International Journal of Manpower

The cross-national transfer of HRM practices in MNCs: An integrative research model

Wenchuan Liu

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Wenchuan Liu, (2004),"The cross-national transfer of HRM practices in MNCs: An integrative research
model", International Journal of Manpower, Vol. 25 Iss 6 pp. 500 - 517
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IJM
25,6

The cross-national transfer of

HRM practices in MNCs: An
integrative research model

500

Wenchuan Liu
HRM Research Centre, Kemmy Business School, University of Limerick,
Limerick, Ireland

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Keywords Human resource management, Multinational companies

Abstract Drawing on a range of literature, this paper develops a theoretical model of the
cross-national transfer of HRM practices in multinational corporations (MNCs). This model
integrates the significant research on transferability, transfer mechanisms, effects of transfer, and
reverse transfer to produce a comprehensive analytical framework. A three-fold analysis of
transferability is presented to include national, company and HRM practice level. The transfer
mechanisms are categorized into direct and indirect methods. The analysis of reverse transfer is
not only a complement to the forward transfer but also an important part of the integrated model.
The model reflects the complexity of cross-national transfer HRM practices in MNCs.
The propositions presented and suggestions for future research serve to aid further practical
studies.

International Journal of Manpower

Vol. 25 No. 6, 2004
pp. 500-517
q Emerald Group Publishing Limited
0143-7720
DOI 10.1108/01437720410560415

Introduction
Multinational corporations (MNCs) are of particular importance to international
comparative management research (Fenton-OCreevy and Gooderham, 2003) because
of their increasingly important role in the global economy (Porter, 1986; Prahalad and
Doz, 1987; Rosenzweig and Singh, 1991). The MNC is a powerful vehicle for the
transfer of not only the capital and other production functions but also managerial and
technical knowledge across nations (Tayeb, 1998). The effectiveness of human
resource management (HRM) has been seen as the key to the success of MNCs in the
21st century (Bartlett and Ghoshal, 1994, 1995; Pucik, 1992). The ability to effectively
transfer HRM practices which have been proven efficient at parent companies to
MNCs overseas subsidiaries is a key characteristic of the successful MNC (Nohria and
Ghoshal, 1997) and a matter of considerable practical importance for managers in
MNCs (Fenton-OCreevy and Gooderham, 2003, p. 2). This transferability can also
form a kind of special competitive capability for an MNC that may be difficult for
competitors to imitate (Flood et al., 2003).
The subsidiaries of an MNC, when selecting their HRM practices, usually faces two
options: adopting locally designed practices or acceptance of practices originating with
the parent company. The MNC can sustain its isomorphism through exercising HRM
practices of the parent company in all subsidiaries (Flood et al., 2003). Taylor et al.
(1996) identify three generic strategic international HRM (SIHRM) orientations:
adaptive, exportive and integrative. Adaptive orientation means that MNCs create
HRM systems for subsidiaries that reflect the local environments. The firm that adopts
an exportive orientation seeks to transfer HRM practices that are seen as successful in
the parent company to its subsidiaries. MNCs with an integrative SIHRM orientation
attempt to transfer the best practices throughout the organisation. The MNCs

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international strategy, multi-domestic or global, together with top management beliefs

