Culture, Power, and Hybrid HR System in Foreign-Invested Enterprises: Evidence From China

The International Journal of Human Resource
Management
ISSN: 0958-5192 (Print) 1466-4399 (Online) Journal homepage: http://www.tandfonline.com/loi/rijh20
Culture, power, and hybrid HR system in foreign-

invested enterprises: evidence from China
Jianhua Ge & Wei Zhao
To cite this article: Jianhua Ge & Wei Zhao (2018): Culture, power, and hybrid HR system in
foreign-invested enterprises: evidence from China, The International Journal of Human Resource
Management, DOI: 10.1080/09585192.2018.1448293
To link to this article: https://doi.org/10.1080/09585192.2018.1448293
Published online: 13 Mar 2018.
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http://www.tandfonline.com/action/journalInformation?journalCode=rijh20
The International Journal of Human Resource Management, 2018
https://doi.org/10.1080/09585192.2018.1448293
Culture, power, and hybrid HR system in foreign-invested

enterprises: evidence from China
Jianhua Gea and Wei Zhaob
a
School of Business, Renmin University of China, Beijing, China; bDepartment of Sociology, University of
North Carolina-Charlotte, Charlotte, USA
ABSTRACT KEYWORDS
Building on research on hybridization, this study integrates Culture; power; hybrid
the cultural and political perspectives to investigate the hybrid system; HRM; foreign-
HR system of foreign-invested enterprises (FIEs) in China’s invested enterprises; China
emerging economy. Conceptualizing the hybrid system as
an innovative adaptation based on selective adoptions of
international and local management practices, we develop
a cultural-political duality argument and consider both
external-cultural conditions and internal-political processes
in affecting the emergence and effectiveness of the hybrid
HR system. Drawing on quantitative evidence from original
survey data, we find that the cultural distance between a
FIE’s home and host countries exerts a U-shaped curvilinear
effect on the emergence of a hybrid HR system. Moreover,
a FIE with more balanced internal power structures is more
likely to adopt a hybrid HR system. Finally, a hybrid system
significantly enhances HRM effectiveness. As the hybrid
system serves as a valuable alternative to the foreign and local
models, our theoretical framework and findings have broad
theoretical significance and important practical implications
in international business management.
Introduction
The international transfer of management practices presents an increasingly
important challenge to foreign-invested enterprises (FIEs) in the globalization
era (Taylor, Beechler, & Napier, 1996). Many early studies have adopted a dichot-
omous framework, focusing on two polarized tendencies in such international
transfer – internationalization on the one side, and localization on the other side
(Bae, Chen, Wan, Lawler, & Walumbwa, 2003; Bae & Lawler, 2000; Björkman &
Lu, 2001; Lu & Björkman, 1997). This internationalization-localization dichotomy
has received sharp criticism (Chen, 2008; Chen & Miller, 2011; Miller, 2010; Peng
& Nisbett, 1999; Ralston, 2008), mainly because the international transfer and
CONTACT Jianhua Ge gejianhua@ruc.edu.cn

© 2018 Informa UK Limited, trading as Taylor & Francis Group
2 J. GE AND W. ZHAO
adoption of management practices are often contentious and subject to strong

influences from both global and local institutional forces (Ferner, Quintanilla,
& Varul, 2001). Further stimulated by the seminal work on hybridization (Abo,
1994; Boyer, Charron, Jurgens, & Tolliday, 1998), a stream of studies empha-
size that a hybrid system based on the selective adoption or bricolage of both
international and local practices can be a viable alternative (Becker-Ritterspach,
2009; Gamble, 2010). Such hybridization as organizational innovation has been
found in production system (Abo, 1994), quality management (Yu & Zaheer,
2010), organizational communication (Luo & Shenkar, 2006; Peltokorpi & Vaara,
2012), culture management (Shimoni, 2008; Shimoni & Bergmann, 2006; Tolich,
Kennedy, & Biggart, 1999), and human resource management (Chen & Wilson,
2003; Frimousse, Swalhi, & Wahidi, 2012; Gamble, 2006, 2010; Horwitz, Kamoche,
& Chew, 2002).
Despite significant progress in the research on hybridization, several limitations
remain. First, the extant literature adopts two main theoretical perspectives, the
cultural and political approaches. But each approach needs to be refined, and
these two approaches, currently treated largely as separate (Westney, 1999), also
need to be integrated. On the one hand, the cultural and institutional perspective
emphasizes the role of cognitive and normative forces (e.g. cultural schemas).
But the complex and nuanced effects of cultural factors on the hybridization pro-
cess should be further examined. Moreover, this cultural perspective downplays
the role of power, conflict, and control in affecting organizational practices and
international transfer, leaving us with ‘overly homogenized and over-determined
models’ (Gamble, 2010, p. 711). On the other hand, while the political perspec-
tive treats organizations as political arenas and focuses on conflicts, negotiation,
power, and influence, it tends to neglect key institutional and structuring forces
and ‘make[s] no claim to be predictive, being more suited to provide post hoc
explanations’ (Gamble, 2010, p. 712). Although these two perspectives are clearly
complementary, there has been little academic endeavor to integrate them in
explaining international transfer and hybridization process.
Second, as extant studies have mainly focused on hybrid systems in FIEs
in industrialized economies (Doeringer, Evans-Klock, & Terkla, 1998; Ferner,
Edwards, & Tempel, 2012; Frimousse et al., 2012; Liberman & Torbiorn, 2000;
Tayeb, 1998), much less attention has been paid to those in FIEs in emerging
economies (Frimousse et al., 2012; Gamble, 2010). While international transfer
between two industrialized countries is rarely smooth (Ferner et al., 2001; Fiss &
Zajac, 2004), it can be even more contentious to transfer a global management
model into FIEs in emerging economies. The reason lies in that, compared to
industrialized countries, emerging economies tend to have more traditional cul-
tures and distinct institutional arrangements.
Finally, most studies on hybridization in international transfer are qualitative
inquiries based on a limited number of cases. Although their rich descriptions and
in-depth analyses offer important insights into the specific features of the hybrid
THE INTERNATIONAL JOURNAL OF HUMAN RESOURCE MANAGEMENT 3
systems and the hybridization process, it is difficult to generalize from them under
what conditions the hybrid systems are likely to emerge and how they compare to
‘pure’ foreign or indigenous models in terms of overall effectiveness.
Our study aims to address these limitations and advance this line of research.
Theoretically, we build on the ‘institutional duality’ concept (Kostova & Roth,
2002) to develop a cultural-political duality argument by considering both exter-
nal-cultural conditions and internal-political processes. Articulating an ‘institu-
tional duality’ framework, Kostova and her colleagues emphasize that an FIE
faces dual institutional and cultural pressures from both the FIE’s home and host
countries in the external environment (Kostova & Roth, 2002; Kostova, Roth,
& Dacin, 2008, 2009). From this perspective, cultural distance between an FIE’s
home and host countries influences the cognitive orientation and sensemaking
processes, which in turn affects the emergence of a hybrid system. Moreover, draw-
ing insights from Rogers (2003), we shed light on the intriguing curvilinear impact
of cultural distance on the adoption of the hybrid system. We further extend
this ‘institutional duality’ framework to argue that such dual cultural pressures
are channeled into an FIE and are manifested in its internal political struggles.
Therefore, the power structure within an FIE also shapes the creation of a hybrid
system. While from the cultural perspective, the two extreme ends (i.e. both small
and large national cultural distance) facilitate the adoption of the hybrid system
as an organizational innovation, from the political and power perspective, the
more balanced power structure within the organization helps to generate the
hybrid system through political negotiation and social integration. From this
perspective of cultural-political duality – as a hybrid system can help achieve
ambidexterity with both the foreign and local sides under the dual external and
internal pressures – we expect it to promote cohesion and enhance organizational
effectiveness (e.g. HRM outcomes). All these findings enrich the literature from
multiple perspectives and uncover more complex and nuanced processes in the
creation of the hybrid system.
Empirically, different from most studies on hybridization based on qualitative
evidence, we conduct a quantitative study of hybridization based on large-scale
survey data. We also extend the research scope to investigate both the emergence
and effectiveness of the hybrid HR system using original data collected from FIEs
in China. As the world’s largest emerging economy, China has made a large stride
in market transition and risen to a new economic power in the global economy.
Global management practices, including the high-performance HRM system,
have been introduced to China at an unprecedented scale (Guthrie, 1999; Wang,
Bruning, & Peng, 2007; Xiao & Björkman, 2006; Zheng, Morrison, & O’Neill,
2006). Meanwhile, HR practices are particularly sensitive to the cultural influence.
Therefore, during the early stage of introducing Western-style HR practices to
China, as covered by our data, China’s unique cultural heritage and persistent
socialist legacy present particularly strong barriers to such international transfer.
This offers an interesting research context to examine how national culture and
4 J. GE AND W. ZHAO
intra-organizational power structure may affect the creation of the hybrid system.
During this early stage of HR diffusion, it is particularly valuable and interest-
ing to examine the hybrid model as an important organizational innovation (cf.
Rogers, 2003). From this perspective, we believe that China is ‘a good laboratory
for testing theories.’
In China’s institutional environment, FIEs bear strong pressures of both inter-
nationalization and localization. On the one hand, they pioneer in adopting global
best practices to remain competitive in the international market (Guthrie, 1999;
Wang et al., 2007); on the other hand, it is also imperative for FIEs to adapt to
the distinct institutional and cultural environment in China (Cao & Zhao, 2009).
In this intriguing context, is a hybrid system a viable option for FIEs? Under
what conditions will a hybrid system be more likely to emerge? And what is the
impact of a hybrid system on an FIE? To address these questions, we develop a
general theoretical framework to examine the emergence and impacts of hybrid
HR systems in FIEs.
Cultural-political duality and hybrid HRM in FIEs: theory and

