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JIBR
8,4
Integration-responsiveness
framework: Indian IT
subsidiaries in Mexico
278
Pramila Rao
School of Business, Marymount University, Arlington, Virginia, USA
Received 18 October 2015
Revised 19 May 2016
Accepted 8 August 2016
Abstract
Purpose – This qualitative case study research describes the human resource management (HRM)
practices of four leading Indian information technology (IT) subsidiaries located in Mexico. The
purpose of this study is to understand the implementation of these practices from the global
integration-local responsiveness perspective.
Design/methodology/approach – This study adopts a qualitative multiple case-design approach to
compare HRM themes across multiple cases. This research was conducted with HRM leaders from
December 2011 through August 2012. This research involved interviews with 50 per cent of the
population of Indian IT companies in Mexico. The interviews were tape-recorded and transcribed to
maintain the rigor of the research. This study also followed other guidelines to maintain validity and
reliability in research.
Findings – The results indicate that each function has to be considered independently because of
contextual factors. Recruitment and compensation are usually localized as cultural norms, and local
laws dictate following domestic practices. Performance management and professional development
follow the guidelines from the headquarters as these companies seek standardization of work-related
behaviors among their global employees.
Practical implications – This study provides preliminary guidelines for global IT practitioners who
may be interested in doing business in Mexico. This paper also details challenges and guidelines for IT
multinationals planning to establish in Mexico as articulated by the respondents.
Originality/value – This can be considered a pioneer research, as no other research papers (either
qualitative or empirical) have explored the HRM practices of Indian multinational subsidiaries in
Mexico. This paper thus provides a preliminary step in understanding this cross-cultural literature in
emerging markets.
Keywords Cross cultural management, Emerging markets, Global integration,
Local responsiveness
Paper type Research paper
Journal of Indian Business
Research
Vol. 8 No. 4, 2016
pp. 278-294
© Emerald Group Publishing Limited
1755-4195
DOI 10.1108/JIBR-10-2015-0111
1. Introduction
There is little research on HRM (human resource management) practices of
multinationals in emerging markets (Cappelli et al., 2011; Holtbrugge and Kreppel, 2012;
Khanna and Palepu, 2006). This paper addresses this paucity in the extant literature by
researching on leading Indian IT (information technology) companies established in
Mexico. Global consultants identify both India and Mexico as promising emerging
economies of the BRIC (Brazil, Russia, India and China) and MIST (Mexico, Indonesia,
South Korea and Turkey) cluster of nations. The information technology (IT) industry in
India is considered one of its blue chip and is recognized globally for its high standards
(Holtbrügge and Kreppel, 2012; Cappelli et al., 2011). Global practitioners need to be
cognizant of the HRM practices multinational firms should offer within the global
integration (GI) and local responsiveness (LR) framework in leading emerging countries
(Fan et al., 2008).
Scholars (Hamel and Prahalad, 1983; Bartlett and Ghoshal, 1989) have explored the
GI-LR (global integration-local responsiveness) framework from different perspectives.
Hamel and Prahalad (1983) introduced the concept of the GI-LR framework suggesting
that multinationals usually provide standardized or localized products and services.
Multinationals follow integration because of economies of scale, customers’ preferences
and coordination of subsidiaries. On the other hand, these firms follow responsiveness,
because of host country’s product/service preferences and resource advantages. Bartlett
and Ghoshal (1989) broadened this classification to identify a three-step typology for
different kinds of international firms. Global companies usually adopt high
standardization (integration), multi-domestic companies pursue high responsiveness
(localization) and transnational companies pursue both integration and localization.
This research is going to explore how this framework is implemented by Indian IT firms
in Mexico.
Multinationals in Mexico have pursued either local or home practices. US firms in
Mexico adopted local recruitment practices such as specifying age, gender and physical
attractiveness in their employment advertisements. Baker and McKensie, a US-based
law firm, in Mexico, specified for male applicants as the macho culture prefers its clients
being represented by men (Dickerson, and Mandell, 2006). On the other hand, Ramirez
and Zapata-Cantu (2009) provide evidence of how a Danish firm adopted an integrated
(global) management approach in its subsidiaries in Mexico. The company introduced
online personality tests for their hiring process, which was a common practice in its
headquarters office. In Mexico, any kind of employment testing is usually conducted by
hiring managers in a face-to-face environment. The recruitment culture does not endorse
providing online testing without any close supervision. (Ramirez and Zapata-Cantu,
2009).