lead to its international HRM orientation (Taylor et al., 1996).
An MNC with the exportive orientation will face a number of practical questions to
transfer its parent-company-of-origin HRM practices. Fenton-OCreevy (2003) proposed
a focal question: In what circumstances, by what processes and with what effects are
HR/IR practices and routines transferred from (an) MNC parent company to
subsidiary? (2003, p. 47). In line with Fenton-OCreevys research agenda and
question, this paper identifies a series of research questions: What factors influence the
transfer of HRM practices in MNCs? What are the transfer mechanisms? How best can
we evaluate the effects of transfer of HRM practices? How can we understand the
reverse transfer process? While some questions have been partly explored by different
researchers, a comprehensive research framework has not yet been formed. Drawing
on recent research, this paper attempts to bridge the gap by contributing an integrative
and comprehensive research model, which will be helpful to future researchers. First I
identify and analyse factors that influence the cross-national transferability of HRM
practices from three levels: national, company, and HRM practice level. I then focus on
transfer mechanisms. The effects of transfer and the reverse transfer process will be
then analysed. A model of cross-national transfer of HRM practices in MNCs is
presented next. Finally, I discuss the implications and contributions of the model as
well as some issues for future research.
Transferability
Transferability is defined in this paper as the ability to transfer HRM practices
originated from the parent company to its subsidiaries. It is influenced not only by
factors at national and company levels but also by the knowledge and innovation
characteristics of the HRM practice transferred.
National level factors
The general idea that national level factors exert effects on organisation and human
behaviour has been extensively accepted (Beechler and Yang, 1994; Flood et al., 2003;
Hennart and Larimo, 1998; Kostova, 1999; Temple, 1999). Scholars have conceptualised
and measured country-level effects by examining characteristics of national
environments that can discriminate between countries and can explain the
cross-country variance in organisational behaviour. Two means to characterize
national environments have become the most commonly used. Using Hofstedes (1980)
classification of culture, Kogut and Singh (1988) formed a cultural distance index that
has become the proxy of choice for national differences (Barkema et al., 1996; Hennart
and Larimo, 1998; Li et al., 2001). The institutional distance (Kostova, 1997, 1999),
based on institutional theory (Scott, 1995), which refers to the extent of dissimilarity
between host and home institutions, provides an alternative explanation. I argue that
national institutional distance and cultural distance are complementary concepts.
Neither of them captures the full spectrum of national differences of HRM practices. It
is, hence, the combination of both national, cultural and institutional distance that
offers the most comprehensive assessment of the national environment.
National cultural distance. Hofstede (1980) defines culture as the collective mental
programming of people who live in a particular society. Furthermore, Hofstede (1980)
developed a score (index) to represent each of four cultural dimensions for each of the

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50 countries he studied. Later a fifth cultural dimension was also identified (Hofstede
and Bond, 1988). The five cultural dimensions are: power distance, uncertainty
avoidance, individualism, masculinity, and Confucianism/dynamism. Although
Hofstedes research has been criticized, for example, on the methodology employed
(Tayeb, 1996), sample selected from a single company, over-simplification of five
cultural dimensions, and on the importance of these dimensions (Gooderham and
Nordhaug, 2003), his research has gained significant attention (Adler, 1995; Beechler
and Yang, 1994; Flood et al., 2003; Harrison, 1992; Warner, 1993, 1997; Zhang, 2003).
Similar to Hofstedes cultural dimensions, Trompenaars (1993) and Trompenaars and
Hampden-Turner (1997), identified five bipolar dimensions with concern to
interpersonal relationship and work-related values as follows.
(1) universalism vs particularism;
(2) communitarism vs individualism;
(3) neutral vs emotional;
(4) specific vs diffuse; and
(5) achievement vs ascription.
These studies should alert managers to some of the cultural considerations which they
should be aware of in managing in different countries. For example, companies from
universalism cultures entering China must recognize that relationships matter and
take time to develop.
Different national cultures exert their separate influences on human behaviour, thus
forming different HRM practices according to cultural environments. Lau et al. (1997)
and Harrison (1992) have studied job performance and management control systems in
the context of national culture and found there are management practice differences
between different national cultures. Adler (1995), Harrison (1992) and Lau et al. (1997)
found that national culture had an impact on different HRM practices. Because of
major national culture differences between the homogeneous and collectively oriented
eastern countries and heterogeneous and individually oriented western countries
(Hofstede, 1983; Nakane, 1970), it is extremely difficult, if not impossible, to transfer
some practices between two countries with different national cultures (Beechler and
Yang, 1994). Ramamoorthy and Carroll (1998) argue that there could potentially be
incompatibilities between implementing an individualistic HRM system in a
collectivist culture and vice versa.
National cultural distance (Kogut and Singh, 1988), presumably measuring the
extent to which different cultures are similar or different, has gained broader
acceptance in the international business literature and has been applied to most
business administration disciplines. Cultural distance has been used a key variable in
HRM (Shenkar, 2001). In this paper, national cultural distance is employed to analyse
the transferability of HRM practices in MNCs. It is proposed that lesser the national
cultural distance, easier the transfer of HRM practices from the parent company to its
overseas subsidiary.
National institutional distance. Institutional theory (Scott, 1995) indicates that, in
order to survive, organisations must conform to the rules and belief systems prevailing
in the environment (DiMaggio and Powell, 1983; Meyer and Rowan, 1977), because
institutional isomorphism, both structural and procedural, will earn the organisation

