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GLOBAL REWARD MANAGEMENT IN MULTINATIONAL ENTERPRISES
Antecedents and Consequences of Practice Centralization
Inaugural dissertation
submitted to attain the academic degree
doctor rerum politicarum
(Doktor der Wirtschaftswissenschaften)
at the
ESCP Europe Business School Berlin
by
Dipl.-Psych. Michael Tekieli
born on March 22nd, 1987 in Jastrzębie-Zdrój, Poland
Berlin
2018
Global reward management in MNEs
DOCTORAL EXAMINATION COMMITTEE
Head: Prof. Dr. Christian Durach, ESCP Europe Berlin
Examiner: Prof. Dr. Marion Festing, ESCP Europe Berlin
Examiner: Prof. Dr. Xavier Baeten, Professor of Management Practice, Vlerick Business School
Day of disputation: October 29, 2018
Global reward management in MNEs
TABLE OF CONTENTS
List of figures .......................................................................................................................................................... I List of tables .......................................................................................................................................................... II List of abbreviations ............................................................................................................................................. III 1 Introduction .................................................................................................................................................. 1 2 Overview on global reward management research ................................................................................... 4
2.1 Global reward management from a theoretical perspective ................................................................... 4 2.1.1 Firm-internal theories ........................................................................................................................ 5
2.1.1.1 Resource-based view ................................................................................................................................ 5 2.1.1.2 Resource dependence theory .................................................................................................................... 6
2.1.2 Firm-external theories ....................................................................................................................... 7 2.1.2.1 Cultural perspective .................................................................................................................................. 7 2.1.2.2 Institutional perspective ............................................................................................................................ 7
2.2 Current state of research in global reward management and research gaps ........................................... 8 3 Dissertation Structure ................................................................................................................................ 10
3.1 Overview of the manuscripts ............................................................................................................... 10 3.2 Data collection and data basis .............................................................................................................. 15
4 Introductory Insights on the Global Reward Management of the Sample ........................................... 16 5 Research Manuscripts ................................................................................................................................ 18
5.1 Global Alignment or Localization? An Empirical Examination of Global Reward Management
in MNEs from a Subsidiary Perspective ............................................................................................. 18 5.2 Global reward management – a power perspective on the decision-making centralization in
multinational enterprises ...................................................................................................................... 19 5.3 Centralization and Effectiveness of Reward Management in Multinational Enterprises:
Perceptions of HQ and Subsidiary Reward Managers......................................................................... 20 6 Discussion and Conclusion......................................................................................................................... 21
6.1 Summary of key findings .................................................................................................................... 21 6.2 Further analyses ................................................................................................................................... 23
6.2.1 Further analyses linking manuscript 1 and 2 ................................................................................... 23
6.2.2 Further analyses related to manuscript 2 ......................................................................................... 27 6.3 Contributions ....................................................................................................................................... 29 6.4 Limitations and future research implications ....................................................................................... 30 6.5 Practical Implications .......................................................................................................................... 32 6.6 Closing Remarks.................................................................................................................................. 33
7 References ................................................................................................................................................... 34
Global reward management in MNEs
I
LIST OF FIGURES
Figure 1. Underlying total rewards perspective of this dissertation. .............................................. 11
Figure 2. Underlying framework of this dissertation. .................................................................. 13
Figure 3. Reward management centralization of MNEs provided by the headquarters subsample. .... 16
Figure 4. Influences of foreign subsidiaries on MNE’s development of reward programs provided
of the headquarters subsample. ................................................................................... 17
Global reward management in MNEs
II
LIST OF TABLES
Table 1. Overview of the manuscripts included in the thesis. ....................................................... 14
Table 2. Centralization of decision-making for the different employee groups and reward
practices. .................................................................................................................. 24
Table 3. Multiple regression analyses predicting for three different employee groups centralization
of decision-making by alignment and localization pressures. ........................................... 25
Table 4. Centralization of decision-making for the different employee groups and reward
procedure. ................................................................................................................. 28
Global reward management in MNEs
III
LIST OF ABBREVIATIONS
ANCOVA Analysis of covariance
Ed(s). Editor(s)
ed. Edition
e.g. Exempli gratia (for example)
et al. Et alii (and others)
GLOBE Global Leadership and Organizational Behavior Effectiveness Program
GRM Global reward management
HQ Headquarters
i.e. Id est (that is)
(I)HRM (International) Human resource management
IT Information technology
LTI Long-term incentives
MNE(s) Multinational enterprise(s)
p./pp. Page/s
PFP Pay for performance
PMS Performance management systems
SE Standard error
SIT Social identity theory
STI Short-term incentives
UNCTAD United Nations Conference on Trade and Development
UK United Kingdom
USA United States of America
Vol. Volume
Global reward management in MNEs
1
1 INTRODUCTION
Due to the increasing prevalence of globalization, multinational enterprises (MNEs) have
become central players in the world economy. The number of MNEs worldwide increased
from 3,000 in 1990 to 100,000 in 2012 (Javidan & Bowen, 2013), and they account through
their value chains for 80 percent of global trade (UNCTAD, 2013) and employ a major part of
the worldwide workforce (Budhwar & Sparrow, 2002). Consequently, international human
resource management (IHRM) has received a lot of attention in the recent decade from
researchers as well as practitioners (Kroeck & Von Glinow, 2015).
Global reward management (GRM) is a crucial issue for MNEs, since it affects employee
behavior and is therefore able to improve global firm performance (Graham & Trevor, 2000;
Gross & Friedman, 2004). With ongoing globalization, GRM comprises so much more than
expatriate pay, consisting of the following core tasks: a) The consideration of local and global
data when setting up total reward packages for a global workforce, b) the decision whether to
use centralized or decentralized reward systems, and c) the linkage of global outcomes with
geographically dispersed costs. This broad spectrum of tasks has the aim of addressing several
MNE objectives (Kroeck & Von Glinow, 2015):
x To attract and retain critical talent in all locations
x To attract and retain employees suitable for international assignments
x The worldwide exchange and transfer of employees from different locations
x The creation of a consistent and accepted relationship between rewards at HQ and
international subsidiaries
x Implementing reward management that is competitive and simultaneously keeps costs
at a reasonable level
Global reward management in MNEs
2
In the past, one focus of IHRM research was to examine the extent to which MNEs
standardize or localize their worldwide HRM practices (Brewster, Mayrhofer, & Smale,
2016). MNEs face two opposing pressures: “They are pulled to achieve isomorphism with the
local institutional environment, and they also face an imperative for consistency within the
organization” (Rosenzweig & Singh, 1991, p. 340). This duality has also been found in the
area of GRM: “We see evidence both of international convergence around best practice
coupled with an increasingly sophisticated awareness of the distinctive nature of rewards
policies and behavior across countries” (Sparrow, 2004, p.102). HRM is supposed to be the
management function under the highest pressure to adapt to local standards instead of being
standardized across national boundaries, as it is highly sensitive to local conditions, especially
due to its high dependence on the local labor market (Farndale & Paauwe, 2005; Ferner,
Quintanilla, & Varul, 2001). With regard to GRM, the local environment has also been
assumed as a crucial reference point (McGraw, 2015), especially due to governmental
regulations (Chapman & Kelliher, 2011). However, research on GRM is still scarce and lacks
a clear and comprehensive understanding of when and why MNEs adapt their GRM to the
local environment, and when and why they do not do so (Festing & Tekieli, 2018).
