Internal Transfers Of Practices example essay topic

Introduction A major feature of globalization is the steady increase in foreign direct investment. Multinational companies (MNCs), defined as firms producing goods and services in more than one country, have become dominant actors in the global economy. Recent figures indicate that hundreds of thousands of foreign subsidiaries currently employ 35 million people and numbers are increasing (UNCTAD 2000). Theory and empirical evidence suggest that MNCs, despite their international scale of operation, cannot be thought of as stateless players. Most are organizations imprinted with their home countries' culture and institutions, which holds especially true for the area of HRM / IR (e.g. Hu, 1992; Ferner, 1997; Rui grok and van Tul der, 1995). So the following general questions arise.

If MNCs operate in foreign host countries, do their subsidiaries adapt to local practices in the field of personnel and labour policies or does corporate headquarters (HQ) transfer home-based practices abroad? And what are the factors determining this choice? State of research and gaps in knowledge: theory Numerous studies have recently stressed that MNCs face a global-local dilemma (e.g. Rosenzweig and Singh, 1991; Ferner, 1997). On the one hand, one could assume that foreign subsidiaries should act in HRM / IR like their parent companies for reasons of internal equity and consistency (country-of-origin or home-country effects). On the other hand, one could argue that subsidiaries are part of the business environment in which they operate and should therefore behave like their local counterparts (host-country effects). These situations mark the extreme points, but the emergence of various blends of both effects is also possible.

Literally dozens of articles have referred - in a more or less systematic way - to a wide range of cultural, institutional, organizational, and market variables that (potentially) have an impact on the transfer of personnel and labour practices within multinational corporations (e.g. Kamoche, 1996; Dharwad kar, 1997; Takeda, 1998). Contingency theory (e.g. Brewster and Hegewisch, 1994 for a European model) has pointed out that there is no one best way of managing human resources internationally. Diverse factors, like national culture, employment law, IR institutions, firm strategy, industry characteristics, etc., have an impact on HRM / IR. These factors are often interrelated and they determine what package of personnel and labour practices is appropriate in a given situation. Obviously it is not sufficient to summarize and categorize potential influencing variables to explain and predict cross-national transfers of HRM / IR practices.

A theory is necessary to assess how strongly and in what direction the diverse factors will affect MNC subsidiaries' policies. Rosenzweig and Noria (1994) have elaborated a qualitative model in sociological terms to analyse HRM / IR transfers in multinationals operating in the USA. They use DiMaggio and Powell's (1983) concept of 'isomorphic pressures'. This is applied to MNCs' international personnel policies in order to investigate the integration-adaptation trade-off for several HRM / IR practices.

However, 'pressure' is a category which makes an economist feel slightly uncomfortable. It is at the core of microeconomic reasoning that rational actors - including MNCs - react to costs: they try to avoid them. Consequently, the cross-national transfer of personnel practices has - at least partly - to be the result of minimizing the costs associated with such transfers. State of research and gaps in knowledge: empirical level Research on Transfer of Practices The phenomenon of practice transfer across national borders has been studied mainly in the field of international management. It has been shown that: practices differ and MNCs capitalize on transfer of practices across borders (Lincoln, Hana da & McBride, 1986); practices are socially embedded, i. e., they reflect the socio-cultural environments in which they have evolved and are being used (Janssen's, Brett, & Smith, 1995); there are various barriers to transfer success that reflect the characteristics of the practice or are of cultural and organizational nature (Kedia & Bhagat, 1988; Zander & Kogut, 1995); MNCs are better vehicles for practice transfer than are markets across nation-states (Kogut, 1991); practices vary in their transferability and integration based on their role for the alignment of global goals and their cultural determination (Robinson, 1994); transfer is facilitated through normative integration and verbal information networks as well as through coordinated informal structures (Pfeffer & Leblebici; 1973); and, finally, import of practices from parent companies affects subunit's performance (Zaheer, 1995). The actual practices used by a particular subunit of a multinational company are the result of the interplay of pressures for local isomorphism with the host country, on one hand, and pressures for global integration with the parent company, on the other hand.

There are many empirical publications on MNCs' cross-national PP transfers. In the 1980's and early 1990's, most of these studies concentrated on Japanese MNCs because the Japanese business system was regarded as especially successful. The question of whether Japanese MNCs would 'export' home HRM practices to their foreign subsidiaries was high on the research agenda (e.g. Yamada, 1981; Ishida, 1986; Fukuda, 1987; Yang, 1992 a, 1992 b). Later, US multinationals became the favorite objects of research because the American business system had now come to be considered as the most successful in the global economy (e.g. Innes and Morris 1995 Bae et al., 1998; Taye b, 1998; Bj " ork man and Fur, 2000). For purposes of synergy and efficiency, organizations often engage in cross-unit transfers of business practices that reflect their core competencies and superior knowledge and that they believe to be a source of competitive advantage. Internal transfers of practices are important for all types of organizations, but they are critical for multinational corporations (MNCs), for a primary advantage that a multinational firm brings to foreign markets is its superior knowledge, which can be utilized in its subsidiaries worldwide (Bartlett & Ghoshal, 1997; Kogut, 1991).