Mexico is emerging as an IT leader in the Latin American region. In 2008, Mexico
received an outsourcing excellence award from the United Business Media and Gartner
Research Analysts for its outstanding contributions to the US outsourcing market
(Anonymous, 2008). In 2011, Mexico ranked sixth among 50 nations as the best
destination for offshoring. It proximity to the USA and strategic collaboration with key
stakeholders in both the domestic and global fields have led to this distinction (A.T.
Kearney Global Services Location Index, 2011). In 2013, Mexico also ranked ninth
among 28 countries as an attractive destination for foreign direct investment. These
merits suggest that Mexico is slowly being recognized in its regional and global markets
(A.T. Kearney, 2013).
Leading Indian IT companies (such as Infosys, Wipro and Mintdtree) have
established their subsidiaries in Mexico, creating a distinctive Indian cluster of firms.
Indian firms have chosen Monterrey as one of the prime locations because of the city’s
proximity to the US markets and also the presence of qualified talent. Mexico’s location
is also ideal for organizations to reach out to the Latin American IT market. The
government has introduced an initiative (Soft Landing) to attract foreign direct
investment that allows for partnerships among academe, government and private
businesses (Laszlo et al., 2008).
Indian IT
subsidiaries in
Mexico
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This study provides three contributions. It provides insights on how Indian
subsidiaries implement the GI-LR framework in one of their strategic industries (IT).
Second, it fills a gap, as research on this theme in Mexico has not been addressed in the
scholarly literature before. Finally, it provides valuable input to practitioners, as
respondents provide both recommendations and challenges for global IT firms planning
to establish in Mexico.
2. Theoretical framework: global integration-local responsiveness
strategy
Multinational organizations generally adopt global, local or hybrid strategies in their
overseas operations. Global practices provide standardization, integration and control
of organizational practices. A GI strategy further offers cost and operational efficiencies
as it emphasizes on economies of scale in production. Local responsiveness suggests
decentralization, sensitivity and responsiveness of firms’ practices. Localization also
allows multinational organizations to develop a strong host presence. Hybrid or
“multifocal” models offer a blend of integration and responsiveness that overlap both
the corporate and host country’s organizational practices (Fan et al., 2008; Girod et al.,
2010; Paik and Sohn, 2004).
Jackson et al. (2014) suggest that HRM practices in multinational corporations
(MNCs) is much more complex and cannot typically follow a two-dimensional outlook in
its implementation. These firms have to balance the needs of both external and internal
stakeholders from different societies. Thus, management practices of MNCs become
naturally contextual and may also result in hybrid models. Thus, studies of HRM
practices of international firms from different regions such as emerging economies will
only provide increased awareness in understanding the complexities of the GI-LR
framework (Jackson et al., 2014).
Meyer and Su (2015), in an empirical study of 345 subsidiaries in two emerging
economies (Poland and Hungary), suggest that the GI-LR framework cannot be
delineated into specific dimensions as earlier studies have typically done. Instead,
important contextual factors at the subsidiary level (talent, cost factors and competitive
advantages) have also to be examined in the final implementation of the MNCs’ strategy.
Similarly, Brewster and Suutari (2005) suggest that such conventional frameworks are
a challenge to implement, as MNCs have to pay attention to different external (industry,
legal and competitors) and internal (corporate culture) factors as they juggle between
global regions. This complexity often results in HRM practices becoming “glocalized” or
hybrid models (Friedman, 2006).
Multinationals often adopt “glocal” or hybrid models to juxtapose management
values from both the home and host countries. Budhwar (2012), in a qualitative study of
74 multinationals in India, provides evidence that these multinationals adopted hybrid
models. These firms introduced recruitment practices that had a combination of both
formal and cultural practices. For instance, the recruiting culture in India is tilted toward
adopting personal referrals with an emphasis on choosing applicants from similar social
backgrounds (such as religion and caste). This cultural practice of referring one’s family
and friends as prospective applicants continued; however, the corporate policy dictated
that these personal referrals undergo formal evaluations, such as interviews and tests.
The HRM leaders in this study indicated that such a cross-cultural integration of policies
was very successful, as both the involved parties (employers and applicants) were
satisfied with the hiring outcomes (Budhwar, 2012). Dr Teagarden, a global expert on
management practices in India and Mexico, refers to this method of imitating and
innovating new practices as “imovate” to satisfy all key stakeholders (Grossberg, 2012,
p. 12).
The literature is mixed on the effects of the GI-LR strategy on management outcomes.