The present work contributes new explanations to the standardization vs. localization
debate in GRM by applying new theoretical lenses and assessing empirically a broad set of
reward practices as well as factors that influence global standardization and local adaptation.
The three research manuscripts are the centerpiece of this thesis, with each manuscript having
a distinct research focus; however, in each document, reward practice centralization is a
dominant research object. Even though one central research aim of the present work is to shed
light on the standardization vs. localization debate in GRM, the term ‘centralization’ is used
instead of ‘standardization’, the latter of which refers usually to the alignment of HQ and
subsidiary practices and was in the past operationalized mostly by practice resemblances
between the two entities (Demirbag, Tatoglu, & Wilkinson, 2016). The term ‘centralization’
Global reward management in MNEs
3
is broader and captures, in addition to practice resemblance, the centralization of decision-
making, which has also been subject to this research. Manuscript 1 seeks to examine from a
subsidiary perspective the influence of several pressures for local adaptation and global
alignment on different reward practices and if the (varying) impact of pressures is reflected in
the extent to which subsidiary reward practices resemble those of HQ and local competitors.
The second manuscript enriches the findings of study 1 by examining from a HQ perspective
power relations between HQ and subsidiaries in the form of decision-making centralization,
as well as another set of external and internal factors regarding their impact on centralization.
While the first two manuscripts focus on practice centralization in the form of practice
resemblance (manuscript 1), respectively decision-making centralization (manuscript 2) and
its antecedents, the third manuscript focuses on the relationship between practice
centralization and its consequences in the guise of the perceived effectiveness of reward
management. Taking into account both the HQ and the subsidiary perspective, manuscript 3
investigates GRM from a psychological perspective, indicating the importance of in-group
favoritism and out-group derogation at HQs, as well as subsidiary managers’ role identities.
In the following, an overview on GRM research is provided, including theoretical
perspectives, the current state of the research, and research gaps. This is followed by Chapter
3, which presents the dissertation structure as well as a short summary of each manuscript.
Chapter 4 provides an introductory overview of GRM in the HQ subsample, which functioned
also as the sample for manuscripts 2 and 3. After presenting the three manuscripts, the results
are discussed and enriched through additional analyses, which link the results of the single
articles and provide in combination with the core findings some interesting additional insights
on GRM, thereby enhancing the coherence of this cumulative dissertation. At the end of the
thesis, limitations, implications, and future avenues are outlined.
Global reward management in MNEs
4
2 OVERVIEW ON GLOBAL REWARD MANAGEMENT RESEARCH
2.1 Global reward management from a theoretical perspective
Reward theories can be classified in different ways. For example, Bloom and Milkovich
(1996) classify reward theories into those that treat rewards and reward systems as outcomes
(the dependent variable) and those that treat them as causes (the independent variable), while
Werner and Ward (2004) differ between theories that examine organizational level reward
practices and those that examine reward issues concerning individuals. However, when GRM
is considered, theories are usually classified within the convergence vs. divergence debate.
The idea of convergence is defined as the adaptation of management practices across
countries due to increasing global competition, while divergence states that management
practices remain different between countries due to stable, country-specific influencing
factors (Festing, 2012; Pudelko & Harzing, 2007). On the company level, this is reflected in
the standardization vs. localization debate, which centers around an MNE’s tension of global
alignment and local adaptation (Pudelko & Harzing, 2007; Bloom, Milkovich, & Mitra,
2003). In general, two conceptual models can be distinguished. The first one relies heavily on
an organizational perspective, assuming that organizational factors dominate when MNEs
design their international compensation systems. The other model assumes that environmental
factors have a primary influence over the design of MNEs’ GRM and that firm-internal
factors are rather subordinate (Dowling, Festing, & Engle, 2017; Bloom et al., 2003).
According to Dowling et al. (2017) each of these two models is founded on another research
paradigm, with the firm-internal perspective founded on the universalist paradigm, while the
firm-external perspective is founded on the contextual paradigm:
Global reward management in MNEs
5
“The universalist paradigm […] essentially centres around arguing that research involves
using evidence to test generalisations of an abstract and generalist nature; that the purpose
for SHRM is to improve the way that HR is managed within companies, and that general
rules can be applied generally. The contextual paradigm argues that research is about
drawing understanding from complex data; that explanation of difference is more
important than firm nature of what is being studied, the levels at which it is studied and
the actors included” (Brewster, 1999, p. 45).
Dowling et al. (2017) state that these theories might be implicit and not expressed by reward
practitioners, albeit the basic assumptions of the theories strongly affect their decisions and
behavior. Therefore, even though some of these theories are not explicitly the theoretical
fundament of any of the three articles presented within this dissertation, their basic
assumptions can be also found in many aspects that have been examined with the presented
research. According to Dowling et al. (2017), the basic explanations are explicit on the level
of norms, values, and artefacts, such as corporate culture, organizational structure, or
company size, which are examined within the articles of this dissertation. GRM has been
examined more often through an external macro perspective than by applying firm-level
theories and has been dominated by cultural and institutional perspectives (Festing & Tekieli,
2018). In the following, two firm-internal and two firm-external theories are presented, both
of which are highly relevant with respect to GRM and are to a certain extent represented in
the three research manuscripts.
2.1.1 Firm-internal theories
2.1.1.1 Resource-based view
According to the resource-based view (Barney, 1991), a company is a unique bundle of
resources, all of which lead to sustained competitive advantage if they are valuable, meaning
Global reward management in MNEs
6
that they exploit opportunities and defend the company from external threats. In addition, they
are rare among firms’ competitors, they are inimitable, meaning that competitors do not
possess the same resources which are furthermore hard to obtain, and they are non-
substitutable with other strategically equivalent resources (VRIN-criteria, Barney, 1991;
Peteraf, 1993; Eisenhardt & Martin, 2000). According to Brewster, Houldsworth, Sparrow, &
Vernon (2016), the resource-based view “presents the clearest argument as to why firms must
transfer capabilities globally” (p. 358), as they possess, due to the multiple environments in
which they operate, significantly large variations in their practices and people. On the other
hand, this can also result in employee groups that have to be managed differently and in
unique ways, since differences in their strategic values might result in different reward
contracts between the company and these employee groups (Bloom, 1999; Holtbruge &
Mohr, 2011; Simon, Hitt, Ireland & Gilbert, 2011; Snell, Lepak & Youndt, 1999).
