Ihrm....

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Mar March 2002 2002 Intern Inte rnat atio iona nall hu huma man n reso resour urce ce mana manage geme ment nt:: review and critique Randal Randalll S. Schul Schuler, er, Pawan Pawan S. Budhwar Budhwar and and Gary W. Florkowski Randal Randalll S. Schule Schulerr is from from the Departm Department ent of Human Human ResourceManagement, School School of Manageme Management nt andLabor Relation Relations, s, 94 Rockafell Rockafeller er Road, Road, Rm 202, Piscatawa Piscataway, y, NJ 08854, 08854, USA. USA. PawanS. PawanS. Budhwa Budhwarr is fromCardiffBusiness fromCardiffBusiness School, School, Colum Colum Drive, Drive, Cardif Cardifff CF1 CF1 3EU, 3EU, UK.Gary W. Florko Florkowsk wskii is from from the Universityof Pittsburgh, Pittsburgh, KatzSchoolof Business Business,, Pittsbur Pittsburgh, gh, PA 15260, 15260, USA. The research agenda for the field of international human resource management (IHRM) is clear. For a better understanding and to benefit substantially, management scholars must study study IHRMin context context (Jacks (Jackson, on, S.E. S.E. andSch and Schuler uler,, R.S. R.S. 1995. 1995. Unders Understand tanding ing human human resourc resourcee management in the context of organizations and their environment. Annual Review of  264; Ge Gerin ringer ger,, J.M. J.M.,, Frayne Frayne,, C.A. C.A. and and Mill Millima iman, n, J.F. J.F. 2002. 2002. In sear search ch of Psychology , 46: 237 ^264; `best practices' in international human resource management: research design and methodology. Human Resource Management , forthcoming). IHRM should be studied within the context of changing economic and business conditions. The dynamics of both the local/regional and international/global international/global business context in which the firm operates should be given serious consideration. Further, it could be beneficial to study IHRM within the context of the industry and the firm's strategy and its other functional areas and operations. In taking these perspectives, one needs to use multiple levels of analysis when studying IHRM: the external social, political, cultural and economic environment; the industry, the firm, the sub-unit, the group, and the individual. Research in contextual isolation is misleading: it fails to advance understanding in any significant way (Adler, N.J. and Ghadar, Ghadar, E. 1990. 1990. Strate Strategic gic human human resourc resourcee manageme management: nt: a global global perspec perspectiv tive. e.Human Resource Management in International International Comparison. Berlin: de Gruyter; Locke, R. and Thelen, K. 1995. Apples and oranges revisited: contextualized comparisons and the study of comparative labor politics. Politics & Society , 23, 337--367). In this paper, we attempt to review the existing state of academic work in IHRM and illustrate how it incorporates the cont conten entt and and how how it migh mightt be expa expand nded ed to do so. so. Introduction ß BlackwellPublishersLtd 2002, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA Internation International al human resource resource management management (IHRM) is about the world-wide management of human human resourc resources es (e.g. (e.g. Adler Adler and Ghadar Ghadar 1990; Brewster 2002; Cascio and Bailey 1995; Internation International al Journal Journal of Management Management Reviews Volume 4 Issue Issue 1 pp. 41 –70 Harris Harris and and Brews Brewster ter 1999 1999;; Pool Poolee 1999 1999;; Punn Punnett ett and and Ricks Ricks 1992 1992;; Tung Tung 1984 1984). ). The The purpose of IHRM is to enable the firm, the mult multina inatio tiona nall enter enterpri prise se (MNE (MNE), ), to be succes successfu sfull global globally. ly. This This entail entailss being: being: (a) compe competit titive ive throu through ghou outt the the world world;; (b) (b) 41 International human resource management: review and critique ß Blackwell 42 Publishers Ltd 2002 efficien efficient; t; (c) locall locally y respons responsive ive;; (d) flexibl flexiblee and and adap adaptab table le with within in the the shor shorte test st of time time perio periods ds;; and and (e) capab capable le of trans transfer ferrin ring g knowledge and learning across their globally disper dispersed sed units. units. These These requir requireme ements nts are signif significan icant, t, and the magnit magnitude ude of the reality reality is indi indisp sput utab able le:: for examp example, le, a subs substan tantia tiall majority of industries in the world are under full-s full-scal calee attack attack by global global compet competito itors rs (Bart (Bartlet lettt and and Ghos Ghosha hall 1998 1998). ). On the the othe otherr hand, most of the emerging markets are now bomb bombard arded ed by foreig foreign n direct direct inves investme tment ntss (FDIs) and by the MNEs of developed nations (UNCTAD 1999). 1999). IHRM for many firms is likely to be critical to their success, and effective IHRM can make the difference between survival survival and extinction for many MNEs. Yet, for reasons of cost, time and and diff diffic icul ulty ty,, IHRM IHRM resear research ch has has been been limited and largely focused on a few issues. Call Callss are are now now bein being g made made to adva advanc ncee our our understandin understanding g of this important important area in several ways, ways, includ including ing:: (1) develop developing ing models models and fram framew ewor orks ks to refl reflec ectt the the comp comple lex x set set of  environment environmental al factors that impinge upon the global global manage managemen mentt of human human resou resource rcess (Adler (Adler and Ghada Ghadarr 1990; 1990; Brewst Brewster er 1995 1995;; Budhwar and Debrah 2001; Locke and Thelen 1995 1995;; Shen Shenka karr 1995 1995;; Sparr Sparrow ow and and Hiltr Hiltrop op 1997); 1997); (2) researc researchin hing g intern internati ationa onall human human resour resource ce activi activities ties in a way that that recogni recognizes zes their their syste systemat matic ic intera interacti ction on (Begin (Begin 1997 1997;; Clark  et al. 1999; Punnett and Ricks 1992); and (3) utilizing more theoretical perspectives to predict and explain relationships (Black and Mendenhall 1990; DeCieri and Dowling 1999; Schuler et al. 1993; Taylor Taylor et al. 1996; al. 1993; Teagarden et al. 1995). In this paper, we review what is being done in the IHRM IHRM field field (Schule (Schulerr and Florkowsk Florkowskii 1998). 1998). A strateg strategic ic framewo framework rk is utiliz utilized ed to organ organize ize our our revie review w and and evalu evaluat atio ion n of the the existing literature and research. While MNEs are our primary focus, issues associated with tradi traditio tiona nall compa comparat rative ive HRM HRM resear research ch are also also briefl briefly y examin examined. ed. Implic Implicati ation onss and sugges suggestio tions ns for future future researc research h agenda agendass are offered throughout. A Model of IHRM O u r m o d e l o f I HR HR M i s b a se se d o n t he he framework offered by Schuler et al. (1993); it draws on Sundaram and Black’s (1992, 733) definition of a MNE as: any enterpr enterprise ise that that carrie carriess out transa transactio ctions ns in or between two sovereign entities, operating under a system of decision making that permits influence over over resour resources ces and capabil capabiliti ities, es, where where the transa transacti ctions ons are subjec subjectt to influe influence nce by factor factorss exogenous exogenous to the home country environment environment of the enterprise. This This defin definiti ition on serves serves to high highlig light ht the the differen differences ces between between managi managing ng global global firms firms and and mana managi ging ng dome domest stic ic firm firmss and and thus thus establ establish ishes es the basis basis for concep conceptual tualizi izing ng IHRM as substan substantial tially ly more more encompa encompassi ssing ng t ha ha n d om om es es ti ti c H RM RM ( e. e . g. g. A dl dl er e r a nd nd Barth Bartholo olomew mew 1992 1992;; Bartl Bartlett ett and Ghos Ghosha hall al. 1999; Dowling et  1992, 1992, 1998; 1998; Black  Black  et al. al. 1999; Roberts et al. 1998). A consequence consequence of this for most MNEs is a human resource department that develops and administers the following policies and practices but across a wide wide varie variety ty of nati nation ons, s, each each with with its own own social, cultural, legal, economic, political and historical characteristics (Morgan 1986): Human resource planning; planning; staffing; staffing; performance performance e v a l ua u a t i o n; n ; t r a i ni n i n g a n d d e v e lo l o p m e nt nt ; compensation and benefits; and labor relations. The The rise rise of the the MNE MNE is bein being g acce accele lera rate ted d becau because se the the costs costs associ associate ated d with with the the development and marketing of new products are too great to be amortized over only one market, even a large one such as the USA or Europ Europee (e.g. (e.g. Bartle Bartlett tt and Ghos Ghoshal hal 1998 1998;; Buck Buckle ley y and and Cass Casson on 1998 1998). ). For For many many multin multinati ationa onals, ls, the likeli likelihoo hood d of compet competing ing in seve several ral dive diverse rse envi enviro ronm nmen ents ts has has neve neverr been been greater greater.. While While these these scenario scenarioss sugges suggestt paths paths that that multi multinat nation ional al enterp enterpris rises es have have inde indeed ed take taken n to be comp compet etit itiv ive, e, they they are are superse superseded ded by the need need to manage manage global globally, ly, as if the the worl world d were were one one vast vast mark market et,, and and simult simultane aneous ously ly to manage manage locall locally, y, as if the world world were a vast vast numb number er of sepa separat ratee and and loosel loosely y connect connected ed markets markets (Barlett (Barlett and Ghosha Ghoshall 1998 1998;; Caligi Caligiuri uri and Stroh Stroh 1995; 1995; Merch Merchant ant 2000 2000). ). Bartle Bartlett tt and Ghosha Ghoshal’s l’s (199 (1998) 8) basi basicc prem premis isee is that that MNEs MNEs are are repr repres esen ente ted d by unit unitss that that need need to be cocoordina ordinated ted or integra integrated ted in some some form form and to some degree, spread throughout the world. In esse essenc nce, e, MNEs MNEs are are firm firmss that that need need to be global and local (multidomestic) at the same time time.. MNEs MNEs,, howe howeve ver, r, need need to achi achiev evee differe different nt levels levels of global globalnes nesss and localn localness ess (Hamel and Prahalad 1986). There are varying ways ways to atta attain in such such leve levels ls (e.g. (e.g. Adler Adler and and Ghadar 1990; Wells 1998). Simultan Simultaneou eouss concern concernss for being being global global,, transferring learning, and being multidomestic (thereby (thereby facilitating facilitating local sensitivity sensitivity)) generate generate important issues relevant to IHRM (Brewster 2002 2002). ). For For exam exampl ple, e, can MNEs MNEs link link thei theirr global globally ly disper dispersed sed units units throu through gh human human resou resource rce polic policies ies and and practi practices ces?? How How do MNEs facilitate facilitate a multidomesti multidomesticc response response that is simultaneously consistent with the need for glob global al co-o co-ord rdin inat atio ion n and and the the tran transf sfer er of  learning and innovation across units through human resource policies and practices? The growing importance of MNEs and use of complex complex global strategic business decisions have generated a similar phenomenon in the area of IHRM, viz. the linkage of IHRM with the strategic needs of the business (Galbraith and Kazanjian 1986; Wright and Snell 1998). Thus, a more strategic perspective of IHRM has develop developed ed (e.g. (e.g. Adler Adler and Barthol Bartholome omew w 1992; Bartlett and Ghoshal 1992; Schuler and Jackson 1999; Schuler et al. 1993; Taylor et  al. 1996). Further Further reasons reasons for the develo developme pment nt of a more more strateg strategic ic perspe perspectiv ctivee of IHRM IHRM includ includee the recognition that: (a) HRM at any level is importa important nt to strateg strategy y implemen implementati tation on (e.g. (e.g. Hamel Hamel and Praha Prahalad lad 1986 1986;; Schul Schuler er and Jackson Jackson 2001; Wright Wright and Snell Snell 1998); 1998); (b) major strategic components of MNEs have a s i gn gn i fi fi c an an t i n fl fl u en en c e o n i n te te r na na t io io na na l manage managemen mentt issues issues,, functio functions, ns, polici policies, es, and practi practices ces (Edstr (Edstrom om and Galbra Galbraith ith 1977; 1977; Roberts et al. 1998); ); (c) (c) many many of thes thesee al. 1998 char charact acteri erist stic icss of IHRM IHRM can influ influen ence ce the the attainment of the concerns and goals of MNEs (Kob (Kobri rin n 1992 1992); ); and and (d) (d) a wide wide vari variet ety y of  factors make the relationship between MNEs and IHRM complex, thereby making the study of IHRM IHRM chal challe leng ngin ing g as well well as impo import rtan antt (Bartlett and Ghoshal 1998, 2000; Dowling et  al. 1999; Oddou and Derr 1999). By including a more strategic perspective, toda today’ y’ss mode modell of IHRM IHRM inco incorp rpor orat ates es the the broader, contextual reality described by Adler and Ghadar Ghadar (1990 (1990). ). While While Schul Schuler er et al. al. (1993 (1993)) descri describe be this this pheno phenomen menon on as the development of a field called strategic IHRM, we trea treatt it as the the evol evolut utio ion n of IHRM IHRM to enco encomp mpas asss a strat strateg egic ic persp perspect ectiv ivee and and use use t h ei e i r f r am a m e wo w o r k a s a c o nt nt e mp m p or o r a ry ry desc descri ript ptio ion n of IHRM. IHRM. In both both case cases, s, the the traditi traditiona onall compar comparativ ativee aspect aspect of IHRM and this this more more recent recent strat strateg egic ic persp perspect ectiv ivee of  IHRM IHRM are join joined. ed. This This facili facilitat tates es the the impl implem ement entat atio ion n of the the resear research ch agend agendaa in IHRM called for by Adler and her colleagues. The The mode modell for for IHRM IHRM that that is used used here here to inventory and appraise what we know today, as well well as to sugg sugges estt a resear research ch agend agendaa for for tomorrow, appears in Figure 1. This model is now now bein being g accep accepte ted d and and util utilize ized d by othe otherr resea research rchers ers in the the field field (e.g. (e.g. De Cieri Cieri and and Dowling 1997; Taylor et al. 1996) as a way to examine the field of IHRM. As shown in Figure 1, there are three major components of IHRM: issues, functions, and policies and practices. In the interest of space, we focus our discussion on these components, referrin referring g interes interested ted readers readers to Schule Schulerr et al. (1993) for a thorough description of the entire model. All aspects of the model, however, are wove woven n into into the the rese resear arch ch agen agenda da that that is articulated here. Mar March 2002 2002 IHRM Issues IHRM issues are best conceptualized in terms of interunit and intraunit needs and challenges. ß Blackwell Publishers Ltd 2002 43 International human resource management: review and critique Figure 1. Integrative framework of international human resources management in MNEs. Adapted from R.S. Schuler, P. Dowling, Dowling, and H. DeCieri (1993) An integrative framework of strategic international human resource management. International journal of Human Resource Management , 4, 722. Although the MNE is separated across several nati nation ons, s, it remai remains ns a sing single le ente enterpr rpris isee and and there therefo fore re must must cons consid ider er how how to bala balanc ncee compet competing ing pressur pressures es for differe differenti ntiati ation on and integr integrati ation on (Lawre (Lawrenc ncee and and Lorsc Lorsch h 1967) 1967).. Mult Multin inat atio iona nals ls must must deci decide de how how to be sens sensit itiv ivee to the the uniq unique ue dema demand ndss of the the indigeno indigenous us environm environment ent without without inhibiting inhibiting their their abilit ability y to co-ord co-ordina inate te the intern internal al operations of local units in pursuit of global s tr t r a te t e gi g i e s. s. B ec e c a us us e t he h e se s e i ss s s ue ue s o f   differ different entiat iation ion and and integr integrati ation on are often often facilitated by HRM activities, they represent ß Blackwell 44 Publishers Ltd 2002 a critical component in IHRM. An example of  this this dual dual focus focus is found found in most most America Americannbased based MNEs, MNEs, which which tend to assign assign primary primary respon responsib sibilit ility y to their their subsid subsidiar iaries ies for local local compensation and benefits, training, and labor relati relation ons, s, with with region regional al units units assu assumin ming g secondary secondary (i.e. co-ordinatin co-ordinating) g) responsibili responsibility ty (Reynolds 1992). IHRM Functions IHRM functions represent three areas: (a) an MNE’s MNE’s human human resource resource orienta orientatio tion; n; (b) the resources (time, energy, money) allocated to its human resource organization; (c) and the location of those resources and HR decision makin making. g. Cons Consid idera erabl blee resou resource rcess can be devo devote ted d to HRM HRM on a tran transn snat atio iona nall scal scale. e. The The cent center er can staff staff a rathe ratherr exte extens nsiv ivee HR departm department ent dedicat dedicated ed exclus exclusive ively ly to IHRM IHRM task tasks, s, such such as decid decidin ing g how how to selec selectt and and repatriate repatriate internatio international nal assignees assignees (e.g. Caligiuri 2000) as well as how to compensate these these employ employees ees (Hamme (Hammerr et al . 