International Human Resource Management - Literature Review

This literature review focuses on the way cultural and institutional differences affect the dissemination of HRM strategies and practices by the EMNCs operating in a developed economy. It also focuses on the challenges that would be faced by the EMNCs during transferring the HRM practices across borders.

Running Head : INTERNATIONAL HUMAN RESOURCE MANAGEMENT
International Human Resource Management
Name of the Student
Name of the University
Author Note

Literature Review
There has been a wide internationalization of the companies from developing economies.
They are trying to participate in the international trade having grown the foreign direct
investment and at the same time, they are surging in the acquisition activities too. It can also be
seen that the multinationals from the emerging economies such as Embraer (Brazil), Haier
(China), Koc Holdings (Turkey), Tata Motors (India) and others are operating rapidly and
entering the developed economies such as United States, United Kingdom and others. This report
will target the EMCs in general which have operations in both developed and emerging markets
(Almond, Edwards and Clark 2003). The report will focus on the way cultural and institutional
differences affect the dissemination of HRM strategies and practices by the EMNCs operating in
a developed economy. It will also focus on the challenges that would be faced by the EMNCs
during transferring the HRM practices across borders. It will further describe the approaches that
would be adopted by the EMNCs for managing their subsidiaries in the developed markets and
subsidiaries in the emerging markets.
Why the EMNCs are entering the developed countries
The EMNCs make use of the cross-border merger and acquisitions for acquiring
strategic assets that fulfil the deficiencies of resources they have. Hence, the developed markets
have become their significant destinations. While entering the developed economies, the EMNCs
are facing cultural and institutional differences. The EMNCs can also face challenges while
establishing legitimacy in a developed economy. This might lead them to need a quick resources
for becoming competitive in the international markets (Audea, Teo and Crawford 2005).

The cultural environment can be considered as a set of practices, beliefs , behaviours and
customs which are found to be common for everyone who lives within a certain population. The
cultural environment can shape the way every person develops having influenced the
personalities and the ideologies. The cultural environments are well determined by the different
aspects of culture which influence the personal behaviours and choices. In the international
business contexts, cultural environment is extremely necessary. It requires a string understanding
of the different cultures while doing business in a global context. What works in one country
might not work in another country and rather can be interpreted as an insult (Rosenzweig and
Nohria 1994). The multinationals in the emerging market and the cross-cultural teams are
rapidly becoming aware of extending the knowledge of global contexts with insightful
approaches to the business problems. The global organizations are facing stumbling blocks in
terms of the culture and the international business.
On the other hand, institutional environment is characterized by the elaboration of the
requirements and rules for which the individual organizations should conform to receive support
and legitimacy. The institutional environment is a process of internationalization. One of the
best way to understand this aspect is through understanding the concepts related to the
international business theory and the institutional theory. It rather consists of the regulations,
customs, the prevalent states of the societies, the professions along with the organizations too
which shape the organizational behaviour and the outcomes too. There is a powerful role of the
home country institutional environment in the international strategy. In relevance to the
internationalization of the business, there is a significant importance of having an institution-
based-view . This new point of view in the field of the international business studies is also
known as the industry –based view or the resource-based view.

The institutions are found to have shaped the individual behaviour and the actions. It also
directly determines the implementation of the strategies along with the areas of gaining
competitive advantage. The institutional environment can be divided into the legal, the societal
and the political or the regulatory, the normative and the cognitive. The regulatory dimensions
are related to the policies of the government, the regulations and the laws that can support the
industries. The normative dimension is the value system of a particular country. The values of a
country guide the selection and justification of the actions, people’s evaluation and the social
construction. The cognitive dimensions consist of the social and educational knowledge which is
developed in the institutions. There are various influences of the institutions in the strategies of
firms. It is quite evident that the institutions can leave influence on the strategy of a firm.
Concepts related to standardization and localization
In this regard, the relationship between standardization and localization has to be dragged
over here. The researchers have postulated that the there is a homogenization of the markets
which allow for the strategy standardization (Whitley 2000). It can be defined as the process of
successfully applying domestic target-market-dictated standards of service to the foreign
markets. The standardization helps to enhance the integration along with coordination of the
marketing activities across various international markets. It helps to facilitate the knowledge
transfer in the international markets. Standardization also promotes easy monitoring, control and
coordination. It makes the implementation of the quality standards, the production methods and
brand awareness too (Brookes et al. 2011). As a contrast, localization of the industry standards
consists of the alteration of a particular service or product in other market. Localization is
closely related to the customization and adaptation that are completely different from
standardization. There are various reasons of an organization’s localization. Due to localization,

an organization becomes open to various constraints such as climate , language, race,
occupations , education and many others with frequent conflicts resulting from various cultures,
laws and societies too. It is extremely evident that people from different country would speak
different language, have different regulations and rules. These would differ evidently across the
state borders.
The global competition has led many MNCs to adopt the same set of the ‘best practices’
which generate uniformity for responding to the international competitive environment. The
MNC s are found to be working on the borderless world to gain strong global identities. The
globalization comes from the concept of industrialization calling the undeveloped countries for a
pluralistic industrialism. The phenomenon is termed as the converging divergencies referring to
the growth of the convergence approach in the HRM practices (Becker and Huselid 1998). It is
with an increase of the divergence of employment shown in the respective countries. The
convergence theory suggests that the managerial practices can easily be transferred to the
countries which are developing. This literature review will focus on two of the frameworks such
as the cultural and the institutional approaches as per the views of Hofstede. The cultural
approach consists of the organizational practice and structure. It also suggests that patterns of
the organizations are controlled by the shared ideas and the considerations (Audea, Teo and
Crawford 2005). On the other hand, the institutional theory suggests that the political, economic
and the social factors frame the institutional structure leaving a strong impact on the
organization.
(The developed and developing country challenges on Transfer of HRM practices)
At the national level

