Country of origin effects and HRM in                  multinational companies                           Anthony Femer, Uni...
Country of origin effects and HRM in multinational companiesrepresentatives of the currently ’hegemonic’ capitalist power,...
Anthony Ferner, University of WarwickFIGURE 1 C O ~ ~ O ~ O ~ ~ fZ J C s                   studies o M N PAuthors         ...
Country of origin effects and HRM in multinational companiestheir foreign operations, highly reliant on establishing an in...
Anthony Ferner, University of Warwick                              METHODOLOGICAL PROBLEMSA variety of models of explanati...
Country of origin effects and HRM in multinational companiescountries like Sweden or Switzerland, with smaller home market...
Anthony Ferner, University of Warwick    In recent years, a significant body of analytical literature has strengthened the...
Country of origin effects and HRM in multinational companies   The second alternative for MNCs faced with strategic choice...
Anthony Ferner, University of Warwick   What are the implications of governance for the behaviour of MNCs? First, Marginso...
Country of origin effects and HRM in multinational companiessubsidiary compared with a US subsidiary. How far, in other wo...
Anthony Ferner, University of Warwick  tournament’ which characterises the promotion system in ‘Latin’ firms such as the F...
Country of origin effects and HRM in multinational companiesidentifying and then ensuring the diffusion of practices from ...
Anthony Ferner, University of Warwickworks councils (also Guest and Hoque, 1996),it is noteworthy that German MNCs havebee...
Country of origin effects and HRM in multinational companiesone research strategy would be to examine MNCs from countries ...
Anthony Ferner. University of Warwickmaking takes place and where international corporate systems are designed, and the le...
Country of origin effects and HRM in multinational companiesnational-subsidiary-specific)HR policies. At one level, theref...
Anthony Ferner, University of WarwickBomers, G. and Peterson, R. 1977. ’Multinationalcorporations and industrial relations...
Country of origin effects and HRM in multinational companiesHu, Y.4. 1992. Global or stateless corporations are national f...
Anthony Ferner, University of WarwickRojot, J. 1990. ‘Human resource management in France’ in Human Resource Management: A...
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  1. 1. Country of origin effects and HRM in multinational companies Anthony Femer, University o Wanoick f n Vol. 6, no. 4 of NRMJ, Guest and Hoque (1996) examine differences in the HR practices of German, US and Japanese greenfield subsidiaries in Britain. The authors’ empirical analysis, based on survey data, starts from the notion that ‘national cultures’ aredifferent ’and that this is manifested in the organisational cultures which are thencommunicated to overseas subsidiaries’ (p. 53). Yet despite the empirical evidence from ti hsand other research, the study of the ’country-of-origin’factor in multinational companies(MNCs) remains surprisingly underdeveloped. In particular, the differences betweenmultinationals of differentnationalities are rarely set within a convincing analytical context.The present article aims to develop a more systematic analytical framework for examiningcountry-of-origin issues. The issue of ownership is central to a number of important policy-related and academicdebates in the area of HRM and IR. One line of argument is that, with increasingglobalisation, MNCs are becoming stateless players, detached from individual nation states(eg Economist, 1995). Evidence for this includes, for example, the growth of strategicinternational alliances and joint ventures, cross-national mergers, the rise of businessdivisions headquartered outside the ’home’ country, and so on. However, much contraryevidence suggests that even the most global of companies remain deeply rooted in thenational business systems of their country of origin. The notion of the global corporationtranscending national boundaries is, very largely, myth. For example, Porter’s (1990) notionof the ’competitive advantage of nations’ implies that the success of internationalcompanies springs from characteristics of their national resource bases. Hu (1992) andRuigrok and van Tulder (1995: ch. 7) have argued that, on several dimensions, MNCs exhib-it national characteristics. For very few of the world’s largest companies is productionhighly ‘intemationalised’:thus less than a score of the Fortune top 100 companies have morethan half their production facilities or their workforce outside the country of origin(Ruigrok and van Tulder, 1995: 1569). Even where the home base does not account for thebulk of sales, operations and employment, the home nation is almost always the primarylocus of ownership and control. Board and senior management positions are staffed dispro-portionately - often overwhelmingly - by home country nationals, strategic decisions tendto be made in the home nation, and innovative activities (research and development) arealso disproportionately located there. Finally, although ’the global firm is exposed to manyjurisdictions, it usually has a home government and a home tax authority.’ It ‘therefore hasa legal and a fiscal nationality that matters to it more than others’ (Hu, 1992: 117). At a general level, writers such as Elger and Smith (1994) have emphasised thatinternational competition is rooted in the specific arrangements of national systems, andthat national economies compete to impose their version of economic development. Thecompetitive advantage of a particular version of capitalism creates strong pressures for itsdissemination, a process in which MNCs are key protagonists. Thus Japanese MNCs, as ~ ~ ~ ~~ ~~ ~HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 19
  2. 2. Country of origin effects and HRM in multinational companiesrepresentatives of the currently ’hegemonic’ capitalist power, are seen as transmission beltsfor the business and work organisation practices of Japanese capitalism. Dissemination by MNCs of practices in such areas as HRM may be one expression ofwhat Streeck (1991) has called ‘regime competition’. Streeck was concerned that weakly-regulated systems would attract footloose capital away from those with better employeeprotection. One can, however, t r Streeck‘s question on its head by asking whether MNCs unfrom strong regulatory systems adopt and export the practices of their parent country, andwhether ti gives them a competitiveadvantage in the host countries where they operate. If hsSO, they may actually form a conduit for the export of elements of more highly regulatedHR/IR regimes into countries with more permissive systems. In short, are MNCs proxies inthe competition between highly regulated national models of employment relations andhighly deregulated ones? Thus, are the patterns found in British MNCs characteristic of European multinationalsmore generally, or are there substantial differences in approach with, for example, French,German or Swedish ones? Do other European MNCs have more efficient or effective ways ofmanaging their international labour force? If so, how far are they linked to specific character-istics of the national business ‘culture’, including - as Guest and Hoque (1996) hypothesise -its institutions of HRM? Do multinationals act as vehicles for ‘transmitting’HR/IR practicesfrom the parent country business culture to the host countries in which they operate, or dothey attempt to drop what they see as the constraining elements of their business systemsonce they leave their own borders? For example, is the alleged long-termist orientation ofthe German system, and its tendency to treat human resources as investments rather thancosts, exported along with its foreign direct investments?How far do MNCs act as forces forconvergencearound the practices of the most ’successful’ national business regimes? The next section critically surveys the literature on the ‘country-of-origin’ effects.Subsequent sections set out an analytical platform for exploring such effects in relation toHR/IR, and consider some issues of research strategy in the area of national differencesbetween MNCs. LITERATUREThere is a relatively small