International Human Resource Management

A Case Study Approach

Daniel Wintersberger, Daniel Wintersberger

• Publisher: Kogan Page
• Year: 2017
• ISBN:
  9780749480998
• Edition: 1
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

In the face of globalization, multinational companies have become the norm, rather than the exception. HR professionals now need to manage across borders, cultures and time zones, meaning that a complete understanding of the theory and practice of International Human Resource Management (HRM) is essential. International Human Resource Management is a concise introduction for all students studying International HRM at the Masters level. It covers everything from the cultural and institutional contexts, international employment law and the role of International Framework Agreements to recruitment and selection, training and development, performance management, reward and benefits, job design and other functional areas of International HRM.With numerous industry examples and global case studies from companies such as Telefonica, Unilever and Volkswagen, International Human Resource Management goes beyond the theory to fully explore how International HRM works in practice. It is an indispensable textbook to prepare students for successful careers in human resources. Online supporting resources include additional case studies, lecture slides for every chapter, self-test exercises for students, discussion questions and further reading.

PART ONE

The context of international HRM

01

Introduction and background to international HRM

About this book

This book provides a comprehensive yet accessible case-based overview of international human resource management in a global context. By doing so, it makes a timely contribution by not only focusing on HRM in multinational companies, but more importantly, by also examining distinct national-level factors impacting on HRM at the local level. Beyond relevant cultural factors impacting on HRM at national level, the book also explicitly focuses on relevant institutional factors impacting on the nature of HRM across different national contexts. As Chapter 5 will show, these institutional factors, including employment legislation and the nationally distinct interplay between the three key actors (the state, trade unions and employers’ associations) arguably continue to exert a strong influence at national level, hence leading to distinct HRM outcomes in different countries, often in close geographical proximity to one another.

As would naturally be expected with a textbook on international HRM, significant attention will be turned to the multinational enterprise and its role in ‘diffusing’ HR ‘best practice’ from the home country to the host countries within which it operates, either through wholly owned subsidiaries or via international joint ventures. Conventional approaches to IHRM have examined the issue of multinationals and diffusion of HRM practices mainly from the somewhat ethnocentric vantage point of western (mainly American) multinational companies and the extent to which they cascade their HRM practices ‘downwards’ to their subsidiaries (see for example Bjorkman and Lu, 2001). In contrast, due to changes in the tide, this book also examines the emergent phenomenon of firms from ‘Eastern’ as well as emerging economies transferring their HRM practices ‘westwards’ to subsidiaries in Europe and North America. For example, we will examine the way in which and the extent to which Japanese firms implement Japanese systems of work organization and job design in mature (UK – see Chapter 5) and emerging (Brazil – see Chapter 12) economies.

Crucially, for a textbook on international HRM, this book contains case studies from numerous countries, including major economies such as the US, UK, China, India, Brazil, Hong Kong, Ghana and Germany.

Who is this book for?

Whether you might be studying an entire master’s programme in international HRM, or just taking a module on HRM or international HRM, you are likely to find this book to be an accessible yet comprehensive companion as you engage with the international context of HRM as well as its key functional areas (such as recruitment, selection, reward, and employee engagement). Those taking an HRM or international HRM module as part of an MBA programme are likely to find the practical emphasis on real-life case studies from different countries stimulating and thought-provoking.

The remainder of this chapter provides a brief overview of the context of international HRM (IHRM).

Learning objectives

After reading this chapter, you should have an understanding of the following:

• the key forces (internationalization/transnationalization of business, globalization and free movement of capital) that have led to the development of IHRM;
• the various routes businesses may take towards internationalization and their implications for the IHRM function;
• the key challenges and opportunities emerging for practitioners of international human resource management.

The context of IHRM

Firms rarely start as truly multinational enterprises, but undergo a sometimes lengthy or sometimes brisk process of internationalization. This chapter therefore examines the processes by which firms internationalize, and the impact this has on the HRM function within the organization. In order to come to grips with the process of internationalization, we need to understand some of the contextual developments (such as globalization) which facilitate the internationalization of businesses. This chapter therefore provides an introduction to the context within which IHRM takes place by highlighting first the changing context of international business and second, the way in which firms internationalize and what impact this process of internationalization has on HRM.

Why do firms internationalize?

One of the key reasons for firms to internationalize is to become more competitive by developing beneficial networks in other countries. Such networks may incorporate production and assembly, as well as sales and distribution. Of course, not all firms internationalize, and whether they do so depends on an array of factors that are internal and external to the firm. One key external factor is the type of industry within which the firm operates; in some industries, comparably greater benefits can be derived from circuits of capital and the new international division of labour (Hymer, 1982). This new international division of labour entails a shift in industrial production from core to periphery. The core in this context is a term used to describe the old established industrialized countries, whereas the periphery refers to the emerging economies where labour costs are cheaper. For manufacturing firms, for example, the potential benefits derived from shifting labour-intensive production processes to countries with cheaper labour costs are greater than for those firms that specialize in more knowledge-intensive activities. A well-known case in point for this is Apple and their global production value chain. Knowledge activities (such as research and development) have been retained in California, while the labour-intensive activities of production have been outsourced to supplier firms in China, such as the infamous Foxconn, where exceptionally appalling working conditions have recently been documented (see for example Ngai and Chan, 2012). Knowledge-intensive activities such as research and development can be retained in tech hubs in and around the Bay area in California where skilled workers command high wages, but relatively few of them are needed for the more abstract conceptual work associated with the design of new products.

International offshoring and outsourcing are both facilitated by the fact that it is becoming increasingly easy for companies to enter foreign markets. Globalization is viewed by many as an inevitable trajectory resulting from increasing functional integration of economic activities as well as increased geographical spread of economic activities (Dicken, 2015: 2). While organizations internationalize, governments, for reasons outlined in more depth below, are increasingly opening their markets to foreign investment in order to speed up economic growth. With few exceptions (examples of some of which will be provided later in the chapter), firms in most countries compete in a global market. Trade barriers to entering foreign markets are being gradually eroded. An exemple of this is the international civil aviation industry (see below). As a result of an increasingly free movement of capital and labour, global competition for goods and services has increased. As a direct result of this, industrialized economies such as the UK and the US have seen jobs in labour-intensive manufacturing sectors such as car production and steel shift to emerging economies, initially to South Korea, but more recently to China and India. This has led to a very different dynamism between ‘mature’ and emerging markets. Governments in advanced industrial economies (mature markets where labour costs are high) are implementing austerity and labour market reforms to cheapen the cost of labour, and making the terms and conditions on which workers can be hired more employer friendly in attempts to become more competitive with emerging markets. At the same time, emerging economies, notably the ‘BRIC’ (Brazil, Russia, India and China) have sustained comparably strong GDP growth rates over the past two to three decades, and with rising inflation have seen an increase in labour costs too. India’s year-on-year GDP growth rate between 2015 and 2016, for example, was a staggering 7.6 per cent in comparison to only 2.4 per cent in the US and 2.3 per cent in the UK (World Bank, 2017).

As Chapter 3 will highlight in more depth, globalization does not necessarily mean that the above trajectory is inevitable. In fact, the very term ‘globalization’ needs to be carefully unpicked for clarity regarding the extent to which we view it in empirical or ideological terms (Dicken, 2015). In empirical terms, we are merely analysing the changes as well as key trends and patterns associated with certain measures of globalization such as the ‘transnationality index’ provided annually by the United Nations Conference on Trade and Development (UNCTAD). Engaging with globalization in ideological terms is quite different insofar as it involves actively advocating the aforementioned changes (for example through the erosion of trade barriers through deregulation/liberalization of markets). The following case study provid...