hypotheses
Straddling institutional boundaries, FIEs are exposed to diverse management
practices and models of both international and local origins. Thus, they have
broader latitude in following the global best practices or adapting to the local
management model (Kostova et al., 2008). Such fragmented and complex environ-
ments of FIEs present opportunities for agency (Clemens & Cook, 1999; Sewell,
1992) and stimulate organizational innovations (Morgan, 2001). FIEs thus are
not simply driven into standardized responses. Instead, FIEs can create a hybrid
system based on the selective adoption or a bricolage of both foreign and local
practices, which is a viable alternative to either the foreign or local model (Abo,
1994; Becker-Ritterspach, 2009; Boyer et al., 1998; Gamble, 2010). There have been
insufficient theoretical explanations, however, on what factors affect the strategic
creation of the hybrid system in the complex institutional contexts surrounding
FIEs.
Building on the institutional duality argument (Kostova & Roth, 2002; Kostova
et al., 2008, 2009), we argue that FIEs are situated in complex and fragmented
environments and face dual pressures both externally and internally. Kostova and
her colleagues have emphasized that in the external environment, macro-level
cognitive structure and cultural schema generate dual institutional pressures on an
FIE derived from its home and host countries (Kostova & Roth, 2002; Kostova &
Zaheer, 1999; Kostova et al., 2008). We further propose that such dual institutional
pressures (as often epitomized in cultural duality) are channeled into internal
micro-level political processes and fuel the political struggle within an FIE as both
the foreign and local managerial representatives strive to shape the FIE’s strategic
choices. In this study, we use ‘political duality’ to refer to the internal distinct
power structure and political struggle between the foreign and the local sides in an
FIE. Under political duality, ‘[m]anagers cannot shape the hybridization outcome
solely by identifying the solution that contributes to performance most efficiently
… or by providing venues for surfacing basic assumptions and cognitive maps
…’; instead ‘[t]hey shape the outcome and process of hybridization … by either
negotiation or imposing hybrid organizational patterns’ (Westney, 1999, p. 402).
International transfer of management practices thus often involves a ‘tug of war’
between the foreign and local sides, and both the external cultural environment
and the internal power structure of FIEs exert key impacts on the hybridization
process. With this cultural-political duality framework, we take into consideration
both cognitive structure and purposive actions (Hirsch & Lounsbury, 1997) and
emphasize that FIEs engage in a continuous process of sensemaking, enactment,
and negotiated political interactions (Dörrenbächer & Geppert, 2011; Geppert,
2003; Kostova et al., 2008; Morgan & Kristensen, 2006).
As FIEs operate across national boundaries, multiple institutional domains
and competing cognitive and normative frameworks present challenges as they
seek legitimacy (Kostova & Zaheer, 1999). Under such ‘institutional duality’, the
taken-for-grantedness of institutionalized practices as highlighted by the new
institutional theory can no longer be presumed, and simple conformity to insti-
tutional expectations coming from multiple sources becomes infeasible (Kostova
et al., 2008). Instead, FIEs need to make sense of their external environment
and formulate an appropriate response. FIE actors must ‘engage in simplification
processes using cognitive tools such as scripts, schemas, and typifications so as to
bring some order to their understanding of their complex institutional settings’
(Kostova et al., 2008, p. 1002). In this situation, the cultural differences between
an FIE’s home country and host country affect the sensemaking process, which
in turn influences its strategic adoption of a hybrid system. Extant studies show
that the effects of cultural distance can be intricate and yield complex patterns
(e.g. Stahl & Voigt, 2008). In this study, drawing insights from Rogers (2003), we
further enrich this line of research and highlight the intriguing U-shaped pattern
of cultural distance on the adoption of a hybrid system.
We further extend the previous research by paying greater attention to the
intra-organizational political processes. Organizational choice of a particular
system of practices reflects not only a distinct cognitive orientation, but also the
special interests of particular groups. As the loci of decisions, organizations are
not static recipients of institutional influences, but are rather involved in ongoing
and dynamic interactions with the external institutional environment (DiMaggio,
1988; Hirsch & Lounsbury, 1997; Stinchcombe, 1997). From this perspective, the
internal process is often interconnected with the external institutional dynamics
in affecting the emergence of the hybrid form (Ferner, Almond, & Colling, 2005;
Ferner et al., 2012). Specifically, the dual institutional pressures of the external
cultural schemas are channeled into FIEs and manifested in the internal politi-
cal process. FIEs often have complex and fragmented internal settings, and the
6 J. GE AND W. ZHAO
strategic choice is also subject to the different interpretations and preferences of

both sides. As different groups seek to control the organization (Clegg, 1989), con-
flicting interests, values, and practices between different groups, which are shaped
by different cognitive structures and cultural schemas at the macro-level, fuel the
political negotiation processes and power struggles (Dörrenbächer & Geppert,
2011; Geppert & Williams, 2006; Morgan & Kristensen, 2006). Consequently,
‘individual actors must engage in a process of creating some level of a shared
understanding of what constitutes the rule system’; and there will be ‘a negoti-
ated political process where power and influence come into play since different
outcomes would benefit the interests of different actors’ (Kostova et al., 2008, p.
1002). In this process, the internal power structure, including the CEO selection
structure, the composition of management team, and the managerial control of
HRM, will play a key role in determining the outcome of negotiations and in
affecting the emergence of the hybrid system.
From the perspective of cultural-political duality, we further contend that a
hybrid system can exert an important impact on organizational effectiveness.
Because a hybrid system bridges the institutional gap between foreign and local
sides and attains ambidexterity under institutional duality, it can achieve an ‘opti-
mal distinctiveness’ under complex environments (Alvarez, Mazza, Pedersen, &
Svejenova, 2005). Moreover, the hybridization strategy also helps mitigate internal
tensions and dilemmas. It is attractive to foreign expatriates since it enables them
to ‘preserve the value of their privileged knowledge of the parent organization but
increase the psychological investment of local personnel’ (Westney, 1999, p. 396).
It is also acceptable to the local managers as it provides ‘a way of simultaneously
building alliances with the [foreign] expatriates and leveraging their local knowl-
edge’ (Westney, 1999, p. 396). From this perspective, a hybrid system as a viable
innovation can enhance organizational effectiveness when compared to the pure
foreign or local models.
Figure 1 illustrates our theoretical framework. Below we elaborate on this
framework and develop specific hypotheses on the emergence and effectiveness
of the hybrid HR system in FIEs.
Cultural distance and creation of a hybrid system
Cultural schema determines the cognitive structure of organizational actors and

thus constitutes a key factor in shaping organizational behavior and structure
(Powell & DiMaggio, 1991). Rooted in national culture, the tacitness of the cog-
nitive and normative domains presents a unique challenge to FIEs (Kostova &
Zaheer, 1999). Thus, cultural schema exerts a powerful influence on the viability
of management systems imported from other countries (Hofstede, 1993). Cultural
influence is especially strong in the realm of HRM. Compared to practices in other
managerial functions, HRM practices are more sensitive to national culture and
social norms and are more likely to be contested when introduced into a new
Foreign Local
Cultural Duality in Cultural Distance Optimal

Cultural Schema Cultural Schema
External Environment Distinctiveness
Distinct Management Systems

Cultural-Political Organizational
Duality Foreign Hybrid Local
Effectiveness
Political Duality in CEO Selection CEO Selection