body of research pointing to systematic differences in the ways inwhich MNCs of different nationalities manage their human resources. A selection of suchstudies is summarised in Figure 1.A number o generalisations emerge from such studies. First, they provide substantive supp- fort for the notion that nationality of ownership is a significant determinant of MNCbehaviour. Thus a long series of studies has found US MNCs to be relatively centralised andformalised in the management of HR; their headquarters set or influence policy on wagesystems, collective bargaining, union recognition, welfare and training policies (eg Bartlettand Ghoshal, 1989 161-3; Bomers and Peterson, 1977;Hamill, 1984; Negandhi, 1986;Yuenand Hui Tak Kee, 1993; Young et al, 1985). Other research suggests that they have beenconsistent innovators in IR, introducing productivity bargaining into Britain in the 1960s,along with fixed-term agreements (Endenvick, 1985: 11519), and have often tried to avoidunion recognition in Britain or Ireland (Gunnigle, 1995), or to resist pressures for sectoralbargaining. US styles of multinational HRh4 have typically been contrasted with Japanese and‘European‘ styles. The foremost characteristic of Japanese companies referred to in bothsurvey-based and qualitative studies is the strong but informal centralised coordination of20 - HUMAN RESOURCE MANAGEMENT JOURNAL VOL 7 NO 1
  3. 3. Anthony Ferner, University of WarwickFIGURE 1 C O ~ ~ O ~ O ~ ~ fZ J C s studies o M N PAuthors Study Selected findingsBartlett and lntrtuirws with 236 manaxers i n three Differences in imrdinating mechanisms in Japanese. US, and EuropeanGhoshal. 1989 US, thrw Japnnrsennd three European firms - use of consensus decision-making, formalised systems and MNCs. ’socialisation’ respectivelyBeaumont e t al, Sumq i $ l R in 232 subsidiaries of High levels of non-unionism, particularly in smaller firms, even where1990 Gcrnian MNCs in GB. parents mognised unions. Low incidence of German-styleemployee involvement arrangements.Bomers and lob security, bargniniiig power and European MNCs decentralise IR much more than US-based; USbasedPeterson, 1977 I R practices of US and European MNCs MNCs tend to centrake through close k t managerial supervision, m Netherlands and Gerniany. profit-plan mechanisms or corporate financial controls.Evans, Lank and Diferent national models of managenienl Different ’Japanese‘, ’LatinEuropean‘, ‘Germanu’ and ‘AngleDutchFarquhar, 1989 deuelopnieiit in MNCs. approaches to career progressionGuest and Suwq of diferencrs in HRM in 85 US MNCs cxcrt wmcwhat more d i m t mtluence over HRM than otherHoque, 1996 greeiijeld subsidiaries of US, lapnnese MNCs h m a n bubsidiaries differshongl from atereurypiial German Cermnii and other MNCs in GB. practiceHamill, 1984 Locus of decision-making in IR I-’ MNCs much mom centralised m IR decsion-making than Lurnpean practice of 30 chemical and reflrchng grratrr production integrahon arid ethnncentnc managerial rnxinrcring MNCs in UK. stylcslnnes and Sunrey $48 Gernm, /apanesisand lapanise companirz more likely hi ha! e smgle union deals nc+trilr.Marris, 1995 US manufactiiring MNCs in Wales. clduu%and cnllecti e bargairung japanese and US hnns mom. likely tii UIL, )oh rutation multikilling and autonomous work gmup5 (mrman firms Ira51 likely to u c works counuls Japanese least likely to use PRPJohansson and Difirrnces m globalisation strategies lapanms firms a .more global and ha e stronger mtcgration mechanisim nYip, 1994 of 36 large US and Iapanesr MNCs, ex glohal gmiup mlrtinp, global budgetmg usinx smi-structured intemiews.Kopp, 1994 PustasfaiSIIRWI~ HRM in 81 japanesp, of lRHM in Japanese MNCs more ‘ethnocentric’ than in US and European European nnd US MNCs. MNCs, especially in use o expatriates in managerial postings and in low f ‘glass ceiling‘ for local employees. As a result, Japanese MNCs likely to experience HRM problems of skill scarcity, friction between parent and host country managers, etc.Negandhi, Orgunisafional structures, control US MNCs rely more on written policies and require more reporting1986 processes and decision-making in 244 than German and Japanese MNCs. subsidiaries of German, US and /npanr;eMNCs.Roberts and Siinvy of perceptions of union British MNC HQs - in contrast to US MNCs - exercise little control overMay, 1974 pressures in 32 British MNCs. subsidiaries’ IR policies, esp. collective bargaming and strike settlement. Main rnle ‘giving advice on company policy.’Rosenzweig and D e p ? of local ‘rsomorphism’ofHRM in Practices more affecting ‘rank-and-file’, and those more subject to localNohria, 1994 249Jnreixn affiliates o lapanese, f norms, tend to be more like local practices. Japanese firms comparatively Canadinn.French, German, Dutch. less like local firms.German and Swedish firms relatively unlike their Swedish. Swiss and UK MNCs in the US. parents (ego” ’benefits’) because of degree of difference between local and home practices.Tun& 1982 U s e of expatriates in US arid lupanese Japanese MNCs more likely to use expatriates in senior management MNCs. posts. Longer duration of expatnation, shonger back-up and training. US firms had higher expatriate failure rates. Greater importance of HRM func- tion in Japanese MNCs, strong authority in recruitment, compensation, evaluation compared with HR function in US MNCs.Wong and Study of centralisation and formalisation Hofstedian ‘power-distance‘ positively related to authority (centralisationBimbaum-More, irr Huiig K o g operations of 39 MNC and formalisation), Japanese and Swiss banks more highly formalised1994 baiiksfrom 14 countries. including US, than average, and rely more on expatriates, than British, French or Ccrninny, France, Netherlandsand UK. Dutch banks.Yuen and Persimnel prtzcfires of 31 LlS nnd 21 US MNCs‘ practices more extensive (ex in areas of welfare, wage structure,Hui Tak Kee, japanrse MNCs compared with 60 local training and development, communication with employees, performance1993 firins operating in lrgalistic Singaporean appraisal) and more formalised and standardised. Japanese companies riii~imnment. fairly similar to local companies.Young, Hood and (Dc~lcriitrnliuttionof decision-making 111 US MNCs more likely to establish financial targets, more centralised onHamill, 1985 finance, operations and personnel, in 116 employment and personnel decisions, less likely to employ home country US subsidiaries and 38 continental nationals at managing director level in UK. Europeanlother subsidiaries in UK f p s t a l survey).HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 21
  4. 4. Country of origin effects and HRM in multinational companiestheir foreign operations, highly reliant on establishing an international network of Japaneseexpatriate managers (Bartlett and Ghoshal, 1989; Bartlett and Yoshihara, 1988; Johanssonand Yip, 1994; Kopp, 1994; Tung, 1982; Lincoln et al, 1995). This ‘ethnocentricity’ of theirinternational HRh4 does not necessarily mean that HR/IR policies are standardised; rather,it is frequently reported that they adapt to local conditions (eg Yuen and Hui Tak Kee, 1993). A second general conclusion from the literature is that nationality manifests i s l more in tefrelation to some issues than others, and that for all countries, ‘rank-and-file’ IR issues aremore likely to exhibit ‘local isomorphism’ (Rosenzweig and Nohria, 1994) - that is, toresemble the practices of the local environment. The argument is that issues such as wagedetermination, hours of work, forms of job contract and redundancy procedures are highlysubject to local institutional arrangements, and are therefore less likely to be stamped withthe influence of the parent country. In the more regulated systems, issues such as workorganisation, training, and employee participation may also be highly determined by localregulation. Other aspects of HR/IR, such as payment systems, management development,or employee communications are generally less likely to be regulated by the local systemand hence more susceptible to the imprint of country-of-originfactors.Gaps in the literatureThe literature on MNCs and nationality suffers from several limitations which restrict theconclusions that can be drawn. First, most of the comparative work is survey-based (seeFigure 