1996; Peterson et al. 1996). It can also hire a staff  of individuals to focus on managerial training and development, largely to develop a global manag manageme ement nt cadre cadre (Black (Black and Grege Gregerse rsen n 2000). Accordingly, the resources devoted to and the location of IHRM operations can be expecte expected d to vary vary consid considerab erably ly across across MNEs MNEs (Alder (Alder and Ghadar 1990; Bird Bird et al. 1998). Dowling (1988) documented several types of  IHRM IHRM structu structures res within within MNEs, MNEs, includi including: ng: a totall totally y centrali centralized zed HR functio function; n; central centralized ized HR policy development with regional input in impleme implementa ntatio tion; n; corpor corporate, ate, group, group, and divdivisional HR units with unique responsibilities; and centralized HR decision making for parent country country nation nationals als (PCNs) (PCNs) and thirdthird-cou countr ntry y nationals (TCNs). Of course, IHRM resource cons consum umpti ption on shou should ld dimi diminis nish h as: (1) (1) the the numb number er of PCNs PCNs and and TCNs TCNs decre decreas ases; es; and and (2) (2) overs overseas eas unit unitss are awarde awarded d great greater er decisio decision-m n-makin aking g autonom autonomy y (i.e. (i.e. decendecentralization). IHRM Policies Policies and Practices Practices IHRM policies and practices, practices, which constitute constitute the last component of the model, involve the develo developme pment nt of general general guidel guideline iness on how individuals will be managed and specific HR initi initiati ative ves. s. IHRM IHRM polic policies ies and and pract practice icess relevant to the needs of MNEs include those related related to planni planning, ng, staffin staffing, g, apprais appraising ing,, compensating compensating,, training training and developing, developing, and al. 1999). labor labor relatio relations ns (Dowlin (Dowling g et al. 1999). To illustrate, an MNE might have an HR policy that that indi indica cate tess that that perf perfor orma manc ncee will will be rewarded. Given that this is a rather general stat statem emen ent, t, each each MNE MNE unit unit coul could d be free free to develo develop p speci specific fic practi practices ces that that are simul simul-taneou taneously sly consi consiste stent nt with with local local condit condition ionss and and the the gene general ral poli policy cy.. Unde Underr this this poli policy cy,, one local unit unit might might develo develop p an indivi individua duall incentive plan for the general manager tied to the sales of the local operation while another unit might institute a group incentive plan for the entire top management team tied to hostcountry sales (Fulkerson and Schuler 1992). As suggested by Adler and Ghadar (1990), Bartlett and Ghoshal (1998), Evans (1986) and Teagarden et al. (1995), understandin understanding g and al. (1995), doing doing research research in IHRM must encompass encompass a rather complex reality. The model in Figure 1 has tried to capture this fact. It is now used to organize and critique what has been published in the the IHRM IHRM doma domain in.. Our Our disc discus ussi sion on is divided into three broad categories: (1) IHRM and MNE effectiveness; (2) MNEs’ impact on host industrial relations (IR) systems; and (3) nation national al HRM system systemss and compet competiti itive ve advantage. Mar March 2002 2002 IHRM and MNE Effectiveness Because IHRM issues are the main drivers of  IHRM IHRM functio functions ns and policie policies/p s/pract ractices ices,, the ensuing discussion is structured around these issues, beginning with interunit linkages. Interunit Linkages With Within in our our frame framewo work rk of IHRM IHRM shown shown in Figure Figure 1, the interunit interunit linkag linkages es have have been been a traditional focal point for discussion of IHRM (Bartlett and Ghoshal 1998; Pucik 1988; Pucik  and Katz 1986). 1986). These discussions discussions typically have have focuse focused d on recogni recognizin zing g the variety variety of  several world-wide units while controlling and co-ordinating that variety (Doz and Prahalad 1986; Edstrom and Galbraith Galbraith 1977). 1977). Indeed, the key objective in interunit linkages appears t o b e b al al an an ci ci ng ng t he he n ee ee ds ds o f v ar ar ie ie ty ty (diversi (diversity) ty),, co-ordin co-ordinatio ation, n, and contro controll for purpos purposes es of global global compet competiti itiven veness ess,, flexiflexibility bility,, and organi organizati zationa onall learnin learning g (and (and transfer of knowledge) (Bartlett and Ghoshal ß Blackwell Publishers Ltd 2002 45 International human resource management: review and critique 2000). The nature of this balance is expected to vary, depending on the characteristics of the p ar ar ti ti cu cu la la r M NE NE , s uc uc h a s i ts ts s ta ta ge ge o f   global globalizat ization ion (e.g. (e.g. Adler Adler and Ghadar Ghadar 1990; 1990; Milliman et al. 1991). IHRM Policies Policies and Practices Practices ß Blackwell 46 Publishers Ltd 2002 IHRM policies and practices shown in Figure 1 have have also also been been a trad tradit itio iona nall focu focuss of  researchers and practitioners in IHRM (Pucik  and and Katz Katz 1986; 1986; Oddou Oddou and Derr Derr 1999 1999). ). In additio addition n to being being the basic activitie activitiess in the fiel field d of HRM HRM dome domest stic ical ally ly,, they they serv servee internationally to strengthen interunit linkages in nume numero rous us ways, ways, includ including ing:: (a) (a) comcomprehensi prehensive ve human human resourc resourcee planning, planning, ensurin ensuring g that that the MNE has the approp appropria riate te people in place around the world at the right time; time; (b) staffi staffing ng policie policiess that that capita capitaliz lizee on the world-wide world-wide expertise of expatriates, expatriates, thirdcountry nationals (TCNs), (TCNs), and host-country host-country nationals nationals (HCNs); (HCNs); (c) performance performance appraisals that are anchored anchored in the competitive competitive strategies strategies of MNE MNE head headqu quar arte ters rs and and host host unit units; s; (d) (d) compens compensati ation on policie policiess that that are strate strategic gically ally and cultur culturall ally y releva relevant; nt; and (e) traini training ng and d e ve ve l op op m en e n t i n it i t i at a t i ve v e s t h at at p r ep ep a re re indiv individu idual alss to oper operat atee effe effecti ctive vely ly in their their over overse seas as loca locatio tions ns and and to co-o co-ope pera rate te with with other MNE units. How organizations develop, effectiv effectively ely implement, implement, and institutio institutionaliz nalizee such such polic policie iess shoul should d be at the heart heart of our our resear research ch agenda agenda for IHRM. IHRM. Some Some resear research ch has been initiated in this regard. For example, Roberts et al. (1998) have have identif identified ied three three al. (1998) practic practical al challe challenge ngess to managi managing ng the global global workfo workforce rce:: (a) deploym deployment ent;; (b) knowle knowledge dge and innovation dissemination; dissemination; and (c) talent identif identifica ication tion and develo developme pment. nt. They They have have also also identi identifie fied d four four strate strategie giess to mee meett these these challenges. These are: (a) aspirational careers; (b) awaren awareness ess building building assignm assignment ents; s; (c) SWAT SWAT team teams; s; and and (d) (d) virt virtua uall solu soluti tion ons. s. Finally, they propose a diagnostic framework  for each of the challeng challenges es and when to use each eac h of the strate strategie gies. s. Yet, Yet, previo previous us studies studies have been skewed heavily toward the effects that staffing or development practices have on individuals – primarily expatriated employees (e.g. (e.g. Hillary Hillary and Bre Brewste wsterr 1999; 1999; Tung and Punn Punnet ettt 1993 1993). ). One One coul could d argu arguee that that this this focus is consistent with the efforts of many MNEs MNEs (esp (espec ecia iall lly y thos thosee base based d in Nort North h Americ America) a) to manage manage inter interun unit it oper operati ation onss through PCNs. Even within Europe, such an ethn ethnoc ocen entr tric ic appr approa oach ch is adop adopte ted d by most most orga organiz nizat ation ionss to orga organiz nizee their their IHRM IHRM (May (M ayrh rhof ofer er and and Brew Brewst ster er 1996) 1996).. As more more firms think and act globally, however, there is a comp compel elli ling ng need need to devi devise se and and sust sustai ain n effective effective transnationa transnationall HRM systems (Adler and Bar Bartho tholome lomew w 1992; 1992; Bre Brewst wster er 2002; 2002; Edwards et al. 1996). Given these caveats, linkage-related IHRM research is reviewed below. Although HCNs and TCNs may enhance such linkages in vital ways, ways, previ previou ouss inves investig tigati ation onss have have conconcentrated on the reactions these groups have to host-level HRM policies and practices. As a result, result, we will examine examine that segment segment of the literatu literature re later later in the section section titled titled ‘Intern ‘Internal al Operations’.   Human resource planning. planning. Human resource resource planning should be an indispensable means of  engineering engineering effective interunit interunit linkage, linkage, most notabl notably y by synchro synchronizi nizing ng the staffin staffing, g, apprais appraisal, al, and compen compensat sation ion subsys subsystems tems of  IHRM. Such planning must be comprehensive in scope cognizant of, and responsive to, the MNE’s industry characteristics, product stage, organization organizational al phase of international international developdevelopment, ment, global global struct structure ure,, and compet competiti itive ve strategies (Bartlett and Ghoshal 1998). These consideratio considerations ns are reflected reflected in the following critical critical human resource planning issues facing MNEs: • • • • manage managemen mentt potent potential ial at the earlie earliest st possible career stage identifying critical success factors for the future international manager providing developmental opportunities tracking and maintaining commitments to individuals in international career paths • • • tying strategic business planning to human resource planning, and vice versa dealing dealing with the organization organizational al dynamics dynamics of multiple multiple (decentralized) (decentralized) business units whil whilee attem attempt ptin ing g to achiev achievee glob global al and and regional (e.g. Europe) focused strategies providing providing meaningful assignments assignments at the right time to ensure adequate international and domestic human resources. Similarly, Wong (2000) has identified 10 major planni planning ng and pro proces cessing sing activi activitie tiess that that internatio international nal HR executive executivess need to address: address: assign assignmen mentt and and cost cost planni planning; ng; candi candida date te select selection ion;; assignm assignment ent terms terms and condit condition ion docume documenta ntation tion;; reloca relocatio tion n pro process cessing ing and vendor vendor manage management ment;; cultura culturall and langua language ge orientatio orientation/tra n/training ining;; compensati compensation on adminiadministrati stration on and payrol payrolll pro proces cessin sing; g; tax admini admini-stration stration;; career career planning planning and developm development; ent; handli handling ng spouse spouse and depend dependent ent matter matters; s; and immigration processing. How How best best to do any any of thes thesee acti activi viti ties es remains a challenge for some MNEs; how best to do them in an integrative manner through HR plannin planning g initia initiativ tives es is a major major challen challenge ge for most most MNEs MNEs (Bartle (Bartlett tt and Ghoshal Ghoshal 1998; 1998; Evans Evans 1986, 1986, 1992). 1992). More More specifi specificc questi questions ons about each of these items are addressed addressed below. I n t e rn r n a t i on o n a l h u m a n r e s ou o u r c e s t a f ffing. Staffin Staffing g is a major major IHRM IHRM practic practicee that that MNEs MNEs have have used used to help help co-o co-ord rdin inat atee and and control their far-flung global operations (e.g. Bonach Bonachee and Cervin Cervino o 1997 1997;; Dowlin Dowling g et al. al. al. 2000 1999;; Harvey 1999 Harvey et al. 2000;; Mayrhof Mayrhofer er and Brewster Brewster 1996; Mendenhall et al. 2002; Pucik  and and Katz Katz 1986; 1986; Stroh Stroh and and Cali Caligiu giuri ri 1998) 1998).. Traditionall Traditionally, y, MNEs sent parent-coun parent-country try nation nationals als abroad abroad to ensure ensure that that the policie policiess and procedures of the home office were being carried out to the letter in foreign operations (e.g. Brewster and Scullion 1997; Punnett and Ricks Ricks 1992 1992). ). Sculli Scullion on and Brewst Brewster er (200 (2001) 1) provid pro videe an excel excellen lentt summar summary y of exist existing ing litera literatur turee that that highlig highlights hts the importa importance nce of  distingu distinguish ishing ing between between MNEs, MNEs, e.g. North North Americ American an and Europe European. an. Regar Regardle dless ss of  location, location, however, as costs became prohibitive and career issues made these assignments less attractive, MNEs turned increasingly to thirdcountry and host-country host-country nationals to satisfy satisfy international staffing needs (e.g. Black  et al. 1999). MNEs MNEs nevert neverthel heless ess continu continuee to expatr expatriat iatee PCNs PCNs as techni technical cal troubl troublesh eshoote ooters, rs, struct structure ure rep prr o du du c er er s , a n d g e n nee r al al m a na na g em em e nt nt oper operat ativ ives es.. Prec Precis isee data data are are lack lackin ing g on the the exte extent nt to wh whic ich h ther theree is cros crosss-cu cult ltur ural al or indust industry ry variat variation ion in the utiliz utilizati ation on of shortshortversu versuss longlong-te term rm tours tours of duty duty and and singl singlee postings postings versus career rotations. rotations. Tung (1982) found fou nd that that Japane Japanese se MNEs MNEs expatr expatriat iated ed more more freque frequentl ntly y when when fillin filling g senior senior-- and middle middle-m a na n a g e me m e n t p o s it i t i o ns n s i n a d v an an c e d indust industria rializ lized ed econom economies ies than than did Europe European an or American firms. The staffing approach for lower lower manage manageria riall positi positions ons was polyce polycentr ntric ic (i.e. staffed from the host labor market) in the advanced industrialized countries regardless of  MNE MNE home home coun countr try; y; howe howeve ver, r, Japa Japane nese se multinati multinationals onals displayed displayed levels levels considerabl considerably y below those for their their Western-base Western-based d countercounterparts. parts. In general, US companies companies are least likely to staf stafff mana manage geme ment nt vaca vacanc ncie iess in thes thesee locations locations with PCNs; neverthele nevertheless, ss, American American compan companies ies do use PCNs. Reason Reasonss for using these