Emerging challenges and trends for the
corporate HR function in multinational
enterprises (MNEs)
Peter J. Dowling Ph.D
Professor of International Management & Strategy
Department of Management
La Trobe University
Melbourne, Australia
Asymmetric threats
In relatively common usage today, asymmetric threats are
those that our political, strategic, and military cultures regard
as unusual. Such threats differ significantly in character both
from those that we anticipate facing from putative enemies and
from the methods with which we plan to menace them… the
endeavor to define asymmetric threats has proved generally
unproductive.
Borrowing from the terrorism case, the most fruitful approach
to the better understanding of asymmetric threats is not via a
forlorn quest for the perfect definition, but rather by the
identification of the principal characteristics of, and corollaries
to, asymmetry.
Source: Colin S. Gray. 2002. Thinking asymmetrically in times of terror. Parameters,
Spring Issue.
Asymmetric threats tend to be
*
Unusual in our eyes.
*
Irregular in that they are posed by instruments
unrecognized by the long-standing laws of war.
*
Unmatched in our arsenal of capabilities and plans. Such
threats may or may not appear truly dangerous, but they will
certainly look different from war as we have known it.
*
Highly leveraged against our particular assets – military
and, probably more often, civil.
*
Designed not only to secure leverage against our assets,
but also intended to work around, offset, and negate what in
other contexts are our strengths.
Source: Colin S. Gray. 2002. Thinking asymmetrically in times of terror.
Parameters, Spring Issue.
Globalization and terrorism
The emerging focus on globalization and terrorism at government
level has lead to the ‘globalization of intelligenceʼ with a
worldwide emphasis by governments and security agencies on
global security and counterterrorism.
Globalization in this sense is a consequence of terrorist threats,
and trends of ʻhomogenizationʼ and ʻinternational standardizationʼ
of counterterrorism intelligence are evident, indicating crossborder coordination and cooperation to maximize effectiveness.
Source: Svendsen, A. (2008). The globalization of intelligence since
9/11: frameworks and operational parameters. Cambridge Review of
International Affairs, 21 (1), 129-144.
Private sector responses to terrorism and asymmetric
threats
Private sector enterprises (domestic and international) need to
consider how best to respond to these significantly changed
circumstances. In a paper examining threats to MNEs, Tan and
Enderwick (2006) note that:
“threats do not simply affect a firm’s operating conditions, but also
its overall viability, as they can cause severe disruptions,
threatening the very survival of the firm. Accordingly, new strategies
for managing this type of threat are required and they cannot be
avoided by simply deciding not to invest in a particular country, or
by using strategies centered on host governments.”
(p. 519)
Source: Tan and Enderwick, 2006, Managing threats in the global era: The impact
and response to SARS. Thunderbird International Business Review, 48 (4), 515536.
Wernick (2006) has proposed an interesting list of measures of mitigation
that MNEs can implement in terms of increasing resilience against political
risk and terrorism. The measures are:
1.Including terrorism in existing risk models
2.Scenario planning
3.Stress testing of the firm’s value chain
4.Increased flexibility in supply chain management
5.Flexibility or contingency in transportation
6.Investigation into new foreign entry modes
7.Developing and strengthening international alliances and joint ventures
8.Decentralization of data systems for disaster recovery
9.Joining voluntary public-private supply chain security programs
10. Investments in technology relevant to security and flexibility
Source: Wernick, D. A. (2006). Terror Incognito: International Business in an Era of
Heightened Risk. In G. Suder (Ed.), Corporate Strategies Under International Terrorism and
Adversity. Cheltenham, UK: Edward Elgar.
The impact of “rising powers” from emerging markets on
MNEs: BRICs and MINTs (and the G20 www.g20.org)
• Most observers of international business are familiar with the concept of the
BRICs (an acronym for the economies of Brazil, Russia, India and China).
The term was first prominently used in a Goldman Sachs report from 2003,
which speculated that by 2050 these four economies would be wealthier than
most of the current major economic powers.
• More recently, the MINTs (Mexico, Indonesia, Nigeria, Turkey) have been
suggested as possible alternatives to the BRICs as “rising powers” (see
Sinkovics et al, Rising Powers from Emerging Markets – The Changing Face of
International Business. International Business Review, 2014).
• IHRM scholars and HR managers in MNEs need to be cognizant of this
development as we know from the International Business literature that
rising economic powers produce Emerging MNEs (EMNEs) which can disrupt
global markets.
Chinese State-Owned Enterprises and risk behaviour
An important recent study of Chinese OFDI by Buckley et al (2007) using
official Chinese data collected between 1984 and 2001 empirically confirms
the importance of the geopolitical context with a finding that Chinese
behavior towards conventionally-measured host political risk differs from
that of developed country investors (page 510).
Summarizing their study the authors draw the following conclusion:
China remains distinctive from other emerging economies in that many of
its MNEs remain in state hands, even though corporatised in order to focus
on commercial objectives. State direction means that these firms still align
their operations, whether at home or abroad, with the five-year plans and
national imperatives. This is a model that is not replicated, in any general
way, in any of the other leading emerging economies. (page 514)
Source:Buckley et al, 2007, The determinants of Chinese Outward Foreign
Direct Investment, Journal of International Business Studies
Which business functions are most important to MNEs?