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legitimacy (Dacin, 1997; Deephouse, 1996; Suchman, 1995). MNCs operating in different
countries within multiple institutional environments are typically under diverse
pressures. Some of those pressures in host and home institutional environments are
testified to exert fundamental influences on HRM practices (Rosenzweig and Singh,
1991; Zaheer, 1995). There is substantial evidence that firms in different types of
economies react differently to similar challenges (Knetter, 1989). Social, economic, and
political factors constitute an institutional structure of a particular environment which
provides firms with advantages for engaging in specific types of activities there.
Companies can perform efficiently if they receive the institutional support.
The institutions are not distributed evenly across nations. Based on Scott (1995),
Kostova (1997) developed a new construct, institutional distance, the extent of
similarity or dissimilarity between the regulatory, cognitive, and normative
institutions of two countries. Kostova (1997, 1999) proposed that the larger the
institutional distance, the more difficult it is for MNCs to establish legitimacy in the
host country. In other words, a large institutional distance triggers the conflicting
demands for external legitimacy in the host country and internal consistency within
the MNC system (Xu and Shenkar, 2002). Balancing these conflicting demands has
been a key challenge for MNCs (Bartlett and Ghoshal, 1989; Westney, 1993). The
specific institutions could become barriers to adopt policies and practices that come
from another institutional system. So, one proposition is that the larger the national
institutional distance between host and home country, the more difficult the transfer of
HRM practices to the foreign subsidiary.
Company-level factors
Theoretical approaches to analyse transferability at company level exist in two main
categories: organisational culture and resource dependence.
Organisational culture is, to some extent, influenced by the national culture but
varies, sometimes significantly, in different companies even if they are located in the
same national cultural environment (Li and Liu, 2002). Based on the organisational
culture theory, the compatibility of organisational cultures is recognised as an
important factor to influence the transfer of management practices (Kostova, 1999;
Taylor et al., 1996).
The resource dependence approach (Aldrich, 1976; Pfeffer and Salancik, 1978) rests
on the assumption that an organisation is unable to generate all of the resources which
it needs to survive and is therefore dependent on other actors. Applying the resource
dependence approach to MNCs, researchers have argued that because subsidiaries rely
on their parent company for resources, they are dependent to varying degrees on the
parent company. Ghoshal and Nohria (1989) argue that the greater the dependence of
the parent company on the resources controlled by its subsidiaries, the more likely the
parent company will attempt to exercise control over these subsidiaries. In this paper,
the resource dependence approach will be employed to analyse transferability of HRM
practices in MNCs from the strategic role of subsidiaries and the structure of MNCs.
Strategic role of subsidiary. Gupta and Govindarajan (1991) developed a typology of
the different strategic roles of subsidiaries to depict knowledge flows within MNCs.
The authors distinguish between outflows, flows of resource from the subsidiary to the
parent company, and inflows, resources flowing into the subsidiary from outside,
especially from the parent company. As resources flows between a subsidiary and the

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parent company increase, the need for control will increase (Pfeffer and Salancik, 1978).
At the same time, the greater the reliance of the parent company on the subsidiary, the
greater will be the power of the subsidiary.
On the basis of Gupta and Govindarajans (1991) typology, Taylor et al. (1996)
posit a link between the strategic roles which subsidiaries adopt and the
management of human resources. They argue that the strategic choice of MNCs,
that is, the strategic roles of subsidiaries, will be reflected in the HRM practices of
subsidiaries. Therefore, Beechler and Yang (1994) hypothesized that an MNC is
likely to attempt to exert country-of-origin influence to the greatest degree on
subsidiaries which are more resource dependent on the parent company, so as to
transfer its HRM practices. The proposition is thus that the transfer of HRM
practices to a subsidiary with high strategic role will be easier than to a
subsidiary with low strategic role.
Ferner and Edwards (1995) define strategic nature of resource subsidiaries possess
as their ability to generate profits, their control of special skills, and their role as
intermediaries with key decision-makers in the local environment (1995, p. 237).
Beechler and Yang (1994) identify three factors in determining the dependence of the
MNC on its overseas subsidiaries:
(1) the importance of the resource, the extent to which the MNC requires it for
continued operation and survival;
(2) the extent to which the subsidiary has discretion over the resources allocation
and use; and
(3) the extent to which there are alternatives for the needed resource to which the
MNC has access.
Temple (1999) argues that a subsidiary involved in research and development will be
of considerable strategic importance to the MNC which benefits from its activities. In
contrast, subsidiaries which have purely sales operations, servicing only the local
market are likely to be of less strategic interest to the parent company.
MNCs structure. Bartlett and Ghoshal (1989) have identified appropriate
organisational structures related to the typology of the strategies of MNCs:
multidomestic, international, global and transnational structures. Different
organisational structures serve different strategies. Multidomestic depicts that
subsidiaries meet local needs and conform to local legislative and market conditions.
The organisational structure of the multidomestic firm is decentralised and the
subsidiaries are relatively independent of MNCs resource. An MNC following an
international strategy does not pursue complete global consistency or local
responsiveness, but attends to both, by transferring knowledge and expertise across
borders. The structure of an MNC pursuing an international strategy is co-ordinated,
where subsidiaries have the freedom to adapt products to local conditions, whilst at the
same time being dependent on the parent company in terms of new products and ideas.
The global strategy is characterised by the pursuit of global efficiency and consistency.
The structure of an MNC with a global strategy is centralised and subsidiaries are
highly resource dependent on the parent company. The structure to fit transnational
strategy needs to be very flexible and it is described as an integrated network which
links the major parts of the company together. Resources in this kind of MNCs are
neither centralised nor decentralised.