PCNs or expatriates, include: protecting company company interests; interests; broadening broadening global global perspecperspectives; tives; prov providin iding g function functional al perspec perspective tives; s; broaden broadening ing global global kno knowled wledge; ge; pro provid viding ing develop development mental al assignme assignments; nts; building building local local talent talent via PCN traini training; ng; orches orchestra tratin ting g better better career planning; managing mature businesses; and managing new and joint ventures. MNEs remain concerned about the best way to identi identify fy and select select expatri expatriates ates for foreign foreign assignments (e.g. Black  et al. 1999; Harzing 2001). Davison and Punnett (1995) argue that internationa internationall managers managers and researchers need to avoid an ‘ostrich-like’ attitude of ‘gender and and race race blin blindn dnes ess’ s’ when when deal dealin ing g with with internation international al assignmen assignments. ts. The existing existing research suggests that the foreign assignment sele selecti ction on proc proces esss shou should ld be done done more more systematically without gender bias and more Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 47 International human resource management: review and critique ß Blackwell 48 Publishers Ltd 2002 strateg strategical ically, ly, e.g. e.g. using using expatri expatriate atess to help help transfer knowledge and learning (Bonache and Fernandez 1999). The trend here appears to be in the direction of developing a selection process based on the identification of critical job dimensions (such as: accept accept foreign foreign assignm assignment ents; s; spouse spouse and f am am i ly ly s up up po po rt rt ; k n ow ow le le d ge ge o f f or or e ig ig n langua language; ge; adjust adjustmen mentt to living living abroad; abroad; adjustm adjustment ent to foreig foreign n busine business ss practi practices ces;; establishing/maintaining establishing/maintaining business contacts; techni technical cal compet competenc ence; e; working working with with others others;; communicating/persu communicating/persuading; ading; initiative/effort; initiative/effort; and company company support support)) and the develo development pment of predictors that can be used to increase the probability of success (Dowling et al. 1999). Ultimately, Ultimately, researchers researchers may want to isolate isolate the relative relative impact that individual individual characteris characteristics tics (e.g. knowledge, skills, abilities) have on successful cessful completio completion n of internati international onal assignassignments as well as other organizational factors, e.g. e.g. apprai appraisal sal and compen compensa satio tion n polici policies es,, support systems (Petrovic et al. 2000; Scullion Scullion and Starkey 2000) The ‘spouse and family support’ dimension typically rests on assumptions that the spouse is female and will not be working abroad in a career-related career-related position position (Punnett (Punnett et al. 1992). However However,, dual-in dual-income come and dual-car dual-career eer couples couples are becoming becoming increasingly increasingly important segment of professional managers in the US (Har (Harve vey y and and Buck Buckle ley y 1998 1998). ). It is now now expe expect cted ed that that the the dualdual-car career eer coup couple less will will increa increasin singly gly be involv involved ed in intern internatio ational nal assign assignmen ments, ts, many many of which which will will entail entail the expatr expatriati iation on of women women manage managers rs (e.g. (e.g. Adler Adler 1994, 2001; Harvey and Buckley 1998). There remains a paucity of research on the initiatives that that USUS- and and nonnon-US US-b -bas ased ed MNEs MNEs are are underta undertakin king g to capital capitalize ize on these these develo developpments ments (e.g. (e.g. spousa spousall employ employmen mentt search search services, services, waivers of immigration immigration restrictions on working spouses), a deficiency that should b e r e me m e di d i ed e d i n s ub u b se s e qu q u en e n t I HR HR M investigations. Further research opportunities abound in the area of staffing with third country and hostcoun country try nati nation onal als. s. Whil Whilee the the use use of more more TCNs and HCNs may solve staffing needs, it raises concerns about the ability to satisfy the needs needs of co-ordi co-ordinat nation ion and contro controll and the transfer of learning across regional units (e.g. Dowling et al. 1999; Harzing 2001; Ouchi and MacGui MacGuire re 1975; 1975; Pucik Pucik 1988). 1988). As Pucik Pucik and Katz (1986) argued, argued, firms firms can redress redress such needs by (a) establishing rules and procedures for HCNs or TCNs to carry rry out or (b) socializing the HCNs or TCNs to think and behave like expatriates. Of course, these pure archetypes might not be found as MNEs seek  the the most most appr approp opri riat atee solu soluti tion on to fit fit the the circumstances. For example, under conditions of rapid rapid chan change ge,, high high unce uncerta rtain inty ty,, and and the the need for social information to be gathered and utiliz utilized, ed, MNEs MNEs would would more more likely likely social socialize ize indivi individua duals ls (Van Maanen Maanen and Schein Schein 1979). 1979). Under Under condit condition ionss of stabil stability ity,, certain certainty, ty, and the the need need for for tech techni nica call info inform rmat atio ion n to be utiliz utilized, ed, firms firms would would more more likely likely establi establish sh rules and procedures for individuals to carry out out (Ban (Banal al 1992 1992). ). Sinc Sincee MNEs MNEs rarel rarely y find find pure purely ly one one set set of cond condit itio ions ns or anot anothe her, r, comb combin inat atio ions ns of the the two two appr approa oach ches es are are commonplace.  Repatriation. Along Along with with this this rese resear arch ch on expat expatria riati tion on is the work work on repatr repatriat iatio ion n (Mendenhall et al. 2002). The quality of the repatriation process is viewed as critical to the overall overall career career succes successs of expatri expatriates ates.. It has also been linked to the adjustment process and turnover of expatriates following their return home home (Adl (Adler er 2001 2001;; Blac Black  k  e t al . 1999; Brews Brewste terr and and Scul Sculli lion on 1997 1997;; Stroh Stroh 1995 1995). ). Much progress has been made in capturing the comple complexit xity y of the repatria repatriatio tion n proces process. s. For example, example, Black  et al. (1999) have presented a rich framework incorporating many variables asso associa ciated ted with with the the antic anticip ipat ator ory y and and inincountry country repatriation repatriation adjustment adjustment process. process. Based on their framework, they presented 18 propo proposit sition ionss waitin waiting g to be tested tested.. AlterAlternatively, natively, Welch et al. (1992) descri described bed the al. (1992) process of repatriation as having four phases: preparati preparation, on, physica physicall relocatio relocation, n, transitio transition, n, and readjus readjustme tment. nt. While While some some would would argue argue this conceptualizatio conceptualization n really goes far beyond beyond the process of ‘coming home’, others would claim that it represents all the variables that p o te te n ti ti a ll ll y i m pa pa c t t h e l o ng ng e vi vi t y a n d p e rf rf o rm rm a nc nc e o f t h e i nd n d i vi vi du d u al a l o nc nc e repatriated. repatriated. Stroh (1995) (1995) examined examined the main turnov turnover er predic predictor torss among among repatri repatriates ates in 51 US-ba US-based sed MNCs. MNCs. Her study study reveal revealed: ed: corporate values related to the importance of  overse overseas as assign assignmen mentt to the organi organizat zation ion,, whet whethe herr the the orga organi niza zati tion on has has a caree careerr develo developm pment ent plan plan for repatr repatriat iates, es, and and the the perceiv perceived ed impact impact of corpor corporate ate turbulen turbulence ce on bein being g able able to place place repat repatria riate tess adeq adequa uate tely ly upon upon their their return return as the the main main pred predict ictor orss of  al. (1998) repatriates repatriates turnover. turnover. Hammer et al. exam examin ined ed the the adjus adjustm tment ent of Ameri American can corpo corporat ratee manage managers rs and and spou spouse sess to their their profess profession ional al and social social enviro environme nments nts upon upon their return to the US. They investigated the relationship relationship of background background variables (e.g. age, prior prior nation national al experi experienc ence), e), host host countr country y varia variabl bles es and and re-en re-entry try vari variab ables les of expe expecctations tations to re-entr re-entry y satisfa satisfactio ction n and re-entr re-entry y difficulties of 44 returning managers and 33 spou spouse sess from from two two MNCs MNCs.. Hamm Hammer er et al. (1998) (1998) found found suppor supportt for the the relati relations onship hip between re-entry expectations and overall reentry entry satisfa satisfactio ction n for manager managerss and re-entr re-entry y expectations and re-entry satisfaction and reentry entry difficu difficulti lties es for spouse spouses. s. Such ongoin ongoing g resear research, ch, along along with with earlie earlierr discus discussed sed fram framew ewor orks ks in the the fiel field d such such as by both both Welch et al. (1992) and Black  et al. (1999) reflect the trends in IHRM to be more systematic, atic, strateg strategic, ic, inclus inclusive ive,, and contex contextua tual. l. In doing so, they offer fertile ground for future research. Socialization/MNE synergy. Concerns Concerns remain about the biasing effects that the culture and n or or ms ms o f p a re r e nt nt f ir ir ms ms c an a n h a ve ve o n social socializa izatio tion n proces processes ses (Pucik (Pucik and Katz Katz 1 98 98 6) 6) . T he he se se e t hn hn oc oc e nt nt r ic ic f or or c eess c a n comp compro romi mise se the the MNE’ MNE’ss abil abilit ity y to iden identi tify fy and benefi benefitt from from cultur cultural al synergi synergies es in their their opera operatin ting g units units.. One One means means of comba combatin ting g manage managemen mentt ethno ethnocen centri trism sm would would be to enga engage ge more more TCNs TCNs in prefe preferen rence ce to PCNs PCNs,, indivi individua duals ls who would be expecte expected d to have have been been previo previous usly ly socia socializ lized ed (Capp (Cappell ellii and McElra McElrath th 1992). 1992). But we still still cannot cannot define define the best way to socialize a culturally diverse set of individuals. It appears, however, that as MNEs become more global, their socialization process needs to be less ethnocentric cultural differences differences are too important important to ignore or deny (Adler 2001; Adler and Ghadar 1990). In fact, facilita facilitatin ting g and diffusi diffusing ng cultura culturall synergi synergies es may may be crit critic ical al to econ econom omic ic succ succes esss as indust industries ries become become more more transna transnation tional al in nature (Adler 2001; Adler and Bartholomew 1992). 1992). Recentl Recently, y, Caligiu Caligiuri ri (2000) (2000) examin examined ed the relationship between host national contact and cross-national cross-national adjustment of expatriates. expatriates. Her findings suggest that greater contact with host host nation nationals als posit positive ively ly relate relatess to crosscrosscultur cultural al adjus adjustm tment ent when when an expatr expatriat iatee posses possesses ses the persona personalit lity y trait trait of openne openness. ss. The person personalit ality y characte characteris ristic tic of sociab sociabili ility ty was also related to cross-cultural adjustment. O n t he he w ay ay t o d ev ev el el op op in in g a g lo lo ba ba l workfo workforce rce and cadre cadre of global global manage managers, rs, MNEs need to open their recruitment process and and enhanc enhancee the the attrac attractiv tiven eness ess of global global a s si si gn g n me m e n ts ts ( A dl dl e r 1 99 99 4; 4 ; A dl d l e r a nd nd Bartho Bartholom lomew ew 1992; 1992; Harvey Harvey et al. 1999). Remaining to be researched, however, is the relati relation onsh ship ip betwee between n an open open recrui recruitin ting g proces processs and MNE effectiv effectivene eness. ss. Indeed Indeed,, yet to be investigated is the extent to which there are are gaps gaps betwe between en what what MNEs MNEs ‘now do’ do’ in recruiting and what they ‘should do’. Staffing Staffing researc research h has targete targeted d expatr expatriate iates, s, TCNs, TCNs, and HCNs, HCNs, but this approach approach is less less t r ue ue o f w o rk rk s e x am am i ni ni n g a p pr pr a is is a ls ls , compensation compensation,, and training. training. This shortcoming shortcoming is being redressed gradually as MNEs seek to globalize their operations in their attempts to increas increasee global global effective effectivenes nesss and facilit facilitate ate more knowledge transfer and organization organizational al learning.  Appraising performance. While the expatriate is on assignment, the individual performance must must be appr apprai aise sed d (Brew (Brewst ster er and and Sculli Scullion on Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 49 International human resource management: review and critique ß Blackwell 50 Publishers Ltd 2002 1997; Dowling Dowling et al. 1999). Peterson Peterson et al. (1996), in their comparative IHRM study of  Brit Britis ish, h, Germ German an,, Japa Japane nese se and and the the US multin multinati ation onals als found found that that expatr expatriat iates es had perform performance ance apprai appraisals sals while while serving serving in the f o re r e i gn g n a s si s i g nm nm e nt n t . T h ei e i r a p pr p r a is is a l mechani mechanisms sms varied varied from from quantit quantitativ ativee (e.g. (e.g. grap graphi hicc scal scale) e) to qual qualit itati ative ve (e.g. (e.g. MBO MBO or narrativ narrative). e). Many Many types types of assign assignmen ments ts exist exist e n t ai ai l i ng ng n u me me r o us us j o b p e rf r f o r ma ma n ce ce dimensions. For the expatriate assignment, in contras contrastt to the domesti domesticc assign assignmen ment, t, MNEs MNEs need to evaluat evaluatee dimens dimension ionss of perform performance ance not specifi specificall cally y job-rel job-relate ated, d, such such as crosscrosscultural cultural interpersona interpersonall qualities; qualities; sensitivity sensitivity to foreign norms, laws, and customs; adaptability to uncertain uncertain and unpredictable unpredictable conditions; conditions; and the host location’s integration with other MNE units. units. The signif significan icance ce of these these factors factors will vary vary by the type type of expa expatr triat iate. e. So far, far, the the research on expatriate expatriate performance performance appraisal appraisal has not fully addressed the relative impact of  these these unique uniquely ly intern internatio ational nal dimens dimension ionss of  perfo performa rmance nce,, regar regardl dles esss of the the type type of  expatr expatriat iatee assign assignmen ment. t. Audia Audia and Tams Tams (2002), (2002), however, however, offer some suggestions suggestions for moving ahead with research in this area. Thus, the the resea research rch oppo opport rtun unit itie iess in this this area area are are relatively unlimited, but feasible. While While the perfor performan mance ce apprai appraisal salss of  expatr expatriat iates es who who are assign assigned ed for speci special al techni technical cal projec projects ts and short-t short-term erm stays stays tend tend t o b e o pe p e r at a t i on on al a l a n d t a sk sk -f - f oc o c u se se d , evaluations of the expatriate manager tend to be more more stra strate tegi gic, c, more more rela relate ted d to the the operation of the entire unit and how it relates to the other locations (Evans 1986; Selmer and de Leon 1997). 