In an empirical study of 230 Japanese companies in China, global integration policies
demonstrated positive results. Their integration formula allowed organizations to
pursue ethnocentric staffing (hiring executives from corporate office) and exercise better
control of their overseas employees. Japanese firms that had several distinct firm
advantages (international markets, manufacturing expertise, etc). tended to pursue an
integration strategy. The Japanese subsidiaries experienced both external (staying
ahead of competitors in the Chinese market) and internal advantages (sharing of
industry-specific knowledge) by following a GI strategy (Mao and Wang, 2007).
However, an over-standardized strategic approach has definitely caused problems
also. For instance, about 65 per cent of the Chinese multinationals have not been very
successful overseas, as they adopted an ethnocentric attitude, resulting in a lack of
sensitivity for local preferences (Fan et al., 2008). On the other hand, Sony, the Japanese
consumer company, considered extremely successful in Europe, moved its entire
operations from Japan to Germany to customize and respond to the local European
demands for their products and services. In this case, a local responsive strategy proved
very successful for the Japanese firm (Paik and Sohn, 2004).
3. Methodology
Jackson et al. (2014) suggest that qualitative studies provide more meaningful data.
First, the researcher has the opportunity to establish a rapport with the respondent,
which usually leads to sharing of relevant information. Second, the researcher can also
probe for any clarifications that may arise during the interview process. Finally, the data
can be sent back to the respondents to ensure and obtain accuracy of information. Thus,
this method is bound to yield purposeful data than those obtained from numbers and
surveys. These scholars recommend that researchers pursue qualitative methods that
are “practice-friendly” (pp. 36-37) to help enhance the current and future body of
knowledge of the HRM field.
3.1 Multiple-case study design
This study adopts a qualitative multiple-case study design to understand the HRM
practices of Indian IT subsidiaries in Mexico from the GI-LR framework perspective. A
subsidiary can be defined as an independent entity of the parent company that
integrates or localizes its operations based on its corporate strategy (Harzing, 2000).
Multiple cases increase the reliability of the research and reduce biases usually
associated with a single-case study. Several other studies (Holtbrügge and Kreppel,
2012; Olivas-Lujan et al., 2007; O’Sullivan et al., 2002) have used this method
successfully to get in-depth understanding of global practices. This method allows
researchers to interpret themes within specific companies and also provide contrasts
across multiple firms (O’Sullivan et al., 2002; Patton, 2002; Yin, 1994).
3.2 Sample
This study uses purposive sampling as the researcher contacted a comprehensive list of
Indian IT companies (eight companies) in Mexico (Federation of Indian Chambers of
Indian IT
subsidiaries in
Mexico
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Commerce and Industry, 2013). The HRM leaders of four companies responded
positively to the researcher’s request. This study was done via phone interviews from
December 2011 to August 2012. The interviews, conducted in English, were recorded to
ensure that respondents’ information was accurately transcribed (Patton, 2002).
3.3 Qualitative interviews
The questions adopted for these interviews were modified from Khilji’s (2003) research
on global integration and local responsiveness in a South Asian economy (please refer to
Appendix). The interviews lasted for about 60-90 min and were semi-structured. These
kinds of formats allow interpretations of the topic in respondents’ own words without
providing any bias in responses (Olivas-Lujan et al., 2007). The open-ended questions
were sent to the participants ahead of time so that respondents could reflect and provide
accurate interpretations of their answers. The tape-recorded conversations were
transcribed immediately after the researcher heard the interviews several times to
understand the main themes. A summary of the interviews was sent to the informants to
ensure the accuracy of information. Subsequent e-mail and phone interactions between
the researcher and respondents were maintained to ensure exact comprehension of
interview material (Yin, 2003; Patton, 2002).
3.4 Respondents
The respondents of the companies were senior HRM leaders responsible for the design
and implementation of HRM practices in their companies. Table I provides a
demographic description of these four companies in Mexico (referred to as
Organizations A, B, C, and D henceforth) for full-time employees, number of employees
in the HRM departments and education backgrounds of the HRM leaders. The leaders of
these organizations have graduate degrees, suggesting qualified managers. These four
companies are considered leaders in the Indian IT industry. Patton (2002) and Yin (1994)
suggest that qualitative data provide rich organizational data, as the answers are
provided by the respondents experiencing the phenomenon in question. In this study,
the HRM leaders who were responsible for staffing, training, appraisal and rewards
functions were interviewed to understand the GI-LR framework better.
3.5 Construct validity and reliability
This study established methods to ensure the robustness of the study. Construct
validity and reliability were adhered to as suggested by research experts (Yin, 2003;
Silverman, 2000). Construct validity of data can be established either through
verification of information and also via triangulation of data. This research performed
both the methods to ensure accuracy in data. The transcribed interview data were sent
back to respondents to confirm that their content was captured correctly. This
Table I.
