International Management

Case studies

Multinational companies (MNCs) in comparative context

Professsor Tony Edwards was the Principal Investigator on a major comparative study of the employment relations practices of multinational companies. The project enhanced current understanding of how multinational companies (MNCs) manage their international workforces.

While previous surveys had been limited in their remit and coverage, the first phase of the project created a unique comparative dataset of the employment practices, and the forms of control over them, in MNCs in four countries (Spain, Ireland, Canada and the UK), while the second phase added data from the Nordic area Australia, Mexico, Argentina and Belgium.

The Surveys

Parallel surveys in each country were created collaboratively by the research teams, devising equivalent questions to allow the same phenomena to be explored, whilst taking account of national context. The same criteria were used to identify the survey population in each country and rigorous checking processes adopted in establishing each national population list.

The questionnaire was designed in English (the working language of the international team) and translated into the home language(s) of the survey country. Back-translation was undertaken to maintain equivalence. The dataset leant itself to two modes of comparative analysis. Model 1 involved parallel multivariate analyses, partitioning the dataset according to host country, while Model 2 involved pooling data and carrying analysis with the host country as a variable.

The Findings

While previous research was locked into a simplistic assumption that MNCs face a global-local trade-off, we have gone beyond this by developing a new conceptual framework identifying different levels at which companies face decisions about integrating and differentiating their operations and practices. Viewed through this lens, there is no simple trade-off between global and local issues; rather, some forms of integration imply more, not less, differentiation. We have also explored the links between these levels and shown them to be ordered in many respects, but less than completely so. The implication is that the HR function operates to a logic that is only partly determined by broader corporate strategy and structure.
We highlight five more specific findings:
  • First, levels of integration amongst MNCs 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.
  • 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. 
  • 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 what are known as ‘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-USowned 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. 
The unprecedented nature of the dataset have allowed the research team to develop a number of high profile publications in journals such as Human Relations, Industrial and Labour Relations Review and Journal of International Business Studies.
For a summary of the project, see Edwards, T, et al (2012) Surveying Employment Practices of Multinationals in Comparative Context: Integrating and Differentiating National Systems ESRC End of Award report, RES-062-23-2080.