2.1.1.2 Resource dependence theory
Resource dependence theory (Pfeffer & Salancik, 2003) claims that organizations strive for a
reduction of their dependency on others, in order to have as much power over their own
decisions. Dependence on certain employees or employee groups results in more power of
these employees to mold the quality and quantity of their reward package (Tremblay, Cote, &
Balkin, 2003). With respect to MNEs, resource dependence theory is highly relevant when
examining dependencies among organizational subunits—and in particular the dependencies
between HQ and foreign subsidiaries. An organizational entity has more power the more this
entity controls scarce and highly valued resources.
Global reward management in MNEs
7
2.1.2 Firm-external theories
2.1.2.1 Cultural perspective
The influence of national culture on IHRM has been examined mainly using the GLOBE
(House et al., 2004), or Hofstede, framework, which defines culture as “[…] collective
programming of the mind” (Hofstede, 1991, p. 5) that is shared by people of the same
nationality, resulting in common values, attitudes, and behaviors of these people (Adler &
Gundersen, 2008), which is in turn reflected in all HRM practices, including reward
management (Grenness, 2011; Rogovsky, Schuler, & Reynolds, 2000). Most of the studies
that examined the relationship between national culture and reward management emphasized
pay for performance (PFP), such as the relationship between uncertainty avoidance and the
design of pay plans and bonus schemes (Schuler & Rogovsky, 1998; Prince, Prince, Skousen,
& Kabst, 2016), or the relationship between power distance and variable pay (Schuler &
Rogovsky, 1998, Berber, Morley, Slavić, & Poór, 2017). The other reward practice groups are
also supposed to be related with culture, which paper 1 elucidates further in more detail.
2.1.2.2 Institutional perspective
The second perspective that has a strong contextual approach is the institutional perspective
(DiMaggio & Powell, 1983; Whitley, 1992). According to Whitley (1992), management
practices vary between countries not only due to country-specific proximate institutions like
financial or labor systems, but also due to country-specific background institutions like the
educational system. According to DiMaggio & Powell (1983), organizations become similar
in their management approaches, in order to strive for legitimacy within the society in which
they operate. This similarity can be driven by three different mechanisms of isomorphism:
Global reward management in MNEs
8
Coercive, mimetic, and normative, all three of which are relevant with respect to reward
management (Chapman & Kelliher, 2011; De Cieri & Dowling, 1999), a notion outlined
further in paper 2.
2.2 Current state of research in global reward management and research gaps
According to Pudelko and Harzing (2007), the small amount of empirical research that has
been conducted on GRM to date has focused on cross-national differences in compensation
and benefits (reflecting the convergence vs. divergence debate), or on an organizational level
by examining the transfer of practices from HQ to MNE international subsidiaries (reflecting
the standardization vs. localization debate), focusing mostly on pay level and pay mix
(Yanadori, 2014; Fay, 2008). Research thereby indicates that pay level is dominated by
localization logic, with most studies showing significant cross-national differences regarding
base pay respectively on an organizational level a strong adaption of MNEs towards local pay
rates. On the other hand, empirical evidence suggests a tendency towards convergence in
terms of standardizing the pay mix (Yanadori, 2014).
Closely linked to this notion is interest in the antecedents of MNEs’ GRM approaches
(Yanadori, 2011) with the aim of identifying firm-internal and firm-external factors that
influence MNEs towards centralization respectively decentralization regarding their GRM
(Kang & Shen, 2015; Bloom et al., 2003). With respect to pay level, the local labor market is
acknowledged by research as one of the most important antecedents (Yanadori, 2011), since
too much deviation from local rates implies strong disadvantages in attracting and retaining
employees (Leonard, 1987). MNEs’ strategic considerations, on the other hand, are
acknowledged as the central determinant with respect to the extent of pay mix standardization
(Yanadori, 2011), which is due to the fact that this reward instrument has an influence on
employee behavior (Jenkins, Mitra, Gupta, & Shaw, 1998; Montemayor, 1996). However,
research suggests that there are more factors affecting an MNE’s GRM besides culture,
Global reward management in MNEs
9
institutions, and strategic considerations (Bloom et al., 2003; Festing, Eidems, & Royer,
2007).
Bloom et al. (2003) identified in their qualitative study four factors in the local environment
and three intra-organizational factors that influence the extent to which MNEs standardize
reward management. A qualitative study by Festing et al. (2007) showed that the extent to
which subsidiaries control several resources (e.g. strategically important management skills)
has an impact to which extend MNE’s transnational strategy includes local adaptions. The
authors suggest taking a closer look at firm-level aspects when examining MNEs’ GRM
approaches, which is also supported by other scholars (e.g. Chapman & Kelliher, 2011), who
even go one step further and suggest examining the macro-level context in combination with
organizational factors such as inter-firm political processes (Edwards, Colling, & Ferner,
2007; Chapman & Kelliher, 2011). Furthermore, research has focused on describing the
extent to which GRM elements are standardized or localized. However, studies that examine
the effectiveness of different approaches are missing (Festing & Tekieli, 2018). Baeten (2010)
suggests that HQ and subsidiary representatives might have different perceptions regarding
their satisfaction regarding the GRM approach of their parent MNE.
To summarize, most of the research on GRM has examined the transfer of HQ reward
practices to international subsidiaries, with an emphasis on pay level and pay mix, as well as
the effect of predominantly macro-level antecedents on this practice transfer. The local
embeddedness literature, dominated in the past by neo-institutional theory, definitely has its
merits; however, consistent answers about whether HRM practices are converging or not, are
still missing (Farndale, Brewster, Ligthart, & Poutsma, 2017), and in particular, this research
does not explain sufficiently reward managers’ decisions regarding standardization or
localization (Chapman & Kelliher, 2011; Festing et al., 2007). Consequently, research calls
for further investigations with alternative theoretical explanations, the examination of
influencing factors other than the dominating institutional and cultural perspective, as well as
Global reward management in MNEs
10
a broader perspective on the rewards spectrum, including benefits and non-financial rewards
(Baeten, 2014; Festing & Tekieli, 2018). Particularly, Festing and Tekieli (2018) call for more
studies that examine GRM, with a stronger focus on organizational and individual level
factors that affect the extent to which MNEs standardize or localize their GRM. More
particularly, they accentuate a stronger focus on psychological processes such as in-group
favoritism toward HQ representatives, or subsidiary managers’ role identification. Related to
this point, they also ask for studies that examine power distribution and decision-making
centralization in GRM research. The next section provides an overview of the three research
manuscripts aiming to fill each of these research gaps.