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On the basis of these descriptions, it can be argued that the multidomestic MNC is
least likely to attempt to transfer its HRM practices to its subsidiaries because they are
autonomous and relatively independent of the resource of the parent company. And the
ability and the necessity to transfer HRM practices to subsidiaries are limited. The
opposite can be said of global MNCs. Hence, it can be proposed that the multidomestic
structure of MNCs is mostly likely to inhibit the transfer of HRM practices from the
parent company to its overseas subsidiaries, whereas the global structure is most likely
to promote it and the transferability in international and transnational companies lies
in between.
The structure of an MNC can also be seen as a differentiated network (Nohria and
Ghoshal, 1997). Highly centralised, stratified networks use coercive pressure on its
members to achieve conformity of practices, resulting in the transfer of HRM practices
(Mizruchi, 1993). On the other hand, the network relationship and resource equivalence
that exist between subsidiaries could lead to structural equivalence (Burt, 1987). That
is, an actor can perceive concordance with comparing other members in an
organisational network (DiMaggio and Powell, 1983). In this view, two actors related to
the same set of third parties are likely to exhibit similarity in behavior. So, we can
hypothesise that if a subsidiary has adopted a certain HRM practice from the parent
company, its transfer to another subsidiary could become easier due to the structural
equivalence in an MNC.
Compatibility of organisational cultures. A widely accepted definition of
organisational culture is a set of values shared collectively among organisational
members (Chatman and Jehn, 1994; OReilly et al., 1991). The values can be grouped
into seven dimensions: innovation, stability, respect for people, outcome orientation,
detail orientation, team orientation, and aggressiveness. Some companies are marked
by very strong cultures, so strong that you either buy into their norms or get out
(Peters and Waterman, 1982, p. 77), while the organisational cultures in other
companies are weak. The compatibility of the organisational cultures of two
organisations involved in the transfer will affect the transfer of practices (Kedia and
Bhagat, 1988). Studies have shown that successful Japanese MNCs, for example, often
choose to set up their subsidiaries in American rural areas or depressed locations
(Yang, 1992). In addition to economic factors, one important reason for the rural choice
is the perception that rural Americans have values more similar to those of the
Japanese in terms of such organisational culture dimensions as team orientation,
outcome orientation, work values, etc., thus making it easier for Japanese companies to
transfer their home-country HRM practices to overseas subsidiaries (Beechler and
Yang, 1994).
Kostova (1999) suggested that comparability of two organisational cultures can
have practice-specific effects on the transfer of practices. Any HRM practice is rooted
in its some deep value assumptions. When the values implied by particular HRM
practices and the values underlying the culture of an organisation are compatible, it
will be easier for employees at the subsidiary to understand and accept HRM practice
from the parent company. However, it will be difficult for employees of the subsidiary
to understand and accept an HRM practice transferred if the values underlying the
practice to the parent company and subsidiary are incompatible. For example, it will be
more difficult to transfer a compensation system based on personal performance to a
company with a higher team orientation than to one with low team orientation.