Demographic
information of Indian
IT subsidiaries in
Mexico
#
Company
1
2
3
4
A
B
C
D
No. of employees
500
84
2,100
200
Education of HRM leader
NA
Graduate degree
Graduate degree
Graduate degree
No. of HRM employees
3
1
20
4
investigation also confirmed triangulation of data by corroborating the interview
information from other secondary sources (such as scholarly, non-scholarly and
institutional). Databases such as ABI Global Inform, Business Source Complete, Google
Scholar, etc. were thoroughly searched to ensure credibility of information (Jack and
Raturi, 2006).
Reliability in qualitative research can be achieved by selecting multiple cases and
following a systematic thematic analysis. This study adopted both these strategies. It
analyzed multiple cases (four) which represented 50 per cent of the population of Indian
IT companies in Mexico. It implemented a methodical interpretation of data by
following reduction, summarization and interpretation. Data reduction involves
reducing the raw data of the respondents into meaningful categories or themes that are
relevant to the research questions. Data summaries include creating a matrix of the
identified categories to identify important patterns across the multiple cases (the data
were organized in a table format identifying themes across the multiple cases). Finally,
conclusion interpretation includes drawing meaningful synopses and outliers among
the multiple cases (Silverman, 2000; Guest et al., 2012).
4. Results
This section will provide the answers as provided by respondents to the questions
provided in Appendix. Respondents described whether the HRM practices in their
organizations were standardized, localized or blended. The respondents were also asked
to identify guidelines and challenges for companies planning to establish in Mexico.
These last two questions were included to provide new information not addressed in the
literature before (Girod et al., 2010). The companies will be referred to as Cases A, B, C
and D henceforth. All the comments provided in these sections titled as “Cases” are the
answers as provided by these four respondents.
4.1 Case A
This subsidiary has 500 employees and was established in Mexico in 2007. The
corporate company is considered one of the leading IT companies in India. The HRM
leader from Mexico was trained in India for a month to completely understand the
Indian corporate HRM practices. The hiring process in this subsidiary was modified to
adapt to the local standards. In India, most entry-level engineers are hired from college
campuses, whereas in Mexico, this is not considered a recommended recruitment source
for engineers. Lateral hiring was followed in Mexico, and entry-level employees were
recruited from other companies based on their education qualifications and work
experiences. Indian expatriate engineers provided training for new employees for
almost three months in Mexico. The Mexican and Indian leaders also provided
cross-cultural training to their employees to understand common business practices of
both the cultures. Performance management included 360° or multi-rater feedback and
a management-by-objective (MBO) goal setting process established by the corporate
office. Compensation and benefits followed a strong local flavor as the practices of
aguilnado (providing employees Christmas bonus) and profit-sharing (10 per cent with
employees) are mandated by Mexican federal laws. The company also provided
employees food and grocery coupons, as most Mexican organizations provide such
fringe benefits to their employees. Employees received vacation benefits as mandated
by the laws of getting six days for every year worked. Severance practices follow local
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standards, and employees were provided with three months of severance pay and at
least four weeks of notice before termination.
The HRM leader identified the following guidelines for global practitioners. First,
complying with federal laws is very important when establishing in Mexico. Second,
understanding the cultural work values is vital for companies to be successful in
Mexico. Finally, the IT business market in Mexico should be analyzed and examined
thoroughly. The main challenges for IT multinationals establishing in Mexico is to
find qualified bilingual talent (Spanish and English). The Mexican law requires that
90 per cent of employees should be Mexicans and only 10 per cent can be foreign
employees. This can be a challenge, as, sometimes, the local workforce might not
have the qualified talent. Multinationals have to be cognizant if they adopt an
ethnocentric staffing approach that is consistent with the requirements of the local
laws.
4.2 Case B
This company has 84 employees and was established in Mexico in 2008. The company
is trying to establish its brand name in Mexico so that it can attract a large number of
applicants. The recruitment process currently focuses on hiring senior and
mid-management employees, whereas entry-level work is outsourced. The organization
is hoping to implement similar recruiting strategies (college campuses) as it does in
India for entry-level employees as soon as it establishes its name in the Mexican market.
Technical training for the local engineers is conducted by expatriate Indian engineers.