A Delphi study by Czinkota & Ronkainen (2008) found that the five
business functions within MNEs that will have the most influence on
global business in the future will be:
1. Logistics
2. Marketing
3. Human Resources
4. Finance
5. Communications
Key upcoming issues identified were terrorism, globalization, corruption,
cultural adjustment and information in descending order of importance.
Source: Czinkota, M. R., & Ronkainen, I. A. (2008). Trends and indications in international
business: Topics for future research. Management International Review, 49 (2), 249266.
International HRM and Small Population Advanced
Economies [SPAEs]
• Any discussion of IHRM needs to take into consideration some
important differences between large advanced economies and small
population advanced economies (SPAEs).
• This is particularly the case with the United States which has a large
population of just over 300 Million. However, the market available to
US businesses is much larger due to the North American Free Trade
Agreement (NAFTA) with Canada and Mexico which share contiguous
borders with the USA. In effect, US firms have access to a free trade
market of approximately 450 Million.
• Not surprisingly, the profile and importance of International Business
is rather different in the US compared to SPAE countries such as
Switzerland (population 8 M); Ireland (population 6 M); The
Netherlands (population 17 M); Australia (population 23 M); New
Zealand (population 4 M); and Sweden (population 8 M).
How are SPAEs different?
• The question of how SPAEs are different has been examined by a
number of International Business scholars – especially through the
pioneering work of the late Danny Van Den Bulke and his colleagues
which focused on the study of small nations in the global economy:
D. Van Den Bulke, A. Verbeke and W. Yuan (Eds.) 2009
Handbook on Small Nations in the Global Economy: The
Contribution of Multinational Enterprises to National
Economic
Success. Edward Elgar, UK.
• Firms in a SPAE (both large and small) are motivated to look for
cross-border business and a larger percentage of the workforce is
involved with international business on a regular basis. This
orientation to internationalization is also reflected in the national
business press and the comments of leading politicians.
• University business education in a SPAE typically has many students
(local nationals and foreign) looking to study International Business.
How are SPAEs different?
Continued
• University business education in a SPAE typically has a strong
emphasis on international business offering majors across key
business disciplines such as Finance, Marketing and Management
which incorporate international business content. Students may
also opt to study a specific internationally-oriented degree such as
a Bachelor of International Business. Such degrees typically offer
IB study tours plus more traditional international student
exchange programs.
• Firms in SPAEs typically look to offer promising younger staff the
opportunity to gain international work experience because such
experience is often a requirement for promotion to key positions
in firms. Performance reviews often ask questions as to level of
interest in an international assignment and younger staff
understand that gaining international experience is of considerable
importance for career advancement.
How are SPAEs different?
Continued
• National governments of SPAEs tend to more actively
monitor the activities of nationally-funded universities
in terms of both programs offered and at the policy
level.
• For example, in Australia the Federal Government
regulates student exchange arrangements in
universities by monitoring whether the two-way
student exchange arrangements are balanced in terms
of inward and outward student numbers. If the
numbers are judged to be out of balance the exchange
arrangement will be suspended and inward foreign
students will be required to pay full international fees.
A recent example of research on SPAEs
Dowling, PJ, Rose, E. & Donnelly, N. 2013. Special
Issue Editors: The Role and Importance of International
Business in Small-population Advanced Economies.
International Studies of Management and Organization.
Published across two issues: Volume 43 (1) and Volume
43 (2).
What are the implications of these differences for a
management academic working in a SPAE and teaching IHRM?
• There is a stronger expectation that academics teaching
IHRM know something about International Business and
can provide contemporary international and local
examples about firms and IB trends relevant to the
national economy.
• National context is regarded as very important so an I/O
psychology view of the world will need to be
supplemented by knowledge from International
Management and/or International Business to better
describe the context.
• In countries where there are significant numbers of
international students on campus there is increasingly an
expectation that academic staff should be able to provide
examples from more than their home country context.
Future IHRM research needs to take a broader
International Business view and explicitly focus on a
strategic view of HRM in the context of the MNE and
the contribution that the Corporate HRM function could
make towards a better understanding of how MNEs
can more effectively respond to the challenges of the
21st Century.
The Figure in the next powerpoint is an example of
one possible approach to mapping the relevant
variables.
External Factors
• PESTLE
 Organizational links with other
MNEs and with national
governments
 Asymmetric events
 Environmental dynamics
Organizational Factors
 MNE balance of global integration
and local responsiveness
 MNE structure
• Firm size and maturity
• MNE strategy
 Corporate governance
 Headquarters’ international
orientation
 MNE culture
HR Function
• Global corporate HR
role
 HR practices
 Crisis management
and coordination
MNE Performance
 Financial
performance
 Social performance
 Enterprise
resilience
A Framework of Strategic HRM in Multinational Enterprises
(De Cieri, H. & Dowling, P.J. 2012. Strategic human resource management in multinational enterprises:
Developments and directions. In G. Stahl, I. Björkman & S. Morris, (Eds.) Handbook of international HRM research.
(2nd edn.) Cheltenham, UK: Edward Elgar, pp. 13-35)