1997). Appraising the performance of  this manager, therefore, becomes an important issue at the interunit linkage level of IHRM (Dowling et al. 1999; Fulkerson and Schuler 1992). Units within a large MNE may pursue differ different ent strateg strategic ic missio missions ns,, face face differ different ent legal legal condit condition ions, s, and encoun encounter ter far differen differentt competitive competitive situations. situations. Consequentl Consequently, y, MNEs must must accou account nt for these these enviro environme nment ntal al condit condition ionss when when constr construct ucting ing apprais appraisal al forma formats ts and and indi indivi vidu dual al obje objecti ctive vess for for unit unit managers. While it appears that this approach to PCN appraisal is not unknown within large multinationals (Fulkerson and Schuler 1992), there there is little little empiri empirical cal eviden evidence ce to sugges suggestt how widespread the practice is or under what cond conditi ition onss (e.g. (e.g. degr degree ee of trus trust) t) it is more more effect effectiv ive. e. It does does appear appear,, howev however, er, that that performance appraisal of expatriate managers can be a critical means whereby MNEs link  their their units units togethe togetherr (e.g. (e.g. by apprai appraisin sing g cooperat operative ive behavi behaviors ors and incorp incorpora oratin ting g the various various environmenta environmentall dimensions dimensions into each manager’s manager’s appraisal appraisal format format different differently) ly) (Har (Harzi zing ng 2001 2001). ). It can can also also faci facili lita tate te the the develo developme pment nt of a common common apprais appraisal al format format that that recog recogniz nizes es and makes makes situat situation ional al diffe differen rence cess legi legiti timat mate, e, so that that the the relat relativ ivee contri contribut bution ionss of manager managerss around around the world world can be tracked, evaluated, and compared. This strateg strategical ically ly and cultur culturall ally y standa standardiz rdized ed inform informatio ation n should should guide guide manage managerial rial career career development, future promotion decisions, and compen compensati sation on adjust adjustmen ments. ts. As the next next two sectio sections ns detail, detail, though though,, there there is only only modest modest evidence that strong linkages actually exist. has been been Compensat Compensating ing the expatriate. expatriate. It has argued argued that that expatri expatriate ate compen compensat sation ion can be as significant as appraisal in fostering interunit linkag linkages es and the attainm attainment ent of intern internati ationa onall et a l. strateg strategic ic objecti objectives ves (Dowlin (Dowling g 1999; Reynol Reynolds ds 1992, 1992, 2001). 2001). ‘‘In ‘‘In theory theory,, [parent [parent country country nationals] should have no more or less at risk risk econo economi mical cally ly than than their their domes domestic tic counter counterpart parts’ s’’’ (Reyno (Reynolds lds 1992, 1992, 75). 75). The reality is that expatriates tend to have greater income income security security because because performan performance ce evalu evaluati ation onss usua usually lly are a rather rather mode modest st determ determin inant ant of their their total total compen compensat sation ion pack packag age. e. Whil Whilee PCNs PCNs may may have have fewer fewer oppo opportu rtuni niti ties es to inve invest st in tax tax shelt shelter erss and and other economic amenities than their functional equi equiva vale lent ntss at home home,, the the form former er can can cost cost MNEs up to five times as much (Dowling et  al. 1999). A side effect of this cost differential is the substantial disparity between the salary of PCNs PCNs and and that that of HCNs HCNs or TCNs TCNs.. This This disp dispar arity ity has has the the pote potent ntia iall to create create stat status us distin distincti ctions ons in an MNE’s MNE’s global global workfor workforce, ce, thereby thereby inhibi inhibiting ting interun interunit it linkages linkages.. The extent to which this actually occurs, however, is not not docum document ented ed publi publicly cly.. It appea appears rs,, howeve however, r, that expatri expatriate ate compen compensati sation on as pract practic iced ed by US MNEs MNEs tends tends to refle reflect ct the the assumption of the home country (e.g. money is the most important motivator) and thus has been been very very cult cultur uree boun bound d (Sch (Schul uler er and and Rogovsky 1998). Similar patterns are evident in the provision of bene benefi fits ts.. Amer Americ ican an and Japa Japanes nesee multi multi-nationa nationals ls normall normally y limit limit TCNs TCNs to the fringe fringe benefits benefits available available for indigenous employees at the same time as PCNs receive home-country entitlements (Towers Perrin 1987). European MNEs are more egalitarian as a rule, extending extending home-co home-countr untry y benefit benefitss to TCNs TCNs and PCNs. PCNs. Given Given how little little we know about ‘standa ‘standard’ rd’ internat international ional compensa compensation tion and benefits benefits administration, research opportunities abound (Sparrow 2000). Some of the key issues to be investigated include the following: • • • How How can MNEs MNEs deve develo lop p pay pay struc structu ture ress that are cost-effective, fair, and adaptable to different employee groups? How can MNEs MNEs develo develop p more more cultur culturally ally sensiti sensitive ve compen compensat sation ion schemes schemes that that recog recogni nize ze coun country try diffe differen rences ces,, yet are are equally motivating and still equitable? H o w c a n i n t e rn r n a t i on o n a l - as a s s i gn gn e e comp compen ensa sati tion on be bett better er link linked ed to the the strateg strategy y and indust industry ry characte characterist ristics ics of a given MNE? Further issues that can be examined include: managin managing g expatri expatriate ate expecta expectatio tions; ns; adding adding ‘appropriate’ ‘appropriate’ value to expatriate expatriate compensation compensation packages; packages; ‘localization’ ‘localization’ of expatriate expatriate compensatio sation; n; cost cost conta containm inment ent;; global global pensi pension on sche schemes mes;; inte integr grat atio ion n of HR plann plannin ing g with with expatriate expatriate compensation; compensation; management management development as a crucial factor in expatriate compensation planning; regionalization; revisiting the ‘balance sheet’ concept; and centralizing centralizing and decentralizing the assignment policy. Addres Addressin sing g these these several several general general and specific specific issues in expatriate expatriate compensation compensation is likely likely to provid providee a full full researc research h agenda agenda for those interested in IHRM reward structures. Train Training ing and develo developin ping. g. Traini Training ng and develo developme pment, nt, or human human resou resource rce develo developpment ment,, is an aspe aspect ct of IHRM IHRM that that pres presen ents ts another means of linking the dispersed units of  an MNE.1 Traditionally, research has focused on the predeparture training extended to PCNs and and thei theirr famil familie ies. s. Lack Lack of prep prepar arat atio ion n general generally ly has been associ associated ated with a higher higher expatriate failure rate; US multinationals tend to enga engage ge in less less trai traini ning ng than than do thei theirr Europe European an and Japane Japanese se counte counterpa rparts rts (Noble (Noble 1997 1997;; Tung Tung 1982 1982). ). Moreo Moreove ver, r, US MNEs MNEs ordina ordinaril rily y place place less less emphas emphasis is on langua language, ge, interpersonal skills, and culture sensitivity in their training programs than do MNEs based elsewhe elsewhere re (e.g. (e.g. Dowlin Dowling g et al. 1999; Tung Tung al. 1999; 1982). Consequently, it is not surprising that US MNEs experience experience higher higher expatriate expatriate failure rates rates than than do other other multin multinati ationa onals. ls. At times, times, such such claims claims are contrad contradicto ictory: ry: for example, example, Peterson et al. (1996, 550) report lower failure rates than reported by Tung (1982). However, as suggested above, the findings of Peterson et  al. (1996) (1996) also also confir confirm m higher higher expatri expatriate ate failure failure rates rates in America American n multin multinati ationa onals ls in comp compari ariso son n with with Wester Western n Euro Europea pean n and Japanese MNCs. As much of this research is based based on self-re self-repor ported ted data, data, therefo therefore, re, more more rigor rigorou ouss desi design gnss are need needed ed to cont contro roll potent potential ial cultur cultural al biases biases better better (e.g. (e.g. homehomecoun countr try y diffe differen rences ces in the the willi willing ngne ness ss to disclose disclose organization organizational al shortcoming shortcomingss or seek  early repatriation). Increasingly, scholars and professionals are castin casting g the the train trainin ing g and develo developin ping g of  inte intern rnati ation onal al assi assign gnee eess into into a much much larg larger er frame, frame, one one cons consist istent ent with with broade broader, r, more more theoreti theoretical, cal, and systema systematic tic descript description ion of  IHRM, as shown in Figure 1 (Mendenhall et  2002). ). For For exam exampl ple, e, the the fami family ly is now now al. 2002 recog recogni nize zed d as a very very sign signifi ifica cant nt facto factorr in expatriate expatriate success (Adler 2001; Dowling Dowling et al. 1999), particularly when dual-career issues are involved involved (Punnett (Punnett et al. 1992; Harvey Harvey and al. 1992; Buckley 1998). Better paradigms (e.g. social Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 51 International human resource management: review and critique ß Blackwell 52 Publishers Ltd 2002 learn learnin ing g theor theory y and and cultu culture re theo theory ry)) have have begun to emerge concerning the impact and likely success of cross-cultural cross-cultural training (e.g. Bhawuk Bhawuk 1998; 1998; Black Black and Menden Mendenhall hall 1990; 1990; Kim 1995). International HR planning is seen more often as a key orchestrator of expatriate career development, development, incorporating incorporating expatriate expatriate assign assignmen mentt decisio decisions ns and the repatria repatriatio tion n process (Black  et al. 1999). Perha Perhaps ps most most indi indicat cativ ivee of this this shif shiftt in perspective is the contention that training and development is no more important for PCNs than it is for individuals individuals from other parts of the world (Adler and Bartholomew 1992). In fact, glob global al firm firmss can can enha enhanc ncee thei theirr inte interu runi nitt linkages linkages by creating creating a pool of global managers with citizenship from anywhere in the world (Bartlet (Bartlettt and Ghosha Ghoshall 2000; 2000; Fulker Fulkerson son and Schuler 1992). As these ‘global’ managers are develo developed ped,, howeve however, r, it appears appears they need to have the global awareness of the MNE and the sensitivity to local cultures and knowledge of  local conditions, conditions, particularly particularly labor relations and laws. Management development activities coul could d be hous housed ed in corp corpor orate ate or glob global al headqu headquarte arters rs with with local, local, regiona regional, l, and other other HR unit unitss assi assist stin ing g in prog program ram desi design gn and and delivery (Bartlett and Ghoshal 1998; Dowling et al. 1999; Evans 1992). The efficacy of this or othe otherr struc structu tural ral appr approac oache hess remai remains ns an empirical question. the actual treatment of individuals regardless of locatio location n through through its top-do top-down wn impact impact on HR polic policy y making making (Schu (Schuler ler 1992 1992). ). Core Core IHRM polici policies, es, in turn, turn, operati operationa onalize lize this this philosophy and arguably constrain the set of  I HR HR M p ra ra ct ct ic ic es es i n u se se ( i. i. e. e. t yp yp es es o f   compensatio compensation, n, staffing staffing procedures, procedures, appraisal appraisal method methods, s, and traini training ng and develo developme pment nt modes). There are many choices in the array of poss possib ible le IHRM IHRM prac practi tice cess (Sch (Schul uler er and and Jackso Jackson n 1987); 1987); becaus becausee these these practic practices es will influen influence ce the behavio behaviors, rs, compete competenci ncies, es, assign assignmen ments ts and motiva motivatio tion n of indivi individua duals, ls, they they need need to be clos closel ely y align aligned ed with with othe otherr IHRM activities activities (Begin (Begin 1997; 1997; Schule Schulerr and Jackson 1999; Wright and Snell 1998). Develo Developi ping ng core core IHRM IHRM polic policies ies that that facilitate interunit linkages may be easier said t ha h a n d on o n e, e , e sp s p ec e c i al al l y i f u ni n i ts t s h av av e dramatically dramatically different different local environments environments or are pursuing pursuing different different competitive competitive strategies with different technologies. This confounding may make the task more challenging, but it does does not not make make it impos impossi sible ble.. Perhap Perhaps, s, however however,, it does does require require more more resourc resources es to devise devise systema systematic tically ally HR practic practices es that that are anch anchor ored ed in comm common on HR poli polici cies es.. Long Longiitudin tudinal al invest investig igati ation onss of the growth growth and and allocat allocation ion pattern patternss of IHRM IHRM budget budgetss within within MNEs MNEs may may shed shed some some ligh lightt on this this matte matter. r. Discus Discussio sion n now turns turns to findin findings gs associ associated ated with the internal operations of MNE units. Superordinate Values for IHRM Practice  Development  Internal Operations and IHRM Part Part of the the chal challe leng ngee in deve develo lopi ping ng HR practice practice to facilita facilitate te interu interunit nit linkag linkages es is to allow allow simult simultane aneou ously sly for some some flexib flexibili ility ty.. Flexib Flexibili ility ty supp support ortss chang changee and enable enabless adapta adaptatio tion n to local local condit condition ions. s. Flexibi Flexibilit lity y is attained in part by ensuring that (1) practices a re re n ot ot c ar ar ve ve d i n s to to ne ne ( me me nt nt al al ly ly o r physic physically ally)) and (2) practic practices es are formul formulated ated with within in a larg larger er cont contex ext, t, most most nota notabl bly y an overrid overriding ing human human resourc resourcee philos philosoph ophy y and core human human resource resource polici policies es (Buckl (Buckley ey and Casson Casson 1998; 1998; Schule Schulerr 1992). 1992). Statem Statement entss of  human resource philosophy proscribe limits on Internal operations require the same degree of  research attention as interunit linkages, since both have an influence on MNE effectiveness (Punnett and Ricks 1992; Taylor et al. 1996). Loca Locall unit unitss must must reco recogn gniz izee and and abid abidee by indige indigenou nouss employ employmen mentt law, law, traditi tradition, on, and custom, unless variances or exemptions have been been granted granted by the host host governm government ent;; thus, thus, over overse seas as unit unitss need need to be give given n some some auto autono nomy my to adap adaptt HR prac practi tice cess to loca locall conditions. Yet, because they need to be coordinated with the rest of the MNE (e.g. to facilitate the transfer of local managers) some comm common onali ality ty must must exis existt rega regard rdin ing g HR policies. The local unit needs to develop HR practic practices es that that advanc advancee its own compet competitiv itivee strategy as well (De Cieri and Dowling 1997; Schuler and Jackson 1987). Exactly how this fit might be obtained is only suggested below, but the implication here is that the local unit need needss to tran transc scen end d mere mere conf confor ormi mity ty with with indigenous culture. There are at least three ways of enhancing internal operations through IHRM policies and pract practice ices. s. The The first first entail entailss match matching ing and and adap adaptin ting g HR pract practice icess to accom accommo moda date te closely the unit’s competitive competitive strategy, local culture, and governing legal system (Hofstede 1998 1998). ). The The seco second nd neces necessi sita tate tess creat creatin ing g a modus operandi whereby HRM practices can be modifie modified d swiftly swiftly to respon respond d to changin changing g host host cond condit itio ions ns.. The The thir third d calls calls for for a set set of  IHRM IHRM poli polici cies es at the the MNE MNE leve levell that that can can encompass and legitimize the HRM practices of the local units.   