Expatriates Local Managers Good Balance &
Internal Power
HRM Control Negotiation & Power Struggle HRM Control Ambidexterity
Structure
Figure 1. A theoretical model on hybrid management system in an FIE.
institutional setting (Gooderham, Nordhaug, & Ringdal, 1999; Sanders & Tuschke,
2007). As shown in Figure 1, our theoretical model conceptualizes that cultural
distance between an FIE’s home and host countries influences sensemaking and
managerial processes and thus affects the creation of the hybrid HR system.
Cultural distance is traditionally regarded as a deterrent to international trans-
fer (Beechler & Yang, 1994; Taylor et al., 1996). But studies show that its effect is
complex and debatable (e.g. Sarala & Vaara, 2010), which may not simply follow
a linear pattern (e.g. Shenkar, 2001). Cultural distance is more subtle in shaping
the complicated hybridization process through the agency and interactions of
foreign and local groups (Gamble, 2006, 2010; Westney, 1999).
Speaking to inconsistent findings in the literature and further capturing the
subtlety in cultural effects, we draw insights from Rogers (2003) and propose a
curvilinear U-shaped impact of cultural distance on the formation of the hybrid
HR system in FIEs. Rogers (2003) contends that each of two distinct types of
social interactions – homophilous and heterophilous interactions – has its unique
strength and can facilitate innovations. On the one hand, homophilous inter-
actions based on similar social and cultural background tend to have effective
communications, facilitating integration and innovation. On the other hand,
heterophilous interactions with distinct social and cultural background likely
encounter more novel ideas and knowledge. Drawing insights from these two
types of social interactions involved in innovations, we predict that cultural dis-
tance will exert a U-shaped pattern in creating the new hybrid system.
On the one hand, when the national cultures of the FIE’s home and host coun-
tries are similar to each other, there is more common ground in the cultural
underpinning of their respective HRM practices, which are also more compatible
with each other. In this light, the FIE faces fewer barriers when transferring foreign
practices (Taylor et al., 1996). Moreover, as effective communication is crucial in
homophilous innovation (Rogers, 2003), cultural similarity can greatly enhance
communication quality and help develop mutual trust, which will facilitate the
importation and translation of foreign HRM practices. Thus, a small cultural
8 J. GE AND W. ZHAO
distance makes it easy for an FIE to blend HRM practices from both sides and to
integrate them into a more coherent hybrid system.
On the other hand, although a large cultural distance between an FIE’s home
and host countries presents a barrier to effective communication, it brings a huge
advantage to organizational innovation by offering novel ideas and knowledge,
leading to heterophilous innovations (Rogers, 2003). There are distinct knowledge
stocks embedded in distinct national culture and institutional background across
countries (Barney, 1991). There are often great complementarities between two
countries with a large cultural distance (Björkman, Fey, & Park, 2007). When two
entities with distinct cultural background and managerial repertories encounter
each other, the knowledge stocks of the two sides tend to be less duplicative and
more complementary. This becomes a great strength to innovation. Empirical
evidence also shows that cultural distance is positively associated with knowledge
transfer in international acquisition (Sarala & Vaara, 2010). In the same vein,
the larger cultural distance can become a catalyst to facilitate their adoption of a
hybrid system.
Based on these considerations, we expect that the hybrid HR system as an
organizational innovation is more likely to emerge when the cultural distance is
rather small or large. This leads to the following prediction:
Hypothesis 1: Cultural distance has a U-shaped curvilinear effect on FIE’s adoption of
a hybrid HR system.
Internal power structure and adoption of a hybrid HR system
Although extant studies have devoted great attention to the cultural factors within
the cross-national context, particularly the cultural distance at the country level,
some further point out that sociopolitical processes at the organizational level is
also key to organizational practices and outcomes (Gamble, 2010; Sarala & Vaara,
2010; Vaara, Sarala, Stahl, & Björkman, 2012). In this light, solely focusing on the
cultural perspective often risks taking a static view and treating the intra-organiza-
tional process as a ‘black box’ (Stahl & Voigt, 2008). Indeed, while cultural distance
is a key environmental factor underlying cognitive orientation and sensemaking
in the process of creating a hybrid system, the final organizational decision is
subject to the internal political process. The external dual institutional pressure
is channeled into internal organizational processes and is embodied in the dual
political structure as the foreign and local managerial sides engage in negotia-
tions (Dörrenbächer & Geppert, 2011; Geppert, 2003; Geppert & Williams, 2006;
Geppert, Williams, & Matten, 2003; Morgan & Kristensen, 2006). The combination
of foreign and local groups constitutes ‘a potential arena for contending interests
and for the enhancement of power’ within the FIEs (Westney, 1999, p. 396). As
shown in Figure 1, the internal power structure within an FIE plays a key role in
influencing the likelihood of creating a hybrid HR system.
As an FIE faces dual institutional pressures, it must heed to the ‘conflicting

voices’ of both the foreign and indigenous sides (Chen & Wilson, 2003). In
this context, organizational decision is less predetermined, and strong agency
is particularly needed for organizational innovation. Aside from the impact of
social culture at the macro level, the internal power structure can also shape the
absorption process and sociocultural integration, which are key in organizational
learning and international transfer (Björkman et al., 2007). In order to create
some level of shared understanding of organizational rules and structures, the
two sides must engage in a negotiated political process where power and influ-
ence come into play (Kostova et al., 2008). The final result is dependent on the
relative power and preferences of different groups of actors (Edwards, Almond,
Clark, Colling, & Ferner, 2005). When power is unbalanced, the side holding the
dominant power tends to implement its preferable model. In contrast, the more
balanced power structure will likely generate a social integration, thus facilitating
the hybridization process (Kim, Shin, & Jeong, 2016; Sarala & Vaara, 2010). Even
when organizations are confronted with conflicting institutional expectations and
demands, they may employ compromise tactics to balance the expectations of
multiple constituents, accommodate diverse institutional elements, and negotiate
with various stakeholders (Oliver, 1991).
As illustrated in the case studies by Yan and Gray (1994), in one American-Sino
joint venture dominated by the American side, ‘[The U.S. company] always con-
siders the joint venture as one of their own children and uses their own “standard
model” to format it. They try to control it in great detail’ (1994: 1494). In contrast,
the managerial orientation and practices in another American-Sino joint venture
with a more balanced power structure are very different. ‘In making important
decisions for BioTech, both sides make compromises. “Compromise” is the most
appropriate word here’ (1994: 1494).
In short, when power is more balanced between the foreign and local sides,
we expect the FIE to be more likely to adopt a hybrid system by attending to
both foreign and Chinese HRM practices. As the process of international transfer
depends on the internal ‘transfer coalition’ consisting of both the key managers of
FIEs and in the functional area of the practice in an FIE (Kostova, 1999), in this
study we examine the internal power structures at three levels – the CEO selection
structure, the composition of the management team, and the managerial control
of HRM (Kostova, 1999; Yan & Gray, 1994). First, the internal power structure
manifests itself in the selection of organizational leaders (Fligstein, 1987; Kim,
Shin, Oh, & Jeong, 2007). As organizational leadership is a key determinant of
organizational orientation and practices, CEO selection embodies distinct con-
ception of control (Fligstein, 1990). In an FIE, the CEO’s background and beliefs
are crucial in determining its HRM orientation and structure (Taylor et al., 1996).
When the CEO is appointed by either the foreign or the local side, the CEO is
likely to carry out the foreign or local HRM model respectively. In contrast, if CEO
selection follows a collective decision-making process, such as appointment by
10 J. GE AND W. ZHAO
the board or through bilateral negotiation, the selected CEO will be more likely
to attend to both sides’ preferences. As a result, the hybrid HR system is more
likely to become an attractive option. Based on these considerations, we predict:
Hypothesis 2: CEO selection based on a collective decision-making structure (appoint-
ment by the board or through bilateral negotiation) has a positive effect on FIE’s adop-
tion of a hybrid HR system.
The management team is a central battlefield of power struggle within an
organization (Clegg, Courpasson, & Phillips, 2006; Eisenhardt & Bourgeois III,
1988; Mintzberg, 1985), and in international transfer process managers ‘have a
lot of discretion in making a decision of whether to engage in the transfer or not’
(Kostova, 1999, p. 317). As such, the composition of the management team can
influence the FIE’s orientation and strategy (Taylor et al., 1996). Foreign manag-
ers (i.e. expatriates) are an important source of managerial control (Shen, 2004).
They are also the stable core of the ‘transfer coalition’ (Kostova, 1999, p. 317),
since their knowledge of and commitment to international HRM practices serve
as important driving forces to transfer those practices to an FIE (Gamble, 2003).
As Yan and Gray reported in one of their case studies, one U.S. partner of a joint
venture once commented:
it takes much longer than we expected to transfer management to the Chinese …
Though they have been pushing hard to cut the number of U.S. expatriates … I would
be reluctant to take any expatriates out in the first ten years of the joint venture. (1994:
1488)
Apparently, changes in composition of the management team could lead to a
considerable shift in organizational orientation and practices. In this light, dom-
inance of the management team by either foreign or indigenous managers will
make a firm more susceptible to the foreign or local management model, including
HRM practices.
‘Staffing is not only a means of control but also a venue through which groups
and individuals bring their cultural properties into a system’ (Shenkar, 2001, p.
527). When the composition of the management team is more balanced, the two
sides should be more willing to engage in serious negotiations and more likely to
compromise by adopting practices from both sides. Moreover, a more balanced
composition in managerial team results in more extensive interactions between
the two sides, which can lead to a better understanding of HRM practices advo-
cated by each other and create a strong momentum for organizational learning
and bricolage (cf. Rogers, 2003). More extensive communication and negotiation
can also help to foster trust. All of these can enhance the possibility of a hybrid
HR system. Therefore, we hypothesize that:
Hypothesis 3: The more equal the distribution of foreign and local managers is in the
management team, the more likely the FIE will adopt a hybrid HR system.
The specific department and the expert group that handle the management prac-
tices in transfer are also critical in the transfer coalition (Kostova, 1999; Kostova &
Roth, 2002). Managerial control of the specific HRM domain, therefore, is another
important factor to affect adoption of a hybrid HR system. Interpretation and

