Defining the terms

Human Resource Management, 4th Edition© Pearson Education Limited 2004

OHT 15.1

Defining the termsComparative HRM: examines how and why HR policy and practice differ across countries. Main analytical focus: institutional influences on organisational decision-making.• Typical questions:

– To what extent are HR policies developed in one country appropriate in other countries?

– Are policies in different countries becoming more similar (convergence) or remaining different (divergence)?


OHT 15.2

Defining the termsInternational HRM: understanding how MNCs manage their international workforces in order to gain competitive advantage. Main focus: organisational strategy and structure, relationship with market competition.• Typical questions:

– What is the best way of organising the international HR function?

– What role can expatriate managers play in achieving strategic integration and control within MNCs?


OHT 15.3 Cross-national differences: Theories

• National Business Systems (NBS) (Whitley) – Economic, political and social characteristics of individual market economies shaped by a social system, leading to distinctive NBS

• Industrial Orders (Lane) – orientations of NBS’s affected by the extent of non-market institutions within the national economy. Systems with more non-market institutions tend to be more production, rather than finance, dominated, and more long-termist

• Coordinated Market Economies (CMEs) vs Liberal Market Economies (LMEs) (Hall and Soskice) –– CMEs (e.g. Japan, Germany) – more non-market institutions, tendency

towards incremental innovation

– LMEs (e.g. USA, UK) – based on ‘free market’, tendency towards rapid change, radical innovation.

– Both types of economy can be competitive, but react in different ways to similar events (airlines example)


OHT 15.4 Empirical differences between NBSs

USA• Coordination by market mechanisms• Organisational capabilities developed by professional management• Short-term focus on shareholder value• Liberal market economy

UK• Market relations dominant• Finance-dominated system• Low level of institutional regulation often prevents effective

implementation of corporate strategies• Liberal market economy


OHT 15.5 Empirical differences between NBSs

Germany• Active institutional regulation by state constrains short-termism• Productivist system• Collectivist system• Incremental innovation, competitive advantage in manufacturing• Coordinated market economy

Japan• High level of inter-firm cooperation and other non-market

mechanisms• Active state role in finance provision• Collective system, firm-based industrial relations• Long-term orientation• Coordinated market economy


OHT 15.6

Comparative HRM

Reasons for cross-national difference:• financial system• labour market system and regulation• industrial relations system• education and training system• welfare state


OHT 15.7

National HR SystemsUSA• market based regulation, lack of institutional ‘constraints’ on HR

policy• low level of collective bargaining, many firms ideologically opposed to

trade unions• centralised, formalised management systems• history of Taylorism• reactions to global competition: employee involvement,

renegotiation/imposition of new forms of work organisation• short-termist nature of financial system makes moves towards ‘best

practice’ HRM difficult


OHT 15.8

National HR SystemsGermany• co-determination (works councils)

• sectoral collective bargaining reduces firm-level autonomy, creates uniformity in some practices across firms

• vocational training system with inputs from employers, state and trade unions

• constraints on moves towards ‘American’ forms of HRM

• ‘pluralist HRM’: argument that constraints on firms encourage moves towards best practice

• system under some pressure as a result of globalisation and reunification


OHT 15.9

National HR SystemsUnited Kingdom• voluntarism• history of low-trust industrial relations• deregulation and individualisation of the employment relationship• lack of coordination of system inhibits moves to ‘best practice’ HRM• reliance on numerical forms of flexibility

Japan• seniority-based wages• ‘lifetime’ employment• financial system aimed at long-term growth• long-term, commitment-based approach to HRM for core workers in

large firms


OHT 15.10

International HRM

Definition• The set of distinct activities, functions and processes that

are directed at attracting, developing and maintaining an MNC’s human resources. It is thus the aggregate of the various HRM systems used to manage people in the MNC, both at home and overseas.

Taylor et al., 1996


OHT 15.11 Models of International HRM

• Schuler, Dowling and De Cieri (1993) – Integrative framework of international HRM– identifies 3 groups of variables that impact on the nature of

strategic IHRM: strategic MNE components, exogenous factors, endogenous factors

– strengths: comprehensive– weaknesses: descriptive, emphasis on management employees

• Taylor, Beechler and Napier (1996) typology– identifies 3 types of strategic IHRM forms: exportive, integrative

and adaptive– draws heavily on resource-based theory of the firm– strengths: recognises variable role of employees in providing

critical resources– weaknesses: unclear what practices are diffused and how


OHT 15.12 Models of International HRM

• Perlmutter (1969) – Mindsets– identifies 4 mindsets: ethnocentric, polycentric, geocentric and

regiocentric– strengths: recognises the role of individual cognition in shaping

organisational practice– weaknesses: fails to specify, or predict, how and why

organisational actors may shift their mindsets

• Adler and Ghadar (1990) – organisational change model– identifies how changes in product life cycles impacts on the

demands of international and local managers– strengths: emphasis on the cultural context and its implications for

international training– weaknesses: overemphasis on expatriate manager


OHT 15.13

Expatriates

• Reasons organisations use expatriates:– to fill positions– provide management development opportunities– to enable organisational change

• The transfer cycle– selection and recruitment– relocation– adjustment– repatriation


OHT 15.14

HRM in MNCs

• Need to draw together the institutional and strategic perspective on IHRM together

• Four Forces Model - Edwards and Ferner (2000)- home country effects - dominance effects- pressures for international integration - host country effects


OHT 15.15 Convergence–Divergence Debate

• Convergence– globalisation is creating similar pressures and diffusing similar

technology encouraging convergence– as American HRM is argued to be the dominant and most

advanced/efficient then it follows MNCs will converge on this

• Divergence– varieties of capitalism argument suggest different national

business systems more appropriate than others demanding diversity in HRM practice

• Conclusion– on-going debate– need to refine the terms convergence and divergence more

precisely– likely we are seeing strong and weak convergence and

divergence across different HRM practices

Defining the terms

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