary or regional market performance. Also, an MNC’s international strategy strongly affects what constitutes performance and its relative importance, i.e. efficiency vs productivity, long-term development and short-term profitability, etc. Some authors have also noticed the mutual influence between international performance appraisal and other IHRM activities. For example, Logger and Vinke (1995) point out the importance of the link between selection, training needs and appraisal criteria, which could result in a more integrated HRM policy. Performance management increases job fit through the identification of training and development needs that are consistent with individual and organisational goals (Lindholm, 1999, p. 49). However, due to a paucity of empirical studies, there is still little known about intervening factors associated with international performance appraisal and the interplay between appraisal and other IHRM policies and practices. 5. The current study By reviewing the literature it is found that the existing literature on international performance appraisal has been mainly focused on expatriate performance appraisal rather than considers all employees including PCNs, HCNs and TCNs, reflecting ‘the scarcity of research on the topic and the general lack of an acceptable way to address the situation’ (Dowling et al., 1994, p. 115). Moreover, most of the existing literature has been derived from Western industrialised economies, particularly within the US

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context, there is a lack of empirical research on international performance appraisal in diverse cultures and economies (Dowling et al., 1994, 1999, Lindholm, 1999; Vance et al., 1992), such as MNCs from developing or transitional economies (e.g. China). According to Dowling et al. (1999), Schuler et al. (1993), Shen (2003b) and Taylor et al. (1996), there is no universally effective IHRM policy per se. MNCs might adopt strikingly different international performance appraisal policies and practices by taking external environment, firm-specific factors and home HRM systems into consideration. Therefore, whether the Western theories are equally powerful when applied to other national contexts is questionable. These deficiencies need to be remedied by further empirical researches. To a certain extent the current study tries to move forward towards this direction through exploring performance appraisal policies and practices for all employees and factors associated with these policies and practices in Chinese MNCs. Since 1978 the year China began its economic reform and open door policies, the rapid process of the internationalisation of Chinese capital has resulted in the development of many newly internationalised firms (Shen, 2003a, p. 31). The research into IHRM in Chinese MNCs becomes timely and necessary. Performance appraisal in domestic operations has been undergoing significant changes in China since the economic reform. Under the planned economy (from 1949 to 1978), the purpose of performance appraisal was more commonly used for cadres mainly for promotion and transfer. There was almost no performance appraisal carried out for workers. Easterby-Smith et al. (1995) reported that the criteria for cadre appraisal were heavily reliant on political loyalty, seniority and the maintenance of harmonious relations with peers and subordinates. The style of appraisal was the “superior-rating-subordinate” system, which lacked specified criteria and appraisal techniques commonly used in Western market economies (Zhu and Dowling, 1998). To a great degree the results of appraisals depend on the relationship (guanxi) with leaders and performance appraisals were not related to pay. Since the economic reform, performance appraisals have been widely used in Chinese organisations (Easterby-Smith et al., 1995; Zhao, 1994), although these are still divided into two categories: performance appraisal of cadres and workers. According to Zhu and Dowling (1998), 74.8 percent of firms carry out performance appraisal annually, 14.3 percent twice a year and 11 percent monthly. The appraisal criteria for cadres are De (political attitudes and morality), Neng (capability), Qing (behaviour and working attitudes) Ji (performance and achievement). There is an emphasis on “democratic” soundings of opinions, which is directly linked to the Chinese culture, such as the importance of harmonious peer and subordinate relationships (Easterby-Smith et al., 1995). Therefore, Chinese firms are underlining “soft” performance criteria, such as party-loyalty, positive working attitude, sound moral practices and good personal relationships. The performance appraisal procedure includes self-assessment, peer group discussion and superior’s final comments (Zhu and Dowling, 1998). This kind of procedure is different from the hierarchical judgement, such as the supervisor or line manager and the employee face to face appraisal, which is commonly adopted by Western organisations. Performance appraisal in China is only used at a low level for communication. There is little feedback from appraisers to appraisees. The results of performance appraisal usually remain confidential because management feels reluctant to pass on any negative information to appraisees so that direct confrontation is avoided and “face” can be saved.

The appraisal criterion for workers is mainly work effectiveness. Some new approaches have been developed, such as job specification, management by objectives (MBO) and internal subcontracting (Dowling et al., 1999). Performance-related pay has been widely applied by Chinese enterprises, but is related only to fringe rewards, rather than basic pay. The lack of openness, transparency, mutual influence and objective standards in Chinese performance appraisal practices have provoked large-scale scepticism and resistance to the implementation of performance appraisals. Moreover, according to Benson et al. (2000), Chinese enterprises often focus on ensuring conformity and compliance with rules by emphasising negative discipline-punishment, restrictions and personal loss of face rather than cultivating employee commitment. As Shen (2003b) argues an MNC’s IHRM policies and practices are influenced by various host contextual and firm-specific factors, it is hypothesised that when operating abroad Chinese MNCs adopt different performance appraisal systems from that of domestic operations. The data in this study are derived from ten leading Chinese MNCs. The case companies consist of seven service and technology import/export companies and three manufacturing companies, covering a range of financial services, electronics, airline, health products, natural resources trading, technology import and export, mineral products and shipping services. Seven of them are state-owned enterprises (SOEs), while others are share-holding companies. Share-holding enterprises are also called joint stock enterprises, which are usually financed and controlled by some large SOEs or other companies in China. Total number of employees and overseas employees are between 1,000 and 80,000, and 280 and 18,000 respectively. The case companies are denoted as A, B, C, D, E, F, G, H, I and J in this study. This study used a semi-structured interview-based survey for collecting data. Yin (1994) states that exploratory research and qualitative methodology are very useful approaches to contribute to theory building. In total 30 in-depth interviews were carried out between February and September 2001. In each case company one general manager, one HR manager at headquarters and one executive manager in the UK subsidiaries have been interviewed. However, the three kinds of managers were not asked identical interview questions. Questions for the general manager and HR managers were focused on the firm’s overall IHRM polices and strategy. The executive managers were asked about IHRM policies and practices in the particular UK subsidiary. Follow-up telephone calls, e-mails and visits were also made to clarify specific issues. Company documents, reports and magazines, especially those related to strategy, structure, culture, size and performance, were also collected whenever available during the research. 6. Empirical findings 6.1 Conduct of international performance appraisals All the selected firms adopt a dual approach to performance appraisal of employees who are different nationalities or in different managerial positions, but pursue a uniform and consistent performance appraisal policy across national boundaries. Headquarters conduct performance appraisals of executives/deputy executive managers, but leave full responsibility to executive managers of subsidiaries for performance appraisals of non-executive employees, including both HCNs and expatriates. Headquarters do not even hold any record of appraisals of non-executive

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HCNs. The term “expatriate” in terms of performance appraisals means those PCNs whose international assignment periods are longer than six months. PCNs whose assignment periods are shorter than six months remain appraised in the parent company. Headquarters set and administer performance appraisal criteria for the executive/deputy executive managers. In all selected firms executive and deputy executive managers are appraised annually, mainly based on the information provided by subsidiaries. In addition, in companies A, B, C, D and G, headquarters also send delegations to subsidiaries to appraise executive/deputy executive managers every two years. Executive/deputy executive managers in companies E, F, H, I and J, are called back to headquarters to be appraised every two years. Performance appraisal procedures for executive/deputy executive managers include self-assessment and peer opinions. These procedures are the same as those in home operations. Performance appraisals of non-executive employees are conducted annually, normally in December or January before the Chinese New Year. Performance appraisal procedures for non-executive HCNs are host-based, including self-assessment and assessment by direct managers or executives. Performance appraisal procedures for non-executive expatriates vary between the case companies. Companies B, C, D and G use self-assessment and peer opinions. The remaining firms use self-assessment and assessment by direct managers or executives. Expatriates are not exempted from active management duties and performance appraisal in the first six months of arrival in a foreign country. This practice is similar to US MNCs (Tung, 1984), but different from Japanese and British MNCs (Hamill, 1987; Tung, 1984). This finding does not lend support to Harrari and Zeira (1978) who suggest that to ease the acculturation process and to avoid costly mistakes expatriates should be exempted from active management duties in the first six months of arrival in a foreign country. No local management and former expatriates are called in to participate and assist in performance appraisal for expatriates. The selected Chinese MNCs do not provide training for appraisers in order to improve appraisers’ skills. There is a lack of transparency and feedback in performance appraisal processes in all the case companies. The selected firms do not directly or immediately give appraisees feedback on the appraisal results, or give explanations to appraisees if appraisal results are negative. Whether appraisees agree with appraisal results or not, it does not usually affect the final outcomes of appraisals unless obvious mistakes have been made, for example, if wrong information is included in the appraisal process. The majority of interviewees believed that lack of communication and the reluctance of appraisers to pass negative evaluation on to their appraisees usually make appraisees unaware of problem areas, and this is an area in Chinese international performance appraisal that needs to be improved. 6.2 Performance appraisal criteria There are differences in performance appraisal criteria for PCN and HCN executive/deputy executive managers. The criteria for PCN executive/deputy executive managers are De, Neng, Qing and Ji. There are strong emphases on short-term fluctuation in sales and profitability of particular subsidiaries, together with conformity to organisational values, rather than long-term corporate strategic goals and creativity, even in some companies with a high reliance on international markets. The business objectives are pre-set in contracts and signed by headquarters

and the executive/deputy executive managers. The reason for this, as the HR manager in company A puts it, is that it is unfair if we consider the individual’s short-term work in terms of the long-term objectives.

Many other interviewees also support this argument. The appraisal criteria for HCN executive/deputy executive managers, however, are mainly focused on Ji, i.e. the business achievement. The appraisal criteria for non-executive HCNs are reflected in job descriptions and individual objectives, which are specified in the contracts and annual work plans at the beginning of each year. The performance appraisal criteria for non-executive expatriates are also reflected mainly in the four aspects of De, Neng, Qing and Ji. However, there are different emphases on these four aspects of appraisal criteria between the case companies. These differences are shown in Table I. Table I indicates that performance record and compliance with the firm’s regulations are regarded as the most essential appraisal criteria by all the selected firms. The majority of the case companies also consider industriousness, diligence and positive attitudes. Financial performance, as mentioned earlier, in the form of short-term fluctuation in sales and profitability, is the major concern in terms of the performance record. The selected firms do not pay much attention to “soft” aspects, such as political attitudes, morality and good personal relationships whilst these are very important criteria in the home performance appraisal processes. Performance appraisals in the selected firms involve static rather than forward-looking attitudes because performance appraisal is primarily used for determining bonuses and salaries rather than personal development; therefore, there is more emphasis on past performance than strategic concerns.

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6.3 Managerial views on conducting international performance appraisals Interestingly, all general and HR managers during the interviews felt that it is harder to conduct international performance appraisals than in domestic operations. Major reasons reported for this are geographical distances resulting in inaccurate information and rapid changes in host environments leading to difficulty in judging subsidiaries’ Criterion

Respondents reported the item of appraisal criteria

Political attitudes

HR manager (Companies A and B), HR and executive managers (Companies C and G) HR and executive managers (Companies A, B, C, D, F and G) HR and executive managers (Companies A, B, C, D, E, F, G, H, I and J) HR manager (Companies A, B, C, D and G) HR manager (Companies A and B), HR and executive managers (C, D and G) HR and executive managers (Companies A, B, C, D, E, F, G, H, I and J)

Hard-working and positive attitudes Performance record Morality Good personal relationships Comply with the firm’s regulations

Note: Only HR and executive managers were asked the question regarding performance appraisal criteria

Table I. Performance appraisal criteria of non-executive PCNs in the case companies

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efficiency and making comparisons between different units. On the contrary, all the executive managers in subsidiaries reported that it is much easier to carry out international performance appraisals than in domestic operation. They reported two common reasons. First, performance appraisal methods in some firms including own assessments and appraisal meetings between appraisees and their direct managers, are simpler and more straightforward than those used in home operations as no peer opinion is consulted nor is a group discussion conducted. Second, performance appraisal criteria are more measurable and objective as performance appraisals are normally focused more on the hard aspects, such as “ji”, rather than “de”. All executive managers also argued that fair and straightforward performance appraisal criteria are major factors contributing to low expatriate failure. .