3 DISSERTATION STRUCTURE
3.1 Overview of the manuscripts
The present thesis aims at analyzing three broad aspects of GRM, first by identifying
antecedents of reward management centralization, second by examining the actual extent
regarding centralization of a broad set of reward practices and with respect to different
employee groups, including senior managers, middle managers, and operational employees,
and third by exploring the consequences of reward management centralization in the form of
the perceived effectiveness of reward management. Each manuscript in this thesis focuses on
another aspect of GRM and addresses the different gaps outlined in the previous chapter. One
feature that all of the manuscripts have in common is that they all take a total rewards
perspective based on the “Total Returns” framework provided by Newman, Gerhart, and
Milkovich (2016), including the following five core reward practice groups: Base Pay, Short-
Term Incentives (STIs), Long-Term Incentives (LTIs), Benefits, and Noncash Rewards.
Figure 1 provides on overview of the reward practice groups, including details presented in
Global reward management in MNEs
11
the boxes below the respective practice group. Please note at this point that “PFP” throughout
the whole work includes both STI and LTI.
Figure 1. Underlying total rewards perspective of this dissertation.
Manuscript 1 (“Global Alignment or Localization? An Empirical Examination of Global
Reward Management in MNEs from a Subsidiary Perspective”) focuses on the antecedents as
well as the extent of reward management centralization and examines the influence of a broad
set of firm-external localization and firm-internal alignment pressures on the design of
different reward practices at international subsidiaries of MNEs. Furthermore, the study
examines whether the extent of alignment and localization pressures is reflected in subsidiary
practice similarities with HQ and local competitors’ practices. Thus, manuscript 1 contributes
to the research by addressing several research gaps. First is the impact of other factors on
GRM, which were identified in a previous qualitative work (Bloom et al., 2003), and second
Global reward management in MNEs
12
is the examination of reward management standardization, respectively localization, in a very
detailed manner and the inclusion of reward management practices which have not been
examined to date.
Manuscript 2 (“Global reward management – a power perspective on the decision-making
centralization in multinational enterprises”) concentrates also on the antecedents and the
extent of centralization, albeit this time with an emphasis on power relations between HQ and
foreign subsidiaries. MNEs can be seen as location- and goal-disparate organizations with
different goals of managers and workers (Ghoshal & Bartlett, 1990), with HQ assuming that
their home-based approach should be applied across all foreign subsidiaries (Chung, 2014;
Quintanilla & Ferner, 2003). Bloom et al. (2003) found this phenomenon also in the field of
GRM:
“Managers across the firms consistently expressed a strong preference for aligning the
design of compensation systems with the MNE’s organizational context rather than
conforming to local host contexts. This preference seemed to emanate from a strategic HRM
mindset: the assumption that conformance would, at best create competitive parity and that
only through strategic alignment competitive advantage can be obtained” (p. 1359).
However, MNEs’ transfer of HQ management practices to subsidiaries depends on social,
political, and economic institutions, all of which are important power sources to local actors
within the MNE (Ferner & Edwards, 1995). Subsidiary representatives are supposed to have a
great deal of power within an MNE if they possess exclusively the competences and resources
required to handle institutional constraints and demands properly (Ferner & Edwards, 1995;
Geppert, Williams, & Matten, 2003). Study 2 examines whether decision-making
centralization differs between reward practices, thereby reflecting that the institutional
constraints and subsidiary resources to handle these constraints differ between the various
Global reward management in MNEs
13
reward practices. Including the combination of institutional and power-related explanations,
this study addresses explicitly a call to explore power distribution and decision-making
centralization within MNEs in the field of GRM (see above). Furthermore, this study also
tests a broad set of factors that have been identified in a previous qualitative study and which
are supposed to have an impact on the power basis of subsidiary reward managers (Festing et
al., 2007).
Figure 2. Underlying framework of this dissertation.
Manuscript 3 (“Centralization and Effectiveness of Reward Management in Multinational
Enterprises: Perceptions of HQ and Subsidiary Reward Managers”) focuses on the
relationship between the extent of centralization and its consequences and examines
GRM in MNEs from a psychological perspective. One central assumption is that HQ and
subsidiary managers have different perspectives regarding the preferred balance of
centralizing or decentralizing an MNE’s reward management program. As the central
theoretical lens, the research team in this study chose social identity theory (SIT, Tajfel &
Turner, 1979) to explain intergroup bias between the reward managers of various MNE
units, as well as to highlight its effects on global reward management. While HQ
representatives across several management areas prefer a centralized approach, due to
Global reward management in MNEs
14
their “sense of superiority” (Chung, 2014, p.229), the relationship examined herein
between reward management centralization and the perceived effectiveness of reward
management is supposed to be more complex within the group of subsidiary reward
managers, as they can identify with one entity stronger than with the other one. The three
manuscripts are depicted in a conceptual framework (Figure 2).
Table 1. Overview of the manuscripts included in the thesis.
No. 1 2 3
Title Global Alignment or
Localization? An
Empirical Examination of
Global Reward
Management in MNEs
from a Subsidiary
Perspective
Global reward management
– a power perspective on the
decision-making
centralization in
multinational enterprises
Centralization and
Effectiveness of Reward
Management in
Multinational Enterprises:
Perceptions of HQ and
Subsidiary Reward
Managers
Co-authors Marion Festing
Marion Festing Marion Festing
Xavier Baeten
Journal International Journal of
Human Resource
Management (IJHRM)
International Journal of
Human Resource
Management (IJHRM)
Journal of Personnel
Psychology (JPP)
VHB Ranking
position
B B C
Publication status Accepted for publication
(June, 2018)
Under review Published (April, 2018)
Points 1 1 0,5
Focus Examination of a broad set
of alignment and
localization pressures on
reward practice
resemblance with HQ &
local competitors
Analysis of power-relations
between HQ and subsidiary
within GRM by combining
neo-institutional theory with
micro-political perspectives
Examination of the
relationship between
reward management
centralization and
effectiveness from a social
identity perspective
In order to keep the framework simple, I only include the moderation tested in manuscript
3 (moderation of the HQ-subsidiary-identification). However, it should be noted that it
differed in terms of employee hierarchies and reward practices with regard to all variables
Global reward management in MNEs
15
measuring the extent of centralization as well the consequences of centralization. In study
1, a differentiation between reward practice groups was also made regarding the impact
of the antecedents of centralization. Table 1 provides an overview of the three
manuscripts regarding their contributions as well publication status.
