Chapter Eight

IHRM In The Host-Country

Context

1
 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
2
 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.
3
 The Global Mindset and
Local Responsiveness
• The aim of localization
– Respect for local culture and traditions
– Adaptation to local institutional
requirements such as legislations and
government policies
– Educational system and HR practices
– Workplace practices and employee
expectations

• The aim of global standardization

– Consistency
– Transparency
– Ease of administration
– Efficiency and effectiveness
– Sense of equity 4
Balancing the Standardization and
Localization of MNE HRM

5
Three Cultures Interact to Influence
Standardization and Adaptation

6
Institutional Effects On MNEs

7
 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
8
 Host-Country Effect

• extent to which HRM practices in subsidiaries are

impacted by the host country context

9
 Home-Country Effect

• extent to which MNEs try to transfer HRM activities

shaped by their home-country environment to foreign
locations.

10
 Reverse Diffusion

• transfer of practices from foreign locations to the

headquarters

11
Factors Driving
Localization

12
 Factors Driving
Standardization

13
 Host-country Culture

• Work behavior is culturally determined, contained in role

definition and expectations.
• Whether corporate culture would supersede or other
‘cultures’ is a subject of much debate.
• Often, what is meant by corporate culture translates into
common practices rather than common values.

14
 Mode of Operation

• Ownership and control are important

factors:
– Acquisition may constrain ability to transfer
technical knowledge, management know-
how, systems, and HR practices
– Wholly owned subsidiaries provide greater
opportunities for transferring work practices
than in IJV
– Management contracts provide skills,
expertise and training to HCNs, without
carrying equity or risks associated with FDI,
and may have HC government support.
15
Impact of the Cultural & Institutional
Context on HRM Practices

16
Impact of the Cultural & Institutional
Context on HRM Practices

17
 Firm size, maturity and
international experience
• The size of the firm, maturity, and international experience
are important firm level factors.
• Motorola in China is a case in point:
– Large size
– Wealth of international experience
– A wholly owned operation in Tianjin, China, 1992
– Centralized IHR programs
– Management could draw on these aspects when entering China

18
 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)
19
 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) 20
HRM Roles With Global Code of
Conduct

21