HRM International HRM IHRM Issues That Occur

HRM

International HRM

IHRM issues that occur when organizations undertake cross-border mergers, acquisitions and international joint ventures

Globalization of economic systems has created a new business environment in the last couple of decades. This trend is largely driven by international trade and multinational corporations expanding crossed international borders. One consequence of this trend is that many multi-national corporations (MNCs) have created an international culture of business that is shared to some extent in most corners of the globe. When an MNC mergers, acquires, or forms a joint venture in a new market then this acts to create a mix of cultures in that new organization and its people. The new culture that arises tends to have many elements of the broader international business culture. Although this trend has been heavily fostered by the business community, it also has spilled over to also affect various social and political norms.

The trend has also made possible a greater level of standardization that can create efficiencies. In many business schools around the world students are taught to adapt to the global practices that are found in the modern environment. If they cannot adapt because of individual preferences then they at least taught to be tolerant and respectful of the business culture in different regions. Communication capabilities have also worked to standardize many processes through technological developments, such as the implementation of ERP system that can manage to track data of a large international corporation. However, many other business functions such human resources have also recognized the benefits gained from standardization through the development of a global set of best practices. Despite the tendency to want to shift towards standardization, it doesn't necessarily work in each situation and in some cases the push for standardization can actually be counterproductive.

International Knowledge Transfers

One factor that influences the success or failure in a merger, acquisition, or strategic partnership is how well knowledge transfers in an organization across international borders. Sometimes there are stark cultural differences that can inhibit training or knowledge sharing and in other cases the information flows more freely. Organizations that can transfer knowledge more effectively are obviously in an advantage in foreign markets. One study has identified that the absorptive capacity of knowledge transfer is correlated with the employees' abilities and willingness to learn (Minbaeva, Pedersen, Bjorkman, Fey, & Park, 2003). It is sometimes easy to pin responsibility for transfers on the parent company yet each side must be suited for collaboration.

Furthermore, knowledge transfer isn't limited to a one directional route from the MNC to the subsidiary either. In many cases knowledge of specialties in design or operations can also pass from the subsidiary to the parent company. It is actually fairly common for foreign partners to operate more efficiently in many areas of operations than the parent company. The most effective international companies are fully aware of this fact and are constantly scanning for potential improvements from any source internally or from external partners. Many countries have competitive advantages in industries in which they specialize. For example, Japan has a high tech orientation while China is becoming the manufacturing hub for practically the entire industrialized world.

One study looks at how various American and European MNCs have worked to integrate subsidiary operations in Japan (Simonin & Ozsomer, 2009). The study emphasized many cases in which the acquired firm operated in ways that were more efficient than the parent company in regards to various business processes. In some cases these processes were absorbed by the parent organization and then spread globally. In this case learning orientation was also a key factor. Yet included members of management from the parent company as well because they had to identify the superior processes in which they then worked to backwards integrate.

Cultural Barriers