International Human Resource Management: A Comprehensive Guide, Exams of Human Resource Management

Download International Human Resource Management: A Comprehensive Guide and more Exams Human Resource Management in PDF only on Docsity!

Solution Manual for

International Human Resource Management 8e Peter Dowling Marion Festing

Ph DAllen D. Engle, Sr. D.B.

Peter J. Dowling

La Trobe University, Australia

Marion Festing

ESCP Europe, Germany

Allen D. Engle, Sr.

Eastern Kentucky University, USA

Table of Contents

Purpose and Topics covered in the Textbook 3 Available Digital Support Resources 4

Part I: Error! Bookmark not defined. 5

Chapter1: 46 Chapter Error! Bookmark not defined. 2 Chapter Error! Bookmark not defined. 20 Chapter Error! Bookmark not defined. 27 Chapter Error! Bookmark not defined. 35 Chapter Error! Bookmark not defined. 41 Chapter 4145 Chapter Error! Bookmark not defined. 51 Chapter 5157 Chapter 10 : Error! Bookmark not defined. 61

Part II: Error! Bookmark not defined. 65

Case 61 Balancing Values: An Indian Perspective on Corporate Values from Scandinavia 66 Case Error! Bookmark not defined. 72 Case Error! Bookmark not defined. 75 Case Error! Bookmark not defined. Just Another Move to China? The Impact of International Assignments on Expatriate Families 80 Case Error! Bookmark not defined. 84

Case Error! Bookmark not defined. 90 Case Error! Bookmark not defined. 96 Case Error! Bookmark not defined. 101 Case 9: Redesigning a Global Mobility Policy: Developing Expatriate Compensation Options for a German Mid-Sized Company 107 Case 61 Wolfgang’s Balancing Act: Rewarding Healthcare Executives in a Dispersed Yet Integrated Firm 110

Purpose and Topics Covered in the Textbook

The major objective of this textbook is to provide an overview of international human resource management; however, this is a complex field. International HRM has been characterized by three broad approaches. The first emphasizes cross-cultural management: examining human behavior within organizations from an international perspective. The second approach developed from comparative industrial relations and HRM literature and seeks to describe, compare, and analyze HRM systems in various countries. A third approach seeks to focus on aspects of HRM in multinational firms. In this book, we take the third approach. Our objective is to explore the implications that the process of internationalization has for HRM activities and policies. In particular, we are interested in how HRM is practiced in multinational enterprises (MNEs).

Typically, HRM refers to those activities undertaken by an organization to utilize its human resources effectively. These activities include, but are not limited to, the following:

● Human resource planning ● Staffing (recruitment, selection, and placement) ● Performance management ● Training and development ● Compensation (remuneration) and benefits ● Industrial relations

This volume discusses these topics in an international context by explicitly considering the context of the multinational enterprise. Therefore, we also include a chapter on the cultural context of IHRM and the organizational context, as well as cross-border mergers and acquisitions, international alliances, and small and medium-sized enterprises (SMEs). An introduction and a conclusion complete the volume. The structure of the book is indicated by the ten chapter names, which are as follows:

1. INTRODUCTION

2. THE CULTURAL CONTEXT OF IHRM: CULTURE AND INSTITUTIONS

3. THE ORGANIZATIONAL CONTEXT: STRUCTURE, MERGER AND ACQUISITION AND GLOBAL

SMALL BUSINESS

4. GLOBAL WORK

5. SOURCING PEOPLE FOR GLOBAL MARKETS: STAFFING, RECRUITMENT, AND SELECTION

6. GLOBAL PERFORMANCE MANAGEMENT

7. INTERNATIONAL TRAINING, DEVELOPMENT, AND CAREERS

8. GLOBAL TALENT MANAGEMENT

9. GLOBAL COMPENSATION

10. IHRM TRENDS AND FUTURE CHALLENGES

Chapter Notes

Chapter 1: INTRODUCTION

Learning Objectives

 define key terms in international human resource management (IHRM) and consider several definitions of IHRM.  introduce the significant issue of expatriate assignment management and review the evolution of these assignments to reflect the increasing diversity with regard to what constitutes international work and the type and length of international assignments.  outline the differences between domestic and international human resource management and detail a model that summarizes the variables that moderate these differences.  present the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models and the increasing awareness of a wide number of choices within IHRM practices due to increased transparency and faster and more detailed diffusion of these practices across organizational units and firms.

