Foreign Direct Investment from Emerging Markets to Africa: The HRM Context

Abstract

In this article, we explore what determines the decisions of emerging‐market multinational corporations (MNCs) to invest in Africa and whether this is any different from their counterparts in mature markets, focusing on the HRM context. More specifically, we explore the effect of potential host‐country wages, local capabilities, and the relative rights of owners versus workers on foreign direct investment (FDI) decisions, as well as other relevant factors such as mineral resources and corruption. We found that emerging‐market MNCs were not deterred by relatively weak property owner rights (as indeed, was also the case for their counterparts from mature markets); hence, any weakening of countervailing worker rights is unlikely to unlock significant new FDI. However, emerging‐market MNCs were more likely to invest in low‐wage economies and did not appear to be concerned by local skills gaps; the latter would reflect the relative de facto ease with which even partially skilled expatriate labor can be imported into many African countries. At the same time, a reliance on low‐wage, unskilled labor, coupled with the extensive usage of expatriates, brings with it a wide range of challenges for the HR manager, which a firm committed to cost‐cutting may lack the capabilities to resolve. © 2014 Wiley Periodicals, Inc.

Foreign direct investment and employment rights in South-Eastern Europe

“…The data on monthly wages (in US$) are obtained from Datastream. Finally, the data on exchange rates per US$, the manufacturing value added and the number 8 Similar sets of variables are also used by Wood et al (2014). 9 The starting of the sample period is chosen to coincide with the release of the Doing Business report.…”

“…However amongst low-wage economies, FDI has been concentrated towards those with large domestic markets or rich natural resources. Many African economies with weak or ineffective employment regulation have been very much less successful in attracting FDI than their Asian counterparts, especially in non-primary sectors (see Wood et al, 2014). We argue that an important limitation of the existing empirical work is that most studies have tended to focus on the impact of relative employment rights at a particular time, rather than exploring the impact of their changes on FDI flows.…”

International Business as Disciplinary Tautology: An Ontological Perspective

“…Exceptions, which recognize the importance of the local environment including workforce in shaping HRM policies include seminal studies couched in the institutional tradition (e.g. Ferner, 2000;Edwards & Rees, 2006;Meardi, Marginson, Fichter, Frybes, Stanojevic, & Toth, 2009;Wood, Mazouz, Yin, Cheah, 2014;Wood & Horwitz, 2015). However, these i) do not constitute the mainstream within IB scholarship and, surprisingly or not, ii) are more often published in non-IB (rather than core IB) outlets.…”

“…This potential will be realized only if IB scholars: i) embrace the analytical plasticity that another ontology affords; ii) demonstrate a genuine interest in nation-level divergence, which is currently largely missing (Delios, 2016) notwithstanding seminal exceptions (e.g. institutional perspectives; Meardi et al, 2009;Wood, Mazouz, Yin, Cheah, 2014;Wood & Horwitz, 2015); and iii) support revitalization of comparative studies and interdisciplinarity as IB's areas of specialization (Shenkar, 2004). The world and its heterogeneity are too wide to be known by one field alone.…”

Human resource management in emerging markets: an introduction

“…Further, there is an increasing number of HRM research articles being published in leading journals for specific EMs such as China and India. They cover a whole range of HR related topics such as expatriate management (e.g., Kim and Tung, 2013;Malek and Budhwar, 2012); strategic HRM (e.g., Zupan and Kase, 2005;Katou and Budhwar, 2010;Takeuchi et al, 2009); internationalisation, FDI and HRM (Khavul et al, 2010;Wood et al, 2014); organisational capability for change (Judge et al, 2009); and working conditions in EMs (Connell and Burgess, 2013). To provide comprehensive literature on HRM in EMs is beyond the scope of this chapter, but we are very hopeful the various thematic chapters in this volume do so.…”