7. Factors associated with international performance appraisal 7.1 Contextual factors 7.1.1 Political factors. This study shows that performance appraisals become more difficult and complicated in the politically unstable countries and regions because the influence of instability on performance needs to be taken into account. As the HR manager in company H puts it, “you can’t expect a company to do well in a war”, most interviewees reported that subsidiaries usually under-performed and therefore normally adopt more flexible appraisal criteria in the regions where there are political and military conflicts. 7.1.2 Economic factors. All the case companies take economic factors into consideration in setting business targets and international appraisal methods. The case companies usually do not have high expectations of business achievement in the economically underdeveloped regions. In contrast, the competition in developed regions is fiercer than in underdeveloped regions. As the HR manager in company H stated, we are under more pressure in America than at home or in some other countries. This is why we differentiate business objectives in different countries.

7.1.3 Socio-cultural factors. The dual approaches to international performance appraisal reflect socio-cultural differences between China and host countries, especially social attitudes towards performance appraisals. Companies A, B, C, D and F only consider morality and peer opinion in performance appraisals for PCNs rather than HCNs. The case companies give more consideration to egalitarianism and saving face in the expatriate management than in the HCN management. Moreover, due to the socio-cultural factors’ effect the selected Chinese MNCs become less concerned with so-called “soft aspects” in international performance appraisals, such as political attitudes (usually party loyalty) and moral merits, that are given much attention in home operations. 7.2 Firm-specific factors 7.2.1 International strategy. Companies H and I that have the international differentiation strategy adopt a polycentric IHRM and tend to localise their international performance appraisals. Companies B, C, D, F and G pursue a global segmentation strategy and exercise more control over performance appraisals by using more home appraisal methods and criteria in subsidiaries. The remaining firms including companies A, E and J that adopt a global differentiation strategy are

somewhere in between. There is an obvious tendency in these three firms to localise performance appraisals. In the words of the general manager of company A: We find it difficult to explore the local market due to lack of localisation of employment. We have been trying to localise and reach international standards.

7.2.2 International organisation structure. This study shows that companies B, C, D and G having a global functional structure export more home appraisal systems abroad. Companies that have a global area divisional structure, such as companies H and I, tend to be more adaptive to local appraisal systems. Companies A, E and J having a mix of global area divisional and functional structure are stuck in the middle. However, only six out of thirty interviewees confirmed the effect of international organisation structure on international performance appraisal, indicating that this effect has not been widely recognised in the case companies. 7.2.3 Organisational culture. The organisational culture of companies H and I is a mixture of role and task culture. In these two companies, executive managers in subsidiaries have been given more responsibilities for performance appraisals. Senior management places greater emphasis on whether objectives are achieved rather than how. The management philosophy is described by interviewees from the two companies as “he governs best who governs least”. Appraisal criteria are more focused on business achievement rather than work attitudes. The remaining companies have a mix of power and role culture. In these companies headquarters exercise more control over international performance appraisal and more attention has been paid to “soft” aspects, such as political and working attitudes and morality. 7.2.4 Stage of internationalisation. Stages of internationalisation vary significantly between the case companies and the effect of stage of internationalisation on performance appraisal is apparent. Companies that are at the international phase, including companies A, B, C, D, E, D and G, regard control and co-ordination of corporate-wide activities as the spearheads of the IHRM function. These firms tend to export more home performance appraisal systems abroad. Companies H, I and J are at the global stage and try to achieve global integration and national responsiveness simultaneously by employing adaptive performance appraisal systems. 7.2.5 Type or niche of industry. Companies in the global industry, such as companies H and I, adopt international-oriented and localised appraisal systems. The remaining firms that are in the multidomestic industry, however, are relatively more reluctant to adapt to local appraisal practices. These findings lend support to Dowling et al. (1999) who argues that if the firm is in a multidomestic industry, the role of the HR department will most likely be more domestic in structure and orientation. If the multinational is in a global industry, the HRM function is required and structured to deliver the international support. Moreover, employees in trading enterprises, such as companies C, D, F, and G, and sales offices of companies H, I and J, are more likely than in other firms to be appraised and rewarded on the basis of individual achievements. Also, business objectives are more flexible in sales offices than in overseas manufacturing companies where the realisation of these objectives is less affected by market fluctuations. As manufacturers, companies H, I and J are more concerned with long-term objectives. 7.2.6 Reliance on international markets. The case MNCs have different roles for their subsidiaries, which mainly depend on the extent of reliance on international markets.

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Companies with a high reliance on international markets, such as companies H and I, tend to create IHRM models that are more suited for day-to-day running of the subsidiaries. These two companies entirely localise performance appraisals and give executives full responsibilities for performance appraisals in their overseas manufactories. Companies C, D and G’s primary interests are focused on the domestic market and have little incentive for exploring local markets. These three companies largely rely on their home appraisal systems. Companies A, B, E, F and J are somewhere in between. These four firms have been conducting China-related business. However, exploring the local market has become their major concern. Their performance appraisal systems are gradually turning into host-based. 7.3 The influence of other IHRM policies and practices This study shows that there is an interplay between international performance appraisal and other IHRM activities, including recruitment and selection, management development, reward and compensation. First, companies pursing the polycentric staffing approach, such as companies H and I, are likely to adopt host-based appraisal systems. Case companies pursing the ethnocentric staffing approach, such as companies B, C, D, F and G, tend to export more home appraisal systems. Companies pursing an ethnocentric staffing approach with a strong tendency towards polycentric staffing, such as companies A, E and J, are likely to be somewhere in between. Since the case companies adopt dual approaches to employees with different nationalities and with different managerial positions, the recruitment and selection approach strongly affects an MNC’s choice of performance appraisal approaches. Secondly, there are two purposes of conducting performance appraisals. One is for rewarding employees. The other is for management or personal development. The procedures and criteria for different purposes vary significantly. For the first purpose, international performance appraisals are more likely to be localised. Firms pay less attention to political attitudes, moral issues and personalities. Executive managers in subsidiaries are given more responsibilities for such performance appraisals. For the second purpose, headquarters exercise more control on appraisals. Also, more attentions have been paid to potentials and other “soft” criteria. Third, because all case companies adopt performance-related pay, different reward and compensation approaches lead to varied performance appraisal practices. Companies conducting the post-based pay tend to adopt the group-based appraisal system (Shen, 2004, p. 22). Companies having the host-based pay adopt the individual-based system. On summarising the major empirical findings, Figure 1 presents a model of international performance appraisal developed in the Chinese context. This model integrates approaches to international performance appraisal and the intervening factors and other IHRM activities that have an effect on international performance appraisal policies and practices. 8. Discussion and conclusion The literature review reveals that international performance appraisal is an underdeveloped area and the IHRM literature has been focused on the expatriate management, other national employees are considerably excluded. Also, most existing literature is derived from MNCs from Western advanced economies, the

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Figure 1. A model of international performance appraisal in the Chinese context

representability of the literature as “international” HRM is arguable. This study explores international performance appraisal policies and practices for all employees, intervening factors associated and the interplay between performance appraisal and other IHRM activities in Chinese MNCs, an area that has been adequately reported in the literature. To a certain extent it remedies the deficiency of empirical research into international performance appraisal in diversified cultures and economies. It reveals that Chinese international performance appraisal systems have the Chinese characteristics that are different to existing findings from Western MNCs, particularly American and European MNCs. The first major difference is that Chinese MNCs adopt different performance approaches to employees with different managerial positions and with different nationalities. This practice is different from MNCs that apply a universal performance appraisal policy to all employees regardless of nationalities and managerial status. Secondly, some authors, such as Scullion and Starkey (2000), argue that international performance appraisal should be aligned with long-term strategic goals of the organisation. However, the major purpose of performance appraisal in Chinese MNCs is to decide how much to pay rather than for the organisational development by being concerned more with short-term business achievement. Thirdly, Chinese MNCs use different appraisal methods and criteria from Western MNCs. Unlike Western MNCs, Chinese MNCs consult peer opinions in performance appraisal for executive and deputy executive managers. Logger et al. (1995) and Dowling et al. (1999) suggest that host-country nationals assist in appraisals. Such practice has not taken place in Chinese MNCs. Performance appraisal in Chinese MNCs is less transparent than in Western MNCs and is short of feedback and communication. In addition, some authors, such as Hossain and Davis (1989), suggest that personal ability and skill including technical ability, management skill, cultural empathy,

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adaptability and flexibility, diplomatic skill and creativity should be criteria for appraisals. In contrast, Chinese MNCs are concerned more about industriousness, diligence, positive attitudes and compliance with the firm’s regulations. However, the findings of this study lend some support to the existing literature, such as: . Apart from the differences, there are commonalties in international performance appraisal procedures and criteria between Chinese and Western MNCs, as some of the Chinese international performance appraisal policies and practices are host-based. . The finding of this study is consistent with the literature that MNCs tend to pursue a uniform and consistent international performance appraisal policy across national boundaries (Dowling et al., 1999; Lindholm, 1999). . This study supports Brewster (1988), who found that there is a general lack of formal performance appraisal procedures in MNCs. Compared to the domestic operations in China, performance appraisal procedures and criteria for parent executive and deputy executive managers are the same as the home practices, regardless of whether headquarters send delegations to subsidiaries to conduct assessments or executive and deputy executive managers are called back to be assessed. There is no formal performance appraisal in either domestic or international operations. The key criteria in both domestic and international performance appraisals are short-term divisional objectives, mainly relating to changes in sales and profitability, and conformity with organisational values rather than long-term corporate strategic goals or creativity. Performance-related pay systems are widely applied in both domestic and international operations. The previous studies argue that MNCs commonly adopt standardised performance management policies and practices at both their home country and in overseas subsidiaries (Anderson, 1990; Dowling et al., 1999; Lindholm, 1999; Lu and Bjorkman, 1997). This is not the case of Chinese MNCs. The differences in performance appraisals between domestic and international performance appraisals in the Chinese context are reflected in the following three aspects. (1) First, in domestic operations, Chinese companies tend to emphasise political attitudes and the maintenance of harmonious relations with peers and subordinates. The selected Chinese MNCs, however, regard the performance record (ji) as the most important international performance appraisal criterion, but pay less attention to morality and seniority (de). Only very few firms consider the political attitudes and morality in the international performance appraisal of expatriates. No firm considers these elements with regard to HCNs. (2) Secondly, peer opinions are not always consulted during the process of performance appraisal for non-executive expatriates and HCNs, indicating the adaptation to the local practices. However, consulting peer opinions through group meeting, such as “bu man hui yi” (departmental meeting) or “xiao zhu hui yi” (group meeting), is very common in the home performance appraisals. (3) Thirdly, there are differences in international performance procedures and criteria between case companies. Such differences hardly appear in the domestic operations.

It is concluded that overall international performance appraisal in Chinese MNCs is more progressive than the domestic system in terms of adopting modern Western HRM concepts. However, the current practices of international performance appraisals in the selected Chinese MNCs appear to be more convergent to the home practices, but more divergent from Western MNCs. There is also an apparent tendency that Chinese international performance appraisals Westernise as Chinese managers interviewed in this study expressed a strong desire to reach “international” standards in human resource management. The model developed in this study indicates that international performance appraisal policies and practices in Chinese MNCs are affected by various host-contextual and firm-specific factors. These factors include political, economic, socio-cultural, international strategy, international organisation structure, organisational culture, stage of internationalisation, type or niche of industry and reliance on international markets. While other factors including legal factors, international experience, size of international operation and top management’s perception of home HRM systems have an influence on other international HRM activities, they are not closely associated with international performance appraisals. The model also shows that there is an interplay between international performance appraisal and recruitment and selection, management development and reward and compensation. This study therefore suggests MNCs take various factors into consideration in order to formulate and implement effective international performance appraisal policies and practices. Although this model has been developed in the Chinese context, it has implications for MNCs, from other transforming and emerging economies, particularly in Asia. However, it should be cautious that the degree of the effect of intervening factors and other IHRM activities on international performance appraisals may vary to other national contexts.

