This paper considers the process of globalisation and how this process shapes Multinational Corporations (MNC). It will outline how globalisation is affecting MNC’s International Human Resource Management (IHRM) strategies at four levels, global, regional, national and organizational. It will also consider which approaches can be used to analyse the effects of globalizations on MNC, in particular cultural and institutional theories. Lastly, the differences and similarities in employment relations systems will be outlined and considered. Throughout, it will look at how various MNC’s have responded to the challenges and opportunities of globalization using specific examples.
Concept of Globalisation
The concept of globalisation refers to the process of international integration arising from the interchange of worldviews, products, ideas and aspects of culture (Al-Rodhan, 2006). While globalisation is said not to be a new phenomenon, the speed and extent of globalisation has increased significantly over the past 20 years. Much of globalisation has been controlled by MNCs, and is being referred to as one of the largest, if not largest forces, affecting world economies at present (Stevens, 2007). However, it is important to stress that “the relationship between globalisation and MNC’s is not linear but interdependent – MNC’s are as much drivers of this process of globalisation as they are driven by it” (Donnelly & Dowling, 2010). The process of globalisation has, together with the expansion of international trade and growth of international capital markets, created what has been refereed to as a “broadening, deepening and speeding up of world-wide interconnectedness” (Held, McGrew, Goldblatt, & Perraton, 1999).
Global, regional, national and organisational effects
In order to understand the significant impact of globalisation on IHRM strategies and practices, the complex interrelationships between global, regional, national, and organisational effects provide four distinct levels of analysis. This paper focuses on the complex interaction between these four levels throughout. The global, regional and national effects set parameters within which organisations operate, whereas the organizational effects determine MNC’s specific subsidiaries strategies and practices (Edwards & Chris, 2011).
Two contrasting theories over the ‘global effect’ of globalisation are the convergence theory and divergence theory. Convergence theory holds that globalisation has lead to a homogenisation of products, services, managerial styles and consumers tastes as well as local differences in culture, and has create one ‘global culture’ (Morrell, n.d). Whereas, Divergence theorist maintain the opposite, holding that globalisation has led to greater differences across theseareas and that cultural diversity will “continue or even be reinforced by the rejection of superficial commonality” (Morrell, n.d). These two opposing theory’s are one of the key ongoing debates in literature over the ‘global effect’ of globalisation.
While some of the growing connections and linkages between national economies warrant the term global, others should more accurately be described as regionally focused. This refers to the influence of national culture and institutional effects that significantly influence IHRM decision-making processes due to the differences between home and host countries cultural systems (Roth, 1992). The implications for IHRM, is to recruit and retain employees with a regional outlook and focus so that processes align with the regional culture and institutions in the specific regions.
Although these global and regional trends are important, they do not fully take into account nationally distinct influences on MNC’s IHRM. The ‘national effect’ of globalisation on IHRM can be analysed in terms of the role of national systems in countries. This level of analysis looks at the distinctive differences between national systems and the role...
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