1).Response rates to international company surveys are typically very low (eg 8-9 percent in the case of Kopp, 1994) and sample sizes are sometimes small - for example, thesurvey by Guest and Hoque (1996) of greenfield sites included only 14 German-ownedplants. There are few detailed qualitative comparative case studies that could throw light onthe complex processes and linkages involved, although there are a number of important anduseful studies on the behaviour of MNCs of one country - eg Morns and Wilkinson (1995),among the very many on Japanesecompanies. A second drawback is that most comparative studies focus on the effect of ownership ongeneral management processes such as co-ordination, formalisation and decentralisation;few studies concentrate specifically on HR/IR, and where they do, it is often on fairlynarrow aspects such as expatriation (eg Kopp, 1994). Third, the comparative literature concentrates overwhelmingly on US and Japanesecompanies. ’European’ companies, where included, are frequently lumped together (egKopp, 1994).One of the major qualitative studies generalises about the ‘traditional means ofcc-ordination in European companies’ on the basis of an in-depth study of three MNCs, oneDutch, one Anglo-Dutch, and one Swedish (Bartlett and Ghoshal, 1989: 163-5). The authorscome to the conclusion that the ’European’model rests on ’socialisation’through the ‘carefulrecruitment, development, and acculturation of key decision makers’ (p. 163), acharacterisationso broad as to be applicable to virtually any MNC. European MNCs meritgreater attention. Several European countries are major MNC home bases in their own right.Aggregate world employment of home country MNCs exceeded one million for each ofseven European countries; French, German, UK,Swiss and Dutch MNCs each totalled morethan one million employees outside their respective home countries (Bailey et al, 1993). Interms of individual MNCs, German and British firms in particular rank prominently amongthe world’s largest firms.22 HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1
  5. 5. Anthony Ferner, University of Warwick METHODOLOGICAL PROBLEMSA variety of models of explanation underlie analyses based on the ‘country-of-origin’effect.Many studies do not problematise the issue at all, considering only how MNCs of differentnational origins differ in their behaviour. Others have tried to unpick some of the constituentelements of the nationality variable, although there have been few if any attempts at asystematic analytical model for exploring national differences. One type of explanation rests on differences in the historical pattern and phasing ofinternational expansion by national capital (eg Bartlett and Ghoshal, 1989). The legacy offoreign direct investment along imperial trade routes by British or Dutch companies wouldbe an example (Jones, 1996). Another characteristic form of explanation refers to features ofnational business culture. An important subset of this rests on the academic industrygenerated by Hofstede’s analysis (1980) of ’culture’s consequences’. Wong and Birnbaum-More (1994),for example, have constructed hypotheses about MNC behaviour on the basisof Hofstede’s analysis of ’power distance’, that is the perception by individuals of the degreeof interpersonal power or influence exerted over them by their superiors in the organisation(Hofstede, 1980: ch.3). They found that the acceptance of unequal power distances in thebank’s home society was ‘highly sigruhcant in explaining the centralisation of authority inthe bank operating in Hong Kong’ (Wong and Bimbaum-More,1994: 115). Other ‘business culture’ types of explanation exploit known national differences in theorganisation and style of management. Prominent here is the analysis of differencesbetweenJapanese and other MNCs (eg Bartlett and Yoshihara, 1988).The reliance of Japanese MNCson expatriate managers and intensive communicationsthrough fax, international travel andglobal group meetings constitutes an international version of the typical Japanesemanagement processes of consensus-building (nernawashi)and shared decision-making(ring).The attempt to export a system inherently unsuited to the demands of internationalmanagement can lead to growing problems of ceordination for Japaneseh4NCs. A more deep-seated methodological issue arises out of the interpretation of ’country-of-origin‘ effects. Is this an explanatory variable in its own right, or is it a proxy for other moreimmediate causal factors? Do differences between Japanese and US MNCs, or betweenBritish and German companies, reflect some inherent quality of ‘Japaneseness’ or’Britishness’? Or rather, do they stem from differences in factors such as phase ofinternationalisation, corporate structure, proportion of operations represented by overseasoperations, and so on? For instance, the high usage of expatriation by Japanese MNCs, andtheir failure to integrate local managers, may be a consequence of the relatively lateinternationalisationof these f r s im. One response to such ambiguities would be to conduct research that systematicallyexcludes such sources of variation by comparing firms of similar ages, structures, strategies,and so on. The ‘residue’ of difference that remains may be attributed unambiguously to‘national’differences.However, ti can only partially address the problem and may indeed hsmiss much of the point. Differences in phases and patterns of internationalisation,organisational structures etc, may themselves be typical of different ’national businesssystems’, to use Whitley’s phrase (1992a). Humes (1993), for example, has pointed todifferent historical patterns of international development in European, American and Asianh4NCs. Late multinationalisationis a reflection of a constellation of elements of the Japanesemodel of development, including late industrialisation, reliance on an export model ofinternationalisation and relative economic isolation. To take another example, MNCs inHUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 23
  6. 6. Country of origin effects and HRM in multinational companiescountries like Sweden or Switzerland, with smaller home markets, are likely to be more‘international’ in terms of the proportion of their foreign operations than are those ofJapanese or US MNCs (and more likely to expand through acquisitions). This strengthens the case for grounding an examination of national MNC differences inan analysis of the national economic and business cultures out of which they have emerged.A further implication is that individual characteristicscannot be treated in isolation. Featuressuch as corporate size and structure form part of a constellation or cluster of features, andacquire their significance in relation to the cluster as a whole. Thus the impact of, say, smallsize in German or Swedish companies may be different compared with small size in Britishor US MNCs. The question of interpretation is bound up with a related difficulty: how to untangle thedeep-seated, long-lasting impacts of the ’nationality’ variable from those that are morecontingent and transient. The transient may be mistaken for some embodiment of nationaldifference. For example, some distinctive aspects of international HRM in Japanese MNCsmay reflect the fact that Japan is in a transitional phase from export-led to direct investmentinternationalisation, and these aspects may be expected to disappear in a relatively shorttimescale. The danger of exaggerating the persistence of national factors is characteristic ofthe Hofstedian approach to national culture. Hofstede’s implication that the variables hestudied are in some ways inherent properties of national psyches - ’I believe that the pidureof national variety [in power distance], with its very old historical roots, is likely to survivefor a long time yet, at least for some centuries’ (1991: 47) - deserves to be treated withcaution. Schmidt (1993) has argued, for example, that the characteristic French business’style’ of authoritarian, bureaucratic firms with rigid divisions of task and low discretion atmiddle and lower levels of the hierarchy has been transformed in recent years. This isevidenced in the democratisation of authori6 structures in the managerial hierarchy, thedecline of elite recruitment to