The content of the training is also translated in Spanish so as to ensure that nothing is
lost in translation. The organization offers English-language training to its employees to
maintain one business language among its subsidiaries. The HRM leader commented on
the differences in approaches to employee training between the Indian corporate and its
Mexican subsidiary. For instance, the company offers several self-development learning
opportunities for their Indian employees who pursue such initiatives enthusiastically.
However, the Mexican employees were not as motivated as the Indian employees to
pursue individualized or e-learning. The interpretation by the HRM leader was that the
local employees did not feel the need for professional developmental opportunities
unless monetary incentives were offered.
The firm adopts the format of appraisal instruments provided by the corporate and
also uses the 360° multi-rater feedback. However, the HRM leader observed that the
appraisal process has been challenging, as employers and employees tend to form a
close bond blurring the objectivity of the appraisal process. Further, the method of
delivering feedback is important in Mexico, and Indian managers are trained to
understand this cultural process. Compensation practices are localized to the domestic
laws. Employee termination is very costly, especially at the senior levels. Thus, hiring of
senior and mid-management employees is an elaborate process to ensure that right
talent is hired.
The HRM leader provides two recommendations for global practitioners. First,
interpersonal relationships play a very important role in the Mexican culture, as local
business leaders know one another very well. Maintaining and developing strong
business connections should be considered an important strategy for multinationals.
Second, Mexican managers have to be closely managed as they may lose focus of work
projects if personal issues (such as family or friends) take precedence. The HRM leader
suggested asking for weekly feedback or having regular follow-up meetings to
overcome such cultural challenges. The two primary challenges in establishing in
Mexico was language barriers and cultural work differences.
4.3 Case C
The organization has approximately 2,400 employees and established in Mexico in 2008.
The organization follows corporate guidelines for some of their HRM policies and
localized others to value local values and norms. In recruitment, background checks are
done on employees, which is a norm both in the Indian and Mexican recruitment culture.
However, Mexican organizations cannot investigate or ask about their applicants’
former salaries or previous performance data. However, in India, background checks on
applicants frequently include such characteristics (prior salaries and performances)
once the offer letters are made. Thus, the Indian subsidiary follows the Mexican norms
of not seeking this information from applicants.
The performance appraisals follow MBO administered by the corporate office. MBO
methods allow both employers and employee to mutually develop and plan their
performance goals for the year (Davila and Elvira, 2013). Employees are evaluated once
in six months and ranked among their respective departments after completing a year.
There are frequent discussions between subordinates and superiors regarding the goal
setting process. However, in Mexico, performance appraisal ratings cannot be linked to
salary increases and is adopted purely for developmental purposes. For instance, if
employees are performing mediocre or poorly, their annual salaries cannot be reduced to
reflect their performances. In contrast, in India, salary increases/decreases reflect
employees’ performances, making them accountable for their work outputs. In Mexico, if
employees are given increased TDRs (tasks, duties and responsibilities), Mexican
employees expect substantial increases in their salaries. In India, when employees’
TDRs are enhanced, these may or may not come with increased salaries. The
performance management practices are a hybrid of the Indian and Mexican
management models. The organization recognizes the importance of providing benefits
such as family-friendly practices as collectivist cultures (such as Mexico) value
spending time with their families. The organization provides “family days” with food
and games so that employees can bring their families to work, which is very important
in the Mexican work culture.
The HRM leader’s suggestions for global practitioners are that local practices are
strongly protected by the federal laws. Understanding the legal framework should be
the first step for multinationals establishing in Mexico. Second, work projects and
deadlines should be developed keeping in mind the local work culture and norms. For
example, Mexicans value work-life balance and will not work very long hours if it takes
away time from their families. Finally, the company should have a customized business
strategy to understand its IT market in Mexico.
The subsidiary did not encounter many challenges initially, as it was one of the first
companies to enter the Mexican market. However, job attrition is one of the current
challenges for entry-level and mid-management levels. It is approximately at 14-16
per cent, as several other global IT companies have established their presence in the
country.
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4.4 Case D
The organization has 200 employees and established in 2009. Recruitment follows
tapping into local sources (such as lateral hiring and referrals) to get the most qualified
talent. The referral system is known as “bring a friend” recruitment policy, which allows
internal employees to refer qualified applicants, a common recruiting practice in
Mexican firms. The employee who refers the applicant is paid if the new employee
remains for six months and demonstrates good performance. The technical training is
provided by Indian expatriate engineers and is usually for a month for entry levels and
one week for upper levels of management. The corporate provides an internal e-learning
system through which employees can constantly update their technical skills.
Performance management is managed by an online appraisal system (Feb-June) by
following the criteria provided by the Indian corporate.