strategic choices of HRM are often negotiated between business partners of both
sides in an FIE (Ferner et al., 2001). Thus, managerial power and control in the
HRM domain can directly influence its orientation and structure. When HRM
is controlled by either side, it is more likely to adopt its own HRM practices. In
contrast, when both sides share control over HRM, they will have to negotiate how
to devise and implement HRM practices. They will also engage in more extensive
communication and deeper learning from each other. It will be more likely for the
two sides to develop mutual understanding and reach compromises to balance
HRM practices from both sides. This will enhance the chance of forming a hybrid
system. Thus, we hypothesize that:
Hypothesis 4: Joint control of HRM by foreign and local sides in an FIE has a positive
effect on the adoption of a hybrid HR system.
The impact of the hybrid HR system
The choice of different HR systems may have differential impacts on organizational

effectiveness. As suggested by extant studies, the costs of doing business abroad
are often very high due in part to the ‘liability of foreignness’ (Ferner et al., 2001;
Kostova & Zaheer, 1999). FIEs’ ‘liability of foreignness’ stems from several sources
(Eden & Miller, 2004). First, FIEs face greater uncertainty with regard to how they
are treated by the local government, the consumers, and the general public in the
host country. Second, foreign organizational models and orientations sometimes
alienate local business partners and the general public. Third, supervision and
management of local employees are challenging. In China’s emerging economy,
such uncertainties and conflicts are heightened because of its distinct cultural and
institutional environments.
In fragmented external and internal environments characterized by cultural-po-
litical duality, focusing on either the foreign or the local model will risk alienating
supporters of the other. As the local institutional environment imposes distinctive
expectations on FIEs, full embracement of global practices often increases the
‘liability of foreignness’ (Ferner et al., 2001). Hence, strict implementation of the
global model is likely to exert a negative impact on an FIE’s indigenous employees
and other local constituencies (Björkman, Smale, Sumelius, Suutari, & Lu, 2008).
Meanwhile, strict adherence to the local model has its own problems. In particular,
since HRM practices in China and many other emerging economies are generally
underdeveloped, insisting on the local model signals a lack of commitment to
change and resistance to managerial advancement. This choice may be viewed
unfavorably by local stakeholders, and it is almost certain to alienate the foreign
parent company and business partners overseas. In short, when the HR system
is fully committed to either the foreign or the indigenous model, it can alienate
certain constituencies.
For FIEs, the hybrid HR system can provide a superior alternative to either the
pure foreign or indigenous model by attaining ‘optimal distinctiveness’ based on
a good balance (Kostova et al., 2008, p. 1002). A hybrid HR system can achieve
the complementarity of both sides with distinct knowledge stocks. Under the dual
pressures in both external and internal environment, a hybrid HR system can
appeal to multiple constituents and achieve ambidexterity with both foreign and
indigenous sides. Externally, as it meets the institutional expectations of both sides,
adopting a hybrid HR system can help gain legitimacy in multiple institutional
domains (Alvarez et al., 2005; Kostova et al., 2008). Internally, a hybrid HR system
signals an FIE’s commitment to attending to the demands of both sides. Through
selective adoption of foreign and local HRM practices, the FIE can leverage the
strengths of both sides.
Moreover, Yan and Gray (1994) argue that mutual trust and common goals
between the two sides are important moderators to enhance organizational effec-
tiveness. Adoption of the hybrid HR system involves more extensive interactions
and negotiation: it provides people with ‘a springboard for coming together, dia-
logue, intersection of thoughts, balance, lucidity and serenity’ (Frimousse et al.,
2012, p. 258). Thus, hybridization can facilitate the sociocultural integration, which
is key to improve organizational effectiveness (Sarala & Vaara, 2010). Through
these processes, the two sides are likely to develop mutual understanding and trust
and to reach agreement over a broad range of strategic issues. Successful inter-
national transfer of management practices also requires internalization of them
in the recipient organization (Kostova, 1999). When internalization is achieved,
local employees have strong identification with transferred practices and can better
appreciate their values. As a hybrid HR system maintains a good balance of both
advanced global practices and valued local routines, it is likely to win the hearts
and minds of FIE employees.
For all of these reasons, we expect that a hybrid HR system can enhance organ-
izational legitimacy externally, gain internal support from employees, and thereby
increase HRM effectiveness (Frimousse et al., 2012). Thus, we predict that:
Hypothesis 5: A hybrid HR system enhances HRM effectiveness in an FIE.
Method
Data
To test our theoretical arguments, we analyze data from a 2007 survey of 442 FIEs
in China. Most of the FIEs in our sample were drawn from cities in the northern
coastal area, such as Beijing, Tianjin, Dalian, and Xuzhou. We focused on this
region for three reasons. First, although nationally representative data would be
ideal, collecting such data is often cost-prohibitive in a large country like China.
Most organizational studies on China thus use regional samples (e.g. Zhou, Zhao,
Li, & Cai, 2003). Compared to China’s inland areas and the southeast coastal
provinces as two extremes in terms of pace of market transition, the northern

coastal area is more representative in terms of the progress of market reforms and
the influence of the global economy. Second, this region is home to FIEs from a
wide array of foreign countries. In addition to attracting companies from Europe
and North America, this region is also a popular destination for Japanese and
Korean investment because of its geographic proximity to these two countries.
This variety in FIE origin is particularly important for us to examine the effects
of cultural distance on the adoption of a hybrid HR system. Finally, the northern
coastal region is culturally homogenous. By focusing on this region we avoid
potential complications stemming from variations in regional culture.
Given the low response rate to mail surveys in China (less than 10% per Zheng
et al.,2006), we relied on several research partners in China and used their exten-
sive connections with the local business communities to secure cooperation from
FIEs. Similar data collection strategies have been adopted by a number of organ-
izational and management studies in China (e.g. Akhtar, Ding, & Ge, 2008; Farh,
Tsui, Xin, & Cheng, 1998; Zhou et al., 2003). We then trained graduate students
in the local universities’ social sciences and business programs to conduct face-to-
face interviews to complete our questionnaires. In most cases, the chief respond-
ent was either the company’s HR director or a senior level HR manager. In the
remaining cases, the respondent was typically the CEO or another member of the
senior management team. We also urged the interviewers to contact other senior
managers in the company to verify information on key organizational character-
istics and indicators of organizational effectiveness. In the end, we were able to
collect data from 442 FIEs, with nearly 25 foreign home countries and regions,
including both developed Western countries in Europe and North America and
later industrialized economies in Asia (e.g. Japan, Korea, Taiwan, and Hong Kong).
There were nearly 100 cases that include missing values for a large proportion
(more than one third) of key variables in our study, which makes it difficult or
impossible to incorporate them for analyses. We then examined the nonresponse
bias by separating the total sample into two groups and performed t tests regarding
major FIE characteristics (Armstrong & Overton, 1977). No statistically significant
differences were found between respondents and nonrespondents on basic firm
characteristics. We thus excluded these cases with too many missing values for
key variables and obtained an effective sample of 344.
The hybrid HR system
As shown in the theoretical model (Figure 1), we conceptualize a hybrid system

as an organizational innovation based on selective adoptions or a bricolage of
foreign and local practices, which is distinguishable from the typical foreign or
local model (Elger & Smith, 2005; Gamble, 2010). Consistent with our theoreti-
cal framework, our survey asked the respondent to reflect on his/her company’s
HRM practices, including compensation, recruitment and promotion, training
and development, and empowerment, and then assess whether the HR system
implemented in his/her company (1) largely resembles the foreign model, (2)
largely resembles the Chinese model, or (3) lies in between the foreign and Chinese
models by selecting practices from both sides. We use this question to classify FIEs
in our sample into three groups: those adopting the foreign HRM model, those
adopting the Chinese model, and those adopting a hybrid model. In accordance
with our specific research interest in the emergence of the hybrid system, we
create a dichotomous measure to indicate its adoption (i.e. ‘lies in between the
foreign and Chinese models by selecting practices from both sides’), which is the
key dependent variable in our analysis.
To validate our theoretical construct on the three distinct ideal types of HRM
models (i.e. foreign, hybrid, and Chinese HRM models), following the method
of comparing adoption scores (Abo, 2007), we compare the level of adoption of
foreign and Chinese HRM practices across these three groups of FIEs. We first
compare their average adoption scores of 25 global ‘best practices’ in the high-per-
formance HRM system (Baron & Kreps, 1999; Becker & Gerhart, 1996), which
has a strong influence world-wide and has been diffused across many countries
including several emerging economies (e.g. Bae & Lawler, 2000; Bae et al., 2003).
These 25 HRM practices fall into four dimensions: recruitment, compensation,
training and development, and empowerment. Recruitment consists of eight
practices, such as ‘recruitment emphasizing candidate potential for learning/
development.’ Compensation contains four practices, such as ‘offering long-term
incentives plans (e.g. profit-sharing).’ Training and development are composed of
five practices, such as ‘using job rotation to develop employee skills and careers.’
Finally, employee empowerment consists of seven practices, such as ‘involving
employees in solving management-related problems.’ In our survey, the respond-
ent was asked to assess on a 7-point scale (1 = ‘not at all’; 7 = ‘fully adopted’) the
extent to which each practice had been adopted in his/her company. For each
dimension, we compute the average adoption score.
As shown in Figure 2, there is a clear contrast among the three groups in terms
of their adoption of these global ‘best practices’ in each of the four dimensions:
FIEs resembling the Chinese HRM model have the lowest level of adoption, while
affiliates resembling the foreign HRM model have the highest level of adoption.
As expected, the adoption level for those FIEs having a hybrid HR system falls
in between. ANOVA analyses further show that for each of the four dimensions
there is a highly significant difference in the adoption level across these three
groups (p < .001).
We then examine if these three groups exhibit different orientations toward the
traditional Chinese labor management and plot the patterns in Figure 3. We iden-
tify four specific areas: nonmarket-based recruitment, provision of social benefits,
informal employee management, and the role of the trade union. As emphasized
by previous studies (Björkman & Lu, 1999; Hong & Warner, 1998; Lockett, 1988;
Warner, 1993; Zheng et al., 2006), these areas reveal distinct features of traditional
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Recruitment Compensation Training Empowerment
Chinese Hybrid Foreign
Figure 2. Adoption scores of global best practices across three types of HRM models.
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Nonmarket Recruitment Social Benefits Informal Management Role of Trade Union
Chinese Hybrid Foreign
Figure 3. Adoption scores of Chinese-style labor management across three types of HRM models.
labor and personnel management in Chinese enterprises under the command