career positions from the grundes ides, and a more flexible,less authoritarianculture of IR (Rojot, 1990). The need, precisely, is to untangle ’layers’ of difference according to how deeply they arelodged in fundamental formative episodes and experiences in national development. Inshort, it is imperative to take into account the dynamics of nationality as a factor affectingthe behaviour of MNCs.The modernisation of political institutions, the rapid pace oftechnological change, the internationalisation of production itself, and changing patterns ofinternational markets and competition, are all likely to modify pre-existing nationalstructures - although not necessarily in the direction of convergence of different nationalsystems on a single model. INFLUENCE OF NATIONAL BUSINESS SYSTEMSMNCs continue to be rooted in their countries of origin. But what featum do they ‘absorb’from their national background? One argument is that cr~ss-nati~nal differences are in anycase diminishing in the face of the economic and technological foxes of convergence, includ-ing the activities of MNCs themselves (for a summary of the debate, see Sparrow and Hiltrop,1994 ch. 6). However, there are grounds for thinking that national models are likely to retaintheir specific features. The existence of systematic national differences in aspects of businessorganisation has been demonstrated by international surveys of corporate practice (notablyin the HR/IR field, those of the Price Waterhouse/Cranfield project [Brewster and Hege- .wisch, 19941; and of IBM/Towers Penin [summansedby S p m w and Hiltrop, 1 9 :37471). 9424 HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1
  7. 7. Anthony Ferner, University of Warwick In recent years, a significant body of analytical literature has strengthened the theoreticaland empirical underpinnings of the notion of the distinctiveness of ’national businesssystems’ (see especially Lane, 1989; Whitley, 1992a; Whitley and Kristensen, 1996). It isargued that different elements of business systems interrelate in a complex whole, givingrise to characteristic patterns of business behaviour in different countries which persist overtime. Writers explicitly or implicitly adopting t i kind of ‘national system’ approach have hsexplored elements such as corporate governance, managerial structures and functional div-isions of labour, IR and labour market institutions, training systems, workplace organ-isation, and so on, often in a comparative perspective (eg Maurice et al, 1986; Lane, 1994;Marginson and Sisson, 1994; Stewart et al, 1994).An important thread of research in the com-parative IR field has examined how long-lasting national patterns were generated by crucialepisodes in historical development, including the process of industrialisation, and the legacyof premodern forms of social organisation (eg Fulcher, 1988; Sisson, 1987; Crouch, 1993). Another strand of literature has adopted a ’culturalist’ perspective, rather than theprimarily institutionalist or structuralist approach of the business systems scholars. Theculturalist school has focused on the impact on business styles of national cultural attitudesand mental schemas. Prominent here is the work of Hofstede (1980) on individualperceptions o power and authority, orientations to individualism and collective action, and fattitudes to the short or long term (see also Trompenaars, 1992). The key analytical question is how far such national differences in business systemsinform the behaviour of MNCs from different countries. The linkages from the general levelof the business system to the behaviour of MNCs need to be specified. In general, there are anumber of constraints on the assimilation by MNCs of their home country business culture.First, it has already been noted that ’local isomorphism’ is more likely in certain areas ofHR/IR because of the constraints of host country regulation or practice. Second, someelements of national business systems make little sense in isolation from the constellation offeatures in which they are integrated in the home nation. In the words of Lincoln et a1 (1995:428) they ‘do not travel well.‘ For example, Japanese MNCs may not be able to adopt home-country personnel management techniques in their foreign operations because the elaborateformal systems that exist are so predicated on Japanese corporate culture. Or again, JapaneseMNCs in Europe prefer to use expatriate managers because of the difficulty of findingmanagers in local labour markets with the right degree of commitment, given the Europeannorm of managerial inter-firm mobility in pursuit of career advancement (pp. 430-1). Inshort, the greater the ’cultural distance’ - what Diilfer (1990: 264-5) calls ‘degree ofstrangeness’ - between the home country and the host, the harder it will be for the MNC totransfer home-country philosophies and practices. Where MNC managements have strategic choice, two primary strategies are available tothem. The first is to adapt to the environment of the host country, adopting local patternswhich may differ considerably from those of the country of origin. One reason for doing somay be that the firm adopts a particular international ‘division of labour’ that makes thetransfer of home country practices redundant. As Dedoussis (1995) argues, for example,Japanese MNCs often reproduce a core-periphery relationship with their foreignsubsidiaries in which the latter perform relatively low value-added activities. In suchcircumstances, MNCs do not necessarily wish to transfer to their subsidiaries practiceswhich may be typical of core firms in Japan such as lifetime employment and seniority-based promotion systems.HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 25
  8. 8. Country of origin effects and HRM in multinational companies The second alternative for MNCs faced with strategic choice is to attempt to create whatmight be called ’cross-nationalisomorphism’; that is, to introduce country-ofa$$.n patternsinto host country operations. In some cases ti may imply the establishment of ’enclave’ hssystems of training, work organisation, and so on, which are located in the hostenvironment, but in some senses alien to it. This may be the case (as is discussed furtherbelow) with the recruitment of workforces with the motivational characteristics and skillsmix appropriate to the imported form of organisationalpractice. Other variants are possible. One is that MNCs develop their own ’internal isomorphism’that approximatesneither to home or host country practices but is sui generis. Another is thatthe interaction of home and host country variables gives rise to shifting patterns of MNCbehaviour which show some consistency as between MNCs of the same national orip, butvary according to how a given home country model interacts with Werent host countryenvironments;as Innes and Morris (1995 30)put it, the behaviour of MNCs in host countriesmay be a synthesis or ’hybrid’ in which host country norms mediate the influence of thehome country ’blueprint’. However, the evidence on such patterns, particularly on MNCsfrom different European countries, is patchy and in many cases virtually nonexistent. LINKS BETWEEN NATIONAL BUSINESS SYSTEMS AND MNC BEHAVIOURAs suggested above, the basic idea of the concept of ‘national business systems’ is thateconomic actors in different comtries are influenced by the national institutionalframeworkin which they operate. Whitley (1992b) looks at how the co-ordination and control ofeconomic activities in different national systems is influenced by: financial institutionsdetermining access to capital; the system of property rights; the structure and policies of thestate, including its ownership role and its function in regulating markets; and labour marketinstitutions such as systems of skill training and certification, and forms of labourrepresentation. Whitley also considers more ‘cultural’ elements such as institutionsgoverning ‘trust’ relations and collective loyalties. In ti section we illustrate some of the possible linkages between elements of national hsbusiness systems and MNC behaviour, taking examples from the French, German andBritish cases in particular. We discuss first the influence of corporate governance systems onfirms’behaviour, followed by the related question