Novela transmedia y círculo de lectura enriquecido 90

The literature on the diffusion of practices within MNCs has produced some mixed, even contradictory, findings. For instance, some studies have shown broad similari-ties between the employment practices of foreign and local firms in a given national economy, while others have revealed marked differences that are attributed to diffu-sion from the centre of MNCs. Perhaps the best illustration of this is in Ireland where the work of Turner et al. (2001), which suggests that foreign-owned firms have adapted their approach to fit in with the Irish system of industrial relations, contrasts sharply with other research by Geary and Roche (2001), which claims that the employment practices in foreign firms differ significantly from those in Irish firms.

How can we make sense of such contrasting findings? One approach is to recognize that not all MNCs will look to diffuse practices across borders but that some key orga-nizational features make it more or less likely to happen. We adopt this approach, focusing on key features of MNCs and their environment that give rise to what we term the ‘facilitating characteristics’ that promote diffusion.

The first of these is a feature of MNCs of which we have already stressed the importance – the country of origin. As argued above, MNCs from countries that have been economically successful have an incentive to diffuse those practices that are seen as having contributed to this success to their foreign subsidiaries. Hence, this promotes forward diffusion. Thus there is evidence that many US MNCs transferred

‘Taylorist’ forms of work organization and formalized payment systems to their European subsidiaries in the post-war period (e.g. Kogut 1991). More recent evidence reveals that many US MNCs transfer practices designed to increase the ‘diversity’ of their workforces, such as quotas on women in management positions and equal treat-ment for homosexual employees, apparently in the belief that such diversity policies form a part of the firm’s competitive advantage (Ferner et al. 2004). Similarly, in the 1980s many Japanese MNCs sought to implement ‘lean production’ and its associ-ated HR practices, such as teamworking and employee involvement in maintaining quality standards, in their European and North American subsidiaries. We can see this as testifying to the way that a country of origin gives senior management the incentive to diffuse practices from their home base. MNCs originating in countries lower down the hierarchy within the international economy, on the other hand, also have the incentive to diffuse practices across borders, but in their case practices that are diffused are more likely to come from their foreign subsidiaries.

A second structural factor that affects the extent to which diffusion occurs is the nature of a multinational’s international management structures. In particular, a IHRM_C05.QXD 11/10/05 4:08 pm Page 100

structure that is based on national units, which Porter (1986) calls ‘multi-domestic’, limits the contact between actors in different countries, thereby constraining the scope for diffusion. In contrast, a structure that is based around international product divisions, which Porter terms ‘global’, deepens the linkages across borders within the firm. In the personnel/HR function, Marginson et al. (1995) have shown that MNCs with a global structure are more likely to have regular meetings of personnel man-agers across their sites, to have an international personnel policy committee and to promote the mobility of staff through international assignments. All of these struc-tures have the potential to act as mechanisms through which diffusion occurs. Thus, while a multi-domestic structure limits the scope for the cross-border diffusion of practices, a global structure promotes such diffusion. Many MNCs have moved towards adopting a matrix structure in which international divisions coexist with regional aspects to the structure, normally based around continents. This type of matrix deepens international managerial structures along two dimensions, providing significant scope for the transfer of practices.

Third, the method by which an MNC has grown can have a significant impact upon the likelihood that it will engage in cross-border diffusion. In general, the con-straints facing management at the HQ in transferring practices to foreign subsidiaries are greater where the subsidiaries have been acquired. This is because the firm inher-its a pre-existing set of practices that may prove difficult to change, and also because the act of acquisition itself may create suspicion and resistance among employees in the acquired units. In firms established through investments on ‘greenfield sites’, on the other hand, management has greater freedom to introduce practices in operation in other countries. Accordingly, the evidence suggests that MNCs that seek to imple-ment a set of practices that diverge from ‘norms’ in a particular country grow mainly through greenfield investments in order to facilitate this diffusion.

So far, the discussion has centred on the assumption that senior managers in MNCs will want to diffuse practices across borders but will be constrained from doing so. The country of origin shapes their inclination to diffuse practices across borders, and the firm’s structure and method of growth affect the strength of the constraints they face. However, there is a further factor that is arguably more important in shap-ing whether senior managers in MNCs want to diffuse practices in the first place: the extent to which processes of production and service provision are integrated on an international basis. Some MNCs are not integrated internationally in that their units in different countries operate independently of one another and perform quite differ-ent functions. This is the case in conglomerates where there is a high degree of diversification. The lack of integration limits the potential for diffusion since tech-nologies and patterns of work organization differ significantly.

