Ch. 14: International HRM

Chapter 14 covers international human resource management (IHRM): globalization and internationalization, the universalist and contextual paradigms, what makes IHRM different from domestic HRM, cultural differences with Hofstede's dimensions, whether cultures change, the institutional perspective, strategic choices of MNCs (global, local, hybrid), and other IHRM issues: convergence versus divergence, expatriate management, knowledge transfer across borders, and outsourcing and offshoring.

1. Globalization and internationalization

Developments of globalization that have affected existing businesses include: digital photography and new possibilities for data transmission; new methods of global communication and social media (e.g., YouTube, TikTok, X, Weibo, LinkedIn, Facebook, WhatsApp, Zoom); and the Internet as a marketplace for buying and selling products and services.

Conditions for internationalization: it is made possible by the fast and cheap transport of data, communication, goods and people (the 'Global Village', a term by Marshall McLuhan, 1962, describing how mass media remove barriers of time and place in human communication). Internationalization can also be related to the expansion of an organization, for example a Dutch company that developed from an 18th-century textile firm into an innovative global company using synthetic fibres for protection (helmets) and sports grass.

2. IHRM and its paradigms

Brewster et al. (2000) distinguish two paradigms:

Illustration of the universalist paradigm failing: a large US retailer entered Germany and standardized its US practices. German customers were not fond of the practice of hiring older people to greet them at the door, and German workers were not impressed with early-morning warming-up sessions. According to German media, the retailer pursued a fundamentally flawed internationalization strategy due to an incredible degree of ignorance of the specific features of the extremely competitive German retail market. The retailer eventually withdrew from Germany.

Further illustrations of context: guanxi in China (personal networks and relationships based on trust and mutual obligations that influence business and hiring) and wasta in Arab countries (using connections and influence to get things done, e.g., jobs). Such practices shape recruitment and promotion and clash with Western ideas of merit-based selection.

3. What IHRM implies (Briscoe and Schuler, 2004)

• Responsibility for a greater number of and more complex activities, including expatriation;
• A broadening of expertise to include knowledge of foreign countries, employment laws, etc.;
• Involvement with a greater mix of employees;
• Coping with external influences and multiple cultures;
• Greater involvement in employees' lives, particularly in the case of expatriation;
• Ability to manage difficulties and risks, particularly if a subsidiary is established in a developing country.

4. Measuring culture and cross-cultural differences

Is a nation-state one culture? Not necessarily: think about Belgium or Canada. Many countries are not homogeneous and have different subcultures, e.g., Indonesia, India, Switzerland and North-African countries.

Cross-cultural differences in values show in communication: Dutch bluntness ('This is not good', 'You are doing this wrong!') versus British politeness ('That's interesting', or a very long polite request such as 'Excuse me, I'm terribly sorry to bother you, but I wonder if you would mind helping me a moment').

The dimensions: individualism-collectivism, masculinity-femininity, power distance, uncertainty avoidance, long-term versus short-term orientation (added in the 1980s) and indulgence-restraint (added in 2010).

LTO was identified by Michael Harris Bond and Hofstede using a Chinese values survey among students in 23 countries. Indulgence was added by Hofstede, Hofstede and Minkov (2010).

Hierarchy is perceived differently across countries. In many Asian countries, age entails respect (wisdom), which affects how young managers can lead older employees and how feedback is given. In the Netherlands, with its very low power distance, employees easily contradict their boss. The lecture ends with an example of Dutch low power distance: the Dutch prime minister dropping his coffee in parliament and mopping it up himself.

Hofstede scores (1980), as read from the charts in the lecture (approximate values):

Interpretation: China combines high power distance, strong collectivism and a very strong long-term orientation. France combines fairly high power distance with individualism and very high uncertainty avoidance (importance of rules and job security). The Netherlands is individualistic, has low power distance and is very feminine (consensus, work-life balance, part-time work). For HRM this means, e.g., that individual performance-related pay and direct feedback fit the Netherlands better than China, and that detailed rules and security matter more in France.

5. Do cultures change?

Hofstede's model of the stability of culture: origins (ecological, geographic, economic, demographic, genetic, historical, technological and urbanization factors) shape societal norms (value systems), which lead to consequences (structure and functioning of institutions: family patterns, role differentiation, social stratification, education, religion, political structure, legislation, architecture, theory development). The consequences reinforce the societal norms, which makes cultures stable. Change comes mainly from outside influences: forces of nature, and forces of man (trade, conquest, scientific discovery). So cultures change, but slowly.

6. HRM and institutional differences

The institutional perspective (Boselie, 2014) mostly uses case analysis and historical analysis, and measures at different levels:

• Society: e.g., institutional foundations in the Japanese state versus EU states;
• Industry: e.g., safety regulation in the chemical industry and the different role of unions per sector;
• Organization: e.g., the relationship between the number of hierarchical layers and HRM activities;
• Department: e.g., the power of ICT engineers or marketing specialists.

7. Strategic choices of MNCs regarding IHRM

8. Other IHRM issues

Convergence versus divergence of HR practices: will HR practices worldwide become more similar (convergence, e.g., 'Americanization' or 'Chinazation') or remain different or even split further (divergence, e.g., regions within countries such as Belgium)? This is an ongoing discussion.

Managing expatriates (employees sent abroad), e.g., coping with culture shock. Issues: the costs of an expatriate, family involvement, and dual career issues (the partner's career).

Expat management includes: expatriate compensation approaches; allowances for cost of living and housing; health and benefits plans; insurance and emergency plans; taxation management; and family and cross-cultural support (e.g., international schools for children and language training).

Knowledge transfer across borders concerns human capital (knowledge, skills and abilities) and social capital (social networks with relevant actors). Conditions:

• An information and communication network (intranet and/or Internet);
• Access to the network for all employees;
• Employee knowledge and skills to operate the knowledge information system;
• Willingness of employees to share knowledge and experiences with others;
• Cross-cultural awareness of all employees and the ability to deal with different norms and values of colleagues in other countries.

9. Outsourcing and offshoring

So outsourcing is about who produces (own firm or third party); offshoring is about where it is produced (home country or abroad). Findings on offshoring (OECD):

• The primary motivation for offshoring is to cut costs;
• Skilled jobs are no longer safe from being sent offshore;
• Offshoring is spreading from traditional manufacturing to knowledge- and technology-intensive industries;
• China and India absorb many offshoring activities from Western countries;
• All industries are affected, but the sectors that downsized their workforce the most are not the ones that offshored the most;
• Offshoring by European companies is responsible for less than 5% of total job losses in Europe, far behind bankruptcies, shut-downs and organizational restructuring.

Key take-aways

• IHRM is HRM in MNCs and across borders (Brewster, 2004).
• Universalist (US, standardize best practices) versus contextual (Europe, context determines practices) paradigm.
• IHRM implies more complex activities, broader expertise and more involvement in employees' lives (Briscoe and Schuler).
• Hofstede: individualism, masculinity, power distance, uncertainty avoidance, long-term orientation, indulgence.
• Cultures are stable because consequences reinforce norms; change comes from outside influences.
• MNCs choose global, local or hybrid HR strategies; expatriates, knowledge transfer, outsourcing and offshoring are key issues.