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As thus, the transferability of HRM practices from the parent company to the
subsidiary will be positively associated with the degree of compatibility of two
organisational cultures embedded in the two units.
HRM practice level factors
Although there are some differences between domestic and international HRM
practices, Dowling and Schuler (1990) argue that the most important HRM practices in
MNCs involve staffing and selection, assessment and compensation, training and
development, and industrial relations and employee participation. Rather than
differentiating HRM practices one by one, this section, following Flood et al.s (2003)
research, focuses the analysis of the transferability on two general characteristics of
HRM practices: innovation and knowledge.
Innovation characteristics of HRM practices. According to Rogers (1995, p. 11), an
innovation is an idea, practice or object that is perceived as new by an individual or
other unit of adoption. It matters little whether or not an idea is objectively new as
measured by the lapse of time since its first use or discovery. The perceived newness of
the idea for the individual determines his or her reaction to it. If the idea seems new to
the individual, it is an innovation (Rogers, 1995, p. 11). The innovation characteristics
affect the transfer of innovation (Wejnert, 2002). A successful organizational practice in
the arena of HRM practiced and demonstrated in the parent company, when
transferred into a subsidiary, can be considered to be an innovation (Flood and
Ramamoorthy, 2002; Flood et al., 2003).
Two couples of innovation characteristics are identified to affect the transfer of
innovation: public vs private consequences and benefit vs costs. The public
consequence of transfer of HRM practices often concerned is the change of company
welfare policy. Accordingly, the private sequence of transfer of such HRM practices is
linked to the change of individual employees income and living level. Direct and
indirect costs of the transfer of an innovation often inhibit its transfer (Wejnert, 2002).
Direct costs are typically clear and are relative to the economic situation of a company
while indirect costs are not often clearly identifiable. Indirect costs may also be
non-monetary (Gerwin, 1988), such as transfer time or social influences. Therefore, it is
proposed that if the public and private consequences of a practice transfer are of
benefit, the transfer will be easier than that considered as high cost to transfer and
without public and private consequences.
Knowledge characteristics of HRM practices. Flood et al. (2003) pointed out that a
specific HR practice is not only embedded in written documents but resides in the
routines, practices, norms and values of the organisation. They also argue that an HRM
practice involves features of three types of knowledge: human, social and structured
knowledge identified by De Long and Fahey (2000). Each of these types of knowledge
includes both tacit and explicit components varying in terms of causal ambiguity. This
causal ambiguity is in itself a barrier to the effective transfer of an HRM practice across
borders. Polanyi (1985) makes a distinction between tacit knowledge and explicit
knowledge. Tacit knowledge is personal, context-specific, and therefore hard to
formalize and communicate. Explicit or codified knowledge, on the other hand, refers
to knowledge that is transmittable in formal, systemic language. As Polanyi (1985) has
pointed out, knowledge is often highly personal in nature, difficult to communicate,
highly specialised and not always easily transferred. In addition to the tacit and

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explicit components of knowledge, an HRM practice could include simple and complex
elements, and independent and systemic components of knowledge (Flood et al., 2003).
Complex knowledge evokes more causal uncertainties, and, therefore, the amount of
factual information required to completely and accurately convey such types of
knowledge is greater than would be the case with simple types of knowledge. Simple
knowledge can be captured with little information and is, therefore, relatively easy to
transfer. Knowledge that is independent can be described by itself, whereas knowledge
that is systemic must be described in relation to a body of knowledge existing in the
transferring organisation. The knowledge involved in the transfer is likely to be
complex, tacit and systemic, so it will be more difficult to transfer and absorb (Bhagat
et al., 2002). Therefore, it is proposed that if an HRM practice is perceived as explicit,
simple and independent, its transfer from the parent company to its subsidiary will be
easier than that involved in tacit, complex, and systematic components.

Transfer mechanism
Owing to the complexity of transfer process, the transfer mechanisms whereby HRM
practices are transferred to different international sites within MNCs have not been
studied completely clear. However, a significant body of international management
scholars have contributed much to relative literature, either from theoretical or from
empirical research.
Harzing (1999), using extensive data from over 100 MNCs with headquarters in nine
different countries and subsidiaries located in 22 nations, made an in-depth analysis of
the control mechanisms of MNCs. Her study demonstrates that the control mechanisms
of MNCs towards their subsidiaries vary according to the characteristics of their
headquarters such as the country of origin and strategy. The author explains that the
features of subsidiaries, including age, size, role and function, also affect the control
mechanisms of MNCs. The empirical evidence of her research shows that expatriates
play an essential role in controlling foreign subsidiaries and facilitating the transfer of
practices.
Ferner and Edwards (1995) identified the types of relations between different parts
of MNCs: authority relations, resource-dependent power relations, exchange relations,
and cultural relations. The authors consider the four types as channels of influences
through which practices can be transferred within MNCs.
ODonnell (2000) lists a variety of mechanisms that are used to facilitate the transfer.
Among these are the transfer through rules, programmes, procedures as well as
expatriates. Similarly, drawing on the work of some researchers (Coller, 1996; Ferner
and Edwards, 1995; Marginson et al., 1995), Temple (1999) identified four mechanisms
which can facilitate the transfer of HRM practices: HRM guidelines and structures, the
international transfer of managers, socialisation mechanisms and best practice
schemes.
In this section, I argue that the transfer mechanisms identified by former
researchers can be categorised into two types in terms of the implementation process of
transfer: direct and indirect transfer mechanisms. The two mechanisms are
complementary rather than substitutable.

