Chapter Nine

IHRM In The
Host-Country Context

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 Chapter Learning Objectives

After reading this chapter, you should be able to:

• discuss the most important drivers shaping the interplay

between global standardization and the localization of
human resource practices in multinational context
including:
– standardization drivers such as MNE strategy and
structure, maturity and age, and corporate culture
– localization drivers such as the host country’s cultural
and institutional environment, the mode of operation
and the subsidiary role

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 Chapter Learning Objectives

• outline measures which support the development of a

balance of globalization and the localization of HRM

• discuss the global code of conduct as a device for

controlling employee behaviour worldwide

• explain the strategic importance of offshoring

3
 Standardization and Localization of
HRM Practices

Managing people

• the most culture-bound resource in an international

context

• high level of complexity because of the diverse

cultural environment

4
 Standardization and Localization of
HRM Practices

The challenge of MNEs is to create a system that operates

effectively in multiple countries by exploiting local
differences and interdependencies and at the same time
sustaining global consistency.

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 Global Standardization

• reaching consistency, transparency and an alignment of a

geographically fragmented workforce around common
principles and objectives.

• use of common management practices is intended to foster

a feeling of equal treatment and clear expectations

6
 Local Responsiveness

• respecting local cultural values, traditions, legislation or

other institutional constraints such as government policy
and / or education systems regarding HRM and work
practices

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Balancing the Standardization and
Localization of MNE HRM

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 Factors Driving
Standardization

• organizational strategy and structures

• organizational culture

• firm size and stage of maturity (degree of international

experience)

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 Factors Driving Localization

• cultural environment
• institutional environment
• firm size maturity
• mode of operation
• subsidiary role

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 Culture Construct Definitions and
Sample Questionnaire Items

Cultural construct definitions Specific questionnaire item

Power distance:
The degree to which members of a collective expect Followers are (should be) expected to obey their
power to be distributed equally. leaders without question.
Uncertainty avoidance:
The extent to which a society, organization, or group Most people lead (should lead) highly structured
relies on social norms, rules and procedures to alleviate lives with few unexpected events.
unpredictability of future events.
Humane orientation:
The degree to which a collective encourages and People are generally (should be generally) very
individuals for being fair, altruistic, generous, caring and tolerant of mistakes.
kind to others.
Collectivism I (institutional collectivism):
The degree to which organizational and societal Leaders encourage (should encourage) group
institutional practices encourage and reward collective loyalty even if individual goals suffer.
distribution of resources and collective action.

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 Culture Construct Definitions and
Sample Questionnaire Items (Table 9.1)
Cultural construct definitions
Collectivism II (in-group collectivism):
The degree to which individuals express pride, loyalty and
cohesiveness in their organizations and families.
Assertiveness:
The degree to which individuals are assertive, confrontational and
aggressive in their relationship with others.
Gender egalitarianism:
The degree to which a collective minimizes gender inequality.
Future orientation:
The extent to which individuals engage in future-oriented
behaviors such as delaying gratification, planning and investing
in the future.
Performance orientation:
The degree to which a collective encourages and rewards group
members for performance improvement and excellence.
Specific questionnaire item
Employees feel (should feel) great loyalty toward this
organization.
People are (should be) generally dominant in their
relationships with each other.
Boys are encouraged (should be encouraged) more than
girls to attain a higher education.
More people live (should live) for the present rather
than for the future.
Students are encouraged (should be encouraged) to
strive for continuously improved performance.
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 The Institutional
Environment

• education system

• industrial relations system

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 Education System

• spread and reputation of such a training system

• recruitment process and the selection criteria reflect the

importance of qualifications

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 Employment Legislation

• minimum conditions

• human rights

• labour relations

• pay equity

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 Country-of-Origin Effect

• MNEs are shaped by institutions existing in their country

of origin, and attempt to introduce these parent-country-
based HRM practices in their foreign subsidiaries

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 Host-Country Effect

• extent to which HRM practices in subsidiaries are

impacted by the host country context

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 Home-Country Effect

• extent to which MNEs try to transfer HRM activities

shaped by their home-country environment to foreign
locations.

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 Reverse Diffusion

• transfer of practices from foreign locations to the

headquarters

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Institutional Effects On MNEs

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Impact of the Cultural & Institutional
Context on HRM Practices

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Impact of the Cultural & Institutional
Context on HRM Practices

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 Mode of Operation Abroad

• ownership

• control

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 Subsidiary Roles

Global  Innovators
• provide significant knowledge for  other units (the IHRM
policies and practices are transferred to the MNE
affiliates)

Integrated Players
• create and receive knowledge (the IHRM practices and
policies of the MNE and subsidiary are similar,
characterized by global standardization and localization)
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 Subsidiary Roles

Implementers
• rely on knowledge from the parent or peer subsidiaries and
create a relatively small amount of knowledge themselves
(IHRM policies and practices are mainly made in the
parent company and implemented at the local level)

Local Innovators
• engage in the creation of relevant country/region-specific
knowledge and have complete local responsibility ( the
HRM policies and practices are localized)
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 Creating the HRM Balance between
Standardization and Localization

Transfer of knowledge

• is dependent on the competence of the management style

and practices

• requires building personal relationships and trust through

face to face interactions and meetings between managers
and subsidiaries.

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 HRM Roles With Global Code of
Conduct

1. drawing up and reviewing codes of conduct

2. conducting a cost–benefit analysis to oversee compliance
of employees and relevant alliance partners
3. championing the need to train employees and alliance
partners in elements of the code of conduct
4. checking that performance and rewards systems take into
consideration compliance to codes of conduct

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 Outsourcing

• transferring some of a company’s recurring interval

activities and decision rights to outside providers, as set in
a contract

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 HRM Roles With Off Shoring

1. consultation with unions/employee representatives

2. manpower planning, considering the scope for employee
redeployment
3. contributing to the internal communication strategy
4. identifying training needs
5. designing new jobs which stem from off shoring
operations
6. highlighting potential risks, such as the implications of
employment regulation both in the home country and in
foreign locations.
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