of forms of corporate control. Then t r ehemore specifically HR/IR elements of national systems are considered: systems for definingand developing managerial resources, the organisation of work and of workforce skillswithin f r s and the role of the personnel function within the managerial division of labour. im,National systems of corporate governance and MNC behaviourIt has become commonplace in recent years to point to the varying systems o corporatefgovernance in Britain and other European countries. Marginson and Sisson (1994 29-33)contrast continental European (most notably German) ’insider’ systems with Anglo-Saxon’outsider’systems. In the former, long-term bank credit and family ownership play a greaterrole. This gives relative protection from the threat of hostile takeover, allowing concentrationon longer-term financial performance; for example, a relatively low proportion of profits ispaid out to shareholders. The ’insider’ model encourages firms to regard employees asassets and a source of competitive advantage, and to grant them ‘stakeholder’rights such asemployee participation, whereas the ‘outsider’ system sees employees as ’disposableliabilities’ and offers them few stakeholder rights.26 HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1
  9. 9. Anthony Ferner, University of Warwick What are the implications of governance for the behaviour of MNCs? First, Marginsonand Sisson suggest that MNCs’ responses to European employee involvement areinfluenced by country-of-origingovernance structures. For ‘insider’ firms, European-levelparticipation structures such as European works councils extend rights already recognisedunder domestic systems; for ’outsider’ firms, they are likely to be seen as a threat to theshareholders’ rights of decision-making. Second, US and British MNCs’ relative freedomfrom pressures of stakeholders other than shareholders may give them greater room formanoeuvre in undertaking certain kinds of action. One area where this may be relevant is indecisions on investment and divestment, and on ‘downsizing‘ of corporate operations. Incompanies from outsider systems, significantly influenced by short-term share priceconsiderations,decisions to cut capacity and employment are likely to be based on markedlydifferent premises than is the case in insider f r s So too are the ways in which MNCs deal im.with the ’social’consequences of such decisions.National systems of corporate control and MNC behaviour Systems of corporate governance are intimately linked with another element of business systems: forms of corporate control. According to Whitley (1992b: 39), Anglo-Saxon corpor- ations ’internalise’ risk rather than sharing it with financial institutions, and as a result develop ‘strong and often dominant finance departments and complex formal systems of financial control.’ In Germany, however, formal financial control systems are less sigruficant,and German companies place a greater reliance on informal face-to-face performancemanagement processes. A major question for comparative research, therefore, is the preciseconsequence of nationally variable forms of financial control in h4NCs for the handling ofissues such as labour cost control, collectivebargaining, pay determination and performancemanagement. British and US MNCs typically appear to have elaborate systems of control, throughbudget-setting and monitoring systems, oriented to short-term financial performance(Coates et al, 1992), and to have in place international systems of performance management.Kopp’s survey (1994 587-9) showed that US firms were much more Likely than Japanesefirms to have standardised world-wide systems of performance evaluation. Research onBritish MNCs and other large UK companies suggests that elements of staffing costs, such astotal payroll, overtime levels, and pay bargaining, are carefuuy monitored against budget,with strong central intervention where necessary (eg Marginson et al, 1993: esp. 15-28).Suchsystems are supplemented by elaborate formal mechanisms for measuring and rewardingmanagers’ performance, including performance-related pay systems (eg Edwards et a/, 1996). By contrast, German MNCs have much less stringent short-term performancerequirements, are less concerned with ratios such as earnings per share, and rely more onmformal feedback and communications than on formal financial control measures (Coates etal, 1992). Similarly, Japanese MNCs’ systems of performance management appear to relymuch less than Anglo-Saxon MNCs on arms-length formal systems and more on face-to-faceinformal assessment - one reason that they are so ’expatiate-intensive’.Given that Germancontrol systems appear to be more like the Japanese model, one may expect to find a similarreliance on informal ’social control’devices such as expatiation in German MNCs. A more general research question is how the highly formalised international systems of,for example, British h4NCs operate in countries with different cultures of performancemanagement. Case study evidence suggests that standardised systems may be implementedin practice in signhcantly different ways (eg Edwards et al, 1996; also Janssenset al, 1995).ABritish MNC‘s formal appraisal systems may be interpreted very differently by a Spanish ~ ~~HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 27
  10. 10. Country of origin effects and HRM in multinational companiessubsidiary compared with a US subsidiary. How far, in other words, do country-of-origindifferences in MNC behaviour survive in form rather than substance? A further aspect of authority and control which characteristically emerges from accountsof national business systems is the degree of ’hierarchisation’of the f r . i m French firms aresaid to be taller, more rigidly organised pyramids - the ‘Eiffel tower‘ model to borrow theterm used by Trompenaars (1992)’ compared with the relatively flat structure of German orBritish companies. In French firms, hierarchical position is seen as the ultimate source ofmanagerial authority, compared for example with German companies where authority restsprincipally on technical expertise and knowledge (Stewart et al, 1994). Hofstede (1980 ch. 4)has pointed to French cultural attitudes that score high on measures of ’power distance’ (theperceived hierarchical gap between different authority levels in the enterprise) and’uncertaintyavoidance’. To the extent that MNCs exhibit the typical authority structures attributed to parentcountry firms in general, consequences may be expected for the international managementof HR and IR.Assuming, for example, that French MNCs reproduce the stereotypicalsteeplyhierarchical authority structure, is international HR/IR management more centralised and‘directive’ than would be the case in, for example, a British MNC? How will steeplyhierarchical French MNCs respond to the current trend towards less hierarchical, lessbureaucratically-integrated international corporate forms - networks, ‘federal’ firms,internationaljoint ventures, strategic alliances, and so on? Will they be able to cope with therevival of complex international ‘matrix’ management structures or with blurred authorityboundaries and loose, overlapping spheres of responsibility? Will they develop new, but stillnationally specific, responses to such challenges?Managerial careers and management developmentComparative studies (eg Evans et af, 1989; Storey et al, 1991) have shown that there arenational differences in the way that managerial careers and management development areorganised. Evans et af (1989) identlfy clear national models of management development.One, characteristic of both Japan and France, relies on elite recruitment. The selection ofpotential managers at the point of entry is regarded as the most important determinant offuture careers in the French system (Lawrence 1992). ’Getting on’ in the organisation is seenas the reward for political skills - the ability to form alliances, get powerful sponsors andflaunt highly visible achievements. The Germanic tradition rests on formal apprenticeshipand functional rotation, followed by progression through functional career paths wherespecialist technical expertise is developed. This contrasts with the increasingly generalistculture of Anglo-Saxon management, exemplified by the prominence of business schoolsand the MBA qualification,which have no equivalent in Germany. Generalist styles are alsopredominant in large Dutch and Scandinaviancompanies. Management development can be expected to play a central role in MNCs, because of itsimportance in developing a cross-national corporate culture and integrating internationaloperations.As Hendry (1994 101-2) argues, the key question is what kinds of behaviour areencouraged by differentnational management development systems, and how well-adaptedare these to the requirements of international management. Hendry goes on to suggest thatsystems based, as in Germany, on functional specialists may be more adapted to an export-led strategy,whereas generalist systems are ’particularlysuited to transnational operations’: Rapid progress through a variety of jobs in different functions, locations, and businesses produces a cadre of people able to manage a diversified international company. By the same token ... the ’political28 HUMAN RESOURCE MANAGEMENT JOURNAL VOL 7 - NO 1
