Surveying Employment Practices of Multinationals in Comparative Context: Integrating and Differentiating National Systems

Lead Research Organisation: King's College London


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Description We highlight five headline findings.

First, levels of integration amongst MNCs (multinational corporations) are high. For the 'first-order' level of firm configuration, standardisation of products and segmentation of operations across countries are widespread. At the 'second-order' level of corporate structure, multiple international lines of organisation are evident in over two-thirds of firms. International integration of MNCs 'upstream' is mirrored in the 'downstream' (or third-order) organisation of business functions, including HR. There is evidence of an 'international architecture' of HR in a substantial proportion of MNCs.

Second, the influences of these different levels on employment practice are partially nested within each other, rather than fully so. For some issues there is a direct effect of the first two levels, but for others, and for control over employment practices, the impact of upstream configuration seems largely indirect. That is, the effect of first- and second-order variables on the employment practice in question is substantially dampened once third-order HR variables, covering international architecture, are introduced.

Third, differentiation across countries in the integration of subsidiaries into the worldwide company, and in the functions they perform, flows through into variations in employment practice. Distinct subsidiary roles are evident in the extent to which they supply other parts of the multinational with components or services and the nature of the largest occupational group (LOG). The analysis demonstrates the impact of these differential roles on employment practice on such issues as the adoption of HRM practices associated with motivation, opportunity and control.

Fourth, country of origin effects are either accentuated or countered by dominance effects. Accentuation occurs in the case of MNCs based in the contemporarily dominant country, the US, with US-owned companies exercising significantly greater policy control over their subsidiaries than MNCs headquartered elsewhere. Country of origin influences have the potential to be most sharply countered by dominance effects amongst MNCs headquartered in co-ordinated market economies. The findings suggest that continental European companies may use the opportunity of operating in liberal market economies to experiment with practices that are precluded by domestic institutional arrangements.

Fifth, the effects of host country institutional environments both constrain and enable MNCs' employment practices. There is noticeable variation in the constraints exercised by the four host countries, underlined by our analysis of US MNCs; whilst the extent to which US- and non-US-owned MNCs differ in the policy control they exert over their subsidiaries is broadly similar, the actual level of policy control varies between the four countries. The notion that host institutions might enable particular types of employment practice arises from MNCs differentiating between countries in terms of the location of different kinds of operation. This showed through in our analysis of MNCs' use of output and social control, which varies with subsidiary function.

The unprecedented nature of the existing dataset, together with the future extensions of it through the addition of more countries, will enable further examination of the effects of organisational and institutional contingencies on issues such as the diffusion of practices and the role of the HR function in MNCs.
Exploitation Route For HR practitioners, the above findings imply that their roles are partially shaped by the strategy and structure of their companies, but that they have some room for manoeuvre, operating to some extent on their own logic with scope to exercise choice. There are also lessons for policymakers. The finding that subsidiary role shapes employment practice indicates that the type of inward investment which is targeted by national and regional public policies has an important bearing on workforce development, forms of work organisation and thereby the quality of employment practice. The impact on the how academic conduct research into multinational companies is already detectable. The result of an invited conference held at Cornell University in September 2010 was that revised versions of the papers presented are currently under second review for a Special Issue of the Industrial and Labor Relations Review. In particular, we have generated considerable interest in our central contention that viewing the challenge that MNCs face in managing their international workforces as trading off the benefits of a global approach with those of a local one is extremely limiting. Rather, MNCs can integrate and differentiate their operations in a range of ways, with this interaction occurring within and across levels of the company. Crucially, some forms of integration imply more differentiation, not less. Accordingly, the research has shown that greater international integration and continued national distinctiveness are not incompatible; indeed, to the extent that MNCs differentiate the roles of subsidiaries to exploit national distinctiveness then they are consolidating rather than eroding differences between countries. Researcher should be senstive to the complexities of how integration and differentiation interact if they are to better understand how such firms manage their international workforces.

Moreover, the argument concerning the 'partially nested' nature of the relationship between our three levels within MNCs has generated considerable debate. The argument questions the notion that international HR strategy is neatly linked to business configuration and corporate structure; rather, it appears that the links between levels are some way from complete. The nature of control over employment matters and the determination of employment practice is of course strongly influenced by the character and role of the HR function in MNCs, but these issues operate according to a logic which is only partly connected to business strategy, operational configuration and internal structures of management organization.
Sectors Pharmaceuticals and Medical Biotechnology

Description Big players, different rules? : multinational companies and collective bargaining in Europe 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact A presentation to the European Trade Union Institute monthly Forum

Section not completed
Year(s) Of Engagement Activity 2010,2019