Where international integration does take place it can take two primary forms, each of which has quite different implications for the diffusion of practices. One of these is standardized production in which units in different countries perform very similar opera-tions. Examples of this are the large consultancy firms such as Accenture and the firms providing IT services such as IBM, which are increasingly offering standardized services in different countries. In this case, the HQ has a clear incentive to diffuse practices

Part 2 • The diffusion of international HRM in multinational companies

across its operations in order to apply lessons learned in one unit to other units in the company and to develop common policies to encourage the mobility of staff across their operations. Hamill (1984) shows how standardized production is associated with centralization of decision making on industrial relations issues within MNCs, which is likely to result in the transfer of practices, and Marginson et al. (1995) argue that it pro-motes the development of common policy approaches to labour management.

The other variant of international integration is segmented production, which involves units in different countries performing distinct functions within a corporate production process. The way in which this form of integration occurs has been described by Gereffi (1999), who has developed the term ‘global commodity chains’ (GCCs). Gereffi distin-guishes between two types of GCC. First, ‘producer-driven commodity chains’ are ‘those in which large, usually transnational, manufacturers play the central roles in coordinat-ing production networks’ (see Figure 5.1). These are characteristic of capital and technology intensive industries such as cars and computers. The way in which the Japanese motor firms have broken up the production of a car so that different parts of the process take place in different Asian countries is an example. Second, ‘buyer-driven com-modity chains’ are ‘those industries in which large retailers, designers and trading companies play the pivotal role in setting up decentralised production networks in a vari-ety of exporting countries’ (see Figure 5.2). This type of chain is found in labour-intensive consumer goods sectors such as clothing, housewares and consumer electronics. Firms like Nike and The Gap have established this sort of chain. The key aspect of both types of chain is that the incentive to diffuse practices is limited; since the functions performed in different countries are quite distinct from one another, there will be little advantage in developing standardized employment practices.

The way in which segmented production leads to quite different patterns of employment relations in different parts of a production process is evident in studies of Japanese MNCs. For instance, Wilkinson et al. (2001) studied the plants in Malaysia and Japan of two producer-driven chains controlled by Japanese firms and found that the differences in the organization of work and related HR practices

‘largely reflected the position of the plants in the international division of labour’

Producer and

driver Distributors

Suppliers Retailers

Figure 5.1 Producer-driven chains

Buyer and driver Distributors

Suppliers

Figure 5.2 Buyer-driven chains IHRM_C05.QXD 11/10/05 4:08 pm Page 102

(2001: 686). The Malaysian plants were characterized by: short cycle times; a highly disciplined, cheap and largely unskilled workforce; workers performing a repetitive, narrow range of tasks; little in the way of employee development; and the absence of union representation. In the Japanese plants, in contrast: there was more research and development (R&D) and more ‘experimental’ work; the workforce was better qualified and better paid; workers were engaged in process improvements and in

‘multitasking’; training involved induction followed by six-month on- and off-the-job programmes; and the plants were all unionized. These differences by plant meant that the scope for diffusion of ‘best practice’ was mainly confined to the technical aspects of the organization of production. While there are obviously some HR conse-quences of transfer in this area, the cross-border diffusion of practices did not extend to areas such as recruitment, payment systems, development or representation.

This approach to identifying the factors that promote or hinder the transfer of practices has been ‘structural’ in that it has focused on key organizational characteris-tics and highlighted the way in which the cross-border transfer of practices is more likely to occur in some MNCs than in others. The country of origin, the way a multi-national is structured, the way in which it established its foreign subsidiaries and the nature of production integration all either constrain or facilitate the transfer of prac-tices across borders. Hence, this approach is potentially more productive than those that group all MNCs together and compare them with local firms. However, one weakness in the approach is that it risks implying that outcomes, in this case the dif-fusion of practices, follow unproblematically from environmental and organizational factors. As argued in Chapter 4, we should not assume that actors in the HQ can exert control over their international operations; rather, the authority of the HQ is com-monly contested and challenged. Thus the structural approach should be complemented with attention to the way in which organizational actors at a variety of levels exercise choices, which may either encourage or obstruct diffusion. This

‘political approach’ highlights the ways in which organizational actors can draw on their sources of power in order to further their own interests, and it is revealing about the processes through which diffusion takes place.