Hrm and National Culture

Int. J. of Unman Resource Management 14:4 June 2003 487-510 | ? Routledge' - ' * - ' S ^K TaylorcaFrancisCroi

A comparative study of humanresource management practicesin international joint ventures:the impact of national origin

Yanni Jan

Aisstract This paper presents a comparative study of the effects of national origin,a company's strategic orientation and its investment profile on preference for the applicationof human resource management (HRM) practices as conducted in intemationai jointventures (IJVs). The approach extends understanding by offering a broader exploration ofhow national differences generate additional barriers that impact on specific HRM practices.The evidence from the study presented suggests that there is little support for national originbeing a major independent influence. National distinctiveness does define the types ofintegration between parent companies and IJVs, but these collaborations do not necessarilyreflect any specific national institutional bias. Examination of eighty-seven IJVs suggests thatUV management has a high degree of organizational autonomy in the implementation of acompany's task-related inputs regardless of the national background of the foreign partner.The presence of a company's task-related effects on HRM practices plays a significantcontextual role where the major attributes are the technology, management development andthe compatible use of an IJV's resources. The results confirm that there is little evidence tosuggest that partner-related influences derived from the partners' complementary resourcesand competences in the field of HRM development that are national origin specific have hadsignificaot influence over HRM development in the IJVs studied.

Keywords Intemationai joint ventures; national origin; investment profile; human resotircepractices.

Introduction

Organizational studies of human resource management provide strong evidence that thedistinct national systems of business are strongly rooted in the specific cultural andinstitutioBal heritage of the home countries of business corporations (Hofstede, 1991).The pressures of operating in the worldwide competitive environment, the impact of newinformation and communication technologies and the globalization of production createuniformity of activity across all business, and yet national influences in multinationalcorporations are still observable (Dickeii, 1998). These phenomena have createdincreasing research interest in the diagnosis of how national differences generate specificadditional barriers that may affect the application of technological development and howthese barriers are overcome by specific human resource management (HRM) practices(Schuler and Jackson, 1999). The differences in HRM practice should be most marked in

Dr Yanni Yan, G 7501, Faculty of Intemationai Business, City University of Hong Kong, Tat CheeAvenue, Kowloon Tong, Hong Kong, PRC (tel: +852 2788 7974; fax: +852 2788 9146; e-mai!:[email protected]).

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international joint ventures (UVs) where there are always at least two parent companiesof different national backgrounds, and it is to be expected that the practices that supportthe partners' business strategies increase in control complexity to mitigate the effects ofsuch barriers (Child and Faulkner, 1998). HRM activities in UVs are increasinglyregarded by researchers as being driven by an idiosyncratic set of organizational policies,regulations and norms that promote the maximization of economic goals (Lu andBjorkman, 1997; Schuler, 2001). One role of HRM is to assist the IJV's management inthe convergence of strategic orientations among partners of different national origins inthe achievement of a business operation where the required bounded rationality isacceptable to all parties (Cyr, 1995), as the management of the complex organizationalsystems inherent in an IJV requires an understanding of the influences derived froma company's strategic orientation (Child, 1991).

There are two main schools of thought concerning the relationship between nationalcultural factors and an investor company's investment profiles. One stresses that organiza-tional dissimilarities are entrenched in the idiosyncratic national institutional regimessurrounding companies (Hofstede, 1991). These national effects can range from the broadsweep of economics to the very specific focus of indigenous cultural psychology(Hampden-Tumer and Trompenaars, 1993). It is argued that the presence of nationaleffects plays a significant contextual role in the setting of HRM practices and that thesecan be assessed by evaluating cross-culture organizational variances (Jackson and Schuler,1995). National models of organization stress that the inertia of corporate governance,recruitment, information reporting, training and ingrained organizational practices areembedded within distinct systems of business, culture and innovation (Kanungo andWright, 1983; Jaeger, 1990; Hofstede, 1991). This perspective postulates that nationaleffects produce differentiated HRM practices that influence managerial patterns ofbehaviour and reinforces the notion that the behaviour and the actions of companies arethe consequences of cultural influence (Rosenzweig and Nohria, 1994; Smith et al., 1996).Researchers holding such views stress that differences in organizational structure, culturalvalues and labour regulations account for the major differences in HRM practices betweenindustrial enterprises of different countries (Jackson and Artola, 1997).

