Issues in International Management

Further empirical evidence relied upon by the research are internationalization of business, knowledge asset value, and increase in technology. The paper demonstrates that MNCs have no option, but to adopt a standardized approach in HRM practices if they are to remain competitive and sustainable. Introduction In the modern globalized economies, market forces have had significant impact on the manner multinational companies (MNCs) carry out their operations. According to Brewster (2017), a MNC is a business concern that carries operations in more than one nation. In the modern global economy, there are more than 40,000 MNCs in operation with another like 250,000 overseas affiliates operating cross-continental business. This has led to the emergence of international human resource management practices, which deal with the need to understand, research, apply, and revise all HR activities in both their internal and external contexts as a means of managing human resources in the global context for various stakeholders.

The standardized approach by MNCs to managing the employment relationship can be investigated using various theories. In the current paper, focus is directed at agency theory, socialization theory, and institutional theory and demonstrates how they positively impact the MNCs and their subsidiaries. Agency theory The agency theory is important in the current study as it helps in explaining the manner a subsidiary, despite operating in a different environment, suits into the strategy adopted at the headquarters. Additionally, the theory helps to explain how the behavior of a subsidiary is controlled by the headquarters in other behavioral realms as opposed to the financial aspect. Institutional theory This theory has been used in explaining organizations comprising of the HRM practices of subsidiaries in foreign countries.

According to Kostova and Roth (2002), it is possible to conceptualize foreign-owned subsidiaries as being affected by institutional factors within the local environment as well as the international processes that comprise of MNC parent firm pressures. The theory perceives organizations as both technical and social phenomena and that technical rationality is not purely used in shaping structures and processes. Since subsidiaries operate in different environments, they are incapable of establishing effective HRM practices that are applicable to the parent MNC and other subsidiaries in other countries. As a result, the institutional approach emphasizes on the importance of the MNC to take a standardized approach that is applicable throughout all levels of the institution. According to Kostova and Roth (2002), it is for this reason that even where subsidiaries operate in environments where HRM practices of local firms are different from those of the parent MNC, the HRM practices of the subsidiaries tend to be more similar to those of the MNC as opposed to the local custom.

Socialization theory It is equally possible to consider socialization theory while evaluating HRM mechanisms in MNCs and how they are replicated in their foreign subsidiaries. Björkman et al. (2004) asserts that there is a positive relationship between corporate socialization mechanisms to foreign subunits transfer in a situation where a practice is integrated. However, this is dependent on the level of autonomy accorded to the foreign subunit regarding decision-making. Wal-Mart Stores, Inc. , a U. S multinational company serves as a perfect example of a MNC that adheres to the convergence approach in HRM practices across its subsidiaries. Divergence Theory As opposed to the convergence theory, the divergence theory perceives MNCs management of human resources as different in different countries because of the national and cultural impact in the respective areas of operations.

According to Crawley et al. Researchers reveal that there are various factors that have influenced MNCs to become international in the manner they manage human capital. These factors comprise of knowledge asset value, internationalization of business, and increased technology. Internationalization of business As a result of globalization, economic integration is becoming a reality in every corner of the world. This is evidenced by the vast number of Regional Trade Agreements in place and others undergoing negotiations. For a majority of small-medium organizations, internationalization is slow process. Of significant important finding is the fact that there is a continuous encouragement by MNCs to their respective managers to develop the best management practices in their respective countries of operations. This is especially when dealing with the issue of human resource management.

As a result, HRM practices considered the best are equally transferred to the new business locations in the process of business internationalization. Knowledge asset value Within the global context, effective management of human resources serves one of the most crucial determinants of not only the success but also the sustainability of an MNC. According to Navrbjerg and Minbaeva (2008), within the global context, knowledge has proved an important aspect of ensuring standardized human resources management and also on creating a strategic advantage. In achieving this standardization, a MNCs human resource management establishes one human resource information system across all the HR departments of subsidiaries. According to Edwards and Marginson (2012, the introduction and adoption of this system by MNCs has not only proved to be successful but also essential in achieving both local and global coordination of human resource practices.

In a study conducted by Edwards and Marginson (2012), the researchers revealed that technological development has enhanced MNCs to move towards a standardized approach to managing the employment relationship. This is primarily based on the fact that improvement in technology enables MNCs to derive synergistic benefits that emanate from integration of their operations beyond national borders. Once international integration sets in, Edwards and Marginson (2012) found out that companies are faced by stronger pressures towards adopting transnational dimension to employment practice for those carrying out operations globally as opposed to their counterparts that are non-internationally integrated. In all companies, measurement of employee engagement was done internally based on an annual or biannual basis, which often took into account both internal and external benchmarking.

The study findings revealed that towards standardized HRM practices, three of the organizations had adopted standard performance management systems. However, in recognition of the impact of culture on employee behavior, InsureCo maintained a local system, although there was a general move towards centralization of the system in the future (Farndale et al. GKN was equally found to differentiate between a standard system for white-collar employees as well as a local system for blue-collar employees. Tesco HSC and AkzoNobel systems explicitly incorporated corporate values in their PMS to assist in developing standardized HRM practices. References Ayentimi, D.  T. , Burgess, J. , & Dayaram, K. Do multinational subsidiaries demonstrate a convergence across their HRM practices in a less developed host-country? Employee Relations, 39(7), 1066-1082. ch7 Björkman, I.

Barner-Rasussen, W & Li, L. (2004) Managing knowledge transfer in MNCs: the impact of headquarters control mechanisms. Journal of International Business Studies. 35: 443-455 Boxall, P. (2012, December). Multinational Companies in Cross-National Context. Retrieved from https://warwick. ac. uk/fac/soc/wbs/research/irru/publications/recentconf/cornell_-_edwards_and_marginson_1. pdf Harzing, A-W. , & Pinnington, A. H. International Human Resource Management. London: Sage.  Employee Relations, 24(1), 69-85. doi:10. 1108/01425450210416933 Kostova, T. & Roth, K. Adaption of organizational practice by subsidiaries of multinational corporations: institutional and relational effects. HRM and IR in Multinational Corporations: Uneasy Bedfellows? SSRN Electronic Journal. doi:10. 2139/ssrn. 1117873 Sheehan, M. Devolvement of HRM and perceived performance within multinational corporations (MNCs). , Briscoe, D. , & Schuler, R. International Human Resource Management. Abingdon: Routledge. Chapter 3: Design and Structure of the Multinational Enterprise.