Compensation practices are very much tailored to local norms and expectations. For
instance, employees are provided advances on their salary if they experience any
financial problems. Employees will repay the borrowed amount over installments, as
appropriate deductions are made to their paychecks. Medical insurance is paid 100
per cent by the company for its employees, as federally mandated medical benefits do
not cover for all medical procedures adequately. The company follows polices of
aguinaldo (Christmas bonus), profit sharing and vacation bonuses as mandated by the
law. Its generous provision of private medical benefits has allowed the company to
experience a very low turnover of 5 per cent in comparison to the industry average of
16-18 per cent. The company provides vacation times that display an awareness of both
cultures. The Indian and Mexican festivals of Diwali and Christmas and annual federal
holidays (such as independence days) are celebrated with a lot of camaraderie. The firm
also promotes corporate social responsibility practices of giving back to communities
and encourages employee volunteerism, as Mexicans really like being engaged with
their local communities.
Global leaders interested in doing business in Mexico should understand that its laws
protect its employees adequately. The challenges for IT companies establishing in
Mexico is finding qualified talent and also ensuring the required applicants speak
English. Expatriate Indian engineers also have to provide rigorous training for Mexican
engineers, as the locals frequently do not have the required technical skills.
5. Discussion
An important contribution of this research is that it demonstrates that each HRM
practice (recruitment and selection, and training and development) has to be considered
independently and examined in the local context before a global corporate HRM
strategy is chosen. HRM practices cannot be holistically implemented as either global or
local, as each function might have different contextual factors. In this multiple-case
study, training and development and performance appraisal were usually standardized
from the corporate office. These firms had Indian expatriates provide training to
Mexican employees, and performance management for all the companies followed the
criteria identified by the headquarters. On the other hand, the functions of recruitment
and compensation were differentiated largely because of cultural norms and legal laws.
Scholars (Brewster and Suutari, 2005; Hamel and Prahalad, 1983) suggest that
organizations may choose to integrate some functions and localize others. For instance,
global automobile organizations commonly standardize their manufacturing operations
and localize their marketing functions (Brewster and Suutari, 2005; Hamel and
Prahalad, 1983). This study provides evidence that departments (such as HRM) also
may have to identify separate strategies for its various functions (recruitment, training,
etc). and not consider it holistically.
MNCs have to thoroughly examine the environments of their subsidiaries before
implementing their final HRM strategies. Specifically, in this research, Indian expatriate
managers provide training to the local employees, as there is a shortage of talent in
Mexico. This supports the premise that firms that are not bound by any location-specific
advantages can integrate other critical resources from their corporate or other
subsidiaries (Meyer and Su, 2015). Scholars (Ulrich and Brockbank, 2005; Hatch and
Dyer, 2004) suggest that training and development are extremely important in
developing a firm’s competitive advantage. A competent and knowledgeable workforce
enhances the image and reputation of the company providing that unique knowledge
capital. In an international context, this becomes critical, as multinationals want to
maintain their global images and reputations. Global companies might also choose to
standardize their training and development, as the local talent may not be qualified for
the skills required. The HRM leaders in this study insisted that the Mexican IT industry
does not have the updated technical skills that the Indian companies are looking for.
These leaders also stated that Indian organizations provide extensive training to both
their front-line and management employees. For instance, Infosys, the leading IT leader
in India, offers elaborate training for about three and half months for their entry-level
engineers in India with subject tests and performance updates (Cappelli et al., 2011).
Many times, organizations step in to fill any talent gaps that exist in the labor forces;
Indian companies frequently act as surrogate universities and train their entry-level
employees extensively (Khanna and Palepu, 2006).
Cappelli et al. (2011) suggest that 70 per cent of the Indian companies track the
performance of the applicants they hire, making performance management a very
strategic imperative in Indian organizations. Therefore, it can be observed that all the
organizations in this case study followed the Indian corporate approach in appraising
their employees. Multinationals should be aware that local values play a strong role in
the administration of the performance management process. In Mexico, an objective
method of evaluation may not be feasible, as superiors and subordinates form close
bonds beyond those required of their jobs. Thus, subjective evaluations, as frequently
adopted in Mexico, might unfortunately not reflect a true picture of the employee’s
performance (Davila and Elvira, 2007). All the Mexican IT companies in this study
adopted either the multi-rater or the MBO methods. In a qualitative study on
international performance appraisals, it was identified that multi-rater feedback and
MBO methods are considered the best in appraising employees in multinationals, as
they help minimize any idiosyncratic factors of paternalistic management (Appelbaum
et al., 2011).