economy, which contrasts with the Western-style HRM concept and practices
as discussed above. Regarding nonmarket-based recruitment, our survey asked
the FIEs to report how frequently they used the following channels in employee
recruitment: employee referral, through Chinese business partners, and through
government labor agencies (1 = ‘rarely used’; 4 = ‘being used as a main method’).
The mean score for these nonmarket-based recruitment items is shown in Figure
3. As expected, those FIEs adopting the Chinese HRM model most frequently
use these nonmarket-based recruitment strategies and those adopting the hybrid
model reside in the middle. We further examine the company’s provision of social
benefits, including dormitory, housing benefits, dining hall, and childcare, which
constitutes the broad compensation (beyond the monetary reward) in China’s
employment system. Following traditional practices under the work-unit (danwei)
system, Chinese firms often provided these social benefits to enhance employee
commitment (Bray, 2005). Here, we compute the mean score for the provision
of social benefits by averaging the total number of social benefits provided by
each company. As shown in Figure 3, the level of social benefit provision follows
the expected pattern, with FIEs adopting the hybrid HR system falling in the
middle. For informal employee management, we asked the companies whether
they had established an HRM department and formal policies and procedures on
recruitment, performance appraisal, and promotion. The total number of formal
structures is reverse-coded to indicate the informality of the company’s employee
management. As shown in Figure 3, FIEs adopting the Chinese HRM model have
the highest level of informality and those adopting the hybrid model lie in the
middle. Finally, another distinct feature of Chinese labor management is with
regard to the role of the trade union. While Western HRM emphasizes employee
empowerment and individual initiatives, the traditional Chinese model empha-
sizes the trade union as the collective representative of employees and an effective
channel to achieve harmony between managerial and employee sides. Our survey
asked if the chairperson of the trade union also assumed managerial positions.
This question serves as an indicator of whether the trade union plays a substantial
role in the company’s HRM or is merely window dressing. As shown in Figure
3, the proportion of having such a feature is the highest among FIEs adopting a
Chinese HRM model, and those adopting a hybrid HRM model once again fall
in the middle. ANOVA tests show that in each of these four dimensions the dif-
ferences across the three groups adopting distinct HRM systems are statistically
significant (p < .01).
Taking both Figures 2 and 3 into consideration, we see clear differences in the
adoption of foreign and Chinese practices among the three groups of FIEs. Those
FIEs choosing the hybrid HR system consistently fall in the middle in terms of
the adoption of both global HRM ‘best practices’ and Chinese-style labor man-
agement. These findings offer support to our conceptualization of the hybrid HR
system as a distinct type based on a bricolage of foreign and local management
practices. They also validate our key measurement of the hybrid HR system.
Other dependent, independent, and control variables
HRM effectiveness
To test the hypothesis on the impact of a hybrid HR system on FIEs, we use a set of
perceptual measures of HRM effectiveness. Perceptual measures of organizational
effectiveness are widely used in survey research in China where accurate objective
data on firm performance are especially difficult to obtain (Bae et al., 2003; Luo &
Park, 2001; Tan & Litsschert, 1994). Moreover, as our theoretical discussions indi-
cate, winning employee support is key to the success of HRM policy. Accordingly,
our first measure of HRM effectiveness is employee’s acceptance of the implemented
HRM system, which reflects the level of overall support of the company’s HRM
policy and practices. It is based on the respondent’s assessment of the extent
to which employees embrace the current HRM system along the dimensions
of compensation and other benefits, recruitment and promotion, training and
development, and empowerment, and the response categories follow a 5-point
scale ranging from 1 = ‘very low’ to 5 = ‘very high.’ We construct it by computing
the average score and the Cronbach’s α for these items is .87. This variable allows
us to directly probe the effect of the hybrid system on cognitive legitimacy, a
key issue in our theoretical argument. The second measure is competitiveness of
the implemented HRM system. The respondent assessed whether the company’s
HRM system had any advantage relative to its main competitors. The responses
have a 4-point scale, ranging from ‘at a disadvantageous position’ (=1), ‘about the
same’ (=2), ‘have a small advantage’ (=3), and ‘have a substantial advantage’ (=4).
Our third measure is employee performance according to managerial assessment,
which is widely used in management literature to evaluate the effectiveness of
HRM system. It is constructed by computing the average score of the respond-
ent’s assessment of employees in the following ten aspects: general performance,
work ethics, skills and abilities, efficiency, teamwork, initiatives, relationship with
management, relationship among coworkers, obedience, and loyalty. All these
items are measured on a 7-point scale ranging from 1 (‘extremely unsatisfied’)
to 7 (‘extremely satisfied’). Cronbach’s α for these items is .94, suggesting a high
degree of consistency in management assessment across all aspects of employee
performance.
Cultural distance
Cultural distance measures the extent to which different cultures are similar or dif-
ferent (Shenkar, 2001). We construct this measurement based on Hofstede’s (1980)
indexes of cultural differences. Hofstede’s indexes have been widely used for anal-
ysis of culture and cross-cultural differences and of their impacts on international
management (Kirkman, Lowe, & Gibson, 2006). Following prior studies (e.g.
Kogut & Singh, 1988; Park & Ungson, 1997), we develop a composite index based
on the aggregation of the difference between China and each FIE’s home country
in these four dimensions – power distance, uncertainty avoidance, masculinity/
femininity, and individualism. The algebraic formula for cultural distance is as
follows:
4
∑ | |
CDj = |Ii,j − Ii,China |,
| |
i=1
where CDj is the cultural distance of the jth country from China, and Ii,j stands
for the index in the cultural dimension i for an FIE’s home country j. We per-
form a natural logarithmic transformation to normalize the distribution of this
composite index.
Power balance
Following the theoretical model in Figure 1, we create three variables to meas-
ure power balance between the foreign and the Chinese sides. First, for CEO
selection, we code collective decision in CEO selection ‘1’ if the appointment of
the CEO involved collective decisions or bargaining processes (i.e. appointment
by the board or through bilateral negotiation). It is coded ‘0’ if the CEO was
appointed either by the Chinese or the foreign side. Second, for power balance in
the management team, we use Blau’s heterogeneity index to capture the distribu-
tion of foreign versus Chinese managers (Blau, 1977). The heterogeneity index is
calculated as follows:
2
∑
H =1− Pi2 ,
i=1
where H (the heterogeneity index) indicates the level of balanced composition of

management team, and P is the proportion of management team members from
foreign countries or China. In this measurement, the score ranges from 0 to .5.
Specifically, 0 indicates a total dominance of either foreign or Chinese managers
(when the proportion of foreign or Chinese managers is 1); .5 indicates an equal
distribution of foreign and Chinese managers (when the proportion of both for-
eign and Chinese managers is .5) and suggests the most balanced managerial
power within an FIE. Third, for control over HRM, we code joint control of HRM
‘1’ if the HRM function was jointly controlled by the Chinese and foreign parts.
It is coded ‘0’ if it was controlled by either the Chinese or the foreign side.
Control variables
We control for several basic organizational characteristics. Firm age is measured
as the logarithm term of the number of years between the company’s founding
year and 2007 (the year of our survey). Firm size is measured by the logarithm
of the total number of employees. We also include a set of dummy variables to
control for industries, including heavy manufacturing (the reference category),
light manufacturing, high-tech, and service industries. In addition, FIEs often
have both Chinese and foreign employees, and the composition of employees
may also have an effect on the choice of the HRM system. Thus, we control for the
proportion of foreign employees in the analysis of adoption of the hybrid HR system.
Because employees are carriers of cultures (Lincoln, Olson, & Hanada, 1978) and
the composition of employees may also affect how smoothly an HRM system is
implemented, we control for this variable when analyzing HRM effectiveness.
Because the adoption of a certain HR system often involves political struggle,