Chapter Summary

The purpose of this chapter is to provide an overview of the emerging field of international HRM by:

● Defining key terms in IHRM and considering several definitions of IHRM.

● Introducing the historically significant issue of expatriate assignment management and reviewing the evolution of these assignments to reflect increasing diversity regarding what constitutes international work and the type and length of international assignments.

● Outlining the differences between domestic and IHRM by looking at six factors:

1. more HR activities
2. the need for a broader perspective
3. more involvement in employees’ personal lives
4. changes in emphasis based on variances in the workforce mix of expatriates and locals
5. risk exposure
6. more external influences and detailing a model which summarizes the variables that moderate these differences.

● Presenting the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models, and developing an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and the faster and more detailed diffusion of these practices across organizational units and firms.

We conclude that the complexity from operating in different countries and employing different national categories of employees is a key variable in differentiating between domestic and IHRM, rather than any major differences between the HR activities performed. We also discuss four other variables that moderate differences between domestic and international HRM:

1. the cultural environment
2. the industry (or industries) with which the multinational is primarily involved
3. the extent to which a multinational relies on its home country’s domestic market

4. the attitudes of senior management. These five variables are shown in Figure 1.3. Finally, we discuss a strategic HRM model applied in multinational enterprises (Figure 1.4), which draws together several external and organizational factors that impact on IHRM strategy and practice and in turn on MNE goals.

Links to Other Chapters

This introductory chapter provides the basis for all the other chapters. The definitions and understanding of the differences between HRM and international HRM described herein are key to understanding the other chapters of the book. Case 4 Just another move to China? provides an opportunity to discuss the effects of international assignments on families.

Discussion Questions

1. What are the main similarities and differences between domestic and IHRM?

This question is addressed in ‘Defining IHRM and global work’ and ‘Differences between domestic and international HRM’: Similarities: ● HRM = ‘*...+ those activities undertaken by an organization to utilize its human resources effectively’, including at least: human resource planning, staffing (recruitment, selection, placement), performance management, training and development, compensation (remuneration) and benefits. Differences: ● Domestic HRM involves employees working within only one national boundary_._ ● IHRM also includes aspects pertaining to the national or country categories involved in international HRM activities (the host country where a subsidiary may be located, the parent country where the firm is headquartered, and ‘other’ countries that may be the source of labor, finance, and other inputs), as well as the three categories of employees of an international firm (host country nationals, parent country nationals, and third country nationals). ● In IHRM, staff are moved across national boundaries into various roles within the international firm’s foreign operations (expatriates/international assignees). ● In IHRM, the complexity of operating in different countries and employing different national categories of workers is a key variable that distinguishes domestic and international firms. This complexity is due to six factors: more HR activities, the need for a broader perspective, more involvement in employees’ personal lives, changes in emphasis because of variances in the workforce mix of expatriates and locals, risk exposure, and broader external influences.

2. Define these terms: ‘IHRM’, ‘PCN’, ‘HCN’, and ‘TCN’. This question is addressed in ‘Defining IHRM and global work’.

1. The ‘*…+ interplay between the three dimensions of human resource activities, types of employees, and countries of operation’ (Morgan). ‘We define the field of IHRM broadly to cover all issues related to managing the global workforce. Hence, our definition of IHRM covers a wide range of HR issues facing MNEs in different parts of their organizations. Additionally, we include comparative analyses of HRM in different countries’ (Stahl, Björkman, & Morris, 2012).

