International Human Resource Strategy and Control: The Case of Multinationals and Their Subsidiaries

This study examined the relationship between International Human ResourCe (IHR) Strategy and International Human Resource Control. To do so, Jarillo and Martinez's (1990) framework for parent--subsidiary business strategy was recast into an llIR strategy context and Snell's (1992) conceptualization of control in the supervisor--subordinate relationship was extended to the parent--subsidiary setting. Data from 100 subsidiaries and their parents showed that subsidiaries adopt one of three (receptive, active, or autonomous) IHR strategies. In addition, the data demonstrate that a globally integrated IHR strategy is associated with tighter control over the subsidiary's selection, performance evaluation, and reward systems and looser control over the subsidiary's training and socialization system when contrasted with a more locally responsive IHR strategy. IHR Sp1ltegy and IHR Control paplsmj,doc 2/28194 Page 3 INTRODUCTION AND SUMMARY The past decade has seen an increasing interest in "International Human Resource Strategy" as one of the newest subfields of Human Resource Management (pucik, 1984; Doz and Prahalad, 1986; Adler and Ghadar, 1989; Milliman and Von Glinow, 1991). Oflate, one stream in this research domain has even begun to explore the link between international human resource (lliR) strategy and overall corporate strategy. To date, however, this research has tended to be conceptual, focusing nearly exclusively on overall corporate strategy, IHR strategy, or the· intersection of the two. The relationship between IHR strategy (the decision to standardize or localize) and IHR control systems (those policies and practices adopted to govern a subsidiary) has been neglected. To address this gap, we define, measure, and then analyze the relationship between IHR strategy and lliR control. At present, a framework to analyze the IHR strategy--IHR control relationship does not ~ .. . . exist. This is the case, even though some argue that multinationals should be thought of as internally differentiated interorganizational networks (Ghoshal and Bartlett, 1990). Indeed, some even assert that the MNC's headquarters and its collection of national subsidiaries comprise a network of geographically disperse and goal disparate organizations. Moreover, there are those who say that such an interorganizational networkr~sides within a larger external network made up of other stakeholder groups (including customers, suppliers, and regulators) with whom the multinational and its subsidiaries must interact. Accordingly, there are many who suggest that when it comes to managing their human resources, MNCs need to balance consistency and standardization against the need to adapt to the varied cultures and countries in which they are operating (Adler, 1986; Laurent, 1986; Schneider, 1988; Sheth and Eshgi, 1989). In fact, nearly half of the MNCs surveyed by Dowling (1989) reported that they use different HRM approaches from subsidiary to subsidiary. Considering findings like this, the need for a framework to categorize different HR strategies at the subsidiary level is readily evident.