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Direct transfer mechanisms

Direct transfer mechanisms mean that subsidiaries are asked to comply a set of HRM
polices from the parent company through which the MNCs achieve their control over
subsidiaries. Ferner and Edwards (1995) posit that this issuing of HRM guidelines and
rules by the parent company is based on authority relations between the parent
company and subsidiaries, particularly when they are backed up by formal systems of
management control with reward and penalty systems. The authors also demonstrated
the importance of authority relations through the example of a chemicals MNC.
Another example of exercising direct transfer mechanisms is IBM in which the
international guidelines of personnel issues are laid down to subsidiaries.
The advantage of direct transfer mechanisms lies in the speed of transfer. The MNC
with stronger resource control over its subsidiaries could find them more efficient.
However, the disadvantage of direct transfer mechanisms is obvious. As discussed
earlier, the compulsory transfer will face strong objection from employees of
subsidiaries if those HRM polices are recognised to damage their benefits. For instance,
the subsidiary could refuse a new method of compensation if employees consider that
the new method will lead to the reduction in their income.
Indirect transfer mechanisms
Contrary to direct mechanisms, indirect transfer mechanisms implement the transfer of
HRM practices to the subsidiaries through attaching the HRM practice to some
carriers. The carriers generally include organisational culture and expatriates from the
parent company.
Some HRM practices have links with the reinforcement of the company way or the
way of doing things. In order to enforce the effects of integration of organisational
culture, MNCs could train employees of subsidiaries to recognise the corporate culture.
During the training process, the HRM practices attached to the culture carrier are also
transferred. Coller (1996, p. 164) described how his case study company utilised
international training course to promote the transfer of practices: they are not only a
method of improving managerial skills or an implicit and unstated requirement for
pursuing a professional career within the firm, but also a means of teaching the
company way and a forum for exchanging experiences that may be later applied in
local plants.
In this situation, organisational culture of the MNC becomes a carrier on which
HRM practices are transferred to subsidiaries. Since organisational culture comprises
several levels from surface traditions, rituals, and norms up to deeply planted
corporate values and philosophy, I argue that the HRM practices that can be
transferred through indirect mechanism must be compatible with cultural values.
With respect to expatriates, the movement of managers, either HRM managers or
professionals, from the parent company to subsidiaries can serve to aid in the
dissemination of HRM practices which the expatriates are familiar with. Harris and
Holden (2001, p. 85) argue that expatriates managers have a considerable role as
interpreters and implementers of HR and business strategy. Cerdin (2003, p. 49)
argues that information technology can relay HRM knowledge to subsidiaries, such as
HRM guidelines available on an intranet network, but it can not transfer know-how.
So it is often left up to expatriates to put into full and efficient practice the knowledge
acquired at parent companies and demonstrate and transfer know-how. The author

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further points out that through his or her knowledge, the expatriate can be a carrier of
HRM practices (Cerdin, 2003, p. 49). I also argue that expatriates are willing to be the
carriers of the transfer of HRM practices because they prefer those practices of the
parent company which they are rather familiar with.
In the model of role expatriates in the international diffusion of HR practices, Cerdin
(2003, p. 52) proposes that the higher the number of expatriates in a subsidiary, the
stronger the role of expatriates in the diffusion of HRM practices. The number of
expatriates is influenced by the ownership history of an MNC and the phase of its
internationalisation. The effects of expatriates being a carrier of HRM practices are
also influenced by the characteristics of expatriates in terms of their understanding of
HRM practices of the parent company. That is, the carriers must have a ready
knowledge and experience of the parent companys HRM practices.
Therefore, as Harzing (1999) and Wolf (1994) have pointed out, the functions of
expatriates are not only filling of positions where no qualified local candidates are
available, but also transferring knowledge and practices to subsidiaries.