2. These are the three categories of employees in an international firm:

● PCN – parent country national

and taxes. In the international setting, the HR department must be much more involved in order to provide the level of support required. Consequently, it will need to know more about the employee’s personal life. For example, some national governments require the presentation of a marriage certificate before granting a visa for an accompanying spouse. Thus, marital status could become an aspect of the selection process, regardless of the best intentions of the MNE to avoid using a potentially discriminatory selection criterion.

6. Discuss at least two of the variables that moderate differences between domestic and international HR practices.

Refer to ‘Variables that moderate differences between domestic and international HRM’ and Figure 1.3.

The text names five variables that act as “moderators”; i.e., that diminish or accentuate the differences between domestic and international HRM: complexity, the cultural environment, industry type, extent of reliance of the multinational on its home country domestic market, and the attitudes of senior management to international operations.

Complexity: ● Many firms from advanced economies, with limited experience in international business, underestimate the complexities involved in successful international operations—particularly in emerging economies. There is considerable evidence to suggest that business failures in the international arena are often linked to the poor management of human resources. Cultural environment: ● Possibility of employee culture shock.

● Recognition and appreciation of cultural differences is essential, because international business involves the interaction and movement of people across national boundaries.

● In research, issues are: little agreement on either an exact definition of culture or on the operationalization of this concept, as well as the emic-etic distinction (emic refers to culture- specific aspects of concepts or behavior, and etic refers to culture-common aspects, i.e. universality →divergence-convergence debate).

● Cultural awareness is essential for the HR manager at corporate headquarters as well as in the host location. Coping with cultural differences, and recognizing how and when these differences are relevant, is a constant challenge for international firms. Industry type: ● This is of considerable importance because patterns of international competition vary widely from one industry to another: multi-domestic versus global.

● Global industry (a firm’s competitive position in one country is significantly influenced by its position in other countries, e.g. commercial aircraft, semiconductors, and copiers).

Attitudes of senior management: ● an explicit recognition by the parent organization that its own peculiar ways of managing human resources reflect some assumptions and values of its home culture;

● an explicit recognition by the parent organization that its peculiar ways are neither universally better nor worse than others, but are different and likely to exhibit strengths and weaknesses, particularly abroad;

● it is likely that, if senior management does not have a strong international orientation, the importance of international operations may be underemphasized in terms of corporate goals and objectives;

● if the previous situation becomes prevalent, the HR manager might have to address senior management assumptions, regarding e.g., transferability of practices and people.

● HR managers might have to generate a global mindset in their home organization while implementing policies to facilitate the development of global staff.

Figure 1.4 explains a framework for strategic HRM in a multi-national enterprise.

7. What are the major influence factors in strategic IHRM?

These issues can be summarized by Figure 1.4 ‘A framework of SHRM in MNEs’:

References for further reading

 Andersen, N. (2021). Mapping the expatriate literature: A bibliometric review of the field from 1998 to 2017 and identification of current research fronts. The International Journal of Human Resource Management , 32 (22), 4687– 4724  Brewster, C., Mayrhofer, W., & Farndale, E. (2018). Handbook of research on comparative human resource management (2nd ed.). London, UK: Edward Elgar.  Caligiuri, P., & Bonache, J. (2016). Evolving and enduring challenges in global mobility. Journal of World Business , 51 (1), 127–141.  Caligiuri, P., De Cieri, H., Minbaeva, D., Verbeke, A., & Zimmermann, A. (2020). International HRM insights for navigating the COVID-19 pandemic: Implications for future research and practice. Journal of International Business Studies , 51 (5), 697–713.  Cooke, F. L., Wood, G., Wang, M., & Veen, A. (2019). How farhas international HRM travelled? A systematic review of literature on multinational corporations (2000–2014). Human Resource Management Review , 29 (1), 59–75.  Gooderham, P. N., Mayrhofer, W., & Brewster, C. (2019). A framework for comparative

decide whether incentive systems for groups or for individuals would be effective in a specific culture. Within this context, it is important to recall the discussion on the convergence and divergence of HRM and work practices, as mentioned in the first chapter.