The second school of thought emphasizes the idea that organizations may gradually belosing their national characteristics (Pauly and Reich, 1997). Technological change anddevelopment has been regarded as one of the most important contributory factorsunderlying the internationalization and globahzation of economic activity. It is theadoption of common technologies that leads to uniform behaviours in the handling ofthese technologies (Casson et al., 1998). The convergence between modes of organizationis beheved to arise from economic and technological forces that are in turn motivated byuniversal human needs and driving forces (Bartlett, 1979). Hence, it is assumed thatorganizational practices will become universal across national borders and will lead touniform corporate organizational structures independent of country of origin as theyrespond to uniform environmental pressures (Crookell, 1986). Research is concentratedon how organization transcends national boundaries, recognizing that in so doing theremay be powerful forces for international homogeneity through the transfer oforganizational practices (Scullion and Starkey, 2000). Using the argument thatorganizational form follows function, the globalization of production generates certainoperational contingencies that establish a functional imperative for organizational designand process, regardless of national setting (Delery and Doty, 1996). The extent to whicha multinational moves away from a functionally based logic and localizes its technologicalresource and management expertise is likely to have an impact on a universal set ofcultural norms and organizational effectiveness (Slocum and Lei, 1993).

Yan; A comparative study ofHRM in IJVs 489

The variations in a company's strategic orientations and in the investment profile ofthe partner-specific and task-oriented inputs in an UV that occur as a consequence of thenationality of the foreign partner have generated little significant interest in the study ofinternational HRM (Martin and Beaumont, 1998; Jain et al, 1998). This paper presentsa compaxative study of the effects of national origin and of a company's investmentprofile on preference for the application of HRM practices as conducted in IJVs. Thecontention that more effective HRM practices can be developed through the understandingand incorporation of national characteristics is contrasted with an assessment that callsinto question whether national origin is the dominant paradigm, and this is achieved usingthe methodology of analysing the parameters of a company's strategic orientation and itsinvestment profile. The paper is shaped as follows: it begins with an examination of theevidence supporting the impact of national cultural grouping on the application of HRMpractices arnong companies that have established IJVs in China. The main theoreticalperspectives of international business studies appertaining to HRM practices are used toassess the literature relating to national cultural analysis. This is followed by a discussionof the methodology adopted for the study and presentation of the descriptive data thatexplore national origin, strategic orientation and investment profile in the preference forthe adoption of generic practices addressing various aspects of HRM. The nationaleffects that are elucidated from the literature review, together with some of the empiricalstudies that have explored this connection, are then considered in order to establish therelationship between these HRM practices and national cultural groupings. In conclusion,the paper further discusses the implications of national effects, the parameters ofa company's strategic orientation and its investment profile for the application of HRMpractices in IJVs.

National calture effects

Natioaal cultural analysis asserts that national origin may influence HRM practicesthrough the mediation of an investor company's strategic orientation and investmentprofile. The influence of these HRM practices can be highlighted for each country interms of the strength of the national institution characteristics at the company level(Evans and Lorange, 1990; Becker and Gerhart, 1996). In the context of internationalbusiness, national origin implies that business institutional foundations in differentnations comprise the state, the legal governance and the financial and economic system(Anthony and Quintanilla, 1998). The magnitude and detail of the national institutionalinfluence on an UV can also be used as a foundation for country-specific predictions ofcompanies' adoption of HRM practices (Gamble, 2000). The approach in the literature isbased upon the idea that an organization will evolve its own distinct characteristics fromthe cultcral preferences and embedded institutions inherited from its parent companies.Key strategic orientations and a company's investment preferences are identified astypifying each of these national groupings and evidence is sought of the impact of theseparameters on the investors' actions in implementing integration and control across theirbusiness operations (Schuler, 2001). The potential for control and influence on preferencefor the adoption of HRM practices has established that task-oriented influences(compatibility) relate to an IJVs engagement in the pursuit of knowledge andcompetencies that establish an organizational competitive imperative, while partner-specific influences (complementarity) imply that ventures connecting with the knowledgeand competencies add to or build upon those of the partner (Schuler, 2001: 5). Theanalysis in this study is based upon a sample of joint ventures located in China where theforeign-investing partners can be grouped into the four broad national cultural categories

490 The Intemationai Journal of Human Resource Management

of Anglo-Saxon, Continental European, Japanese and Overseas Chinese. Finally, thedistinctions established by the research model show the extent to which influencesderived from national origin, a company's strategic orientation and its organizationalquality investments affect its preferences in the adoption of HRM practices, as shown inFigure 1.