  11. 11. Anthony Ferner, University of Warwick tournament’ which characterises the promotion system in ‘Latin’ firms such as the French may discour- age overseas assignments because the manager is out of sight and therefore less well-placed to compete for attention. One may hypothesise that MNCs develop strategies for reducing the constraints of theirnational systems: for example, French multinationals might differ from the nationalstereotype in their modes of career progression and succession planning, in order toencourage expatriation. There is some unsystematic evidence to support t i .For example, hsBarham and Devine (1991: 47-55) detail the systems implemented by Rh6ne-Poulenc tocreate a cadre of international managers, from the stage of recruiting graduates onwards.The Jeunes Cadres internationaux programme explicitly offers young high fliers theopportunity of early international experience followed by a senior managementappointment in their home country. Problems of career opportunities for returnees followinginternational assignment are eased by the figure of the ’godfather‘ or mentor, a seniormanager in the expatriate’s home country with extensive networks of contacts. Thegodfather advises on future career openings and negotiates on behalf of the expatriate withprospective bosses. At present, there appears to be little systematic inquiry in such areas. The question forresearch, therefore, is to examine how national systems influence the policies and practicesof MNCs in respect of managerial careers, particularly at the international level.Structuring and co-ordinating workComparative research has paid much attention to national differences in how work isorganised within firms. Thus French firms are said to divide tasks up rigidly between andwithin ddferent strata in the hierarchy (Maurice et al, 1986; Poirson, 1993). German firmsexhibit a much more blurred horizontal differentiation of tasks and functions, and inparticular have a much greater overlap of maintenance and production functions and oftechnical and supervisory work (Lane, 1989; Sparrow and Hiltrop, 1994: 270-3). Othernational systems have evolved characteristic patterns of work design. An example is theSwedish experience of self-regulated group work and the participation of the workforce inthe design and operation of systems. If MNCs are used to working in their home base with a particular set of workforce skillsand work organisation, is this reflected in their international operations? For example,German MNCs are rooted in a home environment which attaches great importance toflexible work organisation and to craft and functional skills based on publicly certifiedapprenticeship schemes; do they make efforts to propagate ti by recruiting highly-skilled hslabour forces in the UK, inculcating flexible work practices, having a technically-skilledstratum of supervisors? Or do they adopt local skill mixes and work organisation traditions,exploiting locational advantages of lower labour costs? There is now a considerable body ofliterature to suggest that Japanese MNCs pursue the ‘enclave’ strategy by ‘exporting’patterns of work organisation based on a cluster of policies, from careful recruitment andselection of ‘greenfield’ workforces to continuous vocational training, functional flexibility,teamworking, and the systematic integration of quality into work operations (eg EIRR, 1992;Oliver and Wilkinson, 1992).Much less is known, however, of European MNCs. One could hypothesise that German and Japanese MNCs, rooted in business systems inwhich the organisation of production assumes a central importance, would be more concerned with the management of the issue internationally than perhaps British or French companies. One factor is the availability of systems of control and evaluation capable of ~~~~HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 29
  12. 12. Country of origin effects and HRM in multinational companiesidentifying and then ensuring the diffusion of practices from the home country. Here thecase study by Sewell and WiLkinson (1993: 144) of a Japanese electronics company in Britainis instructive: Production managers and team leaders are ... expected, on a monthly basis, to agree to targets with a specified amount of labour. Standard times are produced in Japan... and are indicated in precise detail. Times are provided to K-Electric [the British subsidiary] for a whole unit of finished goods, for the sections of the factory, for activities within each section, and right down to the level of components to be assembled or inserted i fractions of a second ... Assembly manuals, which include detailed n standard times broken down to the level of individual component insertion, are regularly updated in Japan i the light of improvement in methods. Whenever an overseas factory makes an impmvement, n this fact, and the new method, is relayed back to Japanand the improvement is passed on to all group factories the next time the manual is updated.Nature of the Dersonnel functionThe literature on the business systems of European countries suggests that there aresignificant national differences in the role and organisation of the personnel function, forexample with regard to the degree of integration of personnel with business strategy, andthe extent of devolution of personnel issues to line managers (Brewsterand Larsen, 1992). The key question, as before, is how far national patterns of personnel managementtranslate to the international level. The organisation of the personnel function in the countryof origin has been used to explain differences in the HR/IR management policies of MNCs.One of the most developed arguments is to be found in Yuen and Hui (1993). In theircomparison of US and Japanese MNCs in Singapore, they focus on differences in thepersonnel function in the two home-country business cultures. In the US, they argue, themanagement of labour is posited on an ’economic-contractual’model of hiring and firing,market-determined wages, and high labour mobility. Personnel departments have evolvedinto large legalistic bureaucracies applying formalised and standardised personnel policies.The preoccupation with compensation, labour market and wage surveys is reflected in theHR/IR priorities of US subsidiaries in Singapore. By contrast, the Japanese model of HRM isa ’human capital model’, based on ‘multidimensionalemployment relations’, social as wellas economic aspects, the predominance of internal labour markets, and a consequentconcern with recruitment, selection, training and development. These characteristics arelikewise reflected in the behaviour of Japanese MNCs’ Singaporeansubsidiaries. Similar links may be made between differences in European styles of HRM and MNCbehaviour. In the German model (described by Lawrence, 1991), for example, sectoralnegotiations mean that personnel managers’ role in pay bargaining is limited tointerpretation and implementation. The statutory system of works councils conditions thecontent and style of personnel managers’ work, encouraging a modus operundi that isoverwhelmingly legalistic, reactive, short-term and operational. Accordingly, the job is ofrelatively low status in the hierarchy of management functions. This model is likely to haveconsequences for international HRM in German MNCs. First, it raises questions about thecapacity of German h4NCs to manage their international labour force in a strategic fashion,to develop international pay and performance management systems, to play a role in theconstruction of international corporate ‘culture’, and so on. Second, the personnel function’sexperience of ‘shared authority’ through the German co-determination system will colourmanagerial HR decision-making in a multinational context, notably in respect of employeeparticipation and involvement. Although Beaumont et ul (1990) found a reluctance ofGerman MNCs in Britain to replicate German forms of employee involvement such as30 HUMAN RESOURCE MANAGEMENT JOURNAL-VOL 7 NO 1