References Adler, N.J. (1991), International Dimensions of Organizational Behaviour, 2nd Ed., PWS-Kent Publishing Company, Boston, MA. Anderson, J.B. (1992), “Compensating your overseas executives, part 2: Europe in 1992”, Compensation & Benefits Review, Vol. 22 No. 4, pp. 25-36. Benson, J., Debroux, P., Yuasa, M. and Zhu, Y. (2000), “Flexibility and labour management: Chinese manufacturing enterprises in the 1990s”, The International Journal of Human Resource Management, Vol. 11 No. 2, pp. 183-96. Black, J.S., Gregersen, H.B. and Mendenhall, M.E. (1992), “Evaluating the performance of global managers”, Journal of International Compensation and Benefits, Vol. 1, pp. 35-40. Brewster, C. (1988), “The management of expatriates”, Human Resource Research Centre Monograph Series, No. 2, Cranfield School of Management, Cranfield. Brewster, C. and Scullion, H. (1997), “Expatriate HRM: a review and an agenda”, Human Resource Management Journal, Vol. 7 No. 3, pp. 32-41. Cardy, R.L. and Dobbins, G.H. (1994), Performance Appraisal: Alternative Perspectives, South Western Publishing, Cincinnati, OH. Dowling, P.J., Schuler, R.S. and Welch, D. (1994), International Dimensions of Human Resources Management, 2nd ed., Wadsworth, New York, NY.

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Dowling, P.J., Welch, D.E. and Schuler, R.S. (1999), International Human Resource Management: Managing People in a Multinational Context, South-Western College Publishing, Cincinnati, OH. Easterby-Smith, M., Malina, D. and Lu, Y. (1995), “How culture sensitive is HRM? A comparative analysis of practice in Chinese and UK companies”, The International Journal of Human Resource Management, Vol. 6 No. 1, pp. 31-59.

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Evans, P. (1986), “The context of strategic human resource management policy in complex firms”, Management Forum, Vol. 6, pp. 105-17. Gregersen, H.B., Hite, J.M. and Black, J.S. (1996), “Expatriate performance appraisal in US multinational firms”, Journal of International Business Studies, Vol. 27 No. 4, pp. 711-52. Hamill, J. (1987), “International Human Resource Management in British Multinationals”, in Van Den Bulke, D. (Ed.), Proceedings of the Thirteenth Annual Meeting of the European International Business Association, Antwerp, pp. 266-78. Harrari, E. and Zeira, Y. (1978), “Training expatriates for managerial assignment in Japan”, California Management Review, Vol. 20 No. 4, pp. 56-62. Hossain, S. and Davis, H.J. (1989), “Some thoughts on international personnel management as an emerging field”, Research in Personnel and HRM, No. 1, pp. 121-36. Janssens, M. (1994), “Evaluating international managers’ performance: parent company standards as control mechanism”, The International Journal of Human Resource Management, Vol. 5 No. 4, pp. 853-74. Lindholm, N. (1999), “National culture and performance management in MEC subsidiaries”, International Studies of Management & Organization, Vol. 29 No. 4, pp. 45-66. Logger, E. and Vinke, R. (1995), “Compensation and appraisal of international staff”, in Harzing, A. and Ruysseveldt, J. (Eds), International Human Resource Management, Sage, London, pp. 252-69. Logger, E., Vinke, R. and Kluytmans, F. (1995), “Compensation and appraisal in an international perspective”, in Harzing, A. and Ruysseveldt, J. (Eds), International Human Resource Management, Sage, London, pp. 144-55. Lu, Y. and Bjorkman, L. (1997), “MNC standardization versus localization: HRM practices in China-Western joint ventures”, The International Journal of Human Resource Management, Vol. 8 No. 5, pp. 614-28. Paauwe, J. and Dewe, P. (1995), “Human resource management in multinational corporations: theories and models”, in Harzing, A. and Ruysseveldt, J. (Eds), International Human Resource Management, Sage Publication, London, pp. 75-98. Peterson, R.B., Napier, N. and Shim, W.S. (1996), “Expatriate management: the differential role of national multinational corporation ownership”, The International Executive, Vol. 38 No. 4, pp. 543-62. Pucik, V. (1985), “Strategic human resource management in a multinational firm”, in Wortzel, H.V. and Wortzel, L.H. (Eds), Strategic Management of Multinational Corporations: The Essentials, Wiley, New York, NY. Schuler, R.S., Dowling, P.J. and De Cieri, H. (1993), “An integrative framework of strategic international human resource management”, The International Journal of Human Resource Management, Vol. 5 No. 3, pp. 717-64. Schuler, R.S., Budhwar, P.S. and Florkowski, G.W. (2002), “International human resource management: review and critique”, The International Journal of Management Reviews, Vol. 4 No. 1, pp. 41-70.

Scullion, H. and Starkey, K. (2000), “In search of the changing role of the corporate human resource function in international firms”, The International Journal of Human Resource Management, Vol. 11 No. 6, pp. 1061-81. Selmer, J. and de Leon, C.T. (1997), “Succession procedures for expatriate chief executives”, Human Resource Management Journal, Vol. 7 No. 3, pp. 80-8. Shen, J. (2003a), “International human resource management policies and practices: an integrative framework in the chinese context”, unpublished PhD thesis, Brunel University, UK. Shen, J. (2003b), “An integrative IHRM model”, The Proceedings of 7th International Human Resource Management Conference, Limerick, Ireland, 4-6 June. Shen, J. (2004), “Compensation in Chinese multinationals”, Compensation & Benefits Review, Vol. 36 No. 1, pp. 15-25. Sparrow, P.R., Schuler, R.S. and Jackson, S.E. (1994), “Convergence or divergence: human resource practices and policies for competitive advantage world-wide”, The International Journal of Human Resource Management, Vol. 5 No. 2, pp. 267-300. Taylor, S., Beechler, S. and Napier, N. (1996), “Towards an integrative model of strategic human resource management”, The Academy of Management Review, Vol. 21 No. 4, pp. 959-77. Tung, R.L. (1984), “Strategic management of human resources in multinational enterprises”, Human Resource Management, Vol. 23 No. 2, pp. 129-43. Vance, C.M., Mcclaine, S.R., Boje, D.M. and Stage, D.H. (1992), “An examination of the transferability of traditional performance appraisal principle across cultural boundaries”, Management International Review, Vol. 32, pp. 313-26. Welch, D. (1994), “Determinants of international human resource management approaches and activities: a suggested framework”, Journal of Management Studies, Vol. 31 No. 2, pp. 139-64. Yin, R.K. (1994), Case Study Research, 2nd ed., Sage, Thousand Oaks, CA. Zhao, S.M. (1994), “Human resource management in China”, Asia-Pacific Journal of Human Resources, Vol. 32 No. 2, pp. 3-12. Zhu, J.H. and Dowling, P.J. (1998), “Performance appraisal in China”, in Selmer, J. (Ed.), International Management in China: Cross-cultural Issues, Routledge, London, pp. 115-36. Further reading Beer, M. (1987), “Performance appraisal”, in Lorsch, J.W. (Ed.), Handbook of Organizational Behaviour, Prentice-Hall, Englewood Cliffs, NJ, pp. 286-300. Fletecher, C. and Williams, R. (1997), “Performance management, job satisfaction and organizational commitment”, British Journal of Management, Vol. 7 No. 2, pp. 169-79. Selmer, J. and de Leon, C.T. (2002), “Parent cultural control of foreign subsidiaries through organisational acculturation: a longitudinal study”, The International Journal of Human Resource Management, Vol. 13 No. 8, pp. 1147-65. Shen, J. and Edwards, V. (2004), “Recruitment and selection in Chinese MNEs”, International Journal of Human Resource Management, Vol. 15 No. 4/5, pp. 814-35. Sparrow, P. and Hiltrop, J.-M. (1994), European Human Resource Management in Transition, Prentice-Hall, New York, NY.

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Work orientation as an element of national culture and its impact on HRM policy-practice design choices Lessons from Sri Lanka Anil Chandrakumara Business Administration Department, Faculty of Management Studies and Commerce, University of Sri Jayewardenepura, Colombo, Sri Lanka

Paul Sparrow Professor of International HRM, Manchester Business School, Manchester, UK Keywords National cultures, Developing countries, Sri Lanka, Human resource management Abstract This study extends the contention that national culture affects human resource management (HRM) policies and practices and explores meaning and values of work orientation (MVWO) as an element of national culture in predicting HRM policy-practice design choices. The data were obtained in a sample of 487 employees in domestic and foreign-invested firms (FIF) in Sri Lanka. Eight distinct MVWO patterns emerged from the sample. Twenty-six HRM design choices were clustered into four components: planned and open career and empowering system, qualifications and performance based reward system, generic functional perspective of job-person fit, and job-related competence and rewards. All the four HRM preference practices are influenced by MVWO. The evidence suggests MVWO relativity of HRM design choices in Sri Lankan context. The question of transferability of empowering and performance management to developing countries becomes evident. Moreover, MVWO relativity of HRM design choices is relatively high in FIF, reflecting that the “type of ownership” can have an impact not only on actual HRM practices but also on preferred HRM practices in FIF. The existence of business in the long-run and host government expectations also seem to be important factors in understanding HRM preferences in FIF. Theoretical and practical implications for international HR managers are discussed.

Introduction World economies are increasingly exposed to international trade, global competition and capital flows, and marketisations. At the same time, many scholars and practitioners today regard human resource management (HRM) as the source of sustained competitive advantage for organisations operating in a global economy (Aycan et al., 2000; Schuler, 2000; Sparrow and WU, 1998). In line with these developments, there has been a great deal of recent research interest in the field of international and comparative HRM. National culture has generated more interest in these fields of HRM because of its impact on HRM practices (Aycan et al., 2000) International Journal of Manpower Vol. 25 No. 6, 2004 pp. 564-589 q Emerald Group Publishing Limited 0143-7720 DOI 10.1108/01437720410560451

The authors thank David Collings and Michael Morley, HRM Research Group at Limerick University for their encouragement and all the support extended throughout and for anonymous reviews for their valuable comments on the first draft of this paper.