Anglo-Saxon

Anglo-Saxon business culture places a strong emphasis on the achievement of financialresults. Its businesses are managed for the maximization of profits and for the satisfactionof shareholders (Goodstein, 1981; Lawrence, 1996a, 1996b). Emphasis on personalityassessment in formal recruitment procedures is the norm. Companies tend to deviseelaborate procedures for dealing with contingencies in areas that include systematicfinancial planning, budgetary control, formal selection procedures, job descriptions andmanagement development (Anthony and Quintanilla, 1998). US companies featurestrongly on openness, equality and recognition by providing higher than averageopportunities for recruitment, career development and training (Jacobs, 1991). The mostimportant criteria for recruitment and rewards in US companies are personalachievement, commitment and creativity (Femer and Quintanilla, 1998). The use ofsophisticated management and information-reporting systems is also highly accentuatedand implemented by the employment of trained managers (Chandler, 1986). Most UKcompanies also adopt similar information-sharing systems and reporting structures(Channon, 1973; Jones, 1986). Formal integration of a company's strategic business unitsat corporate level is achieved by the use of contracts that define business and employmentrelations (Arrighetti et al., 1997). Companies are highly reliant on the use of formalizedsystems that are dependent upon HRM departments for their effective implementation.Facilitation of these methods relies on experts in managerial training on staffdevelopment, internal communication and business integration (Locke, 1989). Anglo-Saxon companies operate in the belief that property rights are derived from ownership,and hence companies favour owning a majority equity share in an IJV to ensure formalintegration with their corporate systems (Nichols, 1969; Jacobs, 1991). US managementis based on a particularly rationalistic paradigm that is manifest in a high use of formal

Strategic Orientation

Investment Profile

Strategic Role of Human ResourceManagement Practices

Figure 1 Strategic role of HRM practices in intemationai joint ventures

Yan: A comparative study ofHRM in IJVs 491

reward systems and operating procedures (Hampden-Tumer and Trompenaars, 1993).The level of rationalism and formalization is reported to be somewhat less in UKcompanies (Lawrence, 1996b; Easterby-Smith et al, 1995).

Continental European

The strategic orientation of Continental European companies has been marked bya relatively long-term approach to business and features long-teim relations withemployees, suppliers and banks where the relations are moderated by trust and loyalty(Brewster, 1995). Internally, companies look for similar traits and try to achieve this byconcentrating on personality assessment in formal selection procedures (Barsoux andLawrence, 1990). A candidate's international experience is considered highly importantwhen recruiting senior executives. Despite the concentration on trust and loyalt)?,sophisticated information-reporting systems and tight control of labour costs areaccentuated through rigorous budget-setting and review processes (Ebster-Grosz andPugh, 1996). Although companies grant considerable managerial autonomy to thegeneral managers of subsidiar)' companies, such autonomy does not permeate throughthe organization as these managers operate in a highly autocratic manner and arereluctant to grant employees further down the chain of command access to informationabout production processes and managerial matters (Sparrow and Hiltrop, 1997).Researchers find that European companies generate low scores v/hen assessed forequality, job security and recognition (Maurice et al., 1980). European companies'reliance on contracts is moderated by a trust relationship and this differentiates theirHRM organizational practices from other national cultural groups (Child et al., 1983).The primary task of the HRM department is to engineer highly formalized andstandardized procedures where control is boilt upon personal supervision, backed by theauthority of senior management support (Ebster-Grosz and Pugh, 1996). HRMdepartments maintain primary responsibility for the recruitment and training ofpersonnel, although there is also strong emphasis on the more bureaucratic activities ofinformation provision and it is the department's task to ensure that the company is not inbreach of any regulations (Calori and Woot, 1994; Ferner, 1997). Technical training isstrongly emphasized within all training activities, although there are relatively largedifferences in the training systems of companies of different nationalities (Locke, 1989).High managerial autonomy leads to low levels of integration between headquarters andaffiliated companies. Thus international operations tend to be decentralized, withdiversity, rather than adopting standardized policies and practices (Eorsgren, 1990).