Although scholars long have recognized the strategic importance of transfers of organizational practices within MNCs, we continue to find substantial evidence that these transfers are not always smooth and successful. Researchers have shown that there are various barriers to transfer success -- some relating to the characteristics of the practices that are being transferred and others of a cultural and organizational nature (Ghoshal & Bartlett, 1988; Kedia & Bhagat, 1988; Szulanski, 1996; Zander & Kogut, 1995). On many occasions, foreign subsidiary managers are frustrated with headquarters' requests for implementation of "yet another new program". [sup 1] Subsidiary managers may, intentionally or not, decide not to implement a particular practice while reporting otherwise to headquarters. They may implement practices only partially, adopting those components that they feel "people here will buy in" and ignoring the rest. In some extreme cases, local managers feel so alienated from the parent company that they do not believe in the parent's motives and, thus, do not even consider complying with implementation requests. Here, I develop a theoretical framework specifying the factors that contribute to the success of the transnational transfer of strategic organizational practices within MNCs.

Strategic organizational practices are those practices considered to be dominant, critical, or crucial for achieving the strategic mission of the firm. By focusing on this particular type of organizational knowledge, rather than on technology or product innovations that have been the primary focus of past research (e. g., Ghoshal & Bartlett, 1988; Kogut & Zander, 1992, 1993; Zander & Kogut, 1995), I aim at filling in some of the gaps in the literature on knowledge transfer. As I argue below, this is an important distinction, which affects the nature of the transfer process, as well as the criteria for and the factors of transfer success. Furthermore, I examine transfers that take place within MNCs, rather than transfers across nations in general. Such transfers are likely to be subject to organizational influences, in addition to country-level influences -- an aspect attended to by management scholars only recently, and then only to a limited extent (Robinson, 1994; Szulanski, 1996; Zaheer, 1995). Transfers of organizational practices can occur in various directions within the MNC, including transfers from parent companies to foreign subsidiaries, from foreign subsidiaries to parent companies, or from one subsidiary to another.

The underlying ideas of the model presented in this article are general enough to accommodate all these types of transfers. However, for purposes of clarity of the presentation, I focus my discussion on one particular type of transnational transfer: that of a parent company to a foreign subsidiary of the same company (termed recipient unit hereafter). Strategic Organizational Practices The term organizational practice, although widely used by researchers and practitioners alike, has been relatively loosely defined in the literature. Researchers from different theoretical perspectives have focused on different defining characteristics of organizational practices and have used different terms in doing so. March and Simon (1958), for example, emphasize the stabilizing function served by organizational practices.

They suggest that organizations use "performance programs" -- that is, habitual ized actions, routines, and standard operating procedures, which are "a central ingredient accounting for the reliability of organizations" (Scott, 1995: 54). Evolutionary theorists, such as Nelson and Winter (1982), have studied organizational routines, which they view as the "genes" of an organization, and have stressed their "taken-for-granted", subconscious, and tacit nature. Szulanski (1996) defines organizational practices similarly, although in broader terms, as the routine use of organizational knowledge. Building upon this variety of approaches and drawing mainly from institutional theory (e. g., Meyer & Rowan, 1977; Selznick, 1957; Zucker, 1991), I define organizational practices as particular ways of conducting organizational functions that have evolved over time under the influence of an organization's history, people, interests, and actions and that have become institutionalized in the organization.

Practices reflect the shared knowledge and competence of the organization; they tend to be accepted and approved by the organization's employees and to be viewed as the taken-for-granted way of doing certain tasks. Practices are multifaceted. They consist of different elements, including a set of (un) written rules of how a certain organizational function should be conducted and an accompanying set of cognitive elements (such as the concepts and categories by which these rules are described). In addition, the rules of a practice reflect a set of underlying values and beliefs (Hofstede, 1991). For example, the practices of ethical business conduct employed by many firms include rules of how a firm should relate to its various stakeholders (e. g., customers and communities), concepts (e. g., social responsibility and corporate giving) that are instrumental for explaining these rules, and a set of underlying values and beliefs (e. g., beliefs about what ethical business conduct is).