Match Matching ing and adapti adapting ng HR practi practices. ces. One mean meanss of ensu ensuri ring ng that that HR prac practi tice cess are are consis consisten tentt with labor-m labor-marke arkett requirem requirements ents would be to staff the HR function with hostcountry nationals. In fact, this is one of the positions that MNEs seem most prone to fill with indigenous persons (e.g. Dowling et al. 1999). 1999). To comple complemen mentt this this fit, fit, the locatio location n mana manage ger, r, in turn turn,, need needss to info inform rm the the HR mana manage gerr of the the unit unit’s ’s busi busine ness ss need needs, s, in particular its competitive strategy. The process of systematically aligning HR practices, practices, policies, policies, and philosophies philosophies with each other and the unit’s strategic needs is similar for domestic corporations corporations and MNEs. A major diff differ eren ence ce,, howe howeve ver, r, lies lies in the the need need to balance the competitive strategy and cultural imperat imperative ivess (Adler (Adler 2001; 2001; Punnet Punnettt and Ricks Ricks 1 99 99 2) 2) . T he he c ul ul t ur ur a l i m pe pe r aatt iv iv e i s a n encomp encompass assing ing term that that can includ includee aspects aspects of the local local culture culture,, econom economy, y, legal legal system system,, religio religious us beliefs beliefs,, and educat education ion.. Its imporimportanc tancee to IHRM IHRM resid resides es in the the defi defini niti tion on of  accept acceptabl able, e, legiti legitimat mate, e, and feasi feasible ble work  work  pract practice icess and behav behavior iorss (e.g. (e.g. Adler Adler 2001; 2001; Adler Adler and Barthol Bartholome omew w 1992; 1992; Bhawuk Bhawuk and Triandis 1996; Laurent 1986). Acceptable in term termss of ques questi tion onss such such as ‘‘Can ‘Can we pay pay w or o r k er er s d i ff ff e re re n t r a te te s, s , a n d t h er er e by by differ different entiat iatee them, them, accordi according ng to perfor perfor-mance?’ mance?’’’ Legiti Legitimat matee in terms terms of questi questions ons such such as ‘‘Are ‘Are ther theree any any lega legall stat statut utes es proh prohib ibit itin ing g us from from not not payi paying ng work worker erss over overti time me for for work work done done on Satu Saturd rday ay and and Sunday?’’ Feasible in terms of questions such as ‘‘While this society espouses hierarchical, authoritarian, and paternalistic values, can we empower empower the workfo workforce rce to make make workpla workplace ce decis decisio ions ns in orde orderr to facil facilit itat atee our our qual qualit ity y strateg strategy?’ y?’’’ All of these these compon component entss should should influence decisions about where to locate units and which HR practices to use therein. The exten extentt to whic which h MNEs MNEs deli delibe berat ratee on thes thesee matt matter erss prio priorr to host host entr entry y has has not not been been examined in previous studies. Local units also must be ready to ensure that HR practices, once developed, can be adapted to fit MNEs’ evolving evolving needs and goals. goals. For example example,, host host manage managemen mentt might might instit institute ute much more comprehensiv comprehensivee succession succession planning ning and and deve develo lopm pmen entt sche scheme mess than than are are warra warrant nted ed in the the host host enviro environm nment ent to accommo accommodate date the larger larger multinat multination ional’s al’s potent potential ial staffin staffing g and transfe transferr needs. needs. In all likelihood, this will be done for a limited pool of individuals (i.e. persons targeted as global manage managers) rs).. Future Future invest investiga igatio tions ns need need to identify and critique the incentive mechanisms that that MNE MNE head headqu quar arte ters rs util utiliz izes es to secu secure re ongoing co-operation in this regard, especially when host units are pursuing distinct business strateg strategies ies.. Anothe Anotherr key issue issue is the relativ relativee impact impact that that organi organizat zation ional al and perso personal nal factors have on the lag period within MNEs for responsive adaptations in HR practice. Creat Creating ing a modu moduss opera operand ndi. i. It is equa equall lly y impo import rtan antt for for HR poli policie ciess and and pract practic ices es to reflect changes in the local environment. To facilitate this, host management must establish procedures procedures for, and recognize the legitimacy legitimacy of, altering HR practices to fit new conditions (e.g. Walsh 1996). This will help ensure the Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 53 International human resource management: review and critique ß Blackwell 54 Publishers Ltd 2002 needed flexibility that is a concern and goal f or or M NE NE s t od od ay ay . E xa xa c tl tl y w ha ha t t he he se se mechanisms are, and what role culture plays in them, awaits future study. center   Develo Developin ping g global global HR polici policies. es. The center has a fundamental responsibility and strategic interest in developing broad HR policies that are appropriate enough for local units to adapt to their their local local enviro environme nment nt and compet competitiv itivee s tr tr a te te g y n ee ee d s ( Br Br e ws ws te te r 2 00 00 2) 2) . T hi hi s discussion discussion complements complements the earlier discussion discussion under under ‘Inter ‘Interun unit it Link Linkage ages’ s’.. There There it was argu argued ed that that poli policie ciess have have to be creat created ed to facil facilita itate te inter interun unit it linka linkage ge and and trans transfer fer of  learning, while still recognizing the needs of  the local units. units. That discussion discussion suggested suggested host units units must must not only only system systematic aticall ally y analyze analyze their their own own enviro environm nment ental al needs needs,, but but also also ensure ensure that those those factors factors are folded folded into into the proc proces esss wher whereb eby y glob global al HR poli polici cies es are are created created (Bartlet (Bartlettt and Ghosha Ghoshall 2000; 2000; Schule Schulerr 2 00 0 0 1) 1) . A s l oc o c al a l u ni ni ts t s b ec e c om o m e m or or e geograp geographica hically lly and cultural culturally ly dispers dispersed, ed, it becomes becomes more more difficu difficult lt for headqua headquarter rterss to i de de nt nt if if y a nd nd t ra ra ck ck f ac ac to to rs rs b ea ea ri ri ng ng o n competitiveness. For example, internal labormarket data that are useful to the larger MNE but unnecessary for local compliance may not need need to be main mainta tain ined ed by host host unit unitss unles unlesss headquarters exercises some control over local HR inform informatio ation n systems systems (Flork (Florkows owski ki and Nath 1993; Niederman 1999). Schuler et al. (1993) proposed that MNEs will devote more resources resources to the development development and implem implement entati ation on of such such overar overarchi ching ng policies policies as environm environmental ental heterogen heterogeneity. eity. Subseq Subsequen uentt invest investig igatio ations ns must must verify verify the extent to which this is true.  Auditing IHRM initiatives. To ensure that all the the HR-rel HR-relat ated ed chall challen enge gess are met, met, MNEs MNEs n e ed ed t o e v al al u at at e s ys ys te te m at at i ca ca l ly ly t h ei ei r functio functional nal capacit capacity y and respon responsiv sivenes enesss in IHRM. While there has been a growing body of literatu literature re devote devoted d to HRM auditing auditing (e.g. (e.g. Becker et al. 2001; Biles and Schuler 1986; Ulrich 1999), this matter receives surprisingly litt little le atten attenti tion on in pract practic icee – the the close closest st appr approa oach ches es are payr payrol olll audi audits ts or form formal al reviews reviews of employ employmen ment-la t-law w compli complianc ancee in domestic domestic operations. operations. Ethnocentrism Ethnocentrism tends to afflict these auditing paradigms as well, given their their inheren inherentt reliance reliance on a single single cultur cultural, al, regula regulato tory, ry, and struct structura urall contex contextt for HR policies (Mayrhofer and Brewster 1996). With few except exception ions, s, they also fail to assess assess how w el el l H RM RM p ro ro fi fi le le s f i t t he he b us us in in es es s’ s’ s environment, environment, structure, structure, and strategy or what chan change gess need need to occu occurr to fost foster er bett better er alignment. Florko Florkowsk wskii and Schule Schulerr (1994) (1994) propos proposed ed auditing auditing strategic strategic IHRM activities from multimulticonsti constitue tuent, nt, strate strategic gic fit, fit, and effici efficienc ency– y– effectiven effectiveness ess perspect perspectives ives.. This synergis synergistic tic approac approach h examine examiness the potent potential ial for conflic conflictt among among the audit’ audit’ss stakeh stakehold olders; ers; the need need to differentiate its contents based on competitive strategy, strategy, organization organizational al life-cycle life-cycle stage, and n at a t io i o na n a l c ul u l tu t u re r e ; a nd n d t he h e w ay a y s t ha ha t effect effectiv ivene eness ss can be opera operatio tional nalize ized d in multina multination tional al setting settings. s. Several Several propos propositio itions ns were develo developed ped that that require require close close empiri empirical cal scru scruti tiny ny.. Ther Theree are are also also othe otherr ways ways of  conducting conducting IHRM audits. audits. For example, Ulrich (199 (1999) 9) sugg sugges ests ts that that HR audi audits ts can can be condu conducte cted d by asse assess ssing ing:: (1) (1) HR practi practices ces (i.e. (i.e. assessi assessing ng the array array of services services offered by an HR department), (2) HR professionals (for (for exam exampl ple, e, doin doing g a 360 360 feedb feedbac ack k on the the e xt x t e nt nt t o w hi hi c h a n H R p ro r o fe f e ss s s io i o na na l demo demons nstra trates tes compet competenc ence), e), and and (3) (3) HR function or department (such as by computing functio functional nal compete competence, nce, by invest investigat igating ing overa overall ll indi indica cato tors rs of HR func functi tion ons, s, or by measuring measuring the competence competence against against established established benchmark standards). So far far,, discus discussio sion n has conce concentr ntrate ated d excl exclus usiv ivel ely y on the the inte intern rnal al poli polici cies es and and practices of multinational enterprises as they relate to HRM. Two other aspects of IHRM rese resear arch ch that that warr warran antt atte attent ntion ion are are (1) (1) the effect effectss of MNEs on the industr industrial ial relati relations ons systems of host countries countries and (2) comparisons comparisons of national HRM systems. The former offers insight insight into the propen propensity sity of multina multination tional al firm firmss to act act as chan change ge agen agents ts in thei theirr operat operating ing enviro environme nments nts,, while while the latter latter begin beginss to clar clarif ify y the the impac impactt that that soci societ etal al HRM policies may have on the international compe competit titive ivene ness ss of firms firms oper operati ating ng in particular host settings. MNEs' Impact on Host IR Systems So far, far, we have have discus discussed sed indige indigenou nouss labor labor-m ar ar ke ke t p ra ra ct ct ic ic es es a s t ho ho ug ug h t he he y w er er e exogenou exogenouss from the MNEs’ perspectiv perspective. e. Yet, transnational transnational decision-making decision-making structures, structures, superi superior or finan financia ciall resou resource rces, s, and and more more extensive extensive informat information ion systems systems arguably arguably equip equip multinationals substantially to influence, if not dictat dictate, e, indust industria riall relati relations ons patter patterns ns in host host 2 countries. Weinberg (1977) alleged that MNEs utilize utilize these these advantag advantages es to secure secure regressi regressive ve chan change gess in coll collec ecti tive ve barga bargain inin ing g and and labo laborr legislation, gravitating toward the lowest level of social responsibility tolerated in a given host countr country. y. Selecti Selective ve exampl examples es of US-own US-owned ed operations in Europe were presented to buttress this this view view.. The The OE OECD CD has has vo voic iced ed simi simila larr c o n ce ce r ns ns , c u l mi mi n a ti ti n g i n n o nn- b i nd nd i ng ng g ui ui de de li li ne ne s f or or t he h e H RM RM a ct ct iv iv it it ie ie s o f   multinationals multinationals operating in member countries. Respec Respectt for for and compl complian iance ce with with local local employment standards are stressed throughout the guidelines (see Bamber and Lansbury 1998; Lee 1997). National and local governments of  HCNs dictate to a great extent the employment regulations and related guidelines (Peng 2000). Such Such dyna dynami mics cs rais raisee crit critic ical al issu issues es for for internati international onal HRM researchers researchers.. Paramount Paramount among among them them is whethe whetherr the characte characteriza rizatio tion n of MNEs MNEs as cult cultur ural al tsun tsunam amis is stem stemss from from overpubliciz overpublicized, ed, isolated isolated incidents incidents or patterned patterned practice. With one exception (Jain 1990), prior studies studies have not systematically systematically catalogued catalogued the HRM profil profiles es of foreign foreign-ow -owned ned busine businesse ssess and and comp compar ared ed them them with with the the stru struct ctur ural al configu configurati ration on eviden evidentt in matche matched d domest domestic ic 3 Lately, Marginson Marginson et al. (1995) companies. Lately, foun found d that that a major majorit ity y of the the firms firms in thei theirr stud study y monit monitor ored ed labor labor perfor performan mance ce acros acrosss units in different countries. Howe Howeve ver, r, ther theree has has been been a tend tenden ency cy to assess multinationals’ sphere of influence on workplace or institutional relationships by (1) aggreg aggregatin ating g case case studie studiess across across indust industries ries withou withoutt adequa adequate te contro controls ls or (2) solicit soliciting ing generic generic percept perception ionss of foreign foreign-ow -owned ned firms firms via questionnaires. The The firs firstt type type of desi design gn appe appear arss in Blan Blanpa pain in (197 (1977) 7).. Mixi Mixing ng a dive divers rsee set set of  case reports, he argues that MNEs have not significantly altered major components of the IR systems in the UK or Belgium. On the other hand, owing to the growth of European Union, there is a trend emerging towards the internatio internationaliz nalization ation of industr industrial ial relations relations (Str (Stree eeck ck 1998 1998). ). Howe Howeve ver, r, such such a deve devellopment opment has its own problems problems (see (see Blyton Blyton and Turnb Turnbull ull 1996). 1996). Althou Although gh larger larger organizat organizations ions tended tended to export export ‘innovat ‘innovative’ ive’ polici policies es at the outse outset, t, eac each h system system reject rejected ed those those deemed deemed to be culturall culturally y unaccepta unacceptable ble within a relatively short period of time. Jedel and and Kuja Kujawa wa (197 (1977) 7) util utiliz ized ed the the seco second nd a pp p p ro r o ac a c h t o c om o m pa p a re r e f or o r e ig ig nn - a nd nd American-owned businesses in the USA. On balan balance, ce, neith neither er grou group p of manag manageri erial al respon responden dents ts expect expected ed MNEs MNEs to diffu diffuse se HRM innovations into the US labor market. Those affiliated with British enterprises held t he he s tr tr on on ge g e st st b el e l ie i e f i n t hi hi s r eg e g ar a r d. d. Furt Furthe herm rmor ore, e, most most of the the fore foreig ign n pare parent nt organizations had staffed the senior industrial relati relations ons positi position on in a polyce polycentr ntric ic manner manner,, increa increasin sing g the likeli likelihoo hood d of adapta adaptatio tion n to local conditions. This is now a more general trend. trend. Pre Presen sently tly,, MNEs MNEs genera generally lly delega delegate te the manage managemen mentt of labor labor relati relations ons to their their foreig foreign n subsi subsidia diarie ries. s. Howeve However, r, a policy policy of  decent decentral raliza izatio tion n does does not not keep keep corpo corporat ratee headq headquar uarter terss from from exerc exercis isin ing g some some cocoordin ordinati ation on over over labor labor relati relations ons strate strategy. gy. Generally Generally,, corporat corporatee headquar headquarters ters will will become involved in or oversee labor agreements made by foreign subsidiaries because these agreements may affect the international plans of the firm and/or create precedents for negotiati negotiations ons in other other countries countries (Dowling (Dowling et  al. 1999, 234–235). Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 55 International human resource management: review and critique ß Blackwell 56 Publishers Ltd 2002 The USA has shown particula particularr interes interestt in the industrial relations and equal employment opport opportuni unity ty (EEO) (EEO) postur posturee to foreig foreign n subsidi subsidiarie aries. s. For example example,, acknowl acknowledgi edging ng several several well-kn well-known own inciden incidents ts where where unfair unfair labor practice charges had been levied against J a pa pa n es es e -o -o w ne ne d f i r ms ms , M a re re t t ( 1 98 98 4) 4) indicated that site locations did not necessarily coincide with regions having low unionization levels. levels. Staffin Staffing g pattern patternss at Japane Japanese-o se-owne wned d f a ci ci l it it i es es h a ve ve r a is is ed e d t he h e s pe p e c te te r o f   discrimin discriminatio ation, n, though. though. For instance, instance, their their auto plants are consistently situated in areas that that have have lower lower blackblack-toto-wh white ite popul populati ation on ratio ratioss than than is the the norm norm for for US auto auto plan plants ts (Cole and Deskin 1988). A subset of US and Japanes Japanese-ow e-owned ned greenfiel greenfield d sites sites further further revealed that the latter had hired significantly f e we w e r m i no n o r it it i es e s t h an a n l a bo b o r m a rk rk e t 4 demographics would predict. Nearly 60% of  the Japanese firms doing business in the USA faced faced poss possib ible le EEO EEO litig litigati ation on by the the late late 1980s 1980s (Labor (Labor Letter Letter 1989), 1989), sugges suggestin ting g once once again that the host system actively works to neutralize objectionable MNE policies. With With much much of the the West Wester ern n worl world d me messmerized by Japanese-style management over the last few decades, it is not surprising to find a paucity of research on the effects that fore foreig ignn-ow owne ned d firm firmss are havi having ng on that that country’s country’s labor market practices. practices. This may prove to be a fruitful area of study over the next next decade decade as Japan Japan underg undergoes oes econom economic ic restr restruct ucturi uring ng to rebou rebound nd from from the the rec recent ent global global econom economic ic downtu downturn. rn. Aggres Aggressiv sivee long long-te -term rm down downsi sizin zing g and the the refus refusal al to hono honorr job job cont contra ract ctss exte extend nded ed to coll colleg egee graduates are two departures from traditional Japanes Japanesee HRM practi practices ces appeari appearing ng with with greater frequency (Miller 1993). So far, these acti action onss have have been been depi depicte cted d as domes domesti ticc initia initiativ tives es rather rather than than as spillo spillover ver effect effectss from operation operationss that are foreign-co foreign-contro ntrolled. lled. The The impe impetu tuss for for sust sustai aine ned d chan change ge in the the HRM system may shift, though, as Japanese markets markets and investmen investmentt opportun opportunitie itiess become more accessible to the international community. It is worth noting that virtually all of the investi investigati gations ons discuss discussed ed above above focused focused on highly highly indus industri trializ alized ed host host countr countries ies.. The The extent to which MNEs drive the HRM policies policies in deve develop lopin ing g coun countri tries es,, place placess where where the the former’ former’ss economi economicc leverag leveragee should should be at its zeni zenith th,, is also also of inte intere rest st (Wel (Wells ls 1998 1998). ). Regrettably, the literature offers little insight on this this poin pointt (Bud (Budhw hwar ar and and Debr Debrah ah 2001 2001;; Napi Napier er and and Vu 1998 1998). ). Schr Schreg egle le (198 (1985) 5) discus discusses ses the lingeri lingering ng influe influence nce that that colo coloni nizi zing ng nati nation onss often often have have on the the post post-independence independence labor laws of former colonies. colonies. To illustrate, illustrate, French-sp French-speakin eaking g African African countries drew heavily from France’s Labour Code for Overseas Territories when enacting thei theirr own own natio nationa nall labo laborr code codes. s. Sardi Sardi and and Williams Williamson on (1989) (1989) detail detail the indust industrial rial relatio relations ns strateg strategy y of a vertic vertically ally integr integrated ated multinationa multinationall operating operating in Nigeria; however, no compar compariso isons ns were made made with indige indigenou nouss competitors in the same lines of business, nor was an evaluat evaluation ion made made of the implicati implications ons thos thosee stra strate tegi gies es had had for for the the larg larger er labo laborr market. market. While While valuab valuable, le, the qualita qualitativ tivee insights of the above mentioned would have been bolstered substantially by more rigorous q ua u a n ti t i t at a t i ve v e a n al a l y se se s . F o r e x am a m p le le , regr regress essio ions ns coul could d have have been been run run in whic which h HRM policy policy sophis sophistica ticatio tion n indices indices were treated treated as depend dependent ent variab variables les and various various financ financial, ial, organiz organizatio ational nal,, and operati operationa onall variables as predictors. Much Much stil stilll need needss to be learn learned ed abou aboutt the the dynamics of MNEs’ adaptation process within and and acro across ss host host coun countri tries es.. Seve Several ral stud studie iess indi indica cate te that that the the IR deci decisi sion on maki making ng is decent decentrali ralized zed as a rule (e.g. Reynol Reynolds ds 2001; 2001; Roberts and May 1974). Yet, Hamill (1984) cautio cautione ned d that that there there migh mightt not not be unifo uniform rm applic applicatio ation n of a single single policy policy within within MNEs. MNEs. He uncovered varying levels of home office involvement across units based on such factors as differen differences ces in inter-su inter-subsid bsidiary iary product product integr integrati ation on,, unit unit life-c life-cycl yclee stage, stage, local local p er er fo fo rm rm an an ce ce , a nd nd t he he s ca ca le le o f p ar ar en en t investment. Discussions by Geary and Roche (2001) and Turner et al. (2001) also reinforce the notion that there is no answer to whether or not not MNEs MNEs dict dictat atee IR prac practi tice cess in host host countries. Another unanswered question is ‘‘Is there a learning curve phenomenon across MNEs, in which which previou previouss host-co host-count untry ry experien experiences ces progressively reduce the magnitude and time of adjustment when expansion into new host nati nation onss occu occurs? rs?’’’ If not, not, then then what what are the the struct structura urall and cultur cultural al impedi impedimen ments ts to effective learning and its transfer? One could argue argue that that firm firmss with with tran transn snat atio iona nall HR syst system emss have have a comp competi etiti tive ve adva advant ntag agee in r e co co gn g n iz iz i ng ng a nd n d r e sp sp on on di d i ng n g t o t he h e se se challen challenges ges (Adler (Adler and Bartho Bartholom lomew ew 1992; 1992; Bart Bartle lett tt and and Ghos Ghosha hall 1998 1998). ). How How is the the learning rate affected by host mix and homecountry base? An appropriate analogy may be the the impa impact ct that that cult cultur ural al toug toughn hnes esss has has on expatri expatriate ate accultu acculturati ration on (Mende (Mendenha nhall ll and Oddou Oddou 1985; 1985; Menden Mendenhal halll and Stahl Stahl 2000). 2000). MNEs functioning primarily in very ‘foreign’ cultura culturall enviro environme nments nts should should have have a harder harder time time avoid avoiding ing indige indigeno nous us backl backlas ashes hes and instituting instituting swift, corrective measures than will thos thosee confin confined ed to more more famili familiar ar cultu cultural ral terrain terrains. s. This This proble problem m will be exacerb exacerbated ated when high levels of regulatory heterogeneity, complexity, and relevance coincide with low levels of regulatory stability and predictability (Florkowski and Nath 1993; Lee 1997). National HRM Systems and Competitive Advantage The existi existing ng literat literature ure is replete replete with crosscountr country y compar compariso isons ns of selecte selected d HRM pracpractices tices (e.g. (e.g. Brews Brewste terr and and Hegewi Hegewisc sch h 1994 1994;; Geringer et al. 2001; Sparrow et al. 1994; Von Glinow and Chung 1989). However, this genre of work typica typically lly docume documents nts proced procedural ural or ideolo ideologi gical cal diffe differen rences ces in HRM HRM witho without ut e m pi pi r ic ic a ll ll y l i nk nk i ng ng s uc uc h v a ri ri a ti ti on on t o behavioral behavioral or economic economic outcomes outcomes for organizations or societies. In an increasingly global econom economy, y, research researchers ers need to address address how count countryry-lev level el HRM system systemss impact impact on intern internatio ational nal trade trade and the compet competiti itiven veness ess of nation national al econom economies ies (e.g. (e.g. Kochan Kochan et al. al. 1992 1992). ). Recent Recently, ly, Debrah Debrah e t a l . (2000) highli highlight ghted ed the benefit benefitss of approp appropriat riatee HR develo developme pment nt polic policies ies for the the partic participa ipatin ting g govern governmen ments ts of a ‘South ‘South-eas -eastt Asian Asian growth growth trian triangl gle’ e’.. This This grow growth th trian triangl glee is a join jointt collab collabora oratio tion n betwee between n the the gover governm nment entss of  Singapore, Singapore, Malaysia Malaysia and Indonesia. Indonesia. Further, a c c om o m p a ny n y i ng n g m e t ho h o d ol o l o gi gi c a l a n d substantive issues are discussed next. Mar March 2002 2002 Comparative Framework  Devising Devising an analytic analytic scheme that effectively effectively captures and evaluates the diversity of HRM struct structures ures,, process processes, es, policie policies, s, and policy policy effect effectss acro across ss natio nations ns remai remains ns a chal challen lenge ge for resear researche chers. rs. Yeung Yeung and Wong Wong (1990) (1990) devised a 2 Â 2 classification matrix reflecting soci societ etal al vari variati ation onss in HR orie orient ntati ation on and and administratio administration. n. The first dimension indicates whether performance or individual welfare is emph emphas asiz ized ed in the the work workpl plac ace, e, whil whilee the the seco second nd refe refers rs to a reli relian ance ce on inte intern rnal al or extern external al labor labor market markets. s. China, China, Japan Japan,, the the USA, and the Scandinavian cluster were used to illustrate the resultant four cells. Although this framework highlights highlights some fundamental fundamental HRM differenc differences, es, its overall overall utilit utility y is very very limite limited. d. For exampl example, e, macro-l macro-leve evell linkag linkages es a m on on g g o ve ve r nm n m e nt nt s , e m pl pl o ye ye r s, s, a n d organized labor are not addressed. The same hold holdss true true for for the the lega legall syst system emss regul regulat atin ing g employment relationships. Most significantly, the model provides no insight into the stability of HRM patterns over time or likely direction of future changes. Convergence theory (e.g. Kerr et al. 1973) offers offers a more more dynami dynamic, c, albeit albeit determi determinis nistic tic,, view of societa societall HRM systems. systems. It postul postulates ates that global global market market and techno technolog logical ical forces forces induce induce economi economicall cally y advanc advanced ed societ societies ies to erect very similar similar,, increasi increasingl ngly y triparti tripartite, te, superstructu superstructures res for industrial relations in the long long run. run. Large Large macro-l macro-level evel differe difference ncess in these these arrange arrangemen ments ts essent essential ially ly indica indicate te that that nation nationss occup occupy y diffe differen rentt poin points ts on the the maturity maturity curve for industrializa industrialization. tion. However, However, ß Blackwell Publishers Ltd 2002 57 International human resource management: review and critique ß Blackwell 58 Publishers Ltd 2002 avai availa labl blee evid eviden ence ce does does not not supp suppor ortt a homogenizati homogenization on of institution institutionss and practices practices within within or among among develo developed ped econom economies ies (e.g. (e.g. Brew Brewst ster er 1999 1999;; Dore Dore 1973 1973;; Spar Sparro row w and and Hiltrop 1997). 1997). Begi Begin n (1997 (1997)) disc discus usse sess nati nation onal al HRM HRM syste systems ms in terms terms of lifelife-cyc cycle le transi transitio tions ns,, stressing stressing their ongoing ongoing synchronizat synchronization ion with a country’s dominant industrial structure. He uses information from six countries: Japan, the U S, S, t he he U K, K, G er e r ma ma ny ny , S we we de de n, n, a nd nd Sing Singapo apore. re. Unlik Unlikee the preced preceding ing model model,, changes do not necessarily reflect movement towa toward rd a fina finall set set of inst instit itut utio iona nall conconf i gu gu r at at i on on s n o r a r e t h ey ey i r re re v er er s ib ib le le . According to Begin, HRM systems containing limited, informal rules should emerge when a nation’s firms are operating predominantly in simp simple le but but dyna dynami micc envi environ ronme ment nts. s. As the the technologica technologically lly simple environment environment becomes becomes more more stab stable le,, ther theree is an expe expect ctat atio ion n that that organi organizat zation ionss that that functi function on as machi machine ne bureaucracies bureaucracies will proliferate proliferate and eventually eventually alter the general character of HRM systems in that that socie society ty.. This This aggr aggreg egate ate ‘shi ‘shift ft’’ in organ organiza izatio tiona nall form form and and its accom accompa panyi nying ng formalization formalization of virtually virtually all HRM activities allegedly marks the arrival of a mature market economy (for more details, see Begin 1997). Movement to the next evolutionary stage of  more temporary and adaptable adaptable organization organizationss will not be triggered unless a preponderance of firms enter and compete in more complex, businesses es dynamic dynamic environm environments. ents.5 Here, business secure and maintain international competitive advantage advantage through through continual continual innovatio innovation, n, which is fueled by relaxed work/job allocation s ys ys te te m mss a s w el el l a s d ev ev el el op op me me nt nt - a nd nd retent retention ion-or -orien iented ted syste systems ms for staffin staffing, g, govern governanc ance, e, and reward rewardss (Begin (Begin 1997) 1997).. Howev However, er, a soci societa etall decl declin inee in inno innova vati tive ve activ activity ity even eventu tuall ally y lead leadss to some some form form of  retren retrenchm chmen entt in HRM syst systems ems.. Moreo Moreove ver, r, nation nationss failin failing g to keep keep abreast abreast of the stateof-the of-the-art -art in technol technology ogy risk risk backsli backslidin ding g furthe furtherr into into the machin machinee bureauc bureaucracy racy phase phase with its restrictive HRM systems. Indigenous employ employees ees also also find themse themselve lvess confron confronted ted with a declin declining ing standard standard of living living becaus becausee produc productiv tivity ity gains gains do not generat generatee enough enough revenue to advance the general social welfare. Numerous research issues are embedded in Begin’s Begin’s (1997) (1997) broad broad framewor framework. k. To begin begin with, how do national reward structures affect a country’s competitiveness within and across these life-cycle stages? The level, form, and stabil stability ity of these these compon component entss over over time