3.2 Data collection and data basis
All All three manuscripts are based on data assessed in cooperation with the Vlerick Centre
for Excellence in Strategic Rewards, and AON Hewitt Consulting, between April and October
2015, covering data for 158 MNEs operating across Europe. The quantitative data used in the
three manuscripts are based on two complementary surveys, with one version for HQs and the
other one for local country representatives. This approach helped in taking a more holistic
perspective on GRM—a notion also supported by international management research (Smale,
Björkman, & Sumelius, 2013, Bayo-Moriones & Galdon-Sanchez, 2010). Furthermore,
research suggests that the extent of centralization is related with the position of the respective
employee group in the MNE hierarchy (McGraw, 2015). Consequently, data were assessed
and examined separately for each of three employee groups ‘senior managers’, ‘middle
managers’, and ‘operational employees’.1 Manuscript 3 is based on both subsamples, while
manuscript 2 examines explicitly GRM from a HQ perspective, and manuscript 1 from an
explicit subsidiary perspective. Surveys were sent via an online link to 44,056 HR managers,
and 434 followed the invitation mail. In total, 107 HQ representatives and 51 subsidiary
representatives completed the survey.2 Reporting a valid response rate is not possible here, as
it is not clear how many recipients recognized the mail and were reward managers working
within an MNE. However, as outlined by the manuscripts, tests for non-response bias showed
1 Senior managers: > 899 Hay points, middle managers: 300-899 Hay points, operational employees: <300 Hay points. 2 The subsidiary sample size was 49 in manuscript 1 due to missing data.
Global reward management in MNEs
16
no indication of a non-response bias within the examined data. In total, 44 participating
MNEs had their HQ in the USA, followed by 26 MNEs with Germany as their country of
origin and 25 MNEs with their HQ located in the UK.
4 INTRODUCTORY INSIGHTS ON THE GLOBAL REWARD
MANAGEMENT OF THE SAMPLE
In In addition to the findings provided by the three manuscripts, the present chapter provides a
first hint as to whether GRM is a centralized or a decentralized management discipline and is
based on the answers of the HQ subsample. Almost all HQ representatives reported that their
reward management is centralized with respect to senior managers, while reward management
for middle managers was almost balanced with 55%, thus indicating a centralized approach.
Around two-thirds of respondents reported that their MNE has a decentralized reward
management approach (see Figure 3).
Figure 3. Reward management centralization of MNEs provided by the headquarters subsample.
SeniorManagers
MiddleManagers
OperationalEmployees
Rather centralized 91,7 55,1 37,4Rather decentralized 6,5 44,9 62,6
0
20
40
60
80
100
Perc
enta
ge
Global reward management in MNEs
17
These results correspond with the findings regarding the subsidiary influence on the
development of reward programs, indicating a small respectively no influence regarding
senior managers and a moderate-to-strong influence of subsidiaries on the development of
reward programs for middle managers and operational employees (see Figure 4).
Figure 4. Influences of foreign subsidiaries on MNE’s development of reward programs provided of the headquarters subsample.
Furthermore, data show that around three-quarters have a global evaluation job system with
respect to senior managers (76.6%), whereas 69.2 % stated having a global job evaluation
system for middle managers, and 52.3% for operational employees in this respect. The results
for global market positioning strategy are similar, with 74.8% having one for senior
managers, 63.6% for middle managers, and 51.4% for operational employees. Overall, these
results show that reward management centralization differs between the respective employee
groups, hence supporting the chosen approach of examining GRM separately for these
employee groups.
SeniorManagers
MiddleManagers
OperationalEmployees
No influence 49,5 7,5 3,7Weak influence 21,5 15,0 11,2Some influence 16,8 49,5 35,5Strong influence 6,5 24,3 43,0
0
10
20
30
40
50
60
Perc
enta
ge
Global reward management in MNEs
18
5 RESEARCH MANUSCRIPTS
5.1 Global Alignment or Localization? An Empirical Examination of Global
Reward Management in MNEs from a Subsidiary Perspective
Manuscript No. 1 This manuscript was accepted for publication with the International Journal of Human
Resource Management on June 29, 2018.
Festing, M., & Tekieli, M. (in press). Global Alignment or Localization? An Empirical
Examination of Global Reward Management in MNEs from a Subsidiary Perspective.
International Journal of Human Resource Management.
Manuscript available from the author upon request.
Global reward management in MNEs
19
5.2 Global reward management – a power perspective on the decision-making
centralization in multinational enterprises
Manuscript No. 2 This manuscript is under review with the International Journal of Human Resource
Management as:
Festing, M., & Tekieli, M. (under review). Global reward management – a power perspective
on the decision-making centralization in multinational enterprises. International Journal of
Human Resource Management.
Manuscript available from the author upon request.
Global reward management in MNEs
20
5.3 Centralization and Effectiveness of Reward Management in Multinational
Enterprises: Perceptions of HQ and Subsidiary Reward Managers
Manuscript No. 3 This manuscript is published as:
Tekieli, M., Festing, M., & Baeten, X. (2018). Centralization and Effectiveness of Reward
Management in Multinational Enterprises: Perceptions of HQ and Subsidiary Reward
Managers. Journal of Personnel Psychology, 17, 55-65.
Manuscript available from the author upon request.
Global reward management in MNEs
21
6 DISCUSSION AND CONCLUSION
6.1 Summary of key findings
The first key finding of manuscript 1 is that MNEs differentiate strongly between practices
and employee levels regarding the standardization, respectively localization, of their GRM.
PFP resembled HQ practices strongly, indicating the standardization of incentives. However,
since similarities with local competitors were also at a high level, this might suggest not only
the standardization of PFP, but also a worldwide convergence thereof. As discussed within
manuscript 2, normative isomorphism has a strong impact on the management of PFP
(Chapman & Kelliher, 2011). A typical example is Lawler’s new pay theory (Lawler III,
1995), which recommends the usage of PFP and has been spread worldwide by consulting
firms (Chapman & Kelliher, 2011). In this vein, Von Glinow, Drost, and Teagarden (2002)
declared 15 years ago the emphasis on individual PFP as a “universal trend for the future” (p.
128)—a notion supported by more recent studies showing that PFP is one of the core high-
performance practices across different industries and regions globally (Chapman, Sisk,
Schatten, & Miles, 2016; Posthuma, Campion, Masimova, & Campion, 2013). From a
strategic HRM perspective, PFP is acknowledged as high-performance work system, meaning
that its application results universally in a performance increase (see also Chênevert &
Tremblay, 2011; Demirbag et al., 2016). As these theories, and in particular theories
promoting PFP, have been developed mainly in the US-American context, the literature also
speaks about “Americanization” or adaption to an “Anglo-Saxon model” (Edwards et al.,
2013). A further finding of study 1 was that alignment and localization pressures differed
between reward practice groups when designing their GRM practices. Localization pressures
were strongest regarding benefits, and alignment pressures were strongest with respect to
PFP, which reflected the results on practice resemblance.