and the design of HRM policy practices preferences (Nyambegera et al., 2000; Sparrow and Wu, 1998). However, the majority of research has concentrated on differences across developed economies or between newly industrialized countries. The circumstances confronting developing countries have generally been ignored (Budhwar and Debrah, 2001; Nyambegera et al., 2000). To develop the area of comparative HRM, it is, therefore, necessary to understand HRM in the context of developing countries. The significance of examining cultures and HRM practices in these countries is understood by the fact that employees in developing countries hold values completely different from those in developed countries (Mendonca and Kanungo, 1990; Nyambegera et al., 2000; Sparrow and Budhwar, 1997). This has led to the question of transferability of HRM paradigms adopted mainly in developed countries to developing countries. Therefore, some recent researchers have paid a particular attention to HRM issues and socio-cultural characteristics in developing countries (McCourt, 2001; Nyambegera et al., 2000; Wright et al., 2000). Theoretically, one of the major issues associated with the concept of culture is that the dilemma regarding what factors to be included under the broad concept of national culture needs to be resolved (Budhwar and Sparrow, 2002; Cray and Mallory, 1998). Broadly, the aim of this paper is to address these issues in relation to a developing country. Research context Sri Lanka is a developing country in the South Asia. It is one of the first developing countries to understand the importance of investing in human resources and promoting gender equality. As a result, Sri Lanka has achieved human development outcomes (e.g. literacy rate around 92 per cent) more consistent with those of high-income countries (The World bank, 2000). It liberalised its economy in the late 1970s ahead of other developing nations. Sri Lanka today is South Asia’s most opened economy and therefore known as “the Gate Way to South Asia” by many investors. Its per capita income (US$ 900), almost double than that of India remains the highest in the region, after Maldives. The country has adopted the strategy of export-led model of economic development and foreign investments. More than 500 foreign investors from different part of the world, including investment from Fortune-500 companies, have invested in Sri Lanka for past 10 years. Multinational and global companies have been seen as contributing to take home cultures to foreign locations and the existence of such companies within national cultures creates cultural diversities within nations (Punnett, 1998). On the other hand, the entry of foreign investment into developing countries involves tension related to HR utilisation due to divergent contextual factors (Zaffane, 1994). The question arises as to what HRM issues are of most relevance in this country. There is a very little empirical research in examining culture’s impact on HRM practices has been carried out in Sri Lanka. The recent renewed interest in these developing countries as potential markets for both international trade and foreign investment makes this type of study worthwhile. Researchers have call for increased efforts directed toward studying such markets (Nyambegera et al., 2000; Sparrow and Budhwar, 1997; Thomas and Philip, 1994). As Frost and Cyr (1990) note, in future, particularly where change is rapid and cultures interact (or even collide), it will be companies and countries that value and ensure effective HRM that will likely gain a strategic edge over those that do not do so. Sri Lanka is a country having such a dynamic culture in which rapid transformation of economic and business activities

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taking place for last two decades in an opened and liberalised market environment which was introduced in 1978. Sri Lankas population of 19 million consists of three major ethnic groups: Singhalese (74 per cent), Tamils (17 per cent) and Muslims (8 per cent). Its main religions are Buddhist (69 per cent), Hindu (15 per cent), Christian (8 per cent), and Muslim (8 per cents). It is therefore rich in its diversity of culture, race, language and religion, with a recorded history spanning over 2,500 years. In addition to the influence of a traditional Indian civilisation and cultural phenomenon, Sri Lankan society and culture has been influenced by its colonial heritage and development policies, and the strategies of post-independence governments. The cultural patterns of the society are, therefore, intricately made up of components, which intermesh and influence each other. Interestingly, Sri Lankan exhibit many Asian traits in family and other social interaction, but they tend to mix Asian traits with Western management philosophies and practices in business management. For example, Nanayakkara (1993) notes that many Sri Lankan managers maintain power distance and an individualistic cultural traits. They, however, tend to exhibit collective traits in family and other social interactions. It has also been observed that Sri Lankan management practices evolved from the British system prior to its political independence and has adopted mostly similar Western management practices since independence (Nanayakkara, 1992). Joiner (2001) also notes that progressive firms in the developing countries tend to mimic the practices of successful organisations from more industrialised nations, without reference to surrounding societal values. According to Joiner, the implementation of such cultural changes may jeopardise the success of that change. On the other hand, there is enormous pressure exerted on many organisations to effect changes to enable them to compete successfully in a borderless world. Reflecting these realities, some researchers and national organisations in Sri Lanka have stressed the importance of exploring organisationally/industrially important cultural values and modifying HR practices and work ethics (WE) to overcome some of the HR outcomes (such as low commitment, low productivity, poor relationship between employees and management, etc.) that prevail in many private and public sector organisations (The Central Bank of Sri Lanka, 1999; Vishnath, 1997). There is abundant evidence to indicate that the activity of working and related ethics and values are of major significance to individuals in industrial societies (Buchholz, 1978; MOW International Research Team, 1987; England and Harpaz, 1990; Ruiz-Quintanilla and England, 1996). These work and value orientations represent industrially or organisationally important values. We conceptualised meaning and values of work orientation (MVWO) to represent these variables. MVWO as an element of national culture This study uses MVWO as an element of national culture value orientations because of the theoretical reasons explained in this section and the contextual reasons cited above. Literature review revealed that the concept of MVWO could represent definition of working, work centrality (WC), work norms, WE, and work values. There is substantial theoretical and empirical evidence to indicate the fact that the concept of MVWO as an element of national culture (Budhwar and Sparrow, 2002; Claes and Ruiz-Quintanilla, 1995; Dickson and Buchholz, 1977; MOW International Research Team, 1987; Schwartz, 1999). For example, MOW International Research Team (1987)

study reports that meaning of working is representative of national cultures as it found national differences in working definition patterns, WC and work norms. Claes and Ruiz-Quintanilla (1995) also found that respondent’s country and age have an impact on work meaning patterns. Dickson and Buchholz (1977), in their study in Scotland and the USA, considered work related beliefs as a representative of national culture. Schwartz (1999) suggests that WC, societal norms about working and work values can be used as a way towards utilizing what is known about national differences in cultural values for the study of national differences in work-related values. Budhwar and Sparrow (2002) also conceptualised meaning and values of work as an element of national culture in their model of comparative and international HRM. Thus, in this study we take national culture perspective of MVWO to explore its impact on HRM policy-practice preferences. Individual preference approach to examining the relationship between cultural values and HRM preferences seems to have a great significance for countries or cultures where vast majority of management practices have been uncritically adopted (Aycan et al., 2000; Sparrow and Wu, 1998). Impact of value orientations on HRM preference practices We have already explored national culture values relativity of MVWO. People use values, consciously or unconsciously, as standards or criteria for choosing among alternative courses of goals, interest or actions (Dose, 1997). We use the term “preferences” to represent these alternative choices among which people may select according to their values, standards or criteria. According to Locke (1976), individuals differ what they value and this determines their choices. Thus, values influence preferences or choices. The existing individual difference literature under the label of “work-related preferences” has attempted to glean relevant messages to the field of international HRM from the study of national differences based on the socio-cultural characteristics of individual employees (McGaughey et al., 1997). More importantly, the cultural values represent unique measurements, and could be separated from attitudinal measures (Nyambegera et al., 2000; Sparrow and Wu, 1998). Therefore, a more meaningful examination of psychological work-related preferences and their impact on HRM policy practice can be carried out by tapping into the influence of the MVWO items. Defining MVWO The review of literature revealed that the concept of MVWO was associated with three major concepts: (1) meaning/definition of working, WC, and societal norms about working; (2) WE and beliefs; and (3) work values. Definition of working represents the degree to which people define working in terms of a burden, a constraint, a responsibility, or a social contribution. WC refers to the degree of importance that working has in the life of the individual and the extent to which people put work above other aspects of their life (MOW International Research Team, 1987). Societal norms about working represent “normative evaluation about work in terms of standard of one’s duty to and right from the society” (MOW International Research Team, 1987).

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The concept of work-related ethics and beliefs in this study refers to the underlying concepts or beliefs people holds about working. This includes WE, organisational beliefs (OB), humanistic beliefs (HB), Marxist related beliefs MRB), and leisure ethics (LE) (Buchholz, 1978). WE represent the beliefs that work is good in itself, offers dignity to a person and that success is a result of personal effort. OB refer to the view that work takes on meaning only as it affects the organisation and contribution to one’s position at work. The view that individual growth and development in the job is more important than output represents HB. LE regards work as a means of providing provisions to pursue leisure goals. MRB represent the opinion that work is fundamental to human fulfilment but as currently organised it represents exploitation of the worker and consequent alienation. Work locus of control (WLOC) is defined as a generalised belief and expectancy that rewards reinforcement and outcomes in life are controlled either by oneself or by factors outside oneself, such as other persons (Spector, 1982). WLOC is considered as a culture related work values because of its conceptual relationship to national culture value of “relationship to nature-subjugation” adopted by Maznevski and DiStefano (1995) based on Kluckhohn and Strodbeck (1961) and its contextual relevance. Work values are defined as desirables or what employees seek from the activity of working. They refer to what a person wants out of work in general, rather than to narrowly defined outcomes of a particular job (Wang, 1996). Work values in this study represent intrinsic and extrinsic values such as attitudes towards earnings, social status, upward striving, achievement and growth orientations, and security orientation. Then, the three research questions to be addressed in this study are: (1) Which MVWO are held by the Sri Lankan sample? (2) Whether MVWO influence HRM policy-practice preferences and to what extent? (3) Whether there is any difference between domestic firms (DF) and foreign invested firms (FIF) with regard to: . employees’ preferences for HRM policies and practices; and . the impact of MVWO on preferences for HRM practices. Methodology Sample Data were obtained from eight Sri Lankan DF and FIF. Sixteen firms were approached that had a labour force of not less than 200, were in the manufacturing sector, had been in the operation for more than five years, and had a human resource/personnel department. Eight companies were participated. Table I shows the background profiles of these companies. Depending on the size of the firm, between 80 and 140 questionnaires were distributed among employees who belong to middle managers to operational and manual level. Respondents were selected by adopting disproportionate stratified random sampling. Stratified random sampling was used to ensure that different categories of employees were included in the sample and was disproportionately adopted because some strata are too small or too large (Sekaran, 2000). Questionnaires were distributed through heads of departments or divisions. Respondents were

Firm

Ownership

Product/s

1S 2U 3G 4A 5R 6H 7D 8E

MNCa Joint venture Joint venture Local/Plc Local/Plc Local/Private Joint venture Local/Private

Apparels Apparels Apparels Tyre and rubber Wooden and coir Textiles and apparel Ceramic Apparels

No. of employees 3,300 2,050 1,400 500 235 1,000 1,000 231

Note: aMNC ¼ Multinational company

provided with stamped envelope and asked to return the anonymous questionnaires directly to the researchers or to put them in a special box placed in the reception area in each company. A total of 487 out of 850 questionnaires returned found usable, representing a response rate of 58 per cent. This is a very acceptable rate in the context of a developing country (Nyambegera et al., 2000). The demographic characteristics of the sample are presented in Table II. Most respondents (75 per cent) were aged 35 years or below and 85 per cent possessed at least G.C.E Ordinary or Advanced level education. While managerial and supervisory levels represent 24 per cent (24 per cent) of respondents, the majority (68 per cent) were from operator, manual, and clerical categories of employment. Measures MVWO measure. A questionnaire that consists of 61 items was used to assess MVWO by individual employees. The scale was developed by the researchers to represent a wider scope of the concept of MVWO. The scale, therefore, was based on a number of measurement scales developed by previous researchers (Buchholz, 1977, 1978; England and Harpaz, 1990; Furnham, 1997; MOW International Research Team, 1987; Ros et al., 1999; Ruiz-Quintanilla and England, 1996; Spector, 1982; Wollack et al., 1971). Sub scale items were selected on the basis of being well-written, cultural relevancy, having clarity of meaning, values of factor loading where it was available, and avoiding overlaps with the measurement of other sub-scales. The concepts of definition of working, WC, and societal norms about working were assessed by using standard questions adopted in MOW International Research Team (1987) as the structures of them have been empirically found stable in many cultures (Ruiz-Quintanilla and England, 1996). Thus, the questionnaire consisted of measures relating to both interval and ordinal scales. It was initially prepared in the English language and then translated into local language (Sinhalese). In order to ensure consistency of meanings, it was back translated. HRM policy-practice preference scale. A list of HRM practice measures (54 items) was obtained from the measures developed by Sparrow and WU (1998) based on the initial typology developed by Schuler and Jackson (1987). After effecting modifications to some individual items, the list was produced to HR managers or CEOs of participating companies to select practices relevant to their respective organisations. Their review was supplemented by informal discussions with the researchers.