time are paramou paramount nt concern concerns. s. The abilit ability y to compet competee within and across life-cycle stages may also be a functio function n of organi organized zed labor’s labor’s control control over over labor costs and industrial conflict levels. Each of these items is addressed more fully below. Compensation . The The US Bure Bureau au of Labo Laborr S t at a t i st st i cs c s h a s c o mp m p i le le d s t an a n d ar ar d iz iz e d informatio information n on internation international al compensati compensation on p ol ol i ci ci e s i n t h e m a nu nu f ac ac t ur ur i ng ng s ec ec t or or . Unpubl Unpublish ished ed reports reports are availab available le on hourly hourly compensation costs, which include payments made made direc directl tly y to empl employ oyee eess and and empl employ oyer er benefit contributions, contributions, adjusted for exchange exchange 6 rates. Begin (1997) classified Mexico, South Korea, Taiwan, Canada, and Great Britain as countries countries where the dominant HRM systems systems are machine machine bureaucr bureaucracies acies..7 A low-wa low-wage ge strategy seems to endow the first three nations with a distinct labor factor advantage relative to the other two in this stage, not to mention those occupying more industrially industrially advanced stat states es.. Cost Cost comp competi etiti tion on inte intens nsif ified ied in the the 1980s and early 1990s, best illustrated in the disappearing disappearing Japanese–Ame Japanese–American rican wage differential. differential. French manufacturers manufacturers also came ever ever closer closer to parit parity y with with their their Ameri American can riva rivals ls.. By 1992 1992,, Italy Italy and and Germa Germany ny were were encu encumb mber ered ed with with labo laborr cost costss that that were were substa substantia ntially lly higher higher than than those those found found elsewhere. A majo majorr shor shortc tcom omin ing g in this this kind kind of  analysis is the failure to integrate productivity and quality measures. These items constitute the return on investment from compensation compensation expenditures. In the USA, for example, many firms firms that that initi initiall ally y reloca relocated ted in Mexic Mexico o because of lower wages are repatriating their operati operations ons becaus becausee of low produc productiv tivity ity and a nc n c i ll ll a ry ry c os o s ts ts ( Ma Ma ye y e r 1 99 99 3) 3) . W hi h i le le standard standardize ized d produc productiv tivity ity data data are availa available ble for many countries (e.g. Staff 1991), pertinent qual qualit ity y indi indice cess gene genera rall lly y are are not. not. Such Such infor informat mation ion must must becom becomee more more acces accessi sibl blee before meaningful comparisons can be made. Also Also,, ther theree is a need need to unde unders rsta tand nd the the assump assumptio tions ns that that underl underlie ie much much reward reward behavi behavior, or, and the implica implicatio tions ns of perceiv perceived ed changes in trust, motivation and commitment. It is also also import important ant to underst understand and what pay means to people in different cultures (Sparrow 2000).  Benefits. Approp Appropriate riately ly configu configured red benefit benefit plan planss may be inst instru rume ment ntal al in secur securin ing g an emplo employee yee mix that that promo promotes tes compet competiti itive ve advant advantage age for indivi individua duall firms firms (e.g. (e.g. Bowen Bowen and Wadley 1989). To what extent can this be e x tr t r a p ol ol a t ed e d t o n a ti t i o na n a l e c o no no m ie ie s ? Aggreg Aggregated ated policie policiess may have have distin distinctiv ctivee signat signature uress regardi regarding ng the propor proportio tion n of total total rewards rewards compris comprising ing benefit benefits, s, the benefit benefit option optionss typica typically lly offered offered,, and the extent extent to which which these these items items are privat privately ely or public publicly ly finance financed. d. Interna Internatio tional nal positi positioni oning ng on these these dimens dimension ionss may raise raise serious serious motiva motivatio tional nal (i.e. (i.e. valences valences,, performa performancence-rewa reward rd concontinge tingenci ncies es)) and cost cost concer concerns ns withi within n the the dominant dominant industrial industrial structures structures of competitor competitor nations. Moreover, several US studies indicate that employees employees tend to underestimat underestimatee substantiall substantially y the benefit costs borne by the employer (e.g. Wilson et al. 1985). If this can be generalized across cultures, feelings of pay inequity and its dysfunctional dysfunctional organizational organizational consequences consequences should should become become more more widesp widespread read in nation national al labor labor market marketss as employ employers ers channe channell larger larger fracti fraction onss of thei theirr labor labor cost costss into into bene benefi fits ts.. Differences in the way benefits are paid for m ay ay b e m or or e t el el li li ng ng o f a c ou ou nt nt ry ry ’s ’s competiti competitivene veness ss (White (White et al. 1998). ). To al. 1998 illustrate, national health care and/or pension s ys ys te te m s p ot ot e nt nt ia ia l ly ly f r ee ee u p e m pl pl oy oy e r resources to invest in new benefit categories or pay-for-perfor pay-for-performance mance schemes. schemes. This social real reallo loca cati tion on of cost costss may may have have a more more significant impact on international trade than the relativ relativee level level of benefit benefitss per se (Belous 1 9 84 84 , 2 3) 3) . R e ce ce n tl tl y , S pa pa r rro o w ( 2 00 00 0 ) examin examined ed the the dynam dynamics ics of intern internati ationa onall reward management in a number of countries. Discuss Discussing ing the import importanc ancee of culture culture value value orienta orientatio tions, ns, distrib distributi utive ve justic justicee and pay diffe differen rentia tials ls,, he concl conclud udes es that that MNEs MNEs attempting to harmonize reward systems will face predictable patterns of resistance resistance across different different nations. nations. Highlightin Highlighting g the importance importance of local institutional context, Sparrow (2000) sugges suggests ts that that there there should should be consid considerab erable le local local autonom autonomy y of practic practicee allowed allowed within within MNEs MNEs and distincti distinctive ve pay and benefit benefit pracpract i ce c e s w i ll l l r e ma m a i n w i th t h in i n d om o m es e s ti ti c organizations. Trade Trade Unions Unions. R es es ea ea rc rc h s ho ho ws ws t ha ha t Americ American an union unionss general generally ly exert exert more more i nf n f lu l u en e n ce c e o ve v e r w ag a g es e s t ha h a n d o t he h e ir ir counte counterpa rparts rts in other other indust industrial rialize ized d nation nationss (Blanch (Blanchflo flower wer and Freeman Freeman 1992; 1992; Katz and Darbish Darbishire ire 2000). 2000). A US governm government ent study study criticized the way that labor leaders wield this power power,, conclu concludi ding ng that that impor importt pene penetra tratio tion n levels stem largely from high union wages in the US (US Federal Trade Commission Commission 1987). Other evidence indicates that import import activity activity creates creates substa substanti ntial al downwar downward d pressu pressures res on North North American American union–n union–non-u on-unio nion n wage differential differentialss and union-secto union-sectorr employment employment (e.g. Macpherson and Stewart 1990). Economic policies of American unions are one one reas reason on why why US firm firmss have have diff diffic icul ulty ty compet competing ing with with foreig foreign n produc producers ers.. Yet, Yet, unioni unionizati zation on rates rates are not syste systemat matical ically ly higher higher in high high net-im net-impor portin ting g indust industries ries than than they they are are in low low net-i net-imp mport ortin ing g ones ones (Karie (Karierr 1991a,b 1991a,b). ). Furtherm Furthermore, ore, LeGrand LeGrandee (1988) (1988) foun found d that that chan change gess in the the valu valuee of the the US dollar against foreign currencies had a much more more signif significan icantt effect effect on the relativ relativee labor labor costs of domestic domestic and foreign manufacturers manufacturers durin during g the 1980 1980ss than than did did collec collectiv tively ely bargai bargained ned wage wage levels. levels. If so, then securin securing g wage concessions does not go to the heart of  the compet competiti itiven veness ess proble problem m – unstab unstable le Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 59 International human resource management: review and critique ß Blackwell 60 Publishers Ltd 2002 exchange rates – which cannot be redressed at the bargaining table. More empirical work is needed to reconcile such divergent findings. It may be particu particular larly ly fruitful fruitful to examine examine the relationship between union density and import penetration in industries outside the USA. The propensity for industrial conflict should sign signif ifica icant ntly ly impe impede de a socie society ty’s ’s abil abilit ity y to devise devise and admini administe sterr compet competiti itive ve HRM system systemss regardl regardless ess of the market market niche niche that that has been been targete targeted. d. Ofori-D Ofori-Dank ankwa wa (1993) (1993) conjec conjecture tured d that that confli conflict ct levels levels are dictate dictated d by a country’s dominant union paradigm and environment environmental al munificence munificence (i.e. resource- or institutional-based buffering). During periods of positive positive munificence, munificence, nations nations characterized characterized by unions unions that operate operate with with a high-p high-poli olitica ticall low-economic low-economic paradigm (e.g. France) should displa display y less conflic conflictt than those saddle saddled d with unio unions ns embrac embracin ing g a low-p low-poli olitic tical al highhighecono economi micc orien orientat tatio ion n (e.g. (e.g. USA). USA). The The conv convers ersee is predi predict cted ed in time timess of nega negati tive ve munific munificence ence,, as politic politically ally active active labor labor organizations seek to embarrass the opposing (‘anti(‘anti-lab labor’) or’) party party in power. power. High-p High-poli olitica ticall high-economic paradigms (e.g. Great Britain, Sweden) Sweden) should engender engender responses responses that are more more sensit sensitive ive to specifi specificc combin combinati ations ons of  positiv positive/neg e/negativ ativee resource resource and institu institution tional al buffering (Puchala 1999). While these hypothesized relationships are intriguing, intriguing, there are formidable formidable impediments impediments to testing them at this time. Industrial conflict measures measures are not standardized standardized transnationa transnationally, lly, raising serious construct validity concerns in i n t er e r - c o un u n t r y c o m pa pa r i s on o n s . I d e nt nt i c a l workplace disputes can be treated differently based based on the preva prevaili iling ng decis decisio ion n rules rules governments use for statistical record keeping. There There also also are seve several ral aspe aspect ctss of stri strike kess to consider, consider, including including frequency, frequency, breadth, breadth, duration, and impact (Stern 1978). How does one one inte integr grat atee thes thesee fact factor orss to prov provid idee a c o mp mp r eh eh e ns ns i ve ve e v al al u at at i on on o f s oc oc i e ta ta l performance? Poole (1986) developed strikeactivity profiles for 18 countries utilizing the first three dimensions. While this scheme does facilitate assessments within each of the five pattern patternss that that were presented presented,, it is less less clear clear how one makes interprofile judgments without referring referring to some quantification quantification of impact. impact. For example, is it more desirable to see duration, bread breadth, th, or frequ frequen ency cy as the the domin dominan antt structural feature of strikes? One must decide this on the basis of cultural preferences unless information about impact is integrated. There There is even even less less work work regard regardin ing g unio union n political political activities activities and institution institutional al buffering buffering (Weiss (Weiss 1998 1998). ). Neith Neither er const construc ructt has been been sufficiently sufficiently operationaliz operationalized ed for cross-cultura cross-culturall studi studies. es. The The conven conventio tional nal wisdo wisdom m is that that Europe European an unions unions are much much more more engros engrossed sed in politics than their American cohorts, but it is hard hard to separat separatee well-pu well-publi blicize cized, d, milita militant nt r h et et o ri ri c f r om om a c tu t u a l i n vo vo lv l v e me me nt nt o r effecti effectiven veness ess (e.g. (e.g. per capita capita dues dues allocat allocated ed to politic political al activi activity, ty, the relativ relativee structur structuree of  those those activi activitie ties, s, impact impact on regula regulator tory y process processes, es, and outcome outcome). ). Such Such indicat indicators ors may may be rele releva vant nt in sort sortin ing g out out unio unions ns’’ concen concentrat tration ion on strate strategic gic,, as oppose opposed d to functional or workplace, issues among nations (Kochan et al. 1984). HRM and International International Joint Ventures Ventures Shenkar and Zeira (1987) and Shenkar and Li (1999) (1999) indicated indicated that researc research h on the HRM aspects of international international joint ventures ventures (IJVs) has been sporadic and limited. Additional IJV stud studies ies have have emerg emerged ed sinc sincee then then,, most most of  which which furth further er concep conceptu tuali alize ze the HRM challen challenges ges of these these strateg strategic ic initia initiativ tives. es. For example, Zeira and Shenkar (1990) devised a research framework for IJV personnel policies that ties a typology of venture employees with characteristics characteristics of the parent firms. Others have discussed discussed how socio-cultura socio-culturall factors affect the transferability of HRM practices from foreign parents to their overseas ventures (e.g. Ferner and Varul 2000). Less Less atte attent ntio ion n has has been been focu focuse sed d on the the practic practices es associ associated ated with partne partnerr selecti selection, on, IJV IJV start startup up,, or vent venture ure cont contro rol. l. Gerin Geringe gerr (199 (1991) 1) used used prox proxies ies for for mana manage geri rial al and and techn technica icall talent talent as poss possibl iblee pred predict ictor orss of  partne partnerr select selectio ion n – the only only HRM-re HRM-relat lated ed variables that have been tested so far. Yet, a compreh comprehens ensive ive case study study indicat indicates es that screeni screening ng potent potential ial partner partnerss on the basis basis of  managerial and HRM compatibility increases the likelihood of successful venture operations (e.g. Schuler et al. 1992; Schule Schulerr and Van al. 1992; Sluijs 1992). One survey found that less than 5% of the total time associated with venture creatio creation n was spent spent resolv resolving ing HRM-li HRM-linke nked d issu issues es (Coop (Coopers ers and and Lybran Lybrand d 1986 1986). ). This This foreshadows an abdication of venture control, since HRM-based mechanisms may be a more significant determinant of IJV control-system effectiveness than are ownership position and related formal controls (Cyr 1997; Frayne and Geringer Geringer 1990). Each Each of thes thesee topi topics cs invi invite tess a strea stream m of  research, research, demonstratin demonstrating g that the need for more rigorous rigorous empirical studies of HRM in IJVs has intens intensifie ified d rather rather than than abated abated in the 1990s. 1990s. Schuler (2001) has done an extended review on HR issu issues es and and acti activ vitie itiess in IJVs IJVs.. He discus discusses ses in depth depth most most of the issues issues raised raised abov above. e. What What follo follows ws is a summ summary ary of HRrelated issues in IJVs. Key HR issues in IJVs. In today’s globalized world, world, partne partners rship hips, s, allian alliances ces and IJVs IJVs betw betwee een n two two or more more firm firmss are are beco becomi ming ng increa increasin singly gly common common (Merch (Merchant ant 2000 2000). ). The existing IHRM literature highlights issues such as importance of IJVs (Cyr 1995), reasons for the formation of JVs, success and failures of  JVs, conflict in IJVs (Fey and Beamish 2000), cult cultur uree and cont contro roll IJVs IJVs (Cyr (Cyr 1997) 1997) and and lear learni ning ng in and and from from IJVs IJVs (e.g (e.g.. Chil Child d and and Faul Faulkn kner er 199 1998) 8).. All All thes thesee issu issues es have have implic implicati ations ons for the managemen managementt of HRs in IJVs. IJVs. Consid Consideri ering ng the fact fact that that interna internatio tional nal allian alliances ces and joint joint ventur ventures es are partic particula ularly rly diff diffic icul ultt to mana manage ge and and HR issu issues es and and acti activi vitie tiess are are direc directl tly y asso associ ciat ated ed with with the the succ succes esss of IJVs IJVs (Chi (Child ld and and Faul Faulkn kner er 1998 1998;; Cyr 1995), we highlight the key HR issues in IJVs which form an important research agenda. Of most reasons for the formation of IJVs, the reason that appears to gaining substantial momentum involves learning and knowledge, sharing and transfer (e.g. Child and Faulkner 1998; Shenkar and Li 1999). In this regard, the role role and and impo import rtan ance ce of HRM HRM issu issues es and and activities in IJVs become of prime importance. More More speci specifi fical cally ly,, with within in the the IJV cont contex ext, t, there are a multitude of organizational issues that are at the same time HR issues (Child and Faulkner Faulkner 1998). 