Economic Transition and the Management of Multinational Companies: A Case Study Analysis of the Transfer of HR Practices in a German and Irish Bank in Poland.
Transition economies provide a very particular setting for the study of MNCs. To date many studies have viewed such economies as ‘weak’ or ‘institutionally permissive’ (Dörrenbächer, 2004, Hardy, 2006, Meardi et al., 2009) and only a few have sought to explain the effect the institutional transition process itself has had on MNCs’ practices (Kahancova and Van Der Meer, 2006, Meardi and Toth, 2006). The dearth of such research begs two questions: first, what precisely has the influence of such a profound process of institutional transition been on the practices of MNCs; and second, how adequate are existing theoretical frameworks in explaining observed outcomes.
Outcomes can be expected to pivot on the form of dependency relations that develop. These are likely to vary along several dimensions. On the one hand, MNCs’ power stems from their decision to enter, invest, and remain in a host economy. Such power might be heightened in a context of economic transition – certainly in the early stages – as a host nation seeks to address the dearth of investment capital and the requirement to modernise, renew and upgrade industries and workers’ skills (Bohle and Greskovits, 2012). Such dependency might ensure that the ‘pioneering MNCs’ are granted considerable freedom and discretion in managing their business and employment affairs. On the other hand, the host nation holds the key to grant or refuse access to, as in Poland’s case, a large domestic market. Thus, the terms-of-entry may be central in determining where the structures of power dependency relations come to lie. The matter is likely to be complicated further by the probability that incoming MNCs are bereft of the requisite expertise to understand how best to conduct their business affairs in a context of institutional transition and, in particular, in interpreting the significance of continuing historical legacies. Where they then come to rely on local know-how, corporate management may bestow – at least at the outset – considerable influence to local actors. Yet, there may also be considerable incentive for MNCs – perhaps with the support of local policy-making actors – to import home country practices, which might be presumed to possess superior efficacy. The incentive and ability to do so might vary depending on the form and strength of influence of the firm’s parent country national business system as well as a number of other structural contingencies, including a MNC’s product market structure (multi-domestic as in the case of retail banking), its size and the nature of its international development strategies. Finally, the question of how such influences play out over time is important. The uncertainties and complexities surrounding the context of transition are likely to attenuate as time progresses and are unlikely to have invariant effects. In particular, existing research suggests that, as the process of transition advances, management’s dependence on personalized relationship-based networks gives way – if sometimes only gradually and unevenly – to a rule-based, market-centered resource and capabilities model (Peng, 2003). For this reason, a MNC’s ‘time-of-entry’ might be expected to be a very significant influence on the development of their employment and HR practices.
In an attempt to address these very important scholarly questions we examine the transfer of HR practices of two foreign-owned banks from two very different national business systems – one from a co-ordinated market economy (Germany) and another from a liberal market economy (Ireland) – and which also vary by size – one being small and peripheral (Ireland), the other (Germany) being large, close to and potentially, at least, dominant vis-à-vis the host country – with very extensive operations in Poland’s financial services sector during the time of its transition.
The data were obtained from in-depth semi-structured interviews, documentary sources and direct observation. Interviews were held at three different levels within the MNCs: at corporate level, national level (Polish subsidiary management including managing directors, operation managers and HR managers) and workplace level (branch managers and trade union representatives). This had two benefits. First, it permitted us to examine the extent of transfer across the various organisational levels; and second, it provided an important means of verifying and cross-checking our data. Most of the data at the subsidiary level were collected between 2006 and 2010, with some interviews conducted in 2012 and 2013. This extended period of data collection permitted us to examine the development of practices over a 4 to 7 year period.
We find that a variety of influences, acting in consort, were key to explaining the shape of HR practices in the MNEs’ Polish subsidiaries. These included the structure of the case industry, the form and degree of international integration of the MNCs’ operations, their time-of-entry, and the political dynamics between corporate headquarters and local management. Other factors were also identified, such as the presence of distinctive parent-country management styles, the absorption of US hegemonic practices, and the presence or otherwise of particular dominance effects, but these were found to be relatively minor influences.