we incorporate two additional sets of variables as controls in the analysis of the
emergence of the hybrid HR system. First, as ownership is a key factor affecting
the bargaining power in an international company (Björkman & Lu, 2001; Yan
& Gray, 1994), we control for foreign ownership. Following Björkman and Lu
(2001), we code this variable into a five-point scale based on the foreign share in
ownership: 1 (<35%), 2 (35–49%), 3 (50%), 4 (51–65%), and 5 (>65%). Second,
resource dependence constitutes one of the main structural bases for inter-or-
ganizational influence, and it channels the institutional pressures of choosing
the HRM model (Björkman & Lu, 2001; Ferner et al., 2012; Pfeffer & Salancik,
1978). Thus, we create a composite measure for the affiliate’s resource dependence
on its foreign parent company based on the sum of four items (Cronbach’s α =
.88), which indicates an affiliate’s reliance on its foreign parent company for raw
materials, technology and equipment, marketing and sales channels, and financial
capital, respectively. Each item is measured on a 5-point scale (1 = ‘not at all’;
5 = ‘completely’). In a similar manner, we construct a composite measure for the
affiliate’s resource dependence on its Chinese parent company based on its reliance
on the Chinese side in these four dimensions (Cronbach’s α = .79). Finally, in
additional tests for robustness (results not shown here for simplicity), our models
further control for cities (including Beijing, Tianjin, Dalian, and Xuzhou, among
others), from which our data were collected. The results show the same patterns
as reported here.
Models
To examine the emergence of a hybrid HR system, we use a logit regression model

because of the binary nature of our dependent variable (Long, 1997). For the
analysis of the impacts of the hybrid system on HRM effectiveness, we use OLS
regression models for both employee acceptance of the HRM system and employee
overall performance, and use an ordered logit model for competitiveness of the
HRM system as it is measured as an ordinal variable. We use Huber-White’s robust
standard errors in all models (White, 1980).
Results
Table 1 provides the descriptive statistics and correlation matrix for all varia-
bles included in our study. A large proportion (44%) of the FIEs in our sample
adopted a hybrid HR system. Thirty-four percent of the FIEs implemented the
Chinese-style HRM system, while the remaining 22% adopted a foreign-style
HRM systems. This finding further indicates that the hybrid HR system is a
popular and important alternative to the international and local HRM models.
As expected, three variables about power balance – collective decision in CEO
selection, balanced composition of management team, and joint control of HRM
20
Table 1. Descriptive statistics and pearson correlation coefficients.

Variables Mean S.D. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
1. Adoption of a hybrid HRM .44 .50
system
2. Employees’ acceptance of 3.29 .69 .10
J. GE AND W. ZHAO
HRM
3. Competitiveness of HRM 2.52 .77 .11 .55
system
4. Employees’ overall perfor- 3.58 .63 .07 .58 .46
mance
5. Cultural distance 4.48 .64 −.04 −.06 −.09 .01
6. Collective decision in CEO .52 .50 .10 .11 .09 .06 −.16
selection
7. Balanced composition of .15 .18 .16 .00 .06 .02 .12 −.20
management team
8. Joint control of HRM .20 .40 .25 −.08 .01 −.12 −.02 .03 .27
9. Firm age 1.85 .72 .02 .01 .08 .04 −.01 −.14 .05 .05
10. Firm size 4.88 1.66 .05 .11 .20 .03 −.03 .06 .19 .11 .29
11. Light manufacturing industry .38 .49 −.07 −.03 −.02 −.11 −.06 .14 −.10 −.06 −.05 .13
12. High-tech industry .10 .31 .00 .10 .10 .10 .05 −.07 .11 .02 .03 .03 −.27
13. Service industry .25 .43 .08 .01 −.02 .13 −.11 −.13 .05 .06 .06 −.17 −.46 −.20
14. Proportion of foreign .12 .26 .08 .05 −.02 −.02 .02 −.01 −.21 −.02 .05 −.15 .03 −.07 .02
employee
15. Foreign ownership 4.25 1.44 .11 .06 −.02 .06 .10 −.28 .28 .08 .05 −.01 −.13 .09 .08 .00
16. Dependence on foreign 1.92 .94 .07 −.06 −.03 −.07 .20 −.06 .33 .11 .05 .18 −.04 .01 −.17 .01 .24
parent company
17. Dependence on Chinese 1.96 1.18 .00 .09 .10 .01 −.11 .18 −.13 −.05 −.09 .09 .18 −.14 −.13 .11 −.44 .02
parent company
Notes: N = 344. Correlations equal to or greater than .10 are significant at p < .05 level.
– all have significant and positive correlations with the adoption of a hybrid HR
system. The insignificant correlation between cultural distance and the adoption
of a hybrid HR system is not surprising since we expect a curvilinear relation-
ship between them. The hybrid HR system also has a positive correlation with
employees’ acceptance of the implemented HRM system, HRM competitiveness,
and employees’ overall performance. All of these patterns are consistent with our
hypotheses. We now turn to regression analyses to formally test our hypotheses.
Adoption of the hybrid HR system

We first test Hypotheses 1–4 on the determinants of adoption of the hybrid HR
system. The results are reported in Table 2. Model 1 is the baseline model and
includes only the control variables. Model 2 adds the first- and second-order terms
of cultural distance to test its curvilinear effects. Model 3 incorporates the three
variables on the internal power structure but not the cultural distance variables.
Model 4 is the full model, which includes all independent and control variables.
As the main results are very robust across models, we focus our discussions below
on the results in Model 4.
Hypothesis 1 predicts that cultural distance exerts a U-shaped curvilinear effect
on the adoption of the hybrid HR system. Consistent with this hypothesis, the
coefficients for the first- and second-order terms of cultural distance are significant
Table 2. Logit model estimates of adopting a hybrid HRM system.

Covariates Model 1 Model 2 Model 3 Model 4
Cultural Distance
Cultural distance −13.23* (5.63) −20.69** (7.33)
Cultural distance2 1.62* (.68) 2.55** (.89)
Power Balance
Collective decision in CEO selection .98** (.32) 1.12*** (.34)
Balanced composition of manage- 2.36* (1.21) 2.37* (.99)
ment team
Joint control of HRM 1.21** (.41) 1.16** (.44)
Control Variables
Firm age −.01 (.18) −.12 (.18) .42† (.24) .21 (.25)
Firm size .14† (.08) .17* (.09) .11 (.10) .19† (.10)
Industry (Ref. Heavy manufacturing)
Light manufacturing −.24 (.30) −.26 (.31) −.41 (.36) −.30 (.36)
High-tech −.02 (.44) −.13 (.45) .03 (.53) .03 (.52)
Service .63† (.37) .76† (.39) .76 (.46) 1.14* (.51)
Proportion of foreign employee .39 (.47) .67 (.48) .51 (.54) .83 (.57)
Foreign part ownership .20* (.10) .18† (.10) .26* (.12) .26* (.12)
Dependence on foreign parent .08 (.14) .02 (.15) −.27 (.18) −.41* (.20)
company
Dependence on Chinese parent .15 (.12) .12 (.13) .02 (.15) .00 (.17)
company
Constant −2.24** (.73) 24.14* (11.31) −3.18** (.98) 37.41* (14.64)
χ 2
14.46 18.96 32.41 31.71
Log-likelihood −189.92 −179.87 −136.05 −126.91
N 287 278 230 225
Notes: Standard errors are in parentheses.
†
p < .10
*
p < .05; **p < .01; ***p < .001 (two-tailed tests).
in Model 4 as well as in Model 2. Based on the estimates in Model 4, we plot the