1998). Broadly presented, presented, they can be catego categorize rized d by organi organizati zationa onall level level and individual/g individual/group roup level. At the organization organizational al level, level, the organi organizati zationa onal/HR l/HR issues issues involv involve: e: parent-to-parent parent-to-parent relationships; relationships; parent-to-IJV parent-to-IJV relationships relationships;; IJV-environm IJV-environmental ental context context relatio relationsh nship; ip; and parent parent charact characteris eristic ticss (for (for details see Schuler 2001). Developing and utilizing an organizationallevel capability appears to be more important for competi competitiv tivee partner partnerss that engage engage in IJVs IJVs (Pucik (Pucik 1988). 1988). Several Several organiza organization tional/HR al/HR issues issues at the indivi individua dual/g l/grou roup p level level in IJVs include: learning, sharing, and transferring of  knowled knowledge; ge; developm development ent of competen competencies cies (e.g. knowledge, skills, abilities, abilities, personality personality and habits habits); ); relevan relevantt behavi behaviors ors,, action actionss and attitu attitudes des;; motiva motivatio tion n and commit commitmen mentt to be productive; productive; and lack of business success in the IJV IJV due to HR iss issues ues (su (such as lack lack of  competent and motivated staff). Virtually all of the issues listed above are significant in the IJV process and involve and depe depend nd upon upon HRM. HRM. Thes Thesee issu issues es have have significant HR implications for HR activities in IJVs IJVs (Schule (Schulerr 2001). 2001). The relatio relationsh nships ips of  HR policies and practices with the IJV process are developed through an analysis of the HR i m p l i c a t i on o n s a s so so c ia t e d w i th t h e organization organizational/HR al/HR issues issues identified identified above. These These issu issues es and impli implicat cation ionss are furth further er categorized as they unfold in the IJV process in stages with the HR implications implications for specific HR activit activities ies.. Researc Researchers hers in the field field (see (see Pucik Pucik 1988 1988)) sugg sugges estt four four stag stages es of the the IJV IJV process: (1) formation (the partnership stage); ( 2) 2) d ev ev el el op op me me nt nt ( t he he I JV JV i t se se lf lf ) ; ( 3) 3) impl implem emen enta tati tion on (the (the IJV IJV itsel itself) f);; and and (4) (4) advanc advanceme ement nt (the (the IJV and beyo beyond nd). ). The The organizational/HR issues in each stage of the Mar March ß Blackwell 2002 2002 Publishers Ltd 2002 61 International human resource management: review and critique Implications in the Four Stages of the IJV Process: IJV Stage Table 1. HR Implications Organizational/HR issues HR implications Stage 1 Formation The more more importa important nt learnin learning g is,the greate greaterr therole forHRM Identifying reasons Knowledge needs to be managed Planning for utilization Selecting dedicated manager Systematic selection is essential Cast a wide net in partner search Finding potential partners Be thorough for compatibility Selecting likely partners Ensure extensive communications Resolving critical issues More skilled negotiators are more effective Negotiating the arrangement Integrative strategies for learning Stage 2 Development  Development  Concerns of multiple sets of stakeholders need to considered for long term viability and acceptance Locating the IJV The structure will impact the learning and knowledge management processes. These are impacted by the quality of IJV managers Esta Estab blish lishin ing g the the righ rightt stru tructu cture Rec Recruit ruitin ing g sele select ctin ing g and and mana managi ging ng seni senior or staf stafff can can make make or break the IJV Getting the right senior managers Stage 3 Implementation Implementation These will provide meaning and direction to the IJV and employees Establishing Establishing the the vision, vision, mission, mission, values, the strategy strategy and and structure These will impact impact what is learned learned and shared shared Deve Develo lopi ping ng HR poli polici cies es and and prac practi tice cess Need Need to desi design gn poli polici cies es and and prac practi tice cess with with loca locall glob global al considerations Staf Staffi fing ng and and man managin aging g the the emp employe loyees es The The peop people le will will make make the the plac place e Stage 4 Advancement and beyond  Partners need to have the capacity to learn from each other L ea earning from the partne r H R sy st ste ms ms nee d to be e st stabli sh shed to support know le le dg dge flow to the parent and learning by the parent Transfe Transferri rring ng the new knowled knowledge ge to the parent parentss Transferring the new knowledge to other locations Sharin Sharing g throug through h the parent parent is critic critical al IJV IJV proc proces esss are nume numero rous us and and so are their their impl implic icat atio ions ns for for HRM. HRM. Ther Theree are are then then a multitude multitude of organization organizational al and HRM issues a t e ac ac h s ta ta ge ge t ha ha t a re re f il il le le d w it it h H R implications. Some of these implications are presented in Table 1. These implications form the basis for describing the HR activities in the IJV process and should form the agenda for future research. research. Similarly, there are a large number of HR issues critical for the success of mergers and acquis acquisiti itions ons.. Researc Research h opport opportuni unitie tiess in this this area are in abundance (for details, see Schuler and Jackson 2001). ß Blackwell 62 Publishers Ltd 2002 Conclusion Over the last decade or so, the IHRM research has has cove covered red a lot lot of grou ground nd;; howev however er,, the the published research to date raises many more questions which should be the focus of future resear research ch.. This This revie review w of the the liter literatu ature re was couched couched in a strateg strategic ic contex contextt based based on the expecta expectatio tion n that that IHRM IHRM increas increasing ingly ly will will become a source of competitive advantage in global as well as multi-domestic markets. Acco Accord rdin ingl gly, y, ther theree is a stro strong ng need need to improve our understanding of the approaches that that MNEs MNEs utilize utilize to satisfy satisfy the compet competing ing needs needs for integra integratio tion n and differen differentia tiatio tion n in their their operati operations ons (Brewst (Brewster er 2002). 2002). Adler Adler and Barth Barthol olom omew ew (199 (1992) 2) foun found d that that a grow growin ing g proportion of published OB/IHRM research is focus focusing ing on inter internat nation ional al intera interacti ction onss (i.e. (i.e. interactions interactions among organization organizational al members from from two or more more count countrie ries) s).. Impr Improv oving ing MNEs’ ability to manage cultural interactions enhanc enhances es the the prosp prospect ectss of satis satisfyi fying ng both both needs. And as Brewster (2002) suggests, this applies to small as well as large MNEs. It also applies to not-for-profit international organizations. Specific IHRM policies and practices have comman commanded ded varyin varying g levels levels of resear research ch attention, clustering primarily in staffing and traini training. ng. We have have pointe pointed d out where future future stud studies ies can can make make incre increme ment ntal al adva advanc nces es in these functional areas as well as in those that have been largely overlooked in the past. Even stronger is the need to link international HRM polici policies es empiric empiricall ally y with with behavi behaviora orall and financial financial outcomes outcomes/firm /firm’s ’s performanc performancee in individual business units and the overall firm (Becker et al. 2001). All this goes beyond descriptive case studies and surveys conveying frequency distributions, modes of analysis that still represent a large proport prop ortion ion of report reported ed researc research h in this this field. field. More More rigorous rigorous designs designs must must be devised devised that operationa operationalize lize internation international al HRM variables variables better, formally test a priori hypotheses hypotheses about their their impact impact on effici efficiency ency and effect effectiven iveness ess,, and incorpo incorporat ratee adequat adequatee control controlss (see (see also also Boyacigiller and Adler 1991, 279–280; Guest 1997; 199 7; Wood Wood 199 1999). 9). Such Such refin refineme ements nts will will greatl greatly y improve improve our abilit ability y to document document the value-add value-added ed that flows flows from internat internationa ionall HRM initiatives a prerequisite to meaningful comparisons of transnational HR systems and less sophistica sophisticated ted alternativ alternatives. es. Qualitativ Qualitativee research remains an essential tool in studying the pro proces cesss by which which intern internati ationa onall HRM HRM policie policiess evolve evolve,, diffus diffuse, e, and are instit institutio utionnalized in multinationals. multinationals. Qualitative Qualitative research research can also be useful in investigating the several question questionss regardi regarding ng IJVs, IJVs, particul particularl arly y those those around the significance of knowledge transfer and learning. learning. Finally, researchers should not lose sight of  the interf interface ace betwe between en HRM HRM syst systems ems that that MNEs utilize and the national HRM systems that compris comprisee their their operati operating ng environm environment. ent. Prior studies indicate that multinationals have a limi limite ted d capa capaci city ty to alte alterr the the entr entren enche ched d feature featuress of indige indigenous nous employme employment nt relati relationonships. ships. It remain remainss unclea unclearr how multin multinati ationals onals react to impending HRM life-cycle transitions in a given country. Are MNEs prone to adapt to such such chang changes es faste fasterr than than their their domes domestic tic competitors? What role do MNEs play in the rate of change and stabilization of new HRM system systems? s? Do host host countr countries ies select selective ively ly pressur pressuree multinat multinationa ionals ls with with ‘devian ‘deviant’ t’ HRM system systemss to conform conform to prevai prevailing ling practic practices es based based on their their home country? country? For example, example, advanced advanced industrialize industrialized d nations may enforce their their employ employmen mentt laws laws more more vigoro vigorous usly ly agains againstt MNEs MNEs from other other develop developed ed nations nations with objectionable trade barriers than against those based elsewhere. Ultimately then, IHRM resear research ch must must unite unite these these micromicro- and macro macro level-perspectives. As demonstrated by this review, interested scholars have a myriad opportunities to help internationa internationall business business organization organizationss develop develop and sustain HR-based competitive advantages. Researchers and firms that chart these waters effectiv effectively ely will secure secure enviabl enviablee market market positions in the decades ahead. Mar March 2002 2002 Acknowledgements The authors authors wish to thank thank David David McGuir McGuire, e, Ibraiz Ibraiz Tariqu Tarique, e, Oded Oded Shenkar, Shenkar, BJ Punnet Punnett, t, Peter Dowling and Helen De Cieri for their invaluable input. Notes 1 Given the the strategic strategic context context within within which this this paper paper is written, use of the concept of Human Resource Develo Developme pment nt (HRD) (HRD) might might be prefer preferabl ablee to Traini Training ng and Develo Developme pment nt becaus becausee for some some HRD is seen as more closely linked to the strategic strategic needs needs of the busine business ss impera imperativ tives es (Samb (Sambroo rook  k  2000), 2000), and becaus becausee HRD is more more closel closely y linked linked ß Blackwell Publishers Ltd 2002 63 International human resource management: review and critique 2 3 4 5 6 7 with HRM and the mutual attainment of individual and organizational organizational goals (Legge 2001; McGuire, McGuire, D., person personal al corres correspon ponden dence ce with with first first author author,, 2 August 2001). While the authors appreciate these sentiments, sentiments, they use the more traditional traditional terminolterminology for its consistency with the literature. Some Some controv controvers ersy y exists exists regardi regarding ng the extent extent to which MNEs operate as change agents within the industri industrial al relations relations systems systems of host countrie countries. s. Available evidence on this point is reviewed later in the papers Hamill (1984) (1984) analyzed analyzed numerous numerous labor relations relations practices of US- and British-owned MNEs in three British industries and found some differences. As noted earlier, Tung (1982) found that the deployment patterns for host top management differed by MNE home-country and assignment region. Training content also varied with home office location. Other investigations have compared the compensation/benef sation/benefits its packages packages of MNEs and domestic domestic firms firms in indust industria rialize lized d host host countri countries, es, report reporting ing that multinationals generally meet or exceed what domestic domestic firms provide. It is our contention that the the comp comple lete te set set of HRM HRM poli polici cies es must must be invent inventori oried ed and evalua evaluated ted to ascert ascertain ain their their cultur cultural al ramifi ramificat cation ions, s, as well as their their abilit ability y to elicit elicit the role role behavio behaviors rs essent essential ial to a partic particula ularr competitive strategy (Schuler and Jackson 1987). However, However, the authors authors noted noted that US firms firms in in other industries industries have not behaved markedly markedly differently differently when launching greenfield operations. Begin also also contends contends that adhocratic adhocratic HRM systems systems may serve as an alternative starting point, although it is difficult to envision how this would occur. The former former compon component ent encomp encompass asses es take-ho take-home me pay, pay, paymen payments ts for non-wo non-work rk time time (i.e. (i.e. holiday holidays, s, vacatio vacations) ns),, and the cost cost of in-kin in-kind d benefi benefits; ts; the latter covers payments for legally required insurance programs programs and collectively collectively bargained/pr bargained/private ivate benefits. The first three countries are solidifying their recent entry entry into into this this life-c life-cycl yclee stage, stage, the fourth fourth never never really evolved beyond it, while the fifth has receded back into it during the post-World War II era. References ß Blackwell 64 Publishers Ltd 2002 Adler, Adler, N.J. N.J. (1994) (1994).. 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