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Emerging challenges and trends for the corporate HR function in multinational enterprises (MNEs) Peter J. Dowling Ph.D Professor of International Management.

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Presentation on theme: "Emerging challenges and trends for the corporate HR function in multinational enterprises (MNEs) Peter J. Dowling Ph.D Professor of International Management."— Presentation transcript:

1 Emerging challenges and trends for the corporate HR function in multinational enterprises (MNEs) Peter J. Dowling Ph.D Professor of International Management & Strategy Department of Management La Trobe University Melbourne, Australia Peter J. Dowling Ph.D Professor of International Management & Strategy Department of Management La Trobe University Melbourne, Australia

2 Asymmetric threats In relatively common usage today, asymmetric threats are those that our political, strategic, and military cultures regard as unusual. Such threats differ significantly in character both from those that we anticipate facing from putative enemies and from the methods with which we plan to menace them… the endeavor to define asymmetric threats has proved generally unproductive. Borrowing from the terrorism case, the most fruitful approach to the better understanding of asymmetric threats is not via a forlorn quest for the perfect definition, but rather by the identification of the principal characteristics of, and corollaries to, asymmetry. Source: Colin S. Gray Thinking asymmetrically in times of terror. Parameters, Spring Issue.

3 Asymmetric threats tend to be * Unusual in our eyes. * Irregular in that they are posed by instruments unrecognized by the long-standing laws of war. * Unmatched in our arsenal of capabilities and plans. Such threats may or may not appear truly dangerous, but they will certainly look different from war as we have known it. * Highly leveraged against our particular assets – military and, probably more often, civil. * Designed not only to secure leverage against our assets, but also intended to work around, offset, and negate what in other contexts are our strengths. Source: Colin S. Gray Thinking asymmetrically in times of terror. Parameters, Spring Issue.

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5 Globalization and terrorism The emerging focus on globalization and terrorism at government level has lead to the ‘globalization of intelligence ʼ with a worldwide emphasis by governments and security agencies on global security and counterterrorism. Globalization in this sense is a consequence of terrorist threats, and trends of ʻ homogenization ʼ and ʻ international standardization ʼ of counterterrorism intelligence are evident, indicating cross- border coordination and cooperation to maximize effectiveness. Source: Svendsen, A. (2008). The globalization of intelligence since 9/11: frameworks and operational parameters. Cambridge Review of International Affairs, 21 (1),

6 Private sector responses to terrorism and asymmetric threats Private sector enterprises (domestic and international) need to consider how best to respond to these significantly changed circumstances. In a paper examining threats to MNEs, Tan and Enderwick (2006) note that: “threats do not simply affect a firm’s operating conditions, but also its overall viability, as they can cause severe disruptions, threatening the very survival of the firm. Accordingly, new strategies for managing this type of threat are required and they cannot be avoided by simply deciding not to invest in a particular country, or by using strategies centered on host governments.” (p. 519) Source : Tan and Enderwick, 2006, Managing threats in the global era: The impact and response to SARS. Thunderbird International Business Review, 48 (4),

7 Wernick (2006) has proposed an interesting list of measures of mitigation that MNEs can implement in terms of increasing resilience against political risk and terrorism. The measures are: 1. Including terrorism in existing risk models 2. Scenario planning 3. Stress testing of the firm’s value chain 4. Increased flexibility in supply chain management 5. Flexibility or contingency in transportation 6. Investigation into new foreign entry modes 7. Developing and strengthening international alliances and joint ventures 8. Decentralization of data systems for disaster recovery 9. Joining voluntary public-private supply chain security programs 10. Investments in technology relevant to security and flexibility Source: Wernick, D. A. (2006). Terror Incognito: International Business in an Era of Heightened Risk. In G. Suder (Ed.), Corporate Strategies Under International Terrorism and Adversity. Cheltenham, UK: Edward Elgar. Source: Judge, Douglas & Kutan, Journal of Management, 34, 2008 at page 777. Wernick (2006) has proposed an interesting list of measures of mitigation that MNEs can implement in terms of increasing resilience against political risk and terrorism. The measures are: 1. Including terrorism in existing risk models 2. Scenario planning 3. Stress testing of the firm’s value chain 4. Increased flexibility in supply chain management 5. Flexibility or contingency in transportation 6. Investigation into new foreign entry modes 7. Developing and strengthening international alliances and joint ventures 8. Decentralization of data systems for disaster recovery 9. Joining voluntary public-private supply chain security programs 10. Investments in technology relevant to security and flexibility Source: Wernick, D. A. (2006). Terror Incognito: International Business in an Era of Heightened Risk. In G. Suder (Ed.), Corporate Strategies Under International Terrorism and Adversity. Cheltenham, UK: Edward Elgar. Source: Judge, Douglas & Kutan, Journal of Management, 34, 2008 at page 777.