Links to Other Chapters and Cases

This chapter provides important information on one of the key contextual issues for international human resource management. The importance of the cultural environment has already been introduced in Chapter 1 and will be addressed in many chapters again and linked to topics such as the cultural adaptation and cultural agility processes (Chapter 5), international performance management (Chapter 6), and intercultural training (Chapter 7).

Cases that provide the basis for a cultural discussion include Case 1, about the culture challenges of and Indian-Scandinavian MNE; Case 3, which highlights cultural differences in staffing forecasts; Case 5, about local talent development; and Case 10, about the cultural appropriateness of rewards.

Discussion Questions

1. Define culture. How can culture be conceptualized?

Refer to ‘Definition of culture’ and ‘Schein’s concept of culture’

To date, there is no predominant consensus on the exact meaning of culture: ● ‘Culture consists of patterned ways of thinking, feeling, and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups including their embodiments in artifacts; the essential core of culture consists of traditional …+ ideas and especially their attached values…’ (Kluckhohn and Kroeber, 1950s). ● ‘Culture is+ mental programming’ or ‘software of the mind’ (Hofstede, 1991). ● Culture includes the customs of a community that are practiced by a majority and are based on four basic elements: standardization of communication, thought, feeling, and behavior (Hansen).

Culture can be conceptualized on various levels (Schein, 2004):

1. Artifacts or creations (conscious): visible organizational structures and processes; easily measurable, but hard to interpret variables such as, for example, the economic growth of a country or its political system.
2. Values (partly conscious and partly unconscious): values of a company or culture, found in the intermediate level of consciousness; based on underlying assumptions; e.g., they are the basis for national legislation or attitudes towards abortion. Hofstede’s study is at this level.
3. Underlying assumptions (invisible and unconscious): includes convictions, perceptions, thoughts, and feelings concerning, for example, the nature of reality and the nature of truth, time dimensions, the effect of spatial proximity and distance, the nature of being human, types of human activity, the nature of human relationships through religions, the basic understanding of democracy, and capitalist market organizations. Influences from artifacts, through values to underlying assumptions, are much weaker than those leading in the opposite direction, because the influence of underlying assumptions on values and artifacts is stronger than vice-versa.

2. Outline Hofstede’s cross-cultural management study and discuss it accordingly. Refer to ‘Hofstede’s cross-cultural management study’. ● It was the first major study in cross-cultural comparative research. ● It can be positioned on the values level (according to Schein). Original study at IBM (1967-1973): ● N=116,000 questionnaires which were completed by IBM employees at all hierarchical levels and with various qualifications. ● Four dimensions of country cultures were identified: power distance, uncertainty avoidance, femininity vs. masculinity, and individualism vs. collectivism. ● These dimensions imply consequences for the structures of organizations. Chinese Value Survey ● N=100 people from 23 countries. ● The results reflected three dimensions similar to power distance, individualism vs. collectivism, and masculinity vs. femininity and one new dimension: Confucianism dynamics, which could not be related to the results of the original IBM study.

Dimension Definition Examples of Country Characteristics Major Difference lies in… Power Distance

The acceptance of members of a culture that power is not distributed equally in institutions expresses the emotional distance between employees and superiors

High : acceptance of a hierarchical organization structure, in which every individual can occupy their place without any need for justification Many South Asian countries, South America

Low : aspiration to equal power distribution, demand for explanations for any instance of formalized power inequality US, Anglo Saxon countries

… how power inequality is dealt with

Uncertainty Avoidance

Extent to which the members of a culture feel threatened by uncertain, ambiguous and/or unstructured situations and try to avoid them

Strong : strict beliefs and behavioral codes, no tolerance for people and ideas that deviate from these Some Asian Cultures, e.g. Singapore, Hong Kong, German- speaking countries

Weak : significance of practice exceeds the significance of principles; high tolerance of deviations Scandinavia