Work orientation as an element of national culture 569 Table I. Participating companies and their background

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Characteristic

Value label

Gender (N ¼ 487)

Male Female 25 or younger 26 to 35 36 to 45 46 to 55 55 to 65 Primary school Junior school High school Diploma level First degree Postgraduate Professional Top/Middle level manager Supervisory level Professionals Technical/Operator Manual Clerical Up to 1 Year 2 to 5 Years 6 to 10 Years 11 to15 Years 16 to 20 Years 21 to 25 Years 26 and above None (0) Up to 1 years 2 to 5 years 6 to 10 years 11 to 15 years 16 to 20 years

Age

570 Education

Occupation

Experience

Experience in other companies Table II. Demographic characteristics of the respondents

Frequency

Valid per cent

236 251 171 196 101 16 3 12 223 185 34 14 03 16 44 72 39 211 33 88 71 187 130 43 41 13 2 307 53 93 28 3 3

48.5 51.5 35.1 40.2 20.7 3.3 0.6 2.5 45.8 38.0 7.0 2.9 0.6 3.3 9.0 14.8 8.0 43.3 6.8 18.1 14.6 38.4 26.7 8.8 8.4 2.7 0.4 63 10.9 19.1 5.7 0.6 0.6

This resulted in preparing a questionnaire that contained 42-item bipolar statements. These statements represent practices relating to HR planning, job designing, recruitment and selection, appraising, compensating, and training and career development. Although the six categories may not capture all HRM policies and practices, they represent some of the major and most common policy-practice categories applicable to or used in many cultures. Thus, it provides a basis for any comparative understanding as well. Commensurate measures were developed by modifying the relevant statements to assess HRM preference practices by individual employees. Statements were presented as a pair of alternative HRM practices using a six point bipolar rating scale. Thus, each of the choices runs along a continuum providing respondents with reasonably adequate opportunity to select different viewpoints and to mark their intensity of choices. The participants were asked to decide their individual preferences for how the company should conduct specific HRM policies and practices by circling a number ranging from one to six between the pairs.

Analysis The MVWO items that represented interval scale were subjected to principle component analysis. The decision criterion of factor loading was decided as 0.3 because Steven (1992) recommends that for a sample size of 300, a loading of 0.298. The overall results indicted a five-factor solution representing 37 per cent of total variance on an average (Table AI). Table III shows the labelled factor solution along with relevant reliability indicators. The second major MVWO sub-scale, which consisted of ordinal-scale measures relating to the definition of working and WC, was analysed separately. Table III indicates two resulting working definition patterns and a variable relating to WC. The reliability of those variables was assessed by using mean inter-item correlation (MMIC) as Cronbach’s a coefficient is not a meaningful indicator of ordinal scale’s reliability and for short sub-scales (Briggs and Cheek, 1986; Pallant, 2001). The three sub-scales were then transformed into interval scale (so that the distance between the scale points represent reasonably equal magnitude) by using similar procedures suggested by MOW International Research Team (1987) in their original study for the purpose of multivariate analysis. The alpha reliability index of 0.60 s is consistent with many other empirical studies that used these and similar sub scales (Furnhan, 1996; Pelled and Hill, 1997; Taris and Feij, 2001; Wollack et al., 1971). For example, Furnhan (1996) study reports an a coefficient of 0.65 and 0.66 for work ethics and organisational belief system, respectively. Given the relatively small number of items on most scales, the coefficient of a in 0.60 s can be regarded as reliable (Taris and Feij, 2001) and acceptable for scales measuring broad constructs such as values (Singelis et al., 1995).

Work orientation as an element of national culture 571

Analysis of HRM policy-practice preferences The 42 HRM preference measures were cluster analysed. Cluster analysis was performed as an alternative analytical method after a series of factor analysis results indicated no meaningful and reliable component structure. The diverse nature of factor solution seems to reflect at least two major elements:

Factor

Mean

a

MIIC

IGOWN OPOWEB EWLC EVO SSOUS WCa WDBCa WDSCRa

5.41 4.97 2.85 3.62 4.13 4.50 1.30* 2.12*

0.62 0.62 0.62 0.66 0.61 N/A N/A N/A

0.19 0.13 0.44 0.33 0.14 0.17 0.16 0.16

Notes: aRating scale 1-4, zero (0) frequency is omitted when computing mean because it represent those who do not select the particular definitional statement. N/A ¼ Not applicable for ordinal data. According to Briggs and Cheek’s (1986) recommendation, if MIIC is , 0:1; the scale is poor; if it is in the range of 0.2-0.4, the scale is optimal and therefore, MIIC between 0.1 and 0.2 is in an acceptable range and *number of times 1-4 that definitional statements have been selected in favour of each pattern

Table III. Mean, a, and MIIC of MVWO factors

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(1) the respondents in the sample may not see HRM measures as a coherent set of policies and practices; and (2) the existence of dynamic and complex patterns of cultural work values as explained in the research context. Cluster analysis was performed by using Ward’s method and the stability of initial solution was examined by using different clustering methods – “between group average linkage” – (Weiss, 1976) and “split sampling clustering” – based on managerial and non-managerial division (Aldenderfer and Blashfield, 1984). For all the three clustering methods, 32 items were repeatedly clustered into the same category. An indices based on correlation was adopted (e.g. MIIC) to examine the reliability of components derived from adopting non-correlation method (e.g. cluster analysis). The use of completely different methods seems to be one of the best indicators of reliability test of cluster membership (Hamer and Cunningham, 1981; Weiss, 1976). The result indicated four HR preference clusters (Table IV). One of the major implications of adopting the above stability and reliability measures is that the total number of items was first reduced from 42 to 32 and then to 26. The validity examination and interpretation of the cluster solution were made in relation to the existing HRM theories. Aldenderfer and Blashfield (1984) note that variables to be used in cluster analysis should be chosen within the context of explicitly stated theory. Such a basis supports not only the examination of the validity of clusters but also their interpretation. The HRM variables selected for this study are well supported by the theory. They are based on HRM policies and practices typology first developed by Schuler and Jackson, (1987) and subsequently modified and empirically tested by Nyambegera et al., (2000) and Sparrow and Wu (1998). In addition, these variables can be classified and identified in relation to HRM practice components proposed and used by Aycan et al., (2000); Kanungo and Jaeger (1990) and Kanungo and Mendonca (1994). Hence, the validity of clusters could be examined and established by comparing and agreeing with these conceptual and theoretical structures (see discussion section). Correlation between MVWO and HRM preferences The correlation results are shown in Table V. They are taken against a more conservative significance level of p , 0:01 to minimise the possibility of type 1 error. Table V shows that all the eight MVWO are significantly related to at least one category of HRM preference practices. On the other hand, all the four HRM preference practices are related to at least one MVWO variable. The MVWO concerned with work norms, work beliefs, extrinsic work values, and working defined as a burden and constraint WE (WDABC) are correlated with three out of the four HRM preference practices. Impact of MVWO on HRM policy-practice preferences Table VI shows the results of multiple regression analysis, which reflect the impact of the eight MVWO variables on HRM preferences. It shows that many MVWO-HRM preference relationships suggested by zero-order correlation have become significant ( p , 0:05 or better), indicating the predictive ability of seven out of eight MVWO variables. Table VI shows that the MVWO accounts for 17 per cent variation of “planned and open career and empowering practices”. In particular, there is a significant impact of

Mean MIIC Cluster 1: planned and open career and empowering system HRP1 – HR planning-tightly or loosely (1-6) HRP3 – Following formal procedures or disregarding them HRC2 – Becoming a shareholder of the company is encouraged or not HRR5 – Publishing every job promotion or major job promotion only HRR2 – Selection criteria are revealed or not revealed to every applicant HRD1 – Significant or minimum say in determining career path and training HRP5 – Employees’ involvement or top management’ involvement HRJ7 – Providing or not providing feedback to an individual employee Overall mean

1.32 1.22 1.68 1.71 1.86 1.85 1.90 1.77 1.66

0.18 0.19 0.16 0.20 0.22 0.21 0.14 0.19 19

Cluster 2: performance and qualification based rewards system HRT6 – Selection for company sponsored training on performance or seniority HRD3 – CD policies are set mainly for higher achievers or senior employees HRT1 – Off-the-job training is ensured or not ensured each year HRR4 – Priority for performance and competence or seniority and loyalty HRC7 – Consider skills and qualifications or performance for pay increases HRT5 – Training is for all employees or for employees relating to a clear business need HRA6 – PA result is openly discussed with the individual or is confidential HRA3 – PA is a formalised procedure or informal/face-to-face feedback Overall mean

1.92 1.91 2.16 2.22 2.17 2.34 2.33 2.50 2.19

0.22 0.22 0.15 0.16 0.17 0.15 0.15 0.15 17

Cluster 3: generic functional perspective on job-person fit HRJ4 – A job relating to one functional area or diverse functions HRJ5 – Routine and repetitive tasks or different and varied tasks HRT3 – Participants in T programmes are new employees/poor perf. or all types HRD4 – Focus of career path design on one functional area or different f. areas HRA5 – PA focuses on an individual employee or team/division HRR1 – Considering insiders first or the best from inside or outside Overall mean

4.70 4.92 4.99 4.44 4.32 4.48 4.64

0.23 0.22 0.17 0.18 0.13 0.12 18

Cluster 4: job related competence and rewards HRC5 – Special achievement rewards through financial or non-monetary means HRT4 – Most desired T outcome is skill building or attitude and behaviour change HRJ3 – Having formal and complete instruction or minimum instruction HRA1 – Focusing on how the job is being done or what was achieved Overall mean

2.82 2.85 2.62 3.20 2.87

0.12 0.13 0.11 0.11 12

Notes: The interpretation of mean values of clusters/items should be based on 1 for left extreme and 6 for right extreme; T ¼ training; and PA ¼ performance appraisal

work, WE and work beliefs, and working defined as a social contribution and responsibility on planned and open career and empowering practices. Similarly, there is a 13 per cent variation of the performance management practices explained by MVWO. The significant individual MVWO include work norms, WE and work beliefs, extrinsic work values, and WDABC. Further, the MVWO accounts for 8 and 4 per cent variation of HR practices concerned with generic functional perspective of job-person fit and the job-related competence and rewards, respectively. It reveals that there is a significant impact of work locus of control, WC, and WDABC on the generic functional perspective of job-person fit. Extrinsic work values also have a significant impact on the job-related competence and rewards practices. In brief, the study shows that all the four HRM preferences are influenced by at least one MVWO variable. On the other

Work orientation as an element of national culture 573

Table IV. Cluster analysis solution, mean, and MIIC

Table V. Mean, standard deviation, a coefficients, and correlations between work orientations and HRM preferences 0.99 1.36 1.76 1.68 1.81 0.70 0.51 0.75 0.53 0.76 0.98 1.06

5.41 4.97 3.62 4.13 2.84 4.38 1.29 2.12 1.53 2.19 4.60 3.09

0.12a

0.18

a

0.17a

0.18

a

0.62 0.62 0.62 0.66 0.61 0.17 0.16a 0.16a

2

3

4

5

6

7

20.03

0.13**

20.10*

20.14** 20.01

0.17** 20.05

0.02

20.16** 20.23** 20.08

0.09

20.23** 20.19**

20.29** 20.30**

20.02

0.01

1.0

8

9

20.10*

0.35**

1.0

10

11

0.06

0.14**

0.05

12

0.17** 1.0

0.06 20.21** 20.14** 1.0

0.24** 20.10

0.18** 20.17** 1.0

20.13** 0.16** 20.16**

0.10* 20.11*

0.07 20.18**

1.0 0.42** 1.00 0.01 0.21** 1.00 0.20** 0.28** 0.45** 1.0 20.02 0.04 0.32** 0.36** 1.0 0.14** 0.19** 20.04 0.06 20.08 1.00 20.14** 20.06 0.22** 0.06 0.08 20.20** 1.00 0.04 0.00 20.12* 20.01 20.04 0.06 20.46**