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9 The impact of “rising powers” from emerging markets on MNEs: BRICs and MINTs (and the G20 Most observers of international business are familiar with the concept of the BRICs (an acronym for the economies of Brazil, Russia, India and China). The term was first prominently used in a Goldman Sachs report from 2003, which speculated that by 2050 these four economies would be wealthier than most of the current major economic powers. More recently, the MINTs (Mexico, Indonesia, Nigeria, Turkey) have been suggested as possible alternatives to the BRICs as “rising powers” (see Sinkovics et al, Rising Powers from Emerging Markets – The Changing Face of International Business. International Business Review, 2014). IHRM scholars and HR managers in MNEs need to be cognizant of this development as we know from the International Business literature that rising economic powers produce Emerging MNEs (EMNEs) which can disrupt global markets.

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13 Chinese State-Owned Enterprises and risk behaviour An important recent study of Chinese OFDI by Buckley et al (2007) using official Chinese data collected between 1984 and 2001 empirically confirms the importance of the geopolitical context with a finding that Chinese behavior towards conventionally-measured host political risk differs from that of developed country investors (page 510). Summarizing their study the authors draw the following conclusion: China remains distinctive from other emerging economies in that many of its MNEs remain in state hands, even though corporatised in order to focus on commercial objectives. State direction means that these firms still align their operations, whether at home or abroad, with the five-year plans and national imperatives. This is a model that is not replicated, in any general way, in any of the other leading emerging economies. (page 514) Source:Buckley et al, 2007, The determinants of Chinese Outward Foreign Direct Investment, Journal of International Business Studies

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15 Which business functions are most important to MNEs? A Delphi study by Czinkota & Ronkainen (2008) found that the five business functions within MNEs that will have the most influence on global business in the future will be: 1. Logistics 2. Marketing 3. Human Resources 4. Finance 5. Communications Key upcoming issues identified were terrorism, globalization, corruption, cultural adjustment and information in descending order of importance. Source: Czinkota, M. R., & Ronkainen, I. A. (2008). Trends and indications in international business: Topics for future research. Management International Review, 49 (2),

16 International HRM and Small Population Advanced Economies [SPAEs] Any discussion of IHRM needs to take into consideration some important differences between large advanced economies and small population advanced economies (SPAEs). This is particularly the case with the United States which has a large population of just over 300 Million. However, the market available to US businesses is much larger due to the North American Free Trade Agreement (NAFTA) with Canada and Mexico which share contiguous borders with the USA. In effect, US firms have access to a free trade market of approximately 450 Million. Not surprisingly, the profile and importance of International Business is rather different in the US compared to SPAE countries such as Switzerland (population 8 M); Ireland (population 6 M); The Netherlands (population 17 M); Australia (population 23 M); New Zealand (population 4 M); and Sweden (population 8 M).