… the reaction of individuals to time pressure or uncertainties in the future

Femininity vs. Masculinity

Based on the assumption that values can be distinguished as more masculine or more feminine

Masculine orientation : comprises the pursuit of financial success, heroism and a strong performance approach; role flexibility is less clear-cut German-speaking countries

Feminine orientation : preferences for life quality, modesty and interpersonal relationships; role flexibility is more clear-cut Scandinavia

… the form of social roles attributed to gender by the relevant society

Individualism vs. Collectivism

Extent to which individual initiative and caring for oneself and one’s nearest relatives are preferred by a society as opposed to, for example, public assistance or the concept of extended family

In more individualist cultures , there is merely a casual network of relationships between people. Each person is primarily responsible for himself US, Anglo Saxon countries

More collective cultures have closer, more clearly defined systems of relationships. This applies both to extended families as well as companies Many South Asian countries, South America

… the predominant self-sufficiency among individuals in a society (private & professional)

Confucianism or Long-term Orientation

Basic orientation in the life of people, which can be either more long-term or short-term in nature

Long-term : great endurance and/or persistence in pursuing goals, position of ranking based on status, adaptation of traditions to modern conditions, respect for social and status obligations within certain limits, high savings rates and high investment activity, readiness to subordinate oneself to a purpose, and the feeling of shame → future-oriented, dynamic Asian Countries

Short-term : personal candor and stability, avoiding loss of face, respect for social and status obligations without the consideration of costs, low savings rates and low investment activity, expectations of quick profit, respect for traditions, and greetings, presents and courtesies based on reciprocity → present-oriented or past- oriented, relatively static US

x…the attitude towards time (short-long; past- present-future)

success of societies.

Dimensions ● Institutional collectivism, in-group collectivism, uncertainty avoidance, power distance, gender egalitarianism, assertiveness, performance orientation, and humane orientation. ● Partly based on Hofstede’s dimensions. ● Distinction in the questions between practices (as is) and values (should be).

Results ● Separation of countries based on a literature analysis carried out in ten clusters: South Asia, Latin America, North America, the Anglo cluster, Germanic and Latin Europe, Sub-Saharan Africa, Eastern Europe, the Middle East, and Confucian Asia. ● These cultural regions have different characteristics within the respective cultural dimensions. Unique profiles emerge when combining cultural dimension characteristics with different cultures.

4. Compare cross-cultural management studies and list their advantages and disadvantages.

Refer to ‘A reflection of the Hofstede study’, ‘A reflection on the Globe study’, and ‘A reflection on

cross-cultural management studies based on national values’.

Studies (start)

Data Basis

Advantages Disadvantages

Hofstede (1960s)

Quantitative

N= 116,

62 countries

1 industry

Historical prominence;

Could be repeated at different points in time;

Results could serve as guidelines for explaining behavior

Western research team;

Limited industry focus (only 1);

Equivalence of culture to nation;

Level of analysis

GLOBE (1990s)

Quantitative

N= 17,

62 countries

3 industries

Distinction between practices and values;

Multinational research team;

Various culture levels (individual, organizational, social) and distinctions in the sample in some countries (e.g. South Africa, Switzerland, Germany);

Refined dimensions

Limited industry focus (only 3);

Equivalence of culture to nation (subcultures are not sufficiently reflected);

Still: level of analysis (intra- national subcultures are not considered)

Fischer & Schwartz

Quantitative N1 = 60, 000+ 67 countries (2010)

Appreciates the limits of value difference inquiries in cross-cultural studies.

Value distributions within countries than diversity across countries. Value similarities exist widely across countries.

5. In addition to values, what other cultural constructs can help to conceptualize culture, and how are they useful?

Refer to ‘The situated dynamics framework’

The situated dynamics framework proposes that in addition to values two important factors can help to understand culture:

C ultural schemas are important determinants of behavior or thoughts, when they are accessible or applicable. Accessibility means that a schema needs to have been used recently or that cultural cues are present that activate it. An individual who is used to a high degree of power distance is more likely to act accordingly when introduced to a new leader by waiting for them to make the calls instead of self-initiating projects. Applicability refers to how applicable a schema is to a situation. If a schema is not applicable, it might still be accessible, but it is unlikely to determine behavior, as it is not relevant to the situation at hand. A comment in a meeting about the high workload in a project might make an individual think about typical reactions to high workload in their home context, but it does not automatically lead to a behavioral response.