Linnehan and Blau (2003), in an empirical study of 345 Mexican employees,
suggest that adopting local recruitment practices led to reduced employee turnover
in Mexican manufacturing plants. Adopting host staffing practices also ensures
that the applicant’s skills, knowledge and abilities are appraised in the local context.
It also encourages a polycentric staffing approach of hiring local employees and
demonstrating sensitivity to developing local talent. Laroche (2002) brings home
this point when US multinationals establishing in France did not observe local
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recruiting criteria and lost qualified French applicants. The local French are valued
for the prestigious schools they graduate from, whereas US managers were looking
for specific technical skills (Laroche, 2002). German companies frequently use a
“supply-chain” philosophy for their staffing policies in their subsidiaries hiring
local talent wherever possible (Grossberg, 2012, p. 13).
The Mexican IT companies followed local practices of lateral hiring or referrals for
entry- and mid-level positions. The Indian corporate recruitment practices of hiring
entry-level engineers predominantly from top universities may not be applicable in the
local context, as Mexican universities may not have qualified IT talent. A cultural
characteristic also is that undergraduate engineers typically take up their first jobs as
technicians instead of engineers; this may reflect that their engineering curriculum is not
as robust as compared to other global engineering programs (Booth, 2012). Indian IT
companies also adopt elaborate cognitive testing (math and verbal) as a part of their
recruitment process for entry-level IT employees in India (Cappelli et al., 2011). These
methods might not translate well in the Mexican recruiting environment, as applicants
are not culturally used to such hiring methods (Dickerson and Mandell, 2006).
Finally, legal norms might strongly dictate that compensation practices follow local
laws. All the four case studies insisted that the compensation practices were completely
localized. Multinational firms should either hire local consultants or managers to
understand and follow the domestic legal framework thoroughly. The Mexican law
mandates several generous benefits to employees in annual sharing, aguinaldo, social
security, vacation bonuses, housing benefits and retirement funds. Multinational
practitioners should be mindful that employment practices, such as compensation, once
offered cannot be eliminated or minimized (Posthuma et al., 2000).
6. Conclusion
This qualitative research focuses on analyzing the HRM practices of leading
multinational Indian IT companies operating in Mexico. This study showcases HRM
practices of global companies in an important emerging market in Latin America. The
focus of most of the current research is to understand management practices of
multinationals in western nations (Khanna and Palepu, 2006).
This study makes three contributions to the human resources and global
management literature. First, this research identifies that Indian organizations in
Mexico standardize their training and performance appraisal practices and localize their
recruitment and compensation practices. This study provides valuable insights that
each HRM function should be considered exclusively and contextually before the final
HRM strategy implementation. Each HRM function has to be examined in the context of
the local environment before a strategy is finalized. For instance, in recruitment, the
local universities do not have the required talent that Indian colleges generally do. These
organizations thus hire the available talent following a localized strategy, but train these
applicants to global standards. Therefore, this study provides new findings and extends
the current body of knowledge of integration versus localization for global firms.
Further, there have been no earlier empirical or qualitative studies done on Indian IT
industries in Mexico with the GI-LR perspective. Thus, this research contributes
innovative knowledge on multinationals operating in emerging markets.
6.1 Managerial relevance
Second, this paper provides a framework and recommendations for global managers
planning to establish in Mexico from the GI-LR perspective (Table II). This table
identifies why certain HRM functions have to be standardized or localized. This
preliminary guidance may help practitioners understand better how to operate
effectively in emerging markets. Training practices for IT companies in Mexico have to
be integrated from the headquarters, as the local talent is not qualified to global
standards (Booth, 2012). Further, these companies can tap into these trained employees
as an important labor source in their other subsidiaries (Brewster and Suutari, 2005).
Performance management may also need to be standardized from headquarters, as the
collectivist culture makes objective assessments quite a challenge to implement. For
instance, the relationships between superiors and subordinates in Mexico lean toward
being paternalistic and nurturing, making an impartial process difficult (Davila and
Elvira, 2007). Hiring practices have to follow the local norms, as the domestic culture
might not be accustomed to other global assessments (such as cognitive tests and
behavioral interviews) that are common in other countries. Multinationals that hire
locally will find that it is not only cost-effective but also it demonstrates sensitivity to
#
1
Integrative
practices
Reason for global integration
Responsive practices
Training and
development
Local skills may not be available
or adequate
Recruitment and selection
Local talent may
not be used to
global hiring
assessments of
cognitive ability
tests
Encourages
polycentric
approach to
staffing
Compliance with
local laws
Compensation and
benefits
Compliance with
local laws
2
Facilitates better communication
across various business units
3
Training becomes
developmental as local
managers could be leveraged to
other subsidiaries
Ensures standardization of
performance among its various
global units
Local cultural practices might
blur objective evaluations
4
5
Performance
management
Indian IT
subsidiaries in
Mexico
289
Reason for local
responsiveness
Employees may
not work for
multinationals
that do not
provide benefits
that are
expected locally
Creates a strong
emotional bond
with the
employers
Table II.