effect of cultural distance in Figure 4 while holding all other variables constant at
their respective averages. The intriguing curvilinear pattern is clear. When cultural
distance between an FIE’s home country and host country (i.e. China) is at the
minimum level in our data, the predicted probability of adopting a hybrid HR
system is around 40%. This probability decreases as cultural distance moves to the
middle range. But as cultural distance continues to increase, the predicted prob-
ability of adopting a hybrid system begins to increase dramatically. As discussed
in the theoretical part of this paper, the driving forces of implementing a hybrid
HR system associated with the small and large cultural distance may be different.
When the cultural distance is small, it is easier to blend the HRM practices from
both sides. When the cultural distance is large, an FIE can significantly benefit
from the distinct knowledge stocks from both sides in organizational innovation
(cf. Rogers, 2003). Overall, our finding on cultural distance provides strong sup-
port to Hypothesis 1.
Regarding the internal power structure, our general proposition is that a more
balanced power structure will increase the probability of adopting a hybrid HR
system. As shown in Model 3 and Model 4, the coefficient of the collective decision
in CEO selection is positive and highly significant (b = 1.12, p < .001 in Model
4). Specifically, it increases the odds of adopting a hybrid system by 3.06 times
higher (e1.12 = 3.06) than that in an affiliate with the CEO selection controlled by
a single side. This finding lends strong support to Hypothesis 2. As for the com-
position of management team, the balanced distribution in management team
Figure 4. Cultural distance and adoption of a Hybrid HR system (95% confidence interval).
also shows a significantly positive effect on the adoption of the hybrid HR system
(b = 2.37, p < .05). With other things being equal, one standard deviation change
toward a more balanced manager composition increases the odds of adopting a
hybrid HRM system by 53% (e2.37*.18 = 1.53). Again, this finding provides support
to Hypothesis 3. Finally, joint control of HRM by foreign and Chinese partners
in an FIE also has a significant and positive effect on the adoption of a hybrid HR
system (b = 1.16, p < .01 in Model 4). Based on the estimate in Model 4, the odds
of adopting a hybrid system in an affiliate with joint control of HRM are 3.19 times
higher (e1.16 = 3.19) than those in an affiliate with HRM controlled unilaterally by
either side. This finding lends support to Hypothesis 4. Overall, these findings
provide strong support to our argument that a more balanced internal power in
an FIE enhances its chance of adopting a hybrid HR system.
There are also some interesting findings on the control variables in Table 2.
Among basic organizational characteristics, firm size has a positive effect (mar-
ginally significant) on the adoption of the hybrid system. We suspect that larger
FIEs face particularly strong pressure to maintain a balance between importing
advanced foreign HRM practices and attending to the local management tra-
dition. As a result, they are more likely to implement a hybrid HR system. Our
analysis also shows that industrial sector exerts some effects on the adoption of a
hybrid HR system. In particular, compared with those in the heavy manufacturing
industry, FIEs in the service industry are more likely to adopt a hybrid system.
The reason may lie in the systematic difference of HRM between the service
industry and other industries (Subramony, 2009). In addition to these variables
on basic organizational characteristics, our results further show that a higher level
of foreign ownership has a significant and positive impact on the adoption of a
hybrid HR system. In contrast, dependence on foreign parent company shows a
significant and negative effect on the adoption of a hybrid HR system in Model
4 after controlling for all other variables.
Impact of the hybrid HR system on FIEs
Finally, we employ the ordered logit and OLS models to test our hypothesis on the
impact of the hybrid HR system on HRM effectiveness. The results are reported
in Table 3. In three models, the hybrid HR system shows a significant and posi-
tive effect on employee acceptance of HRM system, HRM competitiveness, and
employee overall performance. As shown in Table 3, a hybrid system signifi-
cantly enhances employee acceptance of the implemented HRM system (b = .76,
p < .001). As posited in our theoretical discussion, a hybrid HR system helps
to win the hearts and minds of employees. Moreover, a hybrid HR system also
improves the competitiveness of HRM system (b = .52, p < .05). Based on the
estimate in Table 3, compared with using either the foreign or the Chinese HR
system, adopting the hybrid HR system increases the odds of achieving a higher
level of HRM competitiveness by 1.68 times (e.52 = 1.68). Finally, adoption of a
Table 3. OLS and ordered logit model estimates of HRM effectiveness.

Competitiveness of
Employee acceptance HRM system (Ordered Employee overall
Covariates of HRM system (OLS) Logit) performance (OLS)
Adoption of a hybrid HRM .76*** (.23) .52* (.25) .15* (.07)
system
Control Variables
Cultural distance −.99 (4.08) 3.75 (4.64) .66 (1.38)
Cultural distance2 −.09 (.49) −.52 (.56) −.08 (.17)
Collective decision in .34 (.23) .21 (.26) .16* (.08)
CEO selection
Balanced composition of −.37 (.63) .64 (.70) .08 (.21)
management team
Joint control of HRM −.61* (.28) −.37 (.31) −.25** (.09)
Firm age −.21 (.16) .15 (.18) −.04 (.05)
Firm size .25** (.07) .24** (.08) .05* (.02)
Industry (Ref. Heavy
manufacturing)
Light manufacturing −.01 (.26) −.27 (.28) −.02 (.08)
High-tech .55 (.39) .33 (.46) .32* (.13)
Service .02 (.32) −.04 (.35) .13 (.10)
Proportion of foreign .47 (.38) .36 (.42) .10 (.12)
employee

χ2 – 33.28 –
Log-likelihood – −300.21 –
F 2.92 – 2.69
R2 .12 – .11
N 283 276 284
Notes: Standard errors are in parentheses.
*p < .05; **p < .01; ***p < .001 (two-tailed tests).
hybrid HR system also has a positive impact on employee performance (b = .15,

p < .05). Overall, the results provide strong support to Hypothesis 5.
Check for common method bias and robustness
We adopt several approaches to check and reduce the possible threat of common
method bias associated with a single respondent (Podsakoff, MacKenzie, Lee, &
Podsakoff, 2003; Podsakoff, MacKenzie, & Podsakoff, 2012). First, we collected
the key information on cultural distance from a separate data source, and all three
measures on political structure is more based on objective fact or information,
including CEO selection structure, composition of managerial team, and the con-
trol of HRM. As our interviewees are HR managers or other senior managers, they
should have clear knowledge and accurate information to answer these straight-
forward questions. Second, the variables used in this study are a part of a com-
prehensive survey including many other questions. They were structurally placed
in very different sections, operationalized with varying styles of question design
and scales, which can help reduce the impact of respondents’ implicit consistency
motifs and effectiveness tendency. A pretest was also conducted to reduce ambi-
guities in the wording and make sure the questions were clear and acceptable for
the respondents. Third, we cross-checked twenty randomly selected sample FIEs
by administering questionnaires and collecting systematic information from both
general managers and HR managers, and pairing and comparing their answers
for the same FIE. The responses between two different managers from the same
responding FIE are highly consistent for the questions used in this study (the mean
r for HRM effectiveness variables = .77, p < .01). Forth, a global factor analysis
was conducted. None of the variables loaded on a single factor, nor did any single
factor dominantly account for the majority of the variance, which suggests that
common method bias is not a serious concern in this study. Finally, we conducted
interviews in seven FIEs to develop a first-hand understanding of the hybridi-
zation of HRM from the perspective of managers and employees. Qualitative
analysis of these data also generally supports the relationships revealed by our
quantitative analysis. All these efforts and results suggest that common method
bias is not a big concern in this study.
To supplement our analysis and ensure the reliability of our results, we conduct
several robustness checks as well. First, by asking the respondent whether the FIE’s
HRM practices are hybridized in each of the four aspects (compensation, recruit-
ment and promotion, training and development, and empowerment), we create an
ordinal variable by aggregating these four indicators (each with a binary coding)
to capture the degree of hybridization, which ranges from 0 to 4. We then test our
hypotheses again using this alternative measure of hybridization, and the results
are largely consistent. Second, we measure cultural distance in an alternative
way based on the Global Leadership and Organizational Behavior Effectiveness
(GLOBE) study. GLOBE develops cultural indexes in nine dimensions, including
uncertainty avoidance, power distance, institutional collectivism, in-group col-
lectivism, gender egalitarianism, assertiveness, future orientation, performance
orientation, and humane orientation (House, Hanges, Javidan, Dorfman, & Gupta,
2004). We construct the GLOBE cultural distance by aggregating the differences
between an FIE’s country of origin and China in each of these nine dimensions
and retest the models. The findings remain the same. Third, we further validate
our results with bootstrap resampling techniques, which are powerful tools for
estimating standard errors from small samples. We calculate standard errors with
1000 replicates and statistical tests based on the bootstrap samples, and the results
also confirm our findings. All these robustness tests corroborate our research
findings and lend additional support to our argument and hypotheses.
Discussion and conclusion

Knowledge contribution
Situated in a complex and unique institutional context, FIEs pose a challenge to
the basic tenets of the new institutional theory and demand richer institutional
analyses and novel conceptual tools (Kostova et al., 2008). In this study, we inte-
grate largely separate theoretical perspectives on cultural and political factors to
investigate the hybrid system in FIEs in China’s emerging economy. Building upon
research on ‘hybridization’ (e.g. Abo, 1994; Boyer et al., 1998), we conceptualize
the hybrid system as an innovative adaptation in FIEs based on selective adoptions