So cial norms also influence our thoughts and behaviors, particularly in situations when others are present and can – or will – evaluate these behaviors. In addition, if individuals enter an unfamiliar situation, they are likely to look for cues relating to specific norms in the behaviors of others in order to determine what constitutes typical or appropriate behaviors.

6. To what extent do cultures undergo changes? Illustrate your statement with an example.

Refer to ‘The development of cultures and cultural research’

● This discussion is closely related to the convergence (cultures are becoming more and more similar)-divergence (specific cultural characteristics remain) debate. ● The extent depends on the level of analysis: o on the macro-level of culture (organizations) change takes place → convergence, because organizations are embedded in institutions that are also subject to convergence (e.g. joining the EU); o but on the micro level (behavior) differences are enduring →divergence. ● Hybridization of once distinct cultures occurs due to growing interdependence and migration. Intra-cultural changes due to, for example, demographic changes (beyond cultural borders), strong economic growth and system changes.

7. What do you think about the statement: ‘Cultures in Europe are becoming more similar?’

Students may be encouraged to use the chapter references, or their own, to give specific examples for their arguments.

In short: On the surface, cultures in Europe are becoming more similar (convergence), but not in depth (divergence).

According to Scholz, Messemer, and Schröter (1991) there are great similarities on the artifact level of European states, which evokes the impression that there are no major differences between countries. However, the consensus is much lower on the levels of values and basic

Further reading

● Homepage of Geert Hofstede: http://www.geert-hofstede.com ● GLOBE Project website: http://globeproject.com ● Dolan, S., & Kawamura, K. (2015). Cross cultural competence: A field guide for developing global leaders and managers. Bingley, UK: Emerald. ● Edwards, T., Schnyder, G., & Fortwengel, J. (2019). Mapping the impact of home- and host-country institutions on human resource management in emerging market multinational companies: A conceptual framework. Thunderbird International Business Review , 61 (3), 531–544. ● Geary, J., & Nyiawung, J. (2021). The impact of Chinese investments on western multinational enterprises’ work and employment practices: A consideration of nstitutional, political and dominance effects. Human Relations, 75(5), 842–870. ● Gelfand, M. J., Aycan, Z., Erez, M., & Leung, K. (2017). Cross-cultural industrial organizational psychology and organizational behavior: A hundred-year journey. Journal of Applied Psychology, 102(3), 514–529. ● Morris, M. W., Chiu, C.-Y., & Liu, Z. (2015). Polycultural psychology. Annual Review of Psychology, 66(1), 631–659. ● Schotter, A. P. J., Meyer, K., & Wood, G. (2021). Organizational and comparative institutionalism in international HRM: Toward an integrative research agenda. Human Resource Management, 60(1), 205–227. ● Szkudlarek, B., Romani, L., Caprar, D. V., & Osland, J. S. (Eds.). (2020). The SAGE handbook of contemporary cross-cultural management. London, UK: SAGE. ● Venaik, S., & Midgley, D. F. (2015). Mindscapes across landscapes: Archetypes of transnational and subnational culture. Journal of International Business Studies, 46(9), 1051 – 1079.

Chapter 3:

THE ORGANIZATIONAL CONTEXT: STRUCTURE,

MERGER AND ACQUISITIONS AND GLOBAL SMALL

BUSINESS

Learning Objectives

In this chapter, we examine how international growth places demands on management, and the factors that impact on how managers of internationalizing firms respond to these challenges. We start with the premise that the human resource (HR) function does not operate in a vacuum, and that HR activities are determined by, and influence, organizational factors. Students should learn about the following areas:

● Issues of standardization and localization ● Structural responses to international growth ● Control and coordination mechanisms, including cultural control ● Effect of responses on human resource management approaches and activities ● Cross-border alliances with a special emphasis on equity-based alliances. These alliances are given priority here due to their association with complex IHRM processes and practices. Equity cross-border alliances include mergers and acquisitions (M&As) and international joint ventures (IJVs).