1

574

Notes: **correlation is significant at the 0.001 level; *correlation is significant at the 0.01 level; amean inter-item correlation

Work norms WE and work beliefs Extrinsic values Intrinsic values Work locus of control WC Working-burden Working-responsibility Career and resourcing system Performnace management Functional view on J-P fit Competence and rewards

Mean SD a/MIICa

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Step1 (demographic Factors) Overall DF FIF Gender Age Tenure Previous experience Education-Higher Advanced Level Occupation Middle/top mgt Supervisory level Professional/executives Manual Clerical Step2 Overall Domestic firms Foreign-invested firms Work norms WE and work beliefs Work values-extrinsic Work values-intrinsic Work locus of control WC Working-as burden and constraint Working-as social contribution/responsibility

Variables

0.17*** 0.07 0.29***

0.04 0.05 0.06

DR 2

20.13* 20.14 20.02 0.00 0.02 20.09 0.07 20.07

0.04 0.02 20.07 0.03 0.02

0.08 0.00 0.00 0.03 0.07

20.15*** 20.24*** 0.02 20.08 0.09 20.07 0.06 20.12**

20.10 0.17 20.15 20.06 0.00 0.00

0.05 0.13 20.17** 20.07 0.03 20.10

2 0.13 2 0.34*** 0.07 2 0.16** 0.13* 2 0.05 0.06 2 0.15**

0.10 0.00 0.06 0.08 0.12*

0.08 0.06 2 0.09 2 0.07 2 0.05 2 0.06

0.12*** 0.13*** 0.13***

0.05** 0.09* 0.08*

2 0.12* 2 0.18*** 0.14** 2 0.07 0.07 0.00 0.17*** 0.01

0.04 0.09 0.00 0.01 0.02

0.00 0.05 0.00 0.03 2 0.14* 2 0.10*

0.05 2 0.02 2 0.02 2 0.06 2 0.15 2 0.09 0.00 2 0.08 0.03 0.03 0.11

0.01 2 0.19** 0.15* 2 0.13 0.12 2 0.02 0.13 2 0.04 (continued)

20.05 0.10 0.03 0.11 20.13 20.11 0.01 20.07 0.04 20.04 20.11

20.22** 20.16* 0.09 0.01 0.05 0.01 0.21** 0.08

Standardised regression coefficients Career and empowering practices Performance management practices b Overall DF FIF DR 2 b Overall DF FIF

Work orientation as an element of national culture 575

Table VI. Multiple regression results of work orientations on HRM preferences

Table VI. 0.08** 0.09* 0.12***

0.04* 0.05 0.06

0.04 0.00 0.09 0.07 2 0.14 0.12 2 0.15* 0.21**

0.11 0.02 0.08 0.06 0.09

0.04 2 0.04 2 0.02 2 0.04 0.02

0.08 0.06 2 0.09 0.03 2 0.13** 0.11* 2 0.11* 2 0.03

0.05 2 0.11 2 0.02 0.00 0.01 0.01

2 0.08 2 0.13 0.06 2 0.02 0.09 0.12*

0.09 0.12 2 0.13 0.01 2 0.12 0.11 2 0.06 0.09

0.04 2 0.05 2 0.05 2 0.08 2 0.03

2 0.12 2 0.08 2 0.02 2 0.02 0.10 0.16*

0.04* 0.04 0.04

0.09*** 0.15*** 0.08*

0.03 2 0.09 2 0.18*** 0.04 0.07 0.00 2 0.02 0.01

0.06 0.08 0.03 2 0.03 2 0.02

0.03 2 0.02 0.06 0.03 0.13** 0.02

0.01 2 0.05 2 0.21* 2 0.02 0.03 0.03 2 0.05 2 0.05

0.08 0.08 0.02 2 0.02 2 0.11

0.03 0.07 0.01 2 0.01 0.12 2 0.04

0.05 2 0.12 2 0.16* 0.08 0.10 2 0.05 2 0.03 0.03

0.00 0.10 0.01 2 0.05 0.04

0.07 2 0.05 0.00 0.05 0.12 0.05

Notes: Significant Beta at P , 0:05; are shown as p , 0:05* ; p , 0:01* * ; p , 0:001* * * ; Missing data were deleted list wise. Education categories were dummy coded treating ordinary level education as a reference group; Occupational Group were dummy coded treating technical/operator category as a reference group

Step1 (demographic Factors) Overall DF FIF Gender Age Tenure Previous experience Education-Higher Advanced Level Occupation Middle/top mgt Supervisory level Professional/executives Manual Clerical Step2 Overall Domestic firms Foreign-invested firms Work norms WE and work beliefs Work values-extrinsic Work values-intrinsic Work locus of control WC Working-as burden and constraint Working-as social contribution/responsibility

DR

Standardised regression coefficients Perspective on job-person fit Job-related competence and rewards b Overall DF FIF DR 2 b Overall DF FIF

576

Variables

2

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hand, seven out of eight MVWO are related to at least one of the four HRM preference factors. Interestingly, Table VI also shows that there is a difference between DF and FIF with regard to the impact of MVWO on HRM preferences. This will be discussed separately in a proceeding section. Results MVWO of Sri Lankan manufacturing sector employees Table III shows mean, a, and MICC of MVWO sub-scales. The analysis revealed that the Sri Lankan sample consists of eight distinct MVWO, which can be interpreted as follows. Individual growth/humanistic beliefs oriented work norms (IGOWN) Work norms generally refer to the standards people employ when making normative evaluations about work. Sri Lankan sample tends to indicate a fairly balanced orientation towards entitlement and obligatory norms. These norms, however, seem to be dominated by HB which indicate individual growth and development in the job is more important than output. Thus, the factor as a whole represents both positive and negative aspects of work orientations. The high overall mean (5.41) and itemised mean values also indicate that this work orientation is strongly held in the Sri Lankan sample. This observation is supported by the existing literature on cultural values in Sri Lanka, which indicates that Sri Lankans are more inclined to be individualistic than pluralistic or group oriented, which signifies the importance attached to individual concerns rather than organisational concerns and the concern that responsibility is more important than results (Nanayakkara, 1992). The concern for responsibility seems to reflect the obligatory norms or duties towards society, while individual growth oriented work norms (IGOWN) reflect the idea that individualistic orientation is mixed with the concern that responsibility is more important than results. In brief, this factor represent the view that although the respondents believe that their right to work in and their duties towards society, they tend to be oriented towards the belief that individual growth and development in a job is more important than output. Organisations and positions oriented work ethics and beliefs The orientation towards work ethics and beliefs (OPOWEB) tends to indicate the belief that work is good in itself and success is a result of personal efforts and therefore, the state of individual independence is much preferred. It also reflects that work takes on meaning only as it affects the organisation and contribution to one’s position at work. This orientation is further blended by collective and participative types of beliefs relating to work organisations. Theoretically, this is a very interesting position because it indicates the existence of both positive and constrained work ethics and beliefs simultaneously in a system of work orientations. This provides evidence for Rodger’s (1978) theoretical assertion that work ethics are not a single conviction, but a complex of ideals with roots and branches. The relatively high mean (4.97) values of the scales seem to indicate that this work orientation is quite strongly held by the respondents. There seems to be quite similar observations made by previous researchers as well. For example, Nanayakkara (1993) contended that Sri Lankan employees tend to “occupy” positions and emphasise rights to positions based on qualifications rather than fulfilling their roles. Because of power, prestige, and privileges of positions, they may

Work orientation as an element of national culture 577

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tend to believe that work itself is good as far as it is related to a position and an organisation. In brief, the respondents believe that work is good in itself, but meaningful only if it relates to an organisation and a job. This reflects the fact that people have positive work ethics but in putting them into practice, they believe and depend much on organisations and job positions (rather than orienting towards entrepreneurship).

578 Status and security oriented upwards striving This component clearly indicates the respondents’ orientation towards advancement and social status with security concern. The security concern means an orientation towards predictive results and averting risks. The overall mean value (4.13) seems to indicate that status and security oriented upwards striving (SSOUS) is quite high in the Sri Lankan sample. Some aspects of this value orientation are congruent with Nanayakkara’s (1992) assertion that the class structure in the traditional society (in which a particular occupation, e.g. fishing, was attached to a particular cast) has added a new meaning to work as a means to gain status and power. Drawing inferences from a study of Indian managers by England (1975), the same author contended that Sri Lankan managers were status and personal goal oriented. In brief, employees in the sample tend to exhibit a security and status oriented upward striving. Extrinsic value orientation (EVO) This factor represents respondents’ orientations toward monetary rewards. In particular, they are oriented towards choosing a job over another because of high salaries and retirement benefits, believing that a good job is a well paying job. However, the concern for earning money by way of doing overtime is not given high value. With regard to the theoretical concerns, all these measures are related to the variables concerned with “attitudes towards earning” in the scale of Wollack et al., (1971). The mean value (2.85) indicates a quite moderate orientation towards earning or extrinsic values. Quite similarly, Nanayakkara (1992) also reports, in response to a question on “why do you work” and “why do others work”, that more than 70 per cent of responses from Sri Lankan managers (public sector) centred around “earning a living”. The significance of attitudes towards earning can also be justified in the context of other developing countries because Furnham (1997) notes that it is quite possible that a fairly large proportion of workers in developing countries are context oriented (high salary, job security, etc.), as they strive to better the livelihood of themselves and their families. External work locus of control This value orientation represents two elements of EWLOC: “promotions are usually a matter of good fortune” and “it takes a lot of luck to be an outstanding employee in most jobs”. The rating score, however, indicates that the orientation towards external work locus of control (EWLOC) is moderate (mean 2.85). Earlier research indicates that lack of independence and accepting status quo tendencies, which have also been attributed to the lack of planning tradition in Sri Lanka (Nanayakkara, 1992) may be, at least partially, related to the above representation of EWLOC. In addition, the relationship to nature-subjugation value orientation adopted by Kluckhohn and Strodbeck (1961) is represented in some of the characteristics of external locus of

control because it contains items suggesting that “it is better to be lucky than smart”, “success is a matter of good fortune”, and “people should not try to change their fate”. In this sense, it can be argued that the concept of work locus of control is directly represented in and related to national culture values and value measures. Accordingly, the tendency towards work locus of control in Sri Lankan manufacturing sector employees is external.

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Work centrality WC refers to the degree of importance that working has in the life of individuals and to what extent people put work above other aspects of their life. Both these aspects were combined in the analysis to get a general view about WC. As in the case of comparable studies (England and Harpaz, 1990; MOW International Research Team, 1987), WC remains in relatively high position in Sri Lanka (mean 4.38). The analysis also reveals that WC tends to be higher with increased level of education. This may be due to the fact that positive work values are internalised through higher education, which may be the major avenue through which people can feel the importance of work in a culture of collective family environment where children, at least until they married or even after, are largely dependent on their parents earning. Ranasinghe (1996) also reveals that there exists a high degree of WC with a relatively lesser degree of agreement with Protestant ethics in Sri Lankan context. Working is defined as a burden and constraint People in this cluster defined working as an unpleasant thing and as something imposed by others. It tends to be unpleasant because it is physically and mentally strenuous and that they believe it has time and place constraint. In other words, they do not consider working as a basic human value or as something that has been internalised into their personality. Simply, these people mean working in negative terms. However, the number of people involved in defining working in this negative term is 164 out of 487 respondents. This evidence seems to be congruent with the idea that many people in Sri Lanka work to live rather than live to work (Nanayakkara, 1993). However, there seems to be some positive sides of this orientation because this negative view of working tends to change with the higher level of education, indicating a more common trend on positive attitudes toward working in the Sri Lankan national culture as indicated below in the second definitional cluster of working. Working is defined as a social responsibility and contribution (WDASRC) People in this cluster defined working as something that benefits to them as well as to others in the society. They also believe that working adds values to something for which they are accountable. This seems to reflect that the positive thinking about working seems to have internalised into the value system of these people. The relevant definitional statements include: if it adds values to something, if others profit by it, if you get money for doing it, and if you have to account for it. About 98 per cent respondents have marked their preferences in favour of at least one of the above definitional statements. In addition, there is a tendency to indicate that this work orientation is a strong characteristic of Sri Lankan national culture because of the fact that none of the demographic factors have influenced this factor in this study.