of international and local management practices. We emphasize that hybridization
often involves interactions, negotiations, and mutual enrichment between different
cultures, fusing and adjusting of conflicting management practices, and result-
ing unique configurations different from both foreign and local models (Asgary
& Walle, 2002; Elger & Smith, 2005; Gamble, 2010; Morgan, 2001; Shimoni &
Bergmann, 2006; Tolich et al., 1999; Westney, 1987, 1999). While most extant
studies have relied on the qualitative approach and focused on the hybridization
process in industrialized economies, our study adopts a quantitative approach
and systematically examines both the emergence and significance of the hybrid
system in FIEs in China. Our study makes contributions to the broad international
business literatures in several aspects.
We integrate cultural analyses and political perspectives to develop a coher-
ent theoretical model, which highlights the cultural-political duality shaping the
hybridization of management practices in FIEs (Figure 1). As an FIE faces the
dual institutional pressure and conflicting institutional demands from its home
and host countries, its strategic choice of the HR system often involves the tug of
war between the foreign and local sides. In this process, external cultural schemas
and the according cultural distance at the macro level and the internal power
structure within an FIE are the key determinants of creating a hybrid HR system.
Our study reveals that the cultural distance between an FIE’s home and host
countries exerts a U-shaped curvilinear effect on the emergence of the hybrid HR
system. This curvilinear effect of cultural distance on hybridization is different
from the conventional view of the linear relationship between cultural distance
and international transfer of existing foreign practices (Beechler & Yang, 1994;
Taylor et al., 1996). This finding suggests that hybridization involves an intricate
process based on innovative configurations of foreign or local templates. From this
perspective, instead of always being constraining forces in international transfer,
diverse national cultures can be valuable sources to stimulate managerial inno-
vation. This enriches the research on the complex and nuanced role of cultural
distance in the international business literature (Sarala & Vaara, 2010; Shenkar,
2001).
Meanwhile, echoing the call of Kostova et al. (2008), our theoretical framework
incorporates both cultural forces and power dynamics, which have been rarely
examined simultaneously in institutional and organizational studies (Hirsch &
Lounsbury, 1997; Selznick, 1996). It pays attention to not only cultural factors,
but also political negotiation and power struggles between the foreign and local
managerial sides with conflicting interests shaped by their different national back-
ground. From this perspective, we highlight the role of internal power structure
in forming a hybrid system. Results reveal that a hybrid system is likely to be
adopted when power balance between competing sides is achieved (Kim et al.,
2016). Specifically, collective decision in CEO selection, balanced composition in
management team, and joint control of HRM between the foreign and local sides
all exert positive effects on the adoption of a hybrid HR system. This multi-di-
mensional analysis of the internal power structure deepens our understanding
of the role of power and agency in shaping organizational behaviors, which has
been widely regarded as crucial to advance institutional analyses of international
transfer and, more broadly, organizational practices (e.g. DiMaggio, 1988; Ferner
et al., 2012; Oliver, 1991; Tempel & Walgenbach, 2007).
In this light, our study emphasizes that organizations are not ‘institutional
dupes’ that passively conform to the institutional environment. Rather, they have
their own interests and can actively respond to institutional pressures (Oliver,
1991). Situated in complex and fragmented settings both externally and internally,
FIEs demonstrate strong agency and the great potential of innovative bricolage
of practices (Gamble, 2010). They engage in political negotiations with external
and internal stakeholders and ‘appear to demonstrate considerable space, within
structural constraints, for managerial “strategic choice”’ (Ferner et al., 2005, p.
317). Such a unique setting enables and stimulates organizational innovations of
FIEs, as embodied in the creation of the hybrid HR system. These findings depict
more complex and dynamic external and internal environments and processes for
FIEs. Accordingly, FIEs’ responses to their institutional environments are often
dynamic, discretionary, and proactive. Therefore, it is particularly important to
incorporate the political perspective into the cultural and institutional analysis,
and future research should refine investigations on how the fragmented internal
composition and contentious political processes may affect FIEs’ adaptation to
their complex institutional and cultural environments (see also Pache & Santos,
2010). These research efforts will deepen our understanding of FIE behaviors and
also enhance institutional analyses.
Finally, our study shows that compared to a pure foreign or local model, a
hybrid HR system appeals to multiple constituents and achieves ambidexterity
with both foreign and local sides, which enhances legitimacy in multiple institu-
tional domains. Internally, a hybrid HR system attends to the needs of both sides
and helps to win the hearts and minds of FIE employees. Our results confirm the
positive effects of a hybrid HR system on employee endorsement and performance
and also on HRM competitiveness, which highlights the broad significance of the
hybrid system.
Management implications
Our findings also have important management implications as the international

transfer of organizational practices becomes increasingly prevalent. Moving
beyond the dichotomy of internationalization and localization, this paper suggests
that the hybrid system based on selective adoptions of international and local prac-
tices provides a viable alternative option. Our findings suggest that, when there
is a small cultural distance between an FIE’s home and host countries, managers
should effectively blend and synthesize foreign and indigenous practices into a
coherent hybrid system. When an FIE is confronted with a huge cultural gap, it
would be wise to strive to reach a compromise and balance the expectations of
both sides. Moreover, while the internal political process and power struggle can
pose threats to an FIE, both sides can actively engage in extensive negotiations
and develop a hybrid system to benefit from both sides’ strengths.
Departing from the ‘either-or’ thinking in the Western mindset, we highlight
the value of the ‘both-and’ orientation often associated with distinct Eastern cul-
ture in China and many other emerging economies. As our study shows, the
hybrid system helps to win the support from employees and enhances HRM
effectiveness. It can be very helpful to promote and nurture sociocultural integra-
tion and synthesis of the workforce in FIEs, which is critical to improve organiza-
tional performance. While a popular trend in the globalization era is to transfer
Western-style managerial techniques to emerging economies, a promising avenue
is adopting the hybridization strategy to pursue the optimal structure in interna-
tional management.
Limitations and future directions
As our study is one of the earliest to conduct systematic quantitative analyses of

the hybrid system based on large-scale survey data, we acknowledge its limitations
and, at the same time, offer suggestions to further this line of research. First, while
our study highlights the global, local, and hybrid HRM models as three ideal types,
our key measure of the hybridization in empirical analysis is based on categorical
information and mainly focus on the system level. Future research should refine
this measure to further scrutinize possible subtypes under the umbrella of hybrid
system. Second, although we have made great efforts to collect the organizational
data and mitigate the common source bias, it would be beneficial to collect refined
data with more solid objective indicators on organizational effectiveness and per-
formance (e.g. financial performance) to yield more definite conclusive findings
in hypothesis testing. Moreover, while our data focus on the early stage of inter-
national transfer of HRM practices to China, longitudinal data will help clarify
the causal relationships in our hypotheses and also capture any changes in the
hybridization process over time. Third, while our study departs from extant studies
and focuses on quantitative analyses of the hybrid system, future research will ben-
efit from integration of quantitative and qualitative approaches. A mixed-method
approach will help reveal the intricate hybridization processes on how different
styles of practices are synthesized and integrated into the hybrid system. It can
also show the specific mechanism on how the hybrid system becomes the optimal
structure to appeal to both external audiences and internal employees. Finally,
while our study focuses on the hybrid HR system in FIEs situated in China’s
intriguing institutional environment, future studies should extend the research
to other managerial fields and emerging economies. This broader application will
help adjudicate to what extent our theoretical arguments and empirical findings
can be generalized to different institutional environments. It will also generate

new and richer evidence to deepen our understanding of the hybrid system in
various research contexts, which presents a prominent topic and challenge to both
scholars and practitioners in the field of international business.
Acknowledgement
We are grateful to the Editors David Lepak and Fang Lee Cooke and three anonymous review-
ers for their insightful and constructive comments and suggestions. We also thank Yang Cao
for generously sharing the data.
Disclosure statement
No potential conflict of interest was reported by the authors.
Funding
Jianhua Ge acknowledges the support from the Fundamental Research Funds for the
Central Universities and the Research Funds of Renmin University of China [grant number
18XNB021]. Wei Zhao acknowledges the support from a SHRM Foundation research grant
and a Faculty Research Grant offered by the University of North Carolina at Charlotte.
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Culture, Power, and Hybrid HR System in Foreign-Invested Enterprises: Evidence From China

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The International Journal of Human Resource

ISSN: 0958-5192 (Print) 1466-4399 (Online) Journal homepage: http://www.tandfonline.com/loi/rijh20

Culture, power, and hybrid HR system in foreign-

Jianhua Ge & Wei Zhao

To link to this article: https://doi.org/10.1080/09585192.2018.1448293

Published online: 13 Mar 2018.

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Culture, power, and hybrid HR system in foreign-invested

CONTACT Jianhua Ge gejianhua@ruc.edu.cn

adoption of management practices are often contentious and subject to strong

Cultural-political duality and hybrid HRM in FIEs: theory and

strategic choice is also subject to the different interpretations and preferences of

Cultural distance and creation of a hybrid system

Cultural schema determines the cognitive structure of organizational actors and

Cultural Duality in Cultural Distance Optimal

Distinct Management Systems

Political Duality in CEO Selection CEO Selection

Figure 1. A theoretical model on hybrid management system in an FIE.

Internal power structure and adoption of a hybrid HR system

As an FIE faces dual institutional pressures, it must heed to the ‘conflicting

important factor to affect adoption of a hybrid HR system. Interpretation and

The impact of the hybrid HR system

The choice of different HR systems may have differential impacts on organizational

provinces as two extremes in terms of pace of market transition, the northern

The hybrid HR system

As shown in the theoretical model (Figure 1), we conceptualize a hybrid system

labor and personnel management in Chinese enterprises under the command

Other dependent, independent, and control variables

where H (the heterogeneity index) indicates the level of balanced composition of

Because the adoption of a certain HR system often involves political struggle,

To examine the emergence of a hybrid HR system, we use a logit regression model

Table 1. Descriptive statistics and pearson correlation coefficients.

Adoption of the hybrid HR system

Table 2. Logit model estimates of adopting a hybrid HRM system.

in Model 4 as well as in Model 2. Based on the estimates in Model 4, we plot the

Impact of the hybrid HR system on FIEs

Table 3. OLS and ordered logit model estimates of HRM effectiveness.

hybrid HR system also has a positive impact on employee performance (b = .15,

Check for common method bias and robustness

Discussion and conclusion

the hybrid system as an innovative adaptation in FIEs based on selective adoptions

Our findings also have important management implications as the international

Limitations and future directions

As our study is one of the earliest to conduct systematic quantitative analyses of

can be generalized to different institutional environments. It will also generate

Becker-Ritterspach, F. (2009). Hybridization of MNE subsidiaries: The automotive sector in

Hofstede, G. (1980). Culture’s consequences: International differences in work-related values.

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