Global reward management in MNEs
22
Including the combination of institutional and power-related explanations in the
standardization vs. localization debate in GRM, study 2 shows that decision-making
centralization differs between the various GRM practices. This supports research stating that
even though there are systematic differences between countries regarding the extent of
regulations (showing that coordinated market economies such as Germany or Sweden have
overall stronger institutional constraints than typical liberal market economies such as the
USA or the UK (Gooderham, Nordhaug, & Ringdal, 1999; Poutsma, Ligthart, & Veersma,
2006)), even countries with highly regulated institutional systems leave “open institutional
spaces” (Tempel & Walgenbach, 2012, p. 235) for some management practices (Colling,
Gunnigle, Quintanilla, & Tempel, 2006; Edwards et al., 2013; Weber, Kabst, & Gramley,
2000). Consequently, Tempel and Walgenbach (2012) conclude that “focusing on the level of
employment practices helps to highlight that such differences in the constraining or open
nature of institutions within national systems may be found not only between, but also within,
institutional spheres” (p. 236). Furthermore, the parent MNE’s decision to cede power from
HQ to international subsidiaries has been identified as being influenced by firm-internal and
firm-external factors. Moreover, the study showed that contact between HQ and subsidiary
representatives has an impact on HQ managers’ cognition, in that the higher the amount of
contact between HQ and subsidiary managers, the stronger the reported influence of firm-
internal reasons for the decentralization of decision-making. Enhanced contact might result in
HQ managers putting more trust in their subsidiary managers and, in consequence, greater
willingness to cede decision-making power to subsidiary managers.
The findings of manuscript 3 do indeed support this interpretation by showing that
social identity processes (Tajfel & Turner, 1979) play a relevant role regarding the perceived
effectiveness of decision-making centralization. HQ managers across all reward practices and
employee hierarchies preferred a centralized GRM approach, which was interpreted as being
due to their in-group favoritism. With respect to subsidiary managers, the extent of their
Global reward management in MNEs
23
identification with HQ and the subsidiary moderated the relationship between centralization
and perceived effectiveness, which also supports scholars who suggest considering also
cognitive aspects such as MNE managers’ mindsets (Ferner, Edwards, & Tempel, 2012; Zhu
& Jack, 2016).
6.2 Further analyses
Since all of the manuscripts were based on one dataset, I applied two additional analyses with
the aim of linking the individual articles as well as providing additional insights on data that
were not integrated within the three manuscripts, thus enriching the standardization vs.
localization debate as well as GRM research in general.
6.2.1 Further analyses linking Manuscript 1 and 2
Considering the results of studies 1 and 2, the aim of these analyses is to check whether
alignment and localization pressures are also reflected in the decision-making centralization
of GRM practices (and not only reflected in practice resemblance, as shown by the findings in
study 1). Thus, I examined within the subsidiary sample of manuscript 1 the extent of the
decision-making centralization of 22 reward practices for each of the three employee groups
(senior managers, middle managers, and operational employees). Reward practices were
classified into five categories: Base pay, STI, LTI, benefits, and noncash rewards. Exploratory
factor analysis with VARIMAX rotation suggested also a five-factor solution, with
satisfactory factor loadings (>.74) and all items loading on their intended factors. For each
reward group, an average centralization score was created, resulting in five (reward group) x
three (employee level) centralization scores per respondent. All scales showed good
Cronbach’s alpha values between .78 and .96. Control variables were also identical with the
ones from Study 1 (autonomy of the subsidiary, HQ and subsidiary location, subsidiary size,
Global reward management in MNEs
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industry sector). Furthermore, I used for the additional analyses the overall scores for
alignment pressures and localization pressures, which were already used in study 1. With the
additional analysis, I tested via multiple regression analyses whether or not localization and
alignment pressures predict decision-making distribution within the MNE. Tolerance scores in
all models were above 0.2, and the variance inflation factor was never greater than 10 and on
average not substantially greater than 1, thereby indicating no concerns with multicollinearity
(Bowerman & O’Connell, 1990; Menard, 1995). Table 2 provides descriptive information
about the extent of decision-making centralization, differentiated by reward practice groups
and employee levels, thus suggesting the strongest decision-making centralization for LTI and
STI and the lowest centralization for benefits, as well as the strongest decision-making
centralization for the group of senior managers and the lowest centralization for operational
employees. In order to test whether alignment pressures strengthen the centralization of
decision-making, and if localization pressures reduce the centralization of decision-making, I
ran for each employee level a multiple linear regression analysis to predict the centralization
of decision-making based on overall alignment pressures, overall localization pressures, and
the four control variables.
Table 2. Centralization of decision-making for the different employee groups and reward practices.
Senior Management Middle Management Operational EmployeesBase pay 3.75 (1.20) 2.88 (1.32) 2.57 (1.33)STI 4.22 (1.06) 3.60 (1.43) 2.99 (1.57)LTI 4.96 (0.18) 4.36 (1.39) 4.06 (1.64)Benefits 1.95 (1.13) 1.68 (0.97) 1.69 (1.01)Noncash rewards 2.75 (1.08) 2.31 (1.01) 2.27 (1.02)
Notes . Means and standard deviations (in parantheses) with 1= completely decentralized (decisionsare completely taken by subsidiary and 5 = completely centralized (decisions are completely taken by headquarters). STI= short-term incentives, LTI=long-term incentives.
Global reward management in MNEs
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As presented in Table 3, results show for all employee levels, that alignment as well as
localization pressures significantly predict the centralization of decision-making in the
following directions: The stronger localization pressures on a reward practice exist, the more
decision-making upon this reward practice is decentralized and the stronger alignment
pressures on a reward practice exist, the more decision-making upon this reward practice is
centralized.
Table 3. Multiple regression analyses predicting for three different employee groups centralization of decision-making by alignment and localization pressures.