Effects of transfer
The transfer of an HRM practice to subsidiaries is generally expected to be
institutionalised so as to impact subsidiaries performance positively. Through the
institutionalisation of HRM practices, an MNC creates imperatives for conformity in
order to gain legitimacy (Scott, 2001). As the number of subsidiaries adopting the same
practice increases, such a practice is institutionalised in the whole MNC (Guler et al.,
2002) and it will form its special competitive capacity. Tolbert and Zucker (1996)
suggested three basic stages of institutionalising a practice: pre-institutionalization,
semi-institutionalization, and full-institutionalization. At the first stage, the key feature
is habituation, where an organisation adopts a set of structures or solutions to a
specific set of problems and formalization of these arrangements into policies and
procedures. In the semi-institutionalization stage, the practice has been fairly diffused,
but not stable. Only up to the last stage, full-institutionalization, has the practice
become taken for granted by members of a social group as efficacious and necessary
(Tolbert and Zucker, 1996, p. 179). Similar to Tolbert and Zucker s research, Kostovas
(1999) differentiates the implementation and internalisation as two different degrees of
institutionalisation, which Fenton-OCreevy (2003, p. 46) explicitly explained as the
distinction between ceremonial or purely formal adoption of a practice and more
substantive adoption. Kostova (1999) emphasised that implementation is a necessary
condition for internalisation and the former does not automatically result in the latter.
Internalisation is, according to Kostova (1999), the state when a practice becomes
infused with value, that is, when the employees consider the practice to be part of their
organisational identity. Much of the literature on HRM suggests the importance of
HRM practices in achieving commitment, satisfaction and motivation. Such practices
are only likely to be effective to the extent that they are infused with value for
managers and employees. Therefore, only when the practice is implemented formally
and is also internalised by the employees of subsidiaries will it become an
institutionalised organisation practice with strategic importance (Kostova, 1999). And
then the practices originated in the parent company will become a source of
organisational identity and competitive advantage.

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Reverse transfer
Until now, the analysis has been focused only on the transfer of HRM practices from
the parent company to subsidiaries, which is termed by Edwards (1998) as forward
diffusion. Reverse transfer refers to the transfer of practices in the opposite direction,
when a practice originated in an overseas subsidiary is imported from the parent
company. Reverse transfer is thought of as strict reverse diffusion by Edwards (1998,
p. 696). The diffusion to all units, not only the parent company but also other
subsidiaries, is termed as flow diffusion (Edwards, 1998, p. 696) and reverse transfer
is a subset of this. Temple (1999, p. 57) posits a definition of the learning effects in
terms of the reverse diffusion of subsidiary practices to the MNCs home country
operations or the diffusion of subsidiary practices throughout the MNC through the
process of multi-directional diffusion. In the field of HRM and industrial relations, the
concept of reverse transfer is important because it has the potential of affect the bulk of
a companys employees who tend to be concentrated within the MNCs home country
(Ferner and Varul, 2000).
There is scant literature on the transfer of HRM practices from the subsidiaries to the
parent company. As discussed in Lius (2003) review, most research has placed emphasis
on Japanese ways (Dedoussis, 1995; Koike, 1984; Purcell et al., 1999) and the one-way
transfer orientation from developed countries, such as Japan and the USA, where
headquarters are located, to other developed and developing countries ( Joshi, 2001).
Edwards (1998) explorative research on reverse transfer partly fills the gap.
Edwards (1998) and Ferner and Varul (2000) have examined the characteristics which
could encourage the transfer from subsidiaries to the parent company. It was found
that many of the characteristics are comparable to those which promote the opposite
transfer and include such structural factors as the degree of product integration
internationally and the existence of worldwide product divisions. Edwards (1998)
argued that the reverse transfer is more likely to be found in the MNCs with the
following characteristics: an international business strategy based on realizing
synergies between sites, a global structure, the geographical dispersion of activities,
maturity, growth through acquisition and the existence of international management
structures in the personnel field.
The model
On the basis of the above analysis, I put forward a research model shown in Figure 1.
This model represents a theoretical research framework and integrates substantial
amount of studies, especially those of Kostova (1999), Temple (1999), Taylor et al.
(1996), Fenton-OCreevy (2003), Cerdin (2003) and Flood et al. (2003).
This model is consistent with the research questions previously identified in the
introduction section which have further developed Fenton-OCreevys (2003) focal
question. From the model we can notice that those research perspectives of
transferability, transfer mechanisms, effects, forward and reverse transfer are not
separated but interrelated. The research model developed here reflects the complexity
of the process of transnational transfer of HRM practices in MNCs.
Discussion
An MNC can choose integrative HRM, which means that all subsidiaries adopt same
HRM practices, or differentiated HRM that different subsidiaries can adopt different