  13. 13. Anthony Ferner, University of Warwickworks councils (also Guest and Hoque, 1996),it is noteworthy that German MNCs havebeen in the vanguard of experiments with European works councils from the mid-1980s(Hall et al, 1995). RESEARCH STRATEGIESThe arguments presented above have two principal implications for research strategy. First,there is a need to assess the extent to which (and the precise manner in which) nationalbusiness characteristics influence the behaviour of MNCs from different countries of origin.One can expect that MNCs will strongly exhibit the impact of their national roots,particularly in those countries, such as Sweden, the Netherlands and Switzerland, wheredomestic MNCs account for a high proportion of output and employment; conversely, onemay anticipate a greater dissimilarity between MNCs and national norms in countries,notably Italy and indeed Japan, where the international company sector is small in relativeterms. However, a key research question is how far MNCs are able to escape the constraintsimposed by their national heritage: can French MNCs, for example, develop new structuresand styles of international management that avoid the limitations of bureaucratic andhierarchical centralism? Secondly, to the extent that MNCs do embody typical national characteristics,what aw theimplications for the internationalmanagement of I and HR? Do Fmch MNCs exhibit more Rcentralised control of personnel management in subsidiaries than British firms?Are GermanMNCs less reliant on formal control systems than their US counterparts?Is the mle played byexpatriates in international ’social control’ (Edstrom and Galbraith 1977) and culturalintegration within the corporationdifferent in Japanesecompared with Swedish companies? Systematic survey evidence is needed to establish the prevalence in MNCs of typicalnational characteristics.One area, for example, is that of international corporate control - thenumber o different hierarchical levels and the division of labour among them; the nature of finternational management control systems; the way the budgetary process handles IR andpersonnel management issues; the extent and functions of expatriation. Another areaconcerns the role of the pemnnel function: the size, structure and international role of thefunction; its relationship to strategic business matters; its representation in key decision-making forums, etc. Survey work needs to be supplemented by careful qualitative case study research tofollow through complex linkages, explore processes, and uncover how decisions are reallymade. For example, surveys show that Japanese firms typically make greater use ofexpatriates, but there is relatively little detailed work giving a feel for the precisemechanisms whereby expatriate managers act as ‘agents’of central control, nor for the typesof intervention they make in the subsidiary. One area for exploration is the relationshipbetween formal structure and actual management behaviour in subsidiary operations. Theexistence of formal systems of, say, performance management says relatively little abouthow they are operated in practice in host environments, especially where they are nottraditional parts of the management culture. The choice of countries of origin for such research should reflect the need to explore theimpact of systematic differences in national business systems for MNC behaviour. Theprevious section has suggested some m a s in which comparison may be fruitful. There isclearly sufficient‘interesting’variation on key dimensions such as corporate governance orwork organisation patterns among the major European MNC home countries. Given this,HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 31
  14. 14. Country of origin effects and HRM in multinational companiesone research strategy would be to examine MNCs from countries - such as Geman&Franceand Britain - whose national business systems have already been subject to sustainedanalysis in a comparative framework. A further consideration is how MNCs of different parent countries interact with the bus-ness systems of different host countries. One criterion for selecting host countries to study isthe degree of regulation. Are MNCs from highly regulated countries less likely to adopt localpractices in ’permissive’host countries and more likely to export their own practices? Or isthere a ‘Gresham‘s law‘ of national business systems in which many aspects of ’progressive’social regulation, such as employee participation in the enterprise and consensual employ-ment relations, are lost when firms work in permissive environments (eg German firms inBritain)? As Guest and Hoque (1996: 52) argue, by looking at deregulated host countries likethe UK, ‘we can ... explore the impact of national ownership and of managerial choice in acontext relatively unconstrained by local institutional arrangements.’ Conversely do firmsoperating in highly-regulated host countries attempt to evade the constraints that theseimpose? One may hypothesise that the impact of national differences may be muted instrongly-regulated host systems, although there is some evidence that even in such systemsMNCs attempt to reduce constraints on their corporate autonomy (egShire,1 9 ) 94. A second criterion for selecting host countries is ’cultural distance’ between the home andhost counq. The ’visibility’ of the country-of-origin effect may be masked where home andhost countries are very similar. For example, a UK MNC’s international financial controlsystem may appear ‘invisible’ in the company’s US affiliate which could be seen asconforming to local norms. By contrast, it would be more recognisable as a nationally-specific feature in the company’s French subsidiary, given the ambient culture’s resistance tosuch systems. In short, it would thus be necessary to examine MNCs in host countries thatare sufficientlydifferent to allow the country-of-origin effect to come through. Such considerations also influence the choice of issues to study. As suggested above, thereare a range of HR areas where host country regulation is likely to be minimal, and theMNC’s need for cross-national isomorphism is at a maximum: notable in ti respect is the hsmanagement of managerial careers and performance. On the other hand, there are HR issueswhere the influence of the host country is likely to be stronger - as evidenced by surveyssuch as Hamill (1984) - and the interest of the MNC in cross-nationalcoherence is less: forexample, pay determination of manual workers, or the collective representation of theworkforce and of employers. Research would need to consider both types of issue. The salience o country-of-origin features is likely to be influenced by sectoral factors. It is fpossible to hypothesise, for example, that the transmission of country-of-origin influencewill be more marked in MNCs operating in more ‘globalised’ industries (ie in industriessuch as vehicles, chemicals or electronics),in which operating u i s are more integrated into ntthe international corporate strategy of the parent company. In industries that are more’polycentric’ in structure (parts of the food and drinks or textiles and clothing sectors, forexample),with individual subsidiaries geared to serving national markets, the higher degreeof management autonomy and lower degree of integration into the international corporatestructure may mute the country-of-origin effect. On the other hand, globalised industriesmay be more subject to pressures to converge around the practices of dominant finns (as inthe case of Japanese-led ‘lean production’ in automobiles), so that MNCs’ national identitywould become blurred. One aspect of research, therefore, would be to explore the influenceof sector on the nationality factor. Finally, an understanding of country-of-origin factors would need to focus on differentlevels within the corporation - both the global corporate level at which strategic decision-32 HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1