The process of the HRM transfer involves two different business systems such as the
home country and the host country. The transfer of the HR practices and processes depend on
the cultural and the institutional differences between the two countries and the two business
systems. It is significant to analyse the effects of the home country for recognizing the way the
host country adjusted the policies of human resource management. The importance of the
influence of the home country is founded on the embeddedness of the MNCs in its origin
country. Taken for example, the MNCs of America are found to be centralized and quite
formalized in terms of transferring the policies to the subsidiaries they have. These MNCs are
prone to become embedded in the origin country through standardizing and localizing the HRM
systems internationally. Regarding the diffusion concept, it can be said that organizations do
share the equal environment for responding to the pressure to demonstrate isomorphism. The
MNCs of the United States try to disseminate all their best practices throughout the world
(Bartlett and Ghoshal. 1999). The investigation of the business systems of America helps to give
an understanding of the home country impacts on the HRM transfer in developing countries.
The host country power can be determined by the mixture of socio- economic infrastructure and
the internal strength which is represented by the national business systems integration.
HRM level
The transfer of the HRM practices and policies concentrate on HRM as the potential
source of gaining competitive advantage on the local organizations. While studying the diffusion
of the HRM practices across the countries, it is quite accurate to consider the institutional theory.
The MNCs across the world are challenging various institutional pressures (Whitley 2000).
Therefore, it is necessary for the MNCs from the developing countries to ensure the legitimacy
of the host business environment and operate successfully across the seas. When the agenda is

seen from the resource –based view, it can be seen that there is a successful transfer of the HRM
policies when the resources of the home country provides the MNCs with a source of
competitive advantages. The application of the HRM practices as recruitment, selection,
development, training , performance appraisals are necessary as it helps in optimizing the
performance of the home country. The transfer of the HRM practices become unnecessary when
the home countries can generate profits higher than the host countries. The international
approaches of HRM can easily be seen in the complex mechanisms of transfer in the EMNCs.
Hence, the international managers or the expatriates play a considerable role in the
implementation of the HRM practices and policies.
The corporate level
There are management functions which are followed by the parent organizations in the
subsidiary companies. There are others to which closely resemble the HRM practices of the
hosting country. These process leave greater impact on the transfer of the HRM practices from
the developed countries to the subsidiaries in the developing countries (Wright et al. 1999).
There are other influencing factors such as organizational structure, culture, directions, strategy
which make the transfer challenging in the host countries. Other factor are the nature if the
subsidiary, its size function, ownership , type and many others. Taken for example, in some of
the EMNCs, the practices of HRM are quite formalized so are the functions
On a concluding note, it can be said that, there are certain factors which contribute to the
transfer of the HRM practices and policies of the EMNCs across borders. It has also outlines
two of the contrasting positions where the globalization is the key determinant. The theory of
globalization suggests that the firms move for a homogenization through following the same
organizational behaviour covering the HR policies. On the other hand, the nationality thesis

suggest that national cultures and institutions have a strong impact on the organizational
behaviour in both the developed and the developing country. The literature review has provided
focus on the way cultural and institutional differences affect the dissemination of HRM strategies
and practices by the EMNCs operating in a developed economy. It also focused on the
challenges that would be faced by the EMNCs during transferring the HRM practices across
borders. It also has further described the approaches that would be adopted by the EMNCs for
managing their subsidiaries in the developed markets and subsidiaries in the emerging markets.

References
Almond, P., Edwards, T. and Clark, I., 2003. Multinationals and changing national business
systems in Europe: towards the ‘shareholder value’model?. Industrial Relations Journal, 34(5),
pp.430-445.
Audea, T., Teo, S.T. and Crawford, J., 2005. HRM professionals and their perceptions of HRM
and firm performance in the Philippines. The International Journal of Human Resource
Management, 16(4), pp.532-552.
Bartlett, C.A., and S. Ghoshal. 1999. Managing across borders: The transnational solution. Vol.
2: Taylor & Francis. - 162 - International Research Journal of Business Studies vol. VII no. 03
(2014 - 2015)
Baumueller, M. 2007. Managing cultural diversity: an empirical examination of cultural
networks and organizational structures as governance mechanisms in multinational corporations.
Vol. 3214: Peter Lang Pub Inc.
Becker, B.E. and Huselid, M.A., 1998. Human resources strategies, complementarities, and firm
performance. SUNY Buffalo: Unpublished manuscript.
Brookes, M., Croucher, R., Fenton-O'Creevy, M. and Gooderham, P., 2011. Measuring
competing explanations of human resource management practices through the Cranet survey:
Cultural versus institutional explanations. Human Resource Management Review, 21(1), pp.68-
79.

Rosenzweig, P.M. and Nohria, N., 1994. Influences on human resource management practices in
multinational corporations. Journal of international business studies, 25(2), pp.229-251.
Taylor, S., Beechler, S. and Napier, N., 1996. Toward an integrative model of strategic
international human resource management. Academy of Management review, 21(4), pp.959-985.
Whitley, R., 2000. The institutional structuring of innovation strategies: business systems, firm
types and patterns of technical change in different market economies. Organization
Studies, 21(5), pp.855-886.
Wright, P.M., McCormick, B., Sherman, W.S. and McMahan, G.C., 1999. The role of human
resource practices in petro-chemical refinery performance. International Journal of Human
Resource Management, 10(4), pp.551-571.