17 How are SPAEs different? The question of how SPAEs are different has been examined by a number of International Business scholars – especially through the pioneering work of the late Danny Van Den Bulke and his colleagues which focused on the study of small nations in the global economy: D. Van Den Bulke, A. Verbeke and W. Yuan (Eds.) 2009 Handbook on Small Nations in the Global Economy: The Contribution of Multinational Enterprises to National Economic Success. Edward Elgar, UK. Firms in a SPAE (both large and small) are motivated to look for cross-border business and a larger percentage of the workforce is involved with international business on a regular basis. This orientation to internationalization is also reflected in the national business press and the comments of leading politicians. University business education in a SPAE typically has many students (local nationals and foreign) looking to study International Business. The question of how SPAEs are different has been examined by a number of International Business scholars – especially through the pioneering work of the late Danny Van Den Bulke and his colleagues which focused on the study of small nations in the global economy: D. Van Den Bulke, A. Verbeke and W. Yuan (Eds.) 2009 Handbook on Small Nations in the Global Economy: The Contribution of Multinational Enterprises to National Economic Success. Edward Elgar, UK. Firms in a SPAE (both large and small) are motivated to look for cross-border business and a larger percentage of the workforce is involved with international business on a regular basis. This orientation to internationalization is also reflected in the national business press and the comments of leading politicians. University business education in a SPAE typically has many students (local nationals and foreign) looking to study International Business.

18 How are SPAEs different? Continued University business education in a SPAE typically has a strong emphasis on international business offering majors across key business disciplines such as Finance, Marketing and Management which incorporate international business content. Students may also opt to study a specific internationally-oriented degree such as a Bachelor of International Business. Such degrees typically offer IB study tours plus more traditional international student exchange programs. Firms in SPAEs typically look to offer promising younger staff the opportunity to gain international work experience because such experience is often a requirement for promotion to key positions in firms. Performance reviews often ask questions as to level of interest in an international assignment and younger staff understand that gaining international experience is of considerable importance for career advancement.

19 How are SPAEs different? Continued National governments of SPAEs tend to more actively monitor the activities of nationally-funded universities in terms of both programs offered and at the policy level. For example, in Australia the Federal Government regulates student exchange arrangements in universities by monitoring whether the two-way student exchange arrangements are balanced in terms of inward and outward student numbers. If the numbers are judged to be out of balance the exchange arrangement will be suspended and inward foreign students will be required to pay full international fees.

20 A recent example of research on SPAEs Dowling, PJ, Rose, E. & Donnelly, N Special Issue Editors: The Role and Importance of International Business in Small-population Advanced Economies. International Studies of Management and Organization. Published across two issues: Volume 43 (1) and Volume 43 (2).

21 What are the implications of these differences for a management academic working in a SPAE and teaching IHRM? There is a stronger expectation that academics teaching IHRM know something about International Business and can provide contemporary international and local examples about firms and IB trends relevant to the national economy. National context is regarded as very important so an I/O psychology view of the world will need to be supplemented by knowledge from International Management and/or International Business to better describe the context. In countries where there are significant numbers of international students on campus there is increasingly an expectation that academic staff should be able to provide examples from more than their home country context.

22 Future IHRM research needs to take a broader International Business view and explicitly focus on a strategic view of HRM in the context of the MNE and the contribution that the Corporate HRM function could make towards a better understanding of how MNEs can more effectively respond to the challenges of the 21 st Century. The Figure in the next powerpoint is an example of one possible approach to mapping the relevant variables.

23 A Framework of Strategic HRM in Multinational Enterprises ( De Cieri, H. & Dowling, P.J Strategic human resource management in multinational enterprises: Developments and directions. In G. Stahl, I. Björkman & S. Morris, (Eds.) Handbook of international HRM research. (2 nd edn.) Cheltenham, UK: Edward Elgar, pp ) HR Function Global corporate HR role  HR practices  Crisis management and coordination MNE Performance  Financial performance  Social performance  Enterprise resilience Organizational Factors  MNE balance of global integration and local responsiveness  MNE structure Firm size and maturity MNE strategy  Corporate governance  Headquarters’ international orientation  MNE culture External Factors PESTLE  Organizational links with other MNEs and with national governments  Asymmetric events  Environmental dynamics


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