Subsidiary Interdependencies and International Human Resource Management Practices in German MNCs: A Resource-Based View

Article excerpt

Abstract:

* Using the resource-based view, this paper links the degree of interdependence that exists between subsidiaries of multinational corporations (MNCs) to the use of various International Human Resource Management (IHRM) practices.

* We assume that in many MNCs this interdependence has increased the need for cross-border coordination.

* We analyze to what extent MNCs use IHRM practices in order to enhance their coordination capability across national borders.

* We present a framework that addresses these effects and empirically test it using data from a questionnaire survey among 142 majority-owned overseas subsidiaries of German MNCs.

* The findings show that the degree of interdependence is related to the level of international experience of staff employed in subsidiaries, the use of third-country nationals, the provision of training, the use of cross-cultural management teams, and the choice of employee evaluation and reward methods.

* We conclude by discussing the implications of our findings for IHRM practitioners and scholars as well as the limitations of our study.

Keywords: International human resource management- Resource-based view. Transnational networks. Expatriates. Global teams. Intercultural training. Remuneration

Introduction

Multinational Corporations (MNCs) can no longer limit their attention to merely managing the growth of foreign activities. They also have to cope with rapidly changing economic, competitive, legal, political, and cultural conditions in the environments they operate in (Birkinshaw 2001; Doz and Prahalad 2005). Research on global strategic management has suggested a number of strategic options for MNCs that are characterized by differing degrees of global coordination or integration and local responsiveness. According to Bartlett and Ghoshal (2002), strategies that focus on only one of these dimensions, such as the global strategy (high coordination, low local responsiveness) or the multinational strategy (low coordination, high local responsiveness), are no longer adequate for maintaining or achieving global competitiveness, given the changes in technology, government policies and consumer preferences. Instead, they suggest that MNCs need to follow a transnational strategy in which MNCs not only try to achieve high levels of global coordination and local responsiveness at the same time, but also high levels of worldwide learning and knowledge transfer. Other authors have suggested similar models to replace the traditional uni-dimensional models of MNCs. These models include, for example, the 'differentiated network' (Nohria and Ghoshal 1997), the 'heterarchy' (Hedlund and Rolander 1990) or the 'metanational corporation' (Doz et al. 2001). Despite some differences in detail, the key idea of these concepts is the simultaneous exploitation of three main sources of competitive advantage: economies of scale, economies of scope, and arbitrage opportunities (Ghoshal 1987).

According to Bartlett and Ghoshal (2002), the implementation of a transnational strategy requires MNCs to establish an integrated transnational network. From a network perspective, subsidiaries are regarded as differentiated but integrated elements of a complex configuration of value creating activities across national borders (Porter 1986). They are differentiated in as far as not all subsidiaries need to carry out the full range of value-adding activities of the MNC, have the same resource configuration and competences, or produce/sell identical services or products (Ghoshal and Bartlett 2005). However, instead of being merely responsible for their position in their respective market, subsidiaries have to contribute to improving the performance of the MNC as a whole (e.g., Rosenzweig 2006). While the associated increase in the interdependence among subsidiaries as well as between them and the headquarters is a "key to competitive advantage" (Kostova and Roth 2003, p. …

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