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511

Figure 1.
Model of the
cross-national transfer of
HRM practices in MNCs

HRM practices. The choice is important for the MNCs (Schuler et al., 1993). While
differentiated HRM can be less costly because there is less centralizing work for the
parent company, less monitoring, and less international transfer of knowledge, it will
lead to a looser and less integrated organisation. On the contrary, integrative HRM
accomplished through the inter-transfer of HRM practices between the parent
company and subsidiaries will allow for standardization and international learning
(Brewster, 2002). A critical challenge in a globalising world is to develop a set of
supporting institutions, policies as well as transfer mechanisms that can foster the
transfer of best management practices. The research on the cross-national transfer of
HRM practices in MNCs is therefore of considerable theoretical and practical
significance.
Various authors have urged international management scholars to pay more
attention to HRM practices of MNCs and research in the field of transfer is often
claimed to lack an integrative perspective (Flood et al., 2003; Ghoshal and Westney,
1993). This paper therefore plays an integrative role in combing different fields of this
research issue, which constitutes its contribution. The theoretical model presented here
represents an attempt to integrate the study of cross-national transfer of HRM
practices in MNCs and to serve as a basis for future research with a comprehensive
conceptual and theoretical framework. The model in this paper is much better
compared to alternative models that would have been developed from a single research
perspective such as transfer mechanisms, transfer effects, or expatriates. Simplifying a
complex research question could be neglecting the interrelation and interaction
between different contexts. Applying the integrative approach will, therefore, allow a
more comprehensive inquiry into the examination of the complex question.
Another contribution of this paper comes from its research methods. The
framework advanced includes multi-level analysis variables in the context of
transferability: national, company and HRM practice level factors. Multi-level analysis

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512

supplies us with general understanding. This is distinct from earlier research.

Furthermore, this model looks at the effects of transfer, either implementation or
internalisation, as the dependent variables. The influence factors and transfer
mechanisms can be conceived of as independent variables. This can then be thought as
an multi-variable input-output research model.
The theoretical contributions of this paper are to convergence-divergence theory
and international management. In contrast to the assumptions of the convergence
theory, this paper argues that globalisation does not lead to the wonderland of a
bordless world (Ohmae, 1991) where capital, knowledge and other resources move
freely around the globe, because of the costly and complex transfer of some practices.
With regard to the international management perspective, the argument between
institutional and cultural distance is well reconciled in this paper. They are
complementary rather than replaceable.
While the model and propositions developed in this paper provide theoretical and
empirical guidelines, there still will be some practical issues I hope to point out here.
Firstly, the transfer of an HRM system (Flood et al., 2003; Huselid, 1995) could improve
an MNCs competence than that of an individual HRM component such as
compensation or training practice. If it is a green-field unit, the transfer of an HRM
system could be feasible, while if in an acquisition unit, transferring individual HRM
practice should be more suitable. Secondly, in the comparative case research, sample
selection is critical. The methods suggested include comparison of large numbers of
MNCs (Harzing, 1999), several MNCs with several subsidiaries located different
countries (for instance, Zhang, 2003), or an MNC with a number of subsidiaries
(Kostova and Roth, 2002). Thirdly, combination of the qualitative and quantitative
approach should be a better method for this model. A qualitative approach may be of
great value while a quantitative one might provide a useful complement
(Fenton-OCreevy, 2003). For example, the qualitative method can be employed to
explore the transfer mechanisms and the quantitative one can be used to analyse the
extent of adoption.
This research model is not without limitations. The complex transfer issue is
impossible to be completely explained by any one simplified representation. This
model established on the basis of present research will inevitable evolve to a newer one
with the development of theories. Ignoring the transfer between subsidiaries in this
model could be another limitation. The transfer of HRM practices in MNCs could occur
in all directions, thus forming the diffusion of some practices. The author argues here
that the transfer between subsidiaries could be less important than that between the
parent company and subsidiaries. The transfer process could be first from a subsidiary
to the parent company and then from the parent company to other subsidiaries.
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