International Human Resource Management IHRM Chapter 3 International Human Resource Management Managing people in a multinational context The context of cross-border alliances and SMEs

Chapter Objectives We learn about: Global perspective on IHRM with external partners Cross-border alliances Equity-based alliances (M&As, IJVs) Globalizing SMEs IHRM Chapter 3

Terms pre-M&A due diligence integration planning M&A IJV SME non-equity cross-border alliance equity modes merger acquisition born globals boundary spanning positions pre-M&A due diligence integration planning implementation planning resources processes values M&A IJV UNCTAD TNC IHRM Chapter 3 3

Equity and non-equity modes of foreign operation Figure 3-1 Equity and non-equity modes of foreign operation IHRM Chapter 3 4

The formation processes of M&As and HR challenges Figure 3-2 The formation processes of M&As and HR challenges IHRM Chapter 3 5

Mergers and acquisitions in US billions Figure 3-3 Mergers and acquisitions in US billions IHRM Chapter 3 6

Typical cross-border M&A problems Within first year of merger, up to 20% of executives may be lost. Over a longer time frame, this tends to increase even further. Personnel issues are often neglected. A high number of M&As fail or do not produce the intended results. IHRM Chapter 3 7

Impact of the human integration and task acquisition on acquisition outcome Figure 3-4 IHRM Chapter 3 8

HR activities in the phases of a cross-border M&A Figure 3-5 HR activities in the phases of a cross-border M&A IHRM Chapter 3 9

Post-acquisition trends in HRM practices Table 3-1 Post-acquisition trends in HRM practices IHRM Chapter 3 10

Formation of an international equity joint venture Figure 3-6 Formation of an international equity joint venture IHRM Chapter 3 11

The main reasons for engaging in an IJV To gain knowledge and to transfer that knowledge Host government insistence Increased economies of scale To gain local knowledge To obtain vital raw materials To spread the risks (e.g. share financial risks) To improve competitive advantage in the face of increasing global competition Provide a cost effective and efficient response forced by the globalization of markets IHRM Chapter 3 12

IJV development stages and HR implications Figure 3-7 IJV development stages and HR implications IHRM Chapter 3 13

Table 3-2 SME definition IHRM Chapter 3 14

Top 10 barriers to international markets by SMEs Shortage of working capital to finance exports. Identifying foreign business opportunities. Limited information to locate/analyze markets. Inability to contact potential overseas customers. Obtaining reliable foreign representation. Lack of managerial time to deal with internationalization. Inadequate quantity of and/or untrained personnel for internationalization. Difficulty in managing competitor’s prices. Lack of home government assistance/incentives. Excessive transportation/insurance costs. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. IHRM Chapter 3 15

SME employer image and internationalization Figure 3-8 SME employer image and internationalization IHRM Chapter 3 16

Learning in small organizations Figure 3-9 Learning in small organizations IHRM Chapter 3 17

Discussion Questions Describe the formation process of cross-border mergers, acquisitions and international joint ventures. What are the major differences? Describe the development phases of an M&A and the respective HR implications. Outline the development phases of an IJV and the respective HR implications. In which ways do cultural and institutional differences impact the HR integration in M&As and in IJVs? What are the barriers to internationalization for SMEs? What are some of the typical challenges for HRM in internationalized SMEs? IHRM Chapter 3 18