Global staffing and control in emerging multinational corporations and their subsidiaries in developed countries

Abstract

Purpose The purpose of this paper is to examine the control mechanisms used by multinational corporations (MNCs) from emerging economies to manage their subsidiaries in developed countries and their implications for human resource management practices. Design/methodology/approach The paper draws on data collected through in-depth case studies and interviews with senior subsidiary managers of 12 major Indian information technology (IT) MNCs operating in Australia. Findings Indian IT MNCs rely heavily on the use of people-centric controls exerted through global staffing practices (via the transfer of parent-country nationals), which, in turn, influence their subsidiary’s discretion over their HR practices. The use of people-centric controls allows Indian IT multinationals to replicate parent-country HRM practices in their Australian subsidiaries in an ethnocentric manner and significantly leverage the people-based competitive advantages from India through short- and long-term expatriate assignments. Research limitations/implications The study investigates control and HRM practices from a single country and a single industry perspective. It provides an insight into the normative means of control in foreign subsidiaries of MNCs and enhances our understanding by explaining the integrated relationship that control mechanisms (and their people-centric components) have with HRM practices including the global staffing approaches and expatriate management practices of emerging MNCs. Practical implications Indian MNCs are using their business model to leverage the Australian immigration and skilled visa programme to maintain cost advantages. However, the immigration legislation in developed countries needs to be capable of allowing emerging multinational corporations (EMNCs) to maintain such advantages as developed countries seek to attract foreign direct investment from emerging economies. Originality/value The results indicate that the control practices of EMNCs are similar to the controls exerted by MNCs from developed countries. They also show that EMNCs do not adopt a portfolio approach to global staffing, and that the people-centric components of their control have a clear impact on their subsidiaries’ HRM practices.

Ethnocentric HRM practices: evidence from Western MNEs in Ghana

“…Despite the large cultural and institutional distance between Ghana and the MNEs’ parent countries, the findings strongly evidenced MNEs’ overcoming institutional difference and liability of foreignness in varying degrees across HRM practices (see Ayentimi et al , 2018b; Fortwengel, 2017). With the exception of expectations established by chiefs around employment, MNEs were able to override local social values to a certain degree (Patel et al , 2019) to replicate HQ HRM practices, emphasising efficiency and competitive advantage.…”

“…The findings suggest that subsidiaries applied ethnocentrism in training and development programmes (as also demonstrated in a study by Michailova and Hollinshead, 2011). Like in other developing countries (Jiang and Yahiaoui, 2019), inpatriate managers travelled to HQ for training and induction programmes, and training centres/schools were used to achieve what Patel et al (2019) noted as socialising of employees to align subsidiary HRM practices.…”

“…Ghanaian cultural and institutional specificities such as the role of chiefs in conflict resolution procedures, high power distance context coupled with cronyism, corruption, deference to seniors, family and social relationships, and in-group collectivism widen the institutional distance between Ghana and the West and should pose challenges to the transfer of HRM practices. Empirical research shows a mixed picture and contrasting results, with some MNEs engaging in forward diffusion of their preferred HRM practices (Patel et al , 2019), whilst others are locally responsive in adopting practices aligning with locally accepted practices (Azungah et al , 2018). Still others advocate for MNEs to adopt a dual approach involving the interplay of HRM practices derived from the local context and corporate HQ (Edwards et al , 2016).…”

“…In examining the diffusion of Western HRM practices to subsidiaries in the Ghanaian context, we enhanced understanding of transferred practices from an under-researched geographical context (Adams et al , 2017). Moreover, as research on HRM practices in subsidiaries of MNEs has generally employed quantitative approaches of inquiry and focused on single respondents or senior management (Jiang and Yahiaoui, 2019; Patel et al , 2019; Pudelko and Harzing, 2008), we consider the qualitative examination of how and why corporate HQ transfer HRM practices from managerial and employee perspectives to be a strength.…”

“…MNEs from developed (usually Western) countries often engage in forward diffusion of their home-country HRM practices (Patel et al , 2019) by utilising headquarter (HQ)/parent country practices when operating internationally. This usually occurs in a prescriptive manner, and practices transferred internationally are full of Westernised business philosophy without sufficient knowledge of the local context (Michailova and Hollinshead, 2011).…”