In addition, I conducted another three multiple regression analyses with the centralization of
decision-making as the criterion, but this time I added as predictors, instead of overall
alignment and overall localization pressures, each (sub)dimension (please see study 1 for each
subdimension) of both pressure types. For all three employee groups, a significant regression
equation was found, with (F (12, 168) = 5.23, p = .000) and an R² of .29 for senior managers,
(F (12, 161) = 6.365) = 10.35, p = .000) and an R² of .34 for middle managers, and F (12,
153) = 4.53, p = .000) and an R² of .28 for operational employees. Interestingly, local culture
was the strongest predictor among the localization pressures, with ß =-.359 (p = .000) for
senior managers, ß = -.183 (p = .024) for middle managers, and ß = -.136 (p = .12) for
Variable B SE B ß B SE B ß B SE B ß
Alignment Pressures ,60 ,10 .37*** ,72 ,11 .41*** ,47 ,11 .28***Home Country ,13 ,19 ,04 ,59 ,19 .18** ,61 ,20 .20**
Localization Pressures -,38 ,12 -.20** -,30 ,12 -.14* -,31 ,13 -.16*
Host Country ,19 ,19 ,06 -,08 ,20 -,02 -,26 ,21 -,08Size ,00 ,00 ,00 ,00 ,00 ,00 ,00 ,00 ,00Autonomy -,08 ,13 -,04 -,16 ,13 -,07 -,06 ,14 -,03Industry -,23 ,20 -,08 -,41 ,20 -.13* -,25 ,21 -,08
R .19*** .30*** .19***
Notes. *p < .05. **p < .01. ***p < .001
Senior Management Middle Management Operational Employees
Global reward management in MNEs
26
operational employees. This means that the more culture is acknowledged as an influencing
factor, the more decision-making regarding a certain reward practice will relocate to a
subsidiary (decisions taken by the subsidiary). Besides local culture, dominant management
practices were the second strongest predictor among localization pressures for decision-
making distribution, with ß=.108 (p =.197) for senior managers, ß =.182 (p = .034) for middle
managers, and ß =.235 (p = .01) for operational employees. Thus, dominant management
practices predict the centralization of decision-making in the opposite direction, i.e. the more
dominant management practices are acknowledged as an influencing factor, the more
decision-making will be centralized (decisions taken at HQ).
This is especially interesting when considering that within study 1 local culture had
only a small influence on the design of reward practices, whereby within the additional
analyses it was the strongest predictor with respect to the centralization of decision-making.
Furthermore, these results support the assumptions of study 2, where it was suggested that
normative pressures in the form of dominant management practices are reflected in the
stronger centralization of decision-making. The stronger participants rated local culture as
relevant with respect to the execution of reward practices, the stronger decision-making was
decentralized for the respective reward practice, meaning decisions were taken rather at the
subsidiary level when local culture was stated as a strong influencing factor. According to
Dowling et al. (2017), successful GRM requires knowledge about law, customs, and
management practices, as well as economic, political, and social contexts. While knowledge
regarding dominant management practices can be gained easily with the help of consulting
companies, gaining knowledge about the local environment might be more difficult. Since
culture might differ within a country, depending on the region, consulting companies might
not be helpful in depicting the appropriate peculiarities of the local culture in which the
individual subsidiary is located. Therefore, when recognizing that culture is a very relevant
issue, HQs might decentralize decision-making and leave it in the hands of subsidiary
Global reward management in MNEs
27
managers, since they are locally embedded and therefore have a sense for local peculiarities.
Again, these additional findings and their interpretation support the assumptions of study 2,
where it is argued that management areas where local knowledge is very context-bound and
dependent on the embeddedness of the local managers result in a stronger decentralization of
decision-making power.
6.2.2 Further analyses related to manuscript 2
In line with most of the research within the standardization vs. localization debate, the three
manuscripts herein focused on practices and neglected processes “that balance requirements
for global standardization and local adaption” (Festing & Eidems, 2011, p. 162). MNEs’
ability to implement practices and policies in subsidiaries depends on “what might be termed
an HR technology of control” (Ferner et al., 2011, p.485). According to Baeten (2010), the
five central global reward management processes and procedures are “External
benchmarking”, “Performance management systems (PMS)”, “Reward IT tools and systems”,
“Reward communication”, and “Employee satisfaction surveys” (p.395).
An additional analysis was conducted, and it examined (as in study 2) the extent of
decision-making centralization, albeit this time regarding the five GRM processes and
procedures identified by Baeten (2010). As within manuscript 2, respondents rated the extent
of decision-making centralization regarding the five procedures separately for each employee
group (senior managers, middle managers, and operational employees). Table 4 presents the
extent of decision-making centralization for each reward procedure, differed by the respective
employee group. For each employee group, an ANCOVA with the three covariates home
country location, company size, and industry was calculated, revealing significant differences
between the five reward procedures (PMS vs. External benchmarking vs. Reward IT tools vs.
Global reward management in MNEs
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Reward communication vs. Employee satisfaction surveys) with respect to senior managers
(F (4,482) = 4.62, p < .01), middle managers (F (4, 424) = 8.16, p < .001), and operational
employees (F (4, 422) = 6.11, p < .001). PMS showed the highest amount of centralization.
Post-hoc one-tailed t-tests revealed for the case of senior managers that PMS was significantly
more strongly centralized than Reward communication (p < .001), Employee Satisfaction
Surveys (p < .01), and marginally significant with Reward IT tools (p = .053), while the
difference to External benchmarking (p = .123) was not significant. With respect to middle
managers, PMS was significantly more strongly centralized than Reward communication (p <
.001), Employee Satisfaction Surveys (p < .001), External benchmarking (p < .001) as well as
with Reward IT tools (p < .05). PMS for operational employees was more strongly centralized
than Reward communication (p < .001), Employee satisfaction surveys (p < .001), and
External benchmarking (p < .001), while the difference with Reward IT tools was not
significant (p = .287).
Table 4. Centralization of decision-making for the different employee groups and reward procedures.
Overall, the additional analyses provided two key insights which are interesting, especially
when considering the results of the three manuscripts. Firstly, opposed to reward practices the
results show that with respect to procedures there is in general a strong to moderate
centralization of decision-making. According to Farndale and Paauwe (2005) “the actual
transfer of HRM systems can only occur when sufficient mechanism are put in place” (p. 13).
Senior Management Middle Management Operational EmployeesPerformance management systems 4.72 (1.05) 4.13 (1.54) 3.54 (1.48)Reward IT tools 4.48 (1.27) 3.74 (1.72) 3.39 (1.72)Employee satisfaction surveys 4.27 (1.45) 3.35 (1.43) 2.83 (1.43)External benchmarking 4.6 (1.41) 3.35 (1.55) 2.74 (1.59)Reward communication 4.23 (1.36) 3.06 (1.29) 2.53 (1.19)
Notes . Means and standard deviations (in parantheses) with 1 = completely decentralized (decisions are completelytaken by subsidiary) and 5 = completely centralized (decisions are completely taken by headquarters).
Global reward management in MNEs
29
This means that in order to standardize certain reward practices, HQ needs the decision-
making power in order to set the ground with certain procedures that enable practice
standardization. The second finding refers to PMS which has been identified as the reward
procedures with the strongest extent of decision-making centralization. From an international
perspective, PMS enable the MNE to improve the performance of the whole company, its
subsidiary units as well as individual employees by applying different performance indicators
like customer satisfaction, costs, or quality (Dowling et al., 2017, Aguinis, 2013). One key
component of PMS is goal-setting which is strongly linked to organizational business strategy
(Claus & Hand, 2009; Varma, Budhwar, & Singh, 2015). Management has to ensure that
individual goals are aligned with the business unit’s objectives which are determined by
organization’s business strategy (Aguinis, 2013). Consequently, PMS and PFP are closely
interlinked with each other (Bartram et al., 2015; Ferner & Almond, 2012; Ferner et al., 2001)
even though there is no clarity to what degree performance management processes impact the
effectiveness of PFP (Baeten, 2014). Consequently, this finding is in line with study 1 and 2
which show that PFP is the reward practice group with the strongest extent of centralization.