GI-LR framework for
IT companies
planning to establish
in Mexico
JIBR
8,4
290
Table III.
Guidelines and
challenges for IT
multinationals
establishing in
Mexico
developing host talent (Shankar et al., 2008). Compensation practices also have to be
localized, as employees are accustomed to and expect local benefits (Posthuma et al.,
2000).
Third, this research provides “live” professional insights for multinational practitioners
planning to establish IT companies in Mexico (Table III). The researcher specifically asked
respondents what were some recommendations and challenges for IT leaders planning to
establish in Mexico. The HRM leaders recommend that legal laws, local values and
interpersonal relationships are critical elements for doing business in Mexico. The main
challenge identified was that the local IT talent may not have the required technical skills.
Thus, global firms may have to provide additional training for both their entry and lateral
hires through their expatriate engineers. This will definitely be additional costs for these
firms to consider in their strategic planning. In addition, language barrier was a problem, as
many locals did not speak English fluently. Multinationals may have to provide additional
training in conversational English, as many of these of engineers are required to interact
with a global workforce. Finally, as more global IT firms establish in Mexico, job-hoping is
becoming a valid concern in this industry. Multinationals have to design and implement
innovative reward practices (other than salaries) to ensure that the locals feel committed to
remain with these firms.
This research focuses on a nation predicted to be one among the new emerging
economies. Scholars (Khanna and Palepu, 2006) suggest a paucity of research of
multinationals in emerging markets. This study showcases high-profile Indian IT
multinationals operating in a leading emerging market. Goldman Sachs has identified
Mexico as a prominent emerging economy for the next decade. The MIST nations are
expected to offer excellent business opportunities for multinationals (Brent, 2009; Myles,
2012). Thus, this article discusses an important topic from a BRIC nation (India) in one
of the MIST (Mexico) countries (Holtbrügge and Kreppel, 2012).
This study is not without its limitations. The results are an analysis of four companies,
which is about 50 per cent of the population of the IT companies in Mexico. There are
approximately eight Indian IT companies in Mexico. The four companies included in this
study are considered topnotch leaders in the Indian IT industry. These insights might not
represent the perceptions of the entire population of the Indian IT industry. Also, there may
be a single-person response bias, as one HRM leader was interviewed from each company.
This article has scope for future researchers interested in the GI-LR framework who can test
#
Recommendations
Challenges
1
Maintaining legal compliance
2
Understanding local cultural values
3
Identifying the needs of the local market
4
Developing interpersonal relationships with
employees
Finding qualified work force in the IT
industry
Adopting a balanced staffing approach
between home and host nationals
Language barriers with Mexican
employees
Employee attrition as several
multinationals establish and provide
attractive compensation packages
5
Having a clear business strategy for the Mexican
market
whether these outcomes are valid. Cross-cultural researchers can compare this framework
from perspectives of other nations and identify similarities and differences in emerging or
developed markets.
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Appendix. Interview questions to HRM leaders adapted from Khilji’s (2003)
global study
• How many employees work in your organization?
• What is your job-title and educational background? (HRM leader in Mexico)
• How many employees are working in the HRM department (Mexico)?
• What was the role of the corporate office (India) in implementing the various HRM practices
in Mexico? (HRM practices: recruitment, selection, training, performance appraisal,
compensation)
• What HRM practices in Mexico have retained a strong local focus? (HRM practices:
recruitment, selection, training, performance appraisal, compensation)
• What HRM practices in Mexico have a hybrid (combination of both Indian and Mexican
practices) focus? (HRM practices: recruitment, selection, training, performance appraisal,
and compensation). Why?
• What do you see as similarities/differences between HRM practices of Mexico and Indian
companies?
• Does India have any standardized HRM policies that they want implemented in Mexico?
• What HRM guidance would you suggest for Indian companies trying to establish in
Mexico? What three suggestions would you provide?
• What were some of the challenges for an Indian company to establish in Mexico?
Corresponding author
Pramila Rao can be contacted at: prao@marymount.edu
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