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HRM policy-practice preferences of Sri Lankan employees The cluster structure shown in the Table IV indicates that there are four HRM preference clusters in the Sri Lankan sample. The first cluster consisted of items in which low mean values equate to a “planned and open career and empowering system”. Basically respondents prefer to have planned HRM system that follows formal procedures. They also prefer an open career system that promotes publishing every job promotion, reveal selection criteria to every job applicant, provides a feedback to individual employee, provides an empowered HRM culture that features a significant say in their career path and training, provides opportunities for employees’ involvement in decision-making, and for becoming shareholders of the company. In brief, the items in this cluster are generally concerned with a preference for planned and systematic treatment of HRM, especially with regard to selection and promotion. A preference of transparent and open data and involvement of employees in these systems also become evident. The second cluster consisted of items in which relatively low mean values equate to a “Performance management system concerned with both performance and qualifications based rewards with generic training preferences”. Specifically, respondents prefer to have performance-based selection system for company sponsored training programmes and to have performance-based career development policies. However, this cluster tends to indicate rather inconsistent preferences because of the fact that the respondents’ preference to have qualifications and skills-based pay increases. Their preference to have common training programmes for all employees is also somewhat akin to qualifications based pay increase because their focus is mixed with both specific and generic performance management preferences. They also prefer their companies to adopt a formalised procedure to evaluate performance and to discuss results openly with individual employee. In brief, this cluster tends to reveal both qualifications and performance focus built into selection, promotion, and reward system, with generic training focus and a formalised system for performance management. The third cluster consisted of items in which relatively high mean values equate to a system of “Generic functional perspective on job-person fit”. It reflects preferences for diversity and variety in performing job duties and deciding training and career paths. They also prefer to have training for all employees rather than having it for only new employees or poor performers, to adopt team-based performance appraisal system rather than individual-based system, and to select the best person from inside or outside. In brief, this cluster reveals a system of varied jobs that are designed in relation to different functional context, career system built around different functional paths, prioritised team-based task performance, and the best person sought for the job either internally or externally. The fourth factor consisted of items in which low means values equate to a system of “Job-related competence and rewards”. This cluster in general reflects reward management practices. The respondents specifically prefer to have opportunities to build their job related-skills rather than behaviour-related skills, complete instructions to do the job, considered what was achieved, and been rewarded financially for special achievements. In brief, this cluster consists of a system of reward management practices that reveals preference for building job-related skills, one best way of doing

the job with complete instructions, and a moderate preference for measuring performance on output. Comparison between DF and FIF A comparison between DF and FIF was made with regard to MVWO, preferences for HRM practices, and the impact of MVWO on preferences for HRM practices. Since there is no difference between the DF and FIF in MVWO, results are not presented in this paper. Table VI shows that there is a difference between the DF and FIF with regard to the impact of MVWO on HRM preferences, which will be discussed in the following section. Table VII shows that there is a significant difference between the FIF and DF with regard to two HRM preference factors. The differences seem to indicate that respondents in FIF prefer a relatively less tightly planned and open career and empowering system than those respondents in DF. On the other hand, respondents in DF seem to prefer a more generic functional perspective on job-person fit rather than functional perspective on job-person fit relevant to those in FIF.

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Discussion The major objective of assessing MVWO in the Sri Lankan context is to examine whether they have an impact on individuals’ preferences for HRM policies and practices. We have argued that MVWO is an element of national culture and that people with certain work orientations may prefer their organisation to adopt certain types of corresponding HRM practices. The findings of this study indicate that there are eight distinct MVWO and four distinct HRM preference factors in relation to the Sri Lankan sample. The impact analysis reveals that all the four HRM preference factors are influenced by MVWO. Therefore, the hypothesis that MVWO influence individual HRM preferences was supported. Of the four HRM factors emerged, MVWO variables account for 17 per cent variation of “planned and open career and empowering practices”. The analysis shows that the greater the orientation towards IGOWN, OPOWEB and WDASRC, the stronger the preferences for loosely planned and less empowered HRM practices. Although the above first two work orientations have both positive and negative aspects, they appeared largely negative as far as entrepreneurship, creativity, and risk-taking orientations are concerned. These characteristics are the real concerns for making positive impact on an organisation where an empowered HR culture exists. This finding seems to indicate that people with relatively negative orientations toward

HRM preferences

Levene’s test for equality of variance Mean DF FIF F Sig. t

Career and empowering practices Performance management practices Functional perspective on job-person fit Job related competence and rewards N

1.49 2.18 4.74 2.88 215

Note: *Significance at p , 0:05

1.59 2.20 4.52 2.86 272

2.39 0.10 3.60 1.53

0.123 0.756 0.058 0.216

2 2.22 2 0.36 2.49 0.17

Sig. 0.027* 0.719 0.013* 0.868

Table VII. Differences in HRM preferences between the DF and FIF

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work norms (e.g. IGOWN) WE and work beliefs (e.g. OPOWEB), tend to prefer relatively less formal planning and empowered HRM culture. The low preferences for empowered HRM culture in relation to developing countries reflects the Jaeger’s (1990) argument that developing countries’ socialisation makes people passive and reactive to tasks. It also addresses an issue raised by Sparrow et al. (1994), that although the empowering aspect of HRM represents a significant trend in a number of US and UK organisations (Lawler, 1991), how important is it to other part of the world. According to the findings of this study and as far as the impact of cultural values on HRM is concerned, the question of adaptability and transferability of formal planning procedures and empowering practices to developing countries become evident. The study also shows that MVWO variables represent 13 per cent variation of performance management practices. There are four MVWO that influence this HRM preference factor, namely IGOWN, OPOWEB, EWV, and WDABC. It reveals that the higher the orientations towards IGOWN and OPOWEB, the lower the preferences for generic training and qualifications and performance based rewards. In other words, people with these work orientations tend to prefer individual and performance-based appraisal and rewards and job focused training and career development. This finding is congruent with what one could expect from theoretical position of the associated variables. For example, individual growth oriented people want to reach a higher stage of human development (Buchholz, 1978) and therefore, they may prefer individual and performance-based rewards and appraisal practices. On the other hand, organisations and positions orientation includes such element as every one should work hard, success is directly linked to one’s own efforts (Buchholz, 1978) and therefore, people with these values orientations may prefer individual-based performance appraisal and rewards and job-based training (Chandrakumara, 2003). Interestingly, OPOWEB seems to be represented in “relations-hierarchical” value orientations adopted by Maznevski and DiStefano (1995) because they include items that suggest hierarchies of authority are best in organisations, rewards and facilities should be designed, accordingly etc. As discussed earlier, people may prefer to acquire or hold positions in organisations because they give them a sense of status, prestige, and privileges as they go up in the hierarchy (Nanayakkara, 1993). Sparrow and Wu (1998) also found that relation-hierarchy value orientation is related to HRM preferences of formal planning procedures, rewarding for specific skills, and training employees for specific needs. The above results of this study largely support these conceptual relationships. The impact of EVO and WDABC was also found significant in influencing performance management practices in this study. It reveals that the stronger the orientation towards EVO and WDABC, the greater the preferences for generic training and skills and qualifications-based rewards. People with EVO exhibit higher motivation when working in team work settings (Cummings, 1981) and therefore may tend to prefer common or generic training (Chandrakumara, 2003). On the other hand one can conceptually argue that people with WDABC, as it represent negative work orientation, may tend to prefer qualifications and performance-based criteria to be included in performance-based reward system. Three MVWO have a significant impact on HRM preferences concerned with “Generic functional” perspective on job-person fit, namely EWLOC, WDABC, and WC. This HRM factor basically represents preferences for diversity and variety in performing job duties and deciding training and career paths, and for selecting the best

person from inside or outside. The result shows that individuals with EWLOC do not prefer these HRM practices. Spector (1982) also found that externals are more concerned with the social rather than task aspect of job and prefer directive supervision with more formalised task rather than a variety of task. Similarly, one can argue that those who define working in negative terms (e.g. WDABC) tend to work on others’ instruction, and prefer standardised and routine tasks. The finding of this study supports this argument by indicating a negative relationship between WDABC and HRM practices concerned with generic functional perspective on job-person fit. In contrast, there is a positive relationship between this HRM factor and WC. It indicates that individuals with high work centrality tend to prefer high task and skill variety by selecting job in different functional areas. Finally, the HRM preference practices concerned with “job-related competence and reward” was also influenced by MVWO. The result shows that the higher the orientation towards extrinsic values, the lower the preferences for job-related competence and rewards. This reflects preference for building job-related skills, job with complete instructions, and for measuring performance on output. The negative relationship between EVO and this HRM factor may be due to the fact that individuals with extrinsic values tend to prefer HR practices that provides more material benefits rather than concentrating on skills and competence development that may contribute towards increasing performance. Quite similarly, Furnham (1997) notes that it is quite possible that a fairly large proportion of workers in developing countries are context oriented, as they strive to better the livelihood of themselves and their families. Differences between DF and FIF As it is generally expected, there is no significant difference between DF and FIF with regard to MVWO. This may be due to the fact that values and work orientations are relatively stable characteristics of individual behaviour (Rokeach, 1973), which can be considered as elements of national culture (Schwartz, 1999; MOW International Research Team, 1987). However, it is found that there is a significant ðp , 0:05Þ difference between DF and FIF with regard to preferences for two HRM factors. Respondents in FIF seem to prefer a relatively “less tightly planned and open career and empowering system” than those respondents in DF. On the other hand, respondents in DF seem to prefer a more “generic functional perspective on job-person fit” rather than more functional perspective on job-person fit which is relevant to those respondents in FIF (Table VII). The comparative result (Table VI) also indicates that the higher the orientation towards three MVWO factors (OPOWEB, WDASRC, SSOUS), the greater the preference for loosely planned and less empowered HRM culture. It is obvious that these three work orientations consist of both positive and negative work ethics and values. What the evidence of this study reveals is that, irrespective of the positive or negative trend of work values, employees in FIF tend to prefer relatively less formal and empowered HRM cultures. Then, the reasons for these preferences seem to be something beyond the differences in value orientations of employees. One of such reasons may be that employees are not encouraged or motivated to involve in empowered HRM cultures in FIF. For example, initial discussion that the researchers had with HR managers regarding actual practices of these companies revealed that three out of four FIF did not offer employees the opportunity to become shareholders of

