Exploring the spatial logic of decision making in MNCs: a study of global and regional effects

Friday, 3 July 2015: 10:15 AM-11:45 AM
TW2.3.01 (Tower Two)
Annette Hayden, Université du Québec à Rimouski, Lévis, QC, Canada; Université du Québec à Rimouski, Lévis, QC, Canada
Globalization and the intensification of international competition that flows from this process exerts considerable pressure upon multinational companies (MNCs) to restructure their business strategies, organizational structures and functional level policies and practices, including at the level of international HRM (IHRM). The restructuring of IHRM policies and practices within this context is a complex process, as senior HR managers grapple with the challenges of the standardization-localization dilemma and the influence that regional and national level institutions have in shaping the nature of IHRM across the firm.

In terms of institutional influences, the literature concerned with differences in national business systems (Whitley, 1999) and varieties of capitalism (Hall and Soskice, 2001) has revealed how the nature of IHRM policy and practice within MNCs is likely to be shaped by a range of national level institutional complexes. These include areas such as finance, education, training and industrial relations (Almond, 2011) and result in the localization rather than the cross-company standardization of IHRM. In contrast, a range of recent research on MNCs has examined the extent and nature of country of origin effects on the cross-national standardization of HR (e.g. Dickmann and Muller-Camen, 2006; Harzing and Noorderhaven, 2008) and has demonstrated how the nature of organisational policies, including those of HRM, can be strongly shaped by social and institutional factors that exist in an MNC’s home country (Almond, 2011).

Adding complexity to the picture, Pudelko and Harzing (2007) argue that an all too neglected aspect of the standardization-localization debate in MNCs is that the standardization of IHRM can also take place around a global ‘best practice’ model, with policies and practices shaped by neither a host nor home country effect, but rather in accordance with a dominance effect (Smith and Meiksins, 1995). In their research into the evolution of IHRM in German and Japanese MNCs, the authors found that the nature of policies and practices were strongly influenced by a US model of HRM, with a focus upon flexibility and systems of performance management that included the individualization of pay related to performance.

The notion that IHRM policies and practices are becoming standardized around a US dominant model within MNCs, irrespective of their country of origin or sector, is a very interesting one, but remains highly under-researched. Further empirical investigation is required to interrogate such developments in MNCs originating from different countries and operating in different sectors and to explore the role that is played by regional and national level institutions in constraining or facilitating such change.

In the context of the above, therefore, this communication seeks to address the following, inter-related, research questions:

1) To what extent is IHRM policy within MNCs converging on a dominant US model of HRM?

2) What are the challenges of operationalizing such policies across different institutional contexts at the regional and national levels?

3) How are regional and national level institutions that are focused upon employee voice, such as European Works Councils and trade unions, responding to such changes in IHRM policy and practice? Are they adapting or remaining rigid in their approaches and what are the implications for the evolution of IHRM policy and practice within MNCs?

This communication draws on comparative case-study research involving six highly-internationalized MNCs, three of which are Swedish-owned and three of which are Canadian-owned. These companies operate across three sectors, forestry, metalworking and banking, with one Swedish and one Canadian firm represented in each sector. A total of 34 semi-structured interviews were conducted in 2005 in the home country operations of all six firms with a range of respondents. These included HR personnel employed at corporate, business area and local levels, national and local level trade union representatives and, in the three Swedish firms, European Works Council employee representatives.

In brief, at the level of IHRM policy, the results of the study reveal convergence in intention across the six firms to adopt a US style approach. However, the pace and degree of development vary according to country of origin and sector. In terms of the operationalization of IHRM policy at the local level, the research reveals how the extent to which institutions constrain or facilitate the ‘Americanization’ of HR practice is strongly influenced by a country of origin effect, with Swedish European Works Councils and trade unions adopting a more flexible approach to change than employee representatives in the Canadian firms.


Almond, P. (2011), ‘Re-visiting county of origin effects on HRM in Multinational Corporations,’ Human Resource Management Journal, 21, 3, 258-271.

Dickmann, M., and Muller-Camen, M. (2006), ‘A Typology of International Management Strategies and Processes,’ International Journal of Human Resource Management, 17, 4, 580-601.

Hall, P., and Soskice, D. (eds) (2001), Varieties of Capitalism, Oxford, Oxford University Press.

Harzing, A.-W., and Noorderhaven, N. (2008), ‘Headquarters-Subsidiary Relationships and the Country-of-Origin Effect,’ New Perspectives in International Business Research, 3, 13-40.

Pudelko, M., and Harzing, A.-W. (2007), ‘Country-of-Origin, Localization, or Dominance Effect? An Empirical Investigation of HRM Practices in Foreign Subsidiaries,’ Human Resource Management,46, 4, 535-559.

Smith, C., and Meiksins, P. (1995), ‘System, Society and Dominance Effects in Cross-National Organisational Analysis,’ Work Employment and Society, 9, 241-267.

Whitley, R. (1999), Divergent Capitalisms: The Social Structuring and Change of Business Systems,Oxford: Oxford University Press.