Indigenization of staffing in MNEs: The case of Saudi Arabia

Abstract

In the Gulf States, there has been increased emphasis on requiring MNEs to indigenize their staffing. Based on a survey of 157 HR directors in MNEs headquartered in Saudi Arabia, this article explores why so little headway has been made through applying and extending Resource Curse Theory. Surprisingly, we found formal ties with government had little effect; Resource Curse Theory would suggest this would be due to the concentration of regulatory scrutiny and support on the oil and gas industry, where, indeed, indigenization was most pronounced Again, although they may compensate for regulatory shortfalls, we found intra firm ties made little difference in advancing indigenization. Again, Resource Curse Theory would suggest that nonminerals sectors suffer a drain in capital and human resources, which would make indigenization more challenging. Resource Curse Theory assumes that mineral endowments negatively impact on macroeconomic and societal outcomes, but only accords limited attention to how these pressures are transmitted via organizations. Through providing organizational level evidence, we both further illuminate Resource Curse effects in practice, and contribute to extending the base and scope of application of the theory. We draw out the implications for practice.

Human Resource Management and Organisational Performance: The Mediating Role of Social Exchange

“…It is held that, within emerging markets, organisations may depend on HR practices that are somewhat different from conceptualisations of HRM faced in mature markets (Webster and Wood, 2005). Therefore, the utilisation of ‘modern’ forms of HRM could have little or no impact on performance, given particular societal and economic realities (see Haak‐Saheem et al, 2017; Darwish et al, 2019; Wood et al, 2020; Singh et al, 2020).…”

Bringing it all back home: the HRM role in workforce localisation in MNEs in Saudi Arabia

“…In Saudi Arabi, MNEs have relied heavily on expatriates to manage their businesses and provide specialist skills and have invested little in recruiting and developing local talent (Wood et al, 2020). The effect has been to depress any incentive for locals to learn business skills, to develop technical knowledge or to seek jobs in the Saudi subsidiaries of MNEs.…”

“…In the Arabian Gulf region, the heavy reliance on expatriates has created an institutional environment in which local workers and job seekers are alienated, since employers have over time developed staffing and management systems and practices which perpetuate the continuing dependence on the foreign workforce (Al-Waqfi & Forstenlechner, 2014). The significant levels of government employment of Saudi nationals, with high salary levels relative to comparable rates in the private sector, contributes to an unwillingness amongst locals in Saudi Arabia to join MNEs (Wood et al, 2020). However, like other Gulf States, Saudi Arabia has spent heavily on automation in the government sector.…”

Substituting expats with locals: TNCs and the indigenization policies of Saudi Arabia

“…The same analogy that is applied to the age of the firm could be applied to the size of the firm. One possible explanation could be that firms -whether small or large -take the view that localization is an issue to be dealt with, but none accord any priority to it in order to add value to the success rate of localization (see Wood et al, 2019). Hence, it could be concluded that the size and age of the institution have no significant role when it comes to the success of localization policies for TNCs in Saudi Arabia.…”