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their respective companies. In addition, employees general opinion in the country do not hold very positive attitudes toward survival and long-run existence of FIF because of the fact that some FIF companies have closed their operations after enjoying tax holiday period and other concessions. This may have led employees to create not only unfavourable attitudes toward FIF but also to expect different rewards systems from FIF. For example, a relatively short-run existence of an employer may cause employees to create expectation for more extrinsic rewards such as high pay and obtaining training and technical skills rather than high intrinsic rewards such as an active involvement in an empowered culture. Indeed, Venkata Ratnam (1998) found that MNCs have highly competitive pay and better working conditions than those in indigenous firms in India. Further, obtaining opportunities for workforce training is a national level objective set at attracting FDI in Sri Lankan (The Central Bank of Sri Lanka, 1999). On the other hand, the opinion of top management of local companies in the apparel industry reveals that the closures of companies or changing geographical location from country to country has been an inevitable business strategy in the face of global competition. All these conditions may have contributed to create low preferences for tightly planned career system and employee involvement, and to create high preferences for extrinsic rewards and training and skill development. One of the theoretical implications of this is that “the type of ownership” has an impact not only on actual HRM practices (Tayeb, 1988; Budhwar and Sparrow, 2002) but also on preferred HRM practices such as empowering and performance management practices. Further, employees’ preferences for HRM practices in FIF seem to be influenced by some macro level factors such as long-run existence and host government expectations. The practical implications of this evidence is that HR managers in FIF should pay a particular attention not only to recruit employees with positive work ethics and values and adjust HRM practices according to cultural value orientations but also to deal with unfavourable attitudes toward FIF and different and unique expectations of employees in FIF and host governments. Limitations of the study. Although MVWO could be related to national culture values, they may not represent all aspects of national cultural value orientations. The data represent only the situation and trends in Sri Lankan manufacturing sector sample of 487 employees. As the manufacturing sector represents employees with relatively low level of education and as the level of education has an impact on some MVWO variables, other sectors in the economy may produce different picture with regard to work and value orientations and HRM preferences. Studies employing self-report measures face the problem of “shared method variance”. This was addressed by using different response format in different section of the questionnaire. To ascertain the level of independence of the measures, the total data set across MVWO and HRM preferences was subjected to principle component analysis and found no MVWO loaded on HRM items and vice versa. Since individual responses were anonymous, method bias due to social desirability is minimised. Conclusions The impact of national culture on HRM cannot be taken for granted (Aycan et al., 2000; Hofstede, 1993; Schuler, 2000; Sparrow and Wu, 1998). This study shows that MVWO can be conceptualised as an element of national culture and assessed its impact on HRM policy-practice design choices in Sri Lankan context. This is a step towards

helping international HR managers who adjust HRM policies to match employees’ expectations. The Sri Lankan sample held four distinct HRM preference factors: planned and open career and empowering system, qualifications and performance-based reward system, generic functional perspective of job person fit, and job-related competence and rewards. All these practices were impacted by MVWO reflecting 17, 13, 8, and 4 per cent variation for the said HRM factors, respectively. This evidence supports culture-related work values relativity of HRM practices and the question of transferability of HR practices such as empowering and performance management practices to developing countries. It was also evident that there could be differences between DF and FIF with regard to preferences for HRM practices and that the type of ownership has an impact not only on actual HRM practices but also on preferred HRM practices. It is therefore important for international managers to know which work and value orientations are held by the people of a particular country or a region and to what extent those values orientations influence HRM design choices. In addition to the impact of MVWO on HRM preferences, macro level issues and attitudes such as existence in the long-run, ability to transfer share-ownership, strategic decision on location, host government expectations, etc., can also have an impact on preferences for HRM practices in FIF. Managers in FIF therefore should pay a particular attention not only to adjust HR practices to fit cultural realities and recruit employees with positive WE and values but also to deal with more macro level issues and unfavourable attitudes toward FIF. The theoretical exploration of the concept of MVWO and the empirical investigation of Sri Lankan work orientations and HRM preferences raise a number of issues for future research. First, a better understanding of HRM policy-practice design choices can be gained by examining work and value orientations of employees. Second, work and values orientation is a very complex concept in the context of developing countries and cannot be easily categorised or structured by using models developed in developed countries. This calls for more studies in developing country context. The findings not only question the applicability of some HR models which have developed in other developed countries but also in the context of DF and FIF. This suggests an agenda for future research in developing countries and comparative studies between DF and FIF.

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Singelis, T.M., Triandis, H.C., Bhawuk, D. and Gelfand, M.J. (1995), “Horizontal and vertical dimensions of individualism and collectivism: a theoretical and measurement refinement”, Cross-Cultural Research: The Journal of Comparative Social Science, Vol. 29, pp. 240-75. Sparrow, P. and Budhwar, P.S. (1997), “Competition and change: mapping the Indian HRM recipe against worldwide patterns”, Journal of World Business, Vol. 32 No. 3, pp. 17-29. Sparrow, P.R. and Wu, P. (1998), “How much do national value orientation really matter? Predicting HRM preferences of Taiwanese employees”, Employee Relations, Vol. 20 No. 1, pp. 26-56. Sparrow, P.R., Schuler, R.S. and Jackson, S.E. (1994), “Convergence or divergence: HR Policies and practices for competitive advantage worldwide”, International Journal of Human Resource Management, Vol. 5 No. 2, pp. 267-99. Spector, P. (1982), “Behaviour in organisations as a function of employees’ locus of control”, Psychological Bulletin, Vol. 91, pp. 482-97. Steven, J. (1992), Applied Multivariate Statistics for Social Sciences, 2nd ed., Erlbaum Associates, London. Taris, R. and Feij, J.A. (2001), “Longitudinal examination of the relationship between supplies-values fit and work outcomes”, Applied Psychology: International Review, Vol. 50 No. 1, pp. 52-80. Tayeb, M. (1988), Organisations and National Culture, Sage, London. The Central Bank of Sri Lanka (1999), Annual Report, Central Bank Printing Press, Colombo. The World Bank (2000), Sri Lanka: Recapturing Missed Opportunities (Report No: 20430), The World Bank, Washington, DC. Thomas, A.S. and Philip, A. (1994), “India: management in an ancient and modern civilization”, International Studies of Management and Organization, Vol. 24 No. 1, pp. 91-115. Venkata Ratnam, C.S. (1998), “Multinational companies in India”, International Journal of Human Resource Management, Vol. 9 No. 4, pp. 567-89. Vishnath, W. (1997), “Business process and information systems re-engineering: an analysis in the Sri Lankan context”, Sri Lankan Journal of Management, Vol. 2 Nos 1/2, pp. 69-99. Wang, G.T. (1996), A Comparative Study of Extrinsic and Intrinsic Work Values of Employees in the United States and Japan, The Edwin Mellen Press, New York, NY. Weiss, D.J. (1976), “Multivariate procedures”, in Dunnette, M.D. (Ed.), Handbook of Industrial and Organisational Psychology, Rand-McNally, Chicago, IL. Wollack, S., Goodale, J.G., Wijting, J.P. and Smith, P.C. (1971), “Development of survey of work values”, Journal of Applied Psychology, Vol. 55 No. 40, pp. 331-8. Wright, M., Pendleton, A. and Robbie, K. (2000), “Employee ownership in enterprises in Africa and Asia”, International Journal of Human Resource Management, Vol. 11 No. 1, pp. 90-111. Zaffane, R. (1994), “Utility theory and organisation design”, American Business Review, Vol. 12 No. 1, pp. 66-86.

Further reading Budhwar, P. and Sparrow, P.R. (1997), “Evaluating levels of strategic integration and development of HRM in India”, International Journal of Human resource Management, Vol. 8 No. 4, pp. 476-94. Ward, J. (1963), “Hierarchical grouping to optimise an objective function”, Journal of American Statistical Association, Vol. 58, pp. 244-63.

Appendix

Scale Items Every person in our society should be entitled to interesting and . . . Work should enable one to learn new things One’s job should give him a chance to try out new ideas The work place can be humanised A worker should be expected to think up better ways to do . . . Work can be organised to allow for human fulfilment It is the duty of every able-bodied citizen to contribute to society . . . By working hard a person can overcome every obstacle that life presents The working class should have more say in running the society Factories would be better run if workers have more of a say in management One must avoid dependence on other persons whenever possible A man can learn better on the job by striking out boldly on his own than . . . One’s contribution to the group is the most important thing about his work Increased leisure time is bad for society One should live one’s life independent of others as much as possible Better decisions are made in a group than they make by individuals I feel that self-fulfilment can be achieved by working . . . Workers should be represented on the board of directors of companies Only those who depend on themselves get ahead in life It is best to have a job as part of an organisation where all work together even if . . . Promotions are usually a matter of good fortune It takes a lot of luck to be an outstanding employee in most jobs A good job is a well paying job A person should choose one job over another mostly because . . . A person should choose the job that pays the most A person should take the job which offers the most overtime if . . . In choosing a job I do consider chances for advancement A man should like to do a job in which he or she is his or her own boss I always work hard in order to be among the best in . . . One should choose a job which has job security and pension One of the reasons that I work is to make my family and . . . My friends would not think much of me if I do not have a good job There is one best way to solve most problems Even if a person has a good job, he/she should always be . . . I dislike having to change my plans in the middle of . . . I like my work to be predictable Percentage of variance Mean Cummunality estimates – Cronbach a (overall 0.72)

1

2

Components 3 4

5

0.661 0.603 0.575 0.475 0.473 0.431

Work orientation as an element of national culture 589

0.390 0.602 0.581 0.461 0.453 0.441 0.409 0.404 0.399 0.386 0.372 0.370 0.320 0.303 0.830 0.799 0.689 0.670 0.653 0.632 0.673 0.518 0.475 0.472 0.456

15.08 5.41 0.62

5.66 4.97 0.62

18.62 2.85 0.62

17.56 3.62 0.66

0.448 0.409 0.403 0.377 0.340 17.23 4.13 0.61

Notes: Only coefficients .0.30 are shown and wording of some statements have been shorten. The rating scale 1-6

Table AI. Rotated component matrix – five MVWO variables

IJM 25,6

About the authors

590

Anil Chandrakumara Anil Chandrakumara is the Head of Business Management Department of the University of Sri Jayewardenepura, Sri Lanka. After obtaining his PhD from Sheffield University Management School he has published a number of journal articles and presented papers at national and international conferences. His research interests include cultural impact on work and HRM practices and citizenship behaviour, HRM in multinationals, and person-HRM fit and performance. E-mail: [email protected] Anne-Wil K. Harzing Anne-Wil Harzing is Associate Professor at the Department of Management, University of Melbourne, Australia. Her research interests are HQ-subsidiary relations, international HRM, cross-cultural management and the role of language in international business. She recently published the 2nd edition of her bestselling textbook on International Human Resource Management (Sage, 2004). E-mail: [email protected] Wenchuan Liu Wenchuan Liu is a PhD candidate at the Kemmy Business School, University of Limerick. He was assistant professor in the School of Business Administration, Northeastern University (China). His current research focuses on the international and comparative human resource management and the relationship between human resource practices and organizational effectiveness. E-mail: [email protected] Peter McGraw Peter McGraw is a Senior Lecturer and Director of Corporate and Executive Education at Macquarie Graduate School of Management. He has researched and published in many areas concerned with management and employee relations and is the author of a best selling textbook, Human Resource Management in Australia. His current research is focused primarily on human resource management issues in multinational companies. E-mail: [email protected] Hafiz Mirza Hafiz Mirza is Professor of International Business at Bradford University School of Management, UK. He has published on a range of research topics, including East Asian Business and Development, Japanese International Political Economy, International Technology Transfer and Globalisation, Regionalisation and the Strategy of Transnational Corporations. He is currently Senior Adviser on International Investment to the ASEAN Secretariat, and is the Editor of Routledge/Curzon’s International Business in Asia Series. E-mail: [email protected]

International Journal of Manpower Vol. 25 No. 6, 2004 pp. 590-591 q Emerald Group Publishing Limited 0143-7720

Barbara Myloni Barbara Myloni is based at the Strategy and Entrepreneurship Laboratory of Athens University of Economics and Business, Athens. Her particular areas of interest are economics, HRM and management development. E-mail: [email protected]

Jie Shen Jie Shen is currently a Lecturer in HRM at International Business School, University of South Australia. His main research interest is comparative and international HRM and domestic HRM. The research issues include strategic integration, recruitment and selection, training and development, performance appraisal, reward and compensation, employee relations, psychological contract, employee turnover and retention, skill mix change, working time and flexible employment and HR outsourcing and shared services. E-mail: [email protected] Paul Sparrow Paul Sparrow is the Ford Professor of International Human Resource Management at Manchester Business School. He has published over 80 books, journal articles and chapters and consulted with major multinationals, public sector organisations and inter-governmental agencies. His research interests include cross-cultural and international HRM, HR strategy, cognition at work and changes in the employment relationship. E-mail: [email protected]

About the authors

591