Coordinated vs. liberal market HRM: the impact of institutionalization on multinational firms

Abstract

The impact of institutionalized contexts on the HRM activities of multinational firms has become a focus of increasing attention in recent literature. However, theories of how different types of business systems or market economies may influence HRM, and the impact of context on multinational corporations (MNCs) operating under these different conditions are still not fully tested. In this paper the influence of the extent of institutional embeddedness of different national contexts (based on varieties of capitalism theory) on the HRM activities of MNCs is explored through the use of extensive survey data from four countries: the UK, Germany, the Netherlands and Sweden. Evidence is found of differences in HRM practices between foreign-and domestic-owned MNCs, as well as between MNCs and domestic organizations. Although less than expected, the restricted amount of leeway within a coordinated economy also appears to have differential effects on the various HRM practices explored in these foreign and domestic organizations.

Are MNCs norm entrepreneurs or followers? The changing relationship between host country institutions and MNC HRM practices

“…The outcome represents a complex interaction of both host and home country institutions, diluting country of origin pressures through infusing local features Farndale, Brewster & Poutsma, 2008).…”

Human Resource Management in Multinational Enterprises: Evidence From a Late Industrializing Economy

“…Linked to this would be the benefit gained by incorporating domestic only firms into future research studies and looking at establishing the similarity or variation in HRM practices between them and domestic-owned MNEs. Farndale et al (2008) previously demonstrated variation in the HRM approaches of domestic only firms, domestic MNEs and foreign MNEs. More particularly, research that explores whether HRM becomes a more important consideration to domestic firms looking at pursuing international business expansion and whether there is an increased emphasis as a firm goes through different stages of international growth would be a welcome addition to knowledge.…”

“…The literature focusing on country of origin effects varies on focus from those primarily interested in specific issues such as employee representation and consultation (e.g., Gunnigle et al 2005) or corporate control mechanisms (e.g., Harzing and Sorge 2003) to ones that have somewhat greater breadth in terms of HRM practices (Farndale et al 2008). Pudelko and Harzing (2007) draw conclusions about the move towards dominant (US) practices based on analysis of 12 subjective, micro-focused, bipolar scale measures, covering recruitment, training, promotion, communication and employee incentives.…”

“…Furthermore, with Ireland's characterization as a liberal market economy, corporate leeway to be innovative and different will be relatively high (Farndale et al 2008;Ferner 1997). …”

“…Multinational enterprises (MNEs) are arguably the organizational form most likely to ascribe to a standardized management approach because of their susceptibility to globalizing forces . While much international management and business scholarship has focused on whether foreign MNEs ascribe to the local norms and traditions, less insight has been provided into HRM practices in domestically-owned MNEs (notable exception being Farndale et al 2008) and whether these firms seek to implement what may be considered as dominant or what Pudelko and Harzing term 'perceived global best practices' (Pudelko and Harzing 2007, p. 536; also see Smith and Meiksins 1995). Gooderham and Nordhaug (2003) suggest that best practice in this context means the application of practices which are perceived as key contributors to performance.…”