6.3 Contributions
Overall, the present research contributes not only to GRM, but also to general international
management research in several ways. GRM was investigated in a very differentiated way by
examining a broad set of reward practices, including benefits and non-financial rewards, as
well as differing between several employee levels. This differentiation delivers one main
finding, namely that GRM is a complex field and cannot be managed by a dichotomous
choice between worldwide standardization and local adaptation (Pudelko & Harzing, 2007;
Yanadori, 2011). Each reward element has been found to differ in its extent of centralization
regarding both dimensions: Decision-making and practice resemblance with HQs respectively
Global reward management in MNEs
30
local competitors. Reasons for these differences between reward practices are based on the
fact that each reward practice is influenced by different firm-internal and firm-external
factors, and to varying degrees. Related to this idea, the present work showed that there are
more influencing factors than institutions, culture, and MNE strategy, which dominated
previous research.
Furthermore, by taking a stronger firm-level perspective and combining this with an
examination of the macro-level environment, as well as an examination of power allocation
across MNEs, this approach provides new insights for the standardization vs. localization
debate. Moreover, manuscript 3 enriches the standardization vs. localization debate by taking
into account individual MNE actors, including their mindsets and other psychological aspects.
In addition, the present work contributes to theory development in several ways. First, studies
1 and 2 establish that the factors identified by the qualitative work of Festing et al. (2007) and
Bloom et al. (2003) have been helpful in gaining new insights for the standardization vs.
localization debate. Second, perceptions gained by combining institutional and micro-political
perspectives supports the call for more multi-theoretical perspectives (Chapman & Kelliher,
2011). Third, study 3 showed that applying SIT (Tajfel & Turner, 1979) might be a fruitful
approach, not only within the GRM field, but also for the broader field of HRM or perhaps
even other management areas. A recent work by Festing, Schäfer, and Tiihonen (2017) was
inspired by study 3 and applied SIT within the talent management field, which supports the
theoretical impact of this study.
6.4 Limitations and future research implications
Each of the three manuscripts has some limitations, two of which are the subject of each
manuscript and will therefore be presented briefly in this chapter, whereas the other
limitations can be found in each individual article. First, the perception of only one reward
Global reward management in MNEs
31
manager per MNE was assessed, which increases the risk of a common method bias
(Podsakoff, MacKenzie, Jeong-Yeon, & Podsakoff, 2003). However, Harman’s single-factor
test did not show any severe common method variance in our data. Nevertheless, future
research studies should assess data from more than one respondent per MNE, ideally in HQ
and subsidiaries. Secondly, the small sample size within both subsamples did not allow for
employing more comprehensive tools, and so future research studies should test through a
larger sample all variables and relationships of the underlying framework simultaneously with
the usage of structural equation analysis. Another limitation, which was not mentioned within
the respective article, is related to the issue of how subsidiary practices resemble HQ practices
(manuscript 2). It was assumed that a high resemblance implied an alignment of subsidiary
practices in accordance with HQ standards, thus suggesting practice transfer from HQ to the
subsidiary. However, according to Edwards et al. (2007), the simple existence of similar
practices in different parts of a company cannot be used as proof of transfer, since similar
approaches in both entities could have emerged independently. Qualitative studies would
allow one “to trace the path of a practice from its inception to implementation” (Edwards et
al., 2007, p. 205). The same logic can be applied with respect to any similarities found
amongst local competitors. MNEs are acknowledged as “effective vehicles for the diffusion of
HRM practices” (Doving & Nordhaug, 2013, p. 6), so a high resemblance with local
competitors is not proof of the subsidiary adapting to local standards; in fact, the resemblance
might have emerged because domestic firms adapted to the foreign role model (Mayrhofer &
Brewster, 2005). In general, qualitative research would significantly enrich the present
findings, as this approach allows for more in-depth insights, which in turn could address other
shortcomings of the present study, such as the examination of causal relationships, e.g. the
causal direction between HQ-subsidiary contact and decision-making centralization. Even
though two studies take a more holistic view by examining the subject on the firm-level and
the macro-level, as well as examining the various reward practices, Chiang, Lemanski, and
Global reward management in MNEs
32
Birtch (2017) suggest that it might improve our understanding about global HRM when we
examine individual HRM practices not in isolation but rather in combination with other HRM
practices that are related with each other. For the case of reward management, it might thus be
beneficial to examine this topic alongside global performance management, since these two
HRM fields are linked closely with each other (Bartram et al., 2015; Ferner & Almond, 2012).
6.5 Practical Implications
As already mentioned in the discussion part of study 1, none of the results provides universal
recommendations regarding the ideal amount of power distribution or reward practice
transfer. However, the present work provides several insights that might be beneficial not only
for global reward managers, but also for practitioners in other management areas. The
potential benefits for global reward managers have already been outlined within the three
manuscripts and will therefore be summarized here in one sentence: Due to the differing
extent of firm-external and firm-internal pressures for local adaptation respectively global
standardization, it might make sense to differentiate between reward practices and procedures
when setting the extent of centralization, i.e. the extent of HQ-subsidiary practice
resemblance, as well as decision-making distribution between HQ and foreign subsidiaries.
The present findings might also be of interest to other MNE representatives. The results of
study 3 suggest that managers should be aware of the impact of psychological processes,
particularly social identity processes, as they result in biased cognitions and behaviors of
organizational members. However, study 2 suggests that contact between HQ and subsidiary
reward managers has an impact on the cognition of respective members and that enhanced
contact might be a way to soften the boundaries between HQ and subsidiary managers. For
example, before implementing several subsidiary practices, it might be useful to execute a
Global reward management in MNEs
33
team-building workshop together with both HQ and subsidiary representatives, in order to
reduce social categorization processes.
6.6 Closing Remarks
The aim of the present work was to shed some light on GRM by analyzing the centralization
of reward practices and procedures, as well as related antecedents and consequences.
Therefore, several theoretical lenses were chosen, while data were assessed and examined
from different perspectives. The results provide new insights into GRM research and practice,
including the identification of influencing factors on a broad set of reward elements.
Furthermore, the findings reveal the relevance of firm-level as well as psychological aspects
when analyzing MNE behavior within the standardization vs. localization debate.
Global reward management in MNEs
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