Chapter Summary

The purpose of this chapter has been to identify the HR implications of the various options and responses that international growth places on the firm. This chapter focuses on:  The general topic of balancing standardization and localization of MNE operations and how this balancing act runs throughout all HR planning, processes, activities and systems.  The organizational context in which IHRM activities take place. Different structural arrangements have been identified as the firm moves along the path to multinational status

• from export department through to more complex varieties such as the matrix, heterarchy, transnational and networked structures.  Control and co-ordination aspects. Formal and informal mechanisms were outlined, with emphasis on control through personal networks and relationships, and control through corporate culture, drawing out HRM implications.  How international growth affects the firm’s approach to HRM. Firms vary from one another as they go through the stages of international development and react in different ways to the circumstances they encounter in the various foreign markets. There is a wide variety of matches between IHRM approaches, organizational structure and stage of internationalization. In 1989 almost half the US firms surveyed by Dowling reported that the operations of the HR function were unrelated to the nature of the firm’s international operations. A study by Monks of nine subsidiaries of multinationals operating in Ireland found that the majority adopted a local approach to the HR function, with headquarters involvement often limited to monitoring the financial implications of HR decisions.  Stages of development and organizational forms should not be taken as normative. Research does suggest a pattern and a process of internationalization, but firms do vary in how they adapt to international operations – we use nationality of the parent firm to demonstrate this.

Through the approach taken in this chapter, we have been able to demonstrate that there is an interconnection between IHRM approaches and activities and the organizational context, and that HR managers have a crucial role to play. In order to better perform this role, it would seem important that HR managers understand the various international structural options, along with the control and co-ordination demands imposed by international growth.

In this chapter we have extended the discussion about the organizational context of MNEs to include other organizational forms which pose specific problems to IHRM, i.e., cross-border alliances and globalizing SMEs. Cross-border M&As have seen a tremendous growth in the course of globalization. We have described their formation process as well as four important development phases: pre-M&A phase, due diligence phase, integration planning phase and implementation phase. In each of the phases specific strategic HR requirements need to be taken into account in order to effectively manage the M&A process. The role of expatriates is mainly discussed with respect to learning effects. A comparative approach to HR in M&As indicates the complexity that emerges from the institutional and cultural environments in which the firms are embedded.

each stage affect the HR function?

This question is best answered via direct reference to the text ‘ The path to global status ’. In general, it is important to note that the number of steps, or stages, along the path to multinational status varies from firm to firm, as does the time involved. Moreover, the sequence of stages can be different as well, as some intermediate steps can be leapfrogged. The stages considered in this question include exporting, use of a sales subsidiary, licensing, subcontracting, and foreign production (refer to Figure 3.3 ‘Stages of internationalization’).