  15. 15. Anthony Ferner. University of Warwickmaking takes place and where international corporate systems are designed, and the level ofoperations at which corporate-wide systems are implemented within a specific nationalcontext. One reason for looking at both levels is that the existence of formal internationalcorporate systems may overstate the strength of the country-of-origin factor, and conversely,their absence may understate country-of-origin influence. For example, a performancemanagement system for executives may be applied globally in an MNC, but its operationand sigruticance in practice may differ very markedly in different countries of operationaccording to the influence of local business culture; conversely, managers in the variousnational subsidiaries of an MNC may tend to operate a similar culture of performancemanagement even where no formal system exists. CONCLUSIONThis article has attempted to clarify some of the issues surrounding the ’country-of-origin’effect in multinationals. A considerable body of evidence exists to suggest that MNCs ofdifferent national origins behave in signhcantly different ways, specifically in respect of thecross-national management of personnel and IR issues. But existing research has failed tosystematically explore differences. Comparisons among MNCs of European origin areextremely scarce despite their importance in the global economy and the a priuri grounds forexpecting sigruficantvariations in their behaviour. A starting point for analysing the country-of-origin factor is proposed, based on thenotion that MNCs are anchored in a set of ~ t i ~ n a l l y - ~ p e characteristics which together cifi~make up national business systems. These characteristics are likely to influence the way inwhich MNCs manage HR internationally. However, the correspondencebetween features ofnational business systems and MNC behaviour is likely to be incomplete: first, because notall elements are ‘exportable’, being too rooted in native cultural assumptions; and second,because to varying degrees host countries present obstacles to the ’import’ of elements offoreign business systems, and colour the operation in practice of those which are transferred. These arguments suggest a programme of research aimed at generating a moresystematic knowledge of country-of-origin differences, and providing answers to a broadrange of important questions on the way in which MNCs of different nationality manageHR internationally. Explanation would relate differences to identifiable elements of nationalbusiness systems: forms of corporate governance; control systems; the functionalorganisation of management work; national cultural propensities, and so on. Finally, further research could explore and explain differences in relation to the dynamicsof national systems. One line of argument is that international competition and theglobalisation of production systems are likely to lead to increasing convergence betweenMNCs of different national origins. Indeed, MNCs themselves, by transmitting practicesacross national borders, may be seen as key actors in the homogenisation of national systemsand thus the erosion of country-of-origin differences. On the other hand, there are alsogrounds for anticipating the persistence of national differences in MNC HR behaviour, sincethe characteristics of the national systems in which they are based reflect long historicalprocesses of cultural and economic development. Moreover, the emergence of common trends in MNCs may paradoxically favour theperpetuation of national differences between them. For example, Marginson and Sisson(1994) have pointed to the trend towards Europe-wide business divisional structures in largeMNCs. These business divisions could be expected to follow business-specific (rather t a hnHUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 1 33
  16. 16. Country of origin effects and HRM in multinational companiesnational-subsidiary-specific)HR policies. At one level, therefore, one is seeing a convergenceof corporate forms. But it may be argued that F m c h multidivisional MNCs are likely toadopt cross-nationalpolicies that are isomorphic to French business culture, British MNCs toBritish business culture, and so on - whereas previously, MNCs would have acted in a morepolycentric and hence in a more locally isomorphic fashion, and national differencesbetween them would have been less marked. Perhaps the most plausible working assumption is that national differences in MNCs willcontinue. However, given the evidence that national systems are evolving (though notalways in the same direction), they will not necessarily be the same differences in the futureas hitherto.AcknowledgementsI would like to thank Paul Edwards, Paul Marginson and Keith Sisson for their helpfulcomments on a draft of this article. I am also most grateful to an anonymous HRMJreviewer for some pertinent and constructive criticisms.Notes1. As an HRM] reviewer has pointed out, a related complication is that firms that are all nominally of a par-ticular nationality may have widely different experiences. A number of nominally French British or DutchMNCs, for example, originally flourished within a colonial setting during their home country’s imperialexpansion.Their experiences and development were markedly different from those of companies that werefounded and evolved within the mother country. See also Jones(1996 34-6) on such ‘free-standing’ intema-tional enterprises.2. There are signifwant methodological problems in analyses of national differences based on comparativesurveys of firms,such as the Price Waterhouse/Cranfieldstudies. National characteristicsare a compositeemerging from the returns of very heterogeneousfirms. This is a particular problem where there are a largenumber o foreign MNCs operating in the economy, so that foreign MNCs have themselves contributed sig- fnificantly to the ’national’ picture. Countries such as Ireland, Spain, Britain, Belgium, Sweden and theNetherlands all have highly internationalisedeconomies with a large population o foreign companies. It is falso a problem where the business culture is charaderised by a marked segmentation in organisation andbehaviour between the bulk of small and medium firms, and a stratum of very large companies, amongwhich the more important MNCs will be found. This leads to the suspicion that the overall indices for eachcountry may be amalgamationsof ‘bipolar’scores for clearly differentiablegroups of firms.3. I am indebted to an anonymous HRMI reviewer for pointing out the importance of cultural distance. Asthe reviewer has also noted, given the tendency of firms in early stages of internationalisationto operate inculturally more similar host countries, the country-of-origin effect may be less detectable in earlier stages ofintemationalisation.(Equally,however, it needs to be borne in mind that the greater the cultural distance, thegreater the obstacles to the transfer of home country practices). REFERENCESBailey, P, Parisotto, A. and Renshaw, G. 1993. Multinationals and Employment. The Global . Economy ofthe 199Os,Geneva: LO.Barham, K. and Devine, M. 1991. The Quest j b the International Manager. A Survey of Global Human Resource Strategies, Ashridge Management Research Group, Special Report No. 2098. Ashridge, EIU: London.Bartlett,C. and Ghoshal, S. 1989.Managing Across Borders,. London: Hutchinson.Bartlett, C. and Yoshihara, H. 1988. ’New challenges for Japanese multinationals. Is organ- isational adaptation their achilles heel?’. Human Resource Management, Vol. 27, no. 1,1943.Beaumont, P., Cressey, P., and Jakobsen, P 1990. ‘Key industrial relations: West German . subsidiariesin Britain’. Employee Relations, Vol. 12, no. 6,3-7.34 HUMAN RESOURCE MANAGEMENTJOURNAL - VOL 7 NO 1
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