Country‐of‐origin, localization, or dominance effect? An empirical investigation of HRM practices in foreign subsidiaries

Abstract

This article contributes to two recurring and very central debates in the international management literature: the convergence vs. divergence debate and the standardization vs. localization debate. Using a large‐scale sample of multinationals headquartered in the United States, Japan, and Germany, as well as subsidiaries of multinationals from these three countries in the two other respective countries, we test the extent to which HRM practices in subsidiaries are characterized by country‐of‐origin, localization, and dominance effects. Our results show that overall the dominance effect is most important (i.e., subsidiary practices appear to converge to the dominant U.S. practices). Hence, our results lead to the rather surprising conclusion for what might be considered to be the most localized of functions—HRM—that convergence to a worldwide best practices model is clearly present. The lack of country‐of‐origin effects for Japanese and German multinationals leads us to a conclusion that is of significant theoretical as well as practical relevance. Multinationals might limit the export of country‐of‐origin practices to their core competences and converge to best practices in other areas. © 2007 Wiley Periodicals, Inc.

Crossing the streams: HRM in multinational enterprises and comparative HRM

“…They find that whilst both European and US MNEs locally adapt their subsidiary HRM practices due to host-country institutional constraints, the degree of adaptation within the subsidiaries of US MNEs is lower. Comparing MNEs and their foreign subsidiaries in three different countries (USA, Germany and Japan), Pudelko and Harzing (2007) present evidence that they suggest indicates convergence towards a worldwide best-practices model. Smith and Meiksins (1995) referred to this as the 'dominance model', arguing that the global hegemony of the USA means that HRM in that country, and in MNEs headquartered in that country, are seen as exemplary.…”

“…Evidence of HRM convergence over this ten-year period, not only between local Chinese firms and foreign subsidiaries, but also between European MNEs, was explained as being due to a combination of MNE and host-country coercive, mimetic and normative institutional pressures. Other research comparing HRM in subsidiaries has argued that there is a 'dominance' of (US-style) 'best practice' that is creating an inexorable move towards convergence of practice across foreign subsidiaries (Pudelko & Harzing, 2007).…”

Microfoundations for learning within international joint ventures

“…The large numbers of departments, sections and units in Homeplus meant that selecting appropriate interviewees to address the research questions was critical (Ghauri & Grønhaug, 2010 As these were top and middle managers there was a danger of upper-echelon bias (Hambrick & Mason, 1984;Pudelko & Harzing, 2007), so triangulation data was collected from other levels at each firm, as well as other related partners, industry bodies and academics. There were, overall, five groups of interviewees: MNE managers within the IJV, local partner managers within the IJV, MNE managers at HQ, local partner managers in the local HQ, and other related partners and academics.…”

Human Resource Management in Multinational Enterprises: Evidence From a Late Industrializing Economy

“…Proponents of globalization suggest that economies are increasingly integrated leading to the emergence of more standardized global management systems and converging HRM practice across countries (Sera 1992;Pudelko and Harzing 2007). Multinational enterprises (MNEs) are arguably the organizational form most likely to ascribe to a standardized management approach because of their susceptibility to globalizing forces .…”

“…Gooderham and Nordhaug (2003) suggest that best practice in this context means the application of practices which are perceived as key contributors to performance. Pudelko and Harzing (2007) are more specific in stating that perceived best practice effectively refers to US management practices, reflecting that country's economic dominance over recent decades and the increased HRM discourse that is now evident in business and which is strongly North American led. This paper further contributes to the literature on a possible convergence and standardization of HRM practice -particularly those suggesting a US styled, 'best practice' HRM model is increasingly prevalent (Pudelko and Harzing 2007;2008).…”