Examples of stage impacts on the firm’s HR function: ● Exporting: the HR function is unclear, but it will involve a selection of export staff and perhaps the training of foreign agency staff. As these activities are handled by the marketing department or exporting staff, the HR department has little, if any, involvement in the development of policies and procedures surrounding the HR aspects of the firm’s early international activities. ● Sales subsidiary: the HR role may involve staff selection (HCN or PCN), as well as expatriation management issues and activities. It may be that, at this point, the HR department becomes actively involved in the personnel aspects of the firm’s international operations, though there is little empirical evidence as to when and how HR-designated staff become involved ● Foreign production/international division: the role of corporate HR staff is primarily concerned with expatriate management, though there will be some monitoring of the subsidiary’s HR function. As the firm expands its foreign production or service facilities into other countries, thus increasing the size of its foreign workforce, accompanied by a growth in the number of expatriates, more formal HR policies become necessary such as, for example, the design of appropriate policies, especially for compensation and pre-departure training for expatriate management. ● Foreign production/global product/area division: as part of the process of accommodating subsidiary concerns through decentralization, the MNE strives to adapt its HRM activities to each host country’s specific requirements. Naturally, this impacts on the corporate HRM function. As there is an increasing devolution of responsibility for local employee decisions in each subsidiary, and with corporate HR staff performing a monitoring role, intervening in local affairs occurs less frequently. This HRM monitoring role reflects management’s desire for the central control of strategic planning, i.e. formulating, implementing, and coordinating strategies for its worldwide markets. Furthermore, growth in foreign exposure, combined with changes in the organizational structure of international operations, results in an increase in the number of employees needed to oversee activities between the parent firm and its foreign affiliates. Within the human resource function, the development of managers able to operate in international environments generally becomes a new imperative.

3. What are the specific HRM challenges in a networked firm? This question is best answered with material starting in ‘Beyond the matrix’.

Managing both the intra-organizational and inter-organizational spheres, and the total integrated network, is crucial to global corporate performance. It involves what has been termed a ‘less-hierarchical structure’, featuring five dimensions:

● Delegation of decision-making authority to appropriate units and levels ● Geographical dispersal of key functions across units in different countries ● Delayering of organizational levels ● De-bureaucratization of formal procedures ● Differentiation of work, responsibility, and authority across the networked subsidiaries A firm that is maturing into a networked organization (firm specificity) requires

IHRM approaches and activities that will assist its ability to develop a flexible global organization that is centrally integrated and coordinated, yet locally responsive, i.e. a geocentric approach.

4. Country of origin can strongly influence a firm’s approach to organization structure. As MNEs from China and India internationalize, to what extent are they likely to differ from Japanese, European and US MNEs? Refer to ‘Different countries take different paths’.

1. European firms tend to move directly from a functional “mother-daughter” structure to a global structure with worldwide product or area divisions, or to a matrix organization without the transitional stage of an international division. It may be that there is a preference for matrix-type structures within European firms, particularly Nordic MNEs.
2. U.S. firms have featured in a number of experiments with the matrix structure.
3. Japanese firms have tended to progress from export divisions to international divisions, although at a slower pace than their US counterparts, in a ‘Greenfield’ approach.
4. Chinese firms , with so-called Chinese bamboo network/family traits, are characterized by tight family control. The incremental approach involves moving into neighboring East and South East Asia before expanding into North America.
5. Indian MNEs , as with Chinese MNEs, are difficult to assess, as there is a relative paucity of information regarding their internationalization. 5. Describe the formation process of cross-border mergers, acquisitions, and international joint ventures. What are the major differences? Refer to ‘Cross-border alliances and ‘International equity joint ventures’.

● A merger is the result of an agreement between two companies to join together their operations. Partners are often equals. ● An acquisition , on the other hand, occurs when one company buys another company with the intention of controlling the activities of the combined operations. ● International joint ventures ( IJVs ) are defined, in line with Shenkar and Zeira, as ‘ [a] separate legal organizational entity representing the partial holdings of two or more parent firms, in which the headquarters of at least one is located outside the country of operation of the joint venture. This entity is subject to the joint control of its parent firms, each of which is economically and legally independent of the other’. In contrast to M&As, the parent companies of an IJV keep their legal identity, and an additional new legal entity representing the IJV is established. The differences between the two can be seen when comparing the definitions: ● In an M&A process, task integration and human integration need to take place. Pre‐existing cultures must be effectively integrated, and interdependencies between acquired and acquiring units must be managed. ● In an IJV, a new organizational entity is created, and the focus is on the compatibility of the respective partners, as well as managing the mutual learning processes between the parent companies and the new joint venture entity. ● Figures 3.9 and 3.10 provide some ideas for related HR challenges.

6. Describe the development phases of an M&A and the respective HR implications. This question addresses material found in ‘M&A phases and HR implications’