Japanese

The major Japanese companies have a long-term orientation that is reflected in anemphasis oil strategic rather than financial goals (Amante, 1993). A company takes keystrategic decisions by process of internal consultation, but, once a decision is taken,coinmitinent is expected at all levels of the organization and the day-to-day managementstyle is autocratic (Pascale and Athos, 1981; Bartlett and Yoshihara, 1988). This approachis dynastic i and, when associated with the view that employees are members of thecompany family, leads to long-term employment practices that are sustainable only ifgrowth rather than bottom-line profit is the priority (Abbeglen and Stalk, 1985). The wideraage of recruitment, selection, training and incentive policies generates sophisticatedHRM systems (Dore, 1973; Oliver and Wilkinson, 1992). Employment commitment isexpected toi be a two-way experience and people have to give a high degree of loyalty totheir company (Omi, 1991). The HRM function is charged with facilitating these


important aspects and has a historically high status derived from such involvement. Mostacademic discussion of Japanese HRM practice has focused on the operations area,namely production and supply (Abo, 1994), where Japanese companies place reliance ontrust rather than contract and use a form of control based on shared corporate norms andunderstandings. Less reliance is placed on formal contracts than on personal trust both ininternal employment relationships and in external relations with suppliers or financialinstitutions (Orm, 1991; Beechler and Yang, 1994). Relationships are key to the wholebusiness system, both within the company and through its external networks (McMillan,1996). Japanese companies endeavour to integrate with, and learn from, their affiliatesand partners through the secondment of staff to adviser role positions within such units(Nonaka and Takeuchi, 1995). They are likely to offer training, job security and promotionopportunities to their employees, and this suggests egalitarianism in their use of companybenefits (Broad, 1994). However, Japanese companies score comparatively less onopenness. Recognition, as evidenced by promotion, and reward policies are based onseniority, efficiency and conformity with organizational values rather than on the basis ofcreativity or professionalism (Pascale and Athos, 1981). The HRM focus is oninvestment in training, especially within the company, and this results in low levels offormalization (Beechler and Yang, 1994). The whole workforce is constantly encouragedto improve its skills, and there is considerable investment in continuous internal trainingthat has a heavy technical emphasis (Alston, 1989; Pascale and Athos, 1981; Yeung andWong, 1990). Emphasis on integration via personnel deployment strengthens the trustrelationship between management and their staff (Gerlach, 1992).

Overseas Chinese

The Overseas Chinese approach is based upon the family business concept and has beenmarked by a high level of competitive awareness, coupled with adaptability and a short-term orientation (Easterby-Smith et al., 1995). The strategic orientations of OverseasChinese companies are sustained by reliance on personal networks to obtain feedbackabout any need for adjustment. A flexible response is achieved via a centralized decision-making process that is implemented through a simple informal stmcture glued togetherby bonds of interpersonal trust and loyalty to the head of the family. Emphasis onrelationships rather than on personality assessment in formal recruitment practices hasexerted considerable influence on HRM activities (Bond, 1996; Whitley, 1992). TheHRM function is regarded as entitled to be consulted on issues relating to social welfare,establishment of incentive policies, staff development and training (Holton, 1990).Overseas Chinese companies often spin-off affiliates that are run by family members orclose associates as this provides a relationship bonding between parent companies andnew ventures (Brown, 1995; Verburg, 1996). Information sharing tends to be constrainedby the boundaries of their hmited social reference groups. Personal loyalties andrelationships are emphasized and there is a reliance on trust rather than formal contract(Child, 1991). Flexibihty and low cost are characterized as among their main strengths,and any expenditure on indirect costs, such as training, is invariably low (Redding, 1990;Chen, 1995). The preference, based upon a long Chinese tradition that holds the law inlow regard, is for an implicit and moral basis for business dealings, rather than a formallegal footing, and thus the viability of dealings rests upon trust between the parties (Tsuiand Farh, 1997). Such a simple stmcture has little formalization, and emphasis is placedon loyalty rather than clearly defined performance criteria. It is widely acknowledgedthat identities and loyalties are vertical in direction and highly personalized (Lockett,1988; Redding, 1990; Brown, 1995). Most employees identify with the aims of the

Yan: A comparative study of HRM in IJVs 493

company and view their personal and professional competence development as beingat one with these aims (Meier et al., 1995; Bjorkman and Lu, 1999a, 1999b). OverseasChinese companies are distinguished by a closely linked institutional system ofco-operation and negotiation (Verburg et al., 1999).

Adoption of HRM practices

A fundamental assumption in studying business institutional foundations is thata company's investment profile asserts rights to control the implementation of resourceinvestmeEts across national borders. These investments are influenced by the investor'sstrategic expectations and beliefs (Bartlett and Ghoshal, 1989). Research on preferencefor the adoption of given HRM practices within an IJV emanates from a company'sstrategic orientations and from the influences of its investment profile on the task andpartner-specific resource inputs. Balancing decentralized flexibility with a company'stask-oriented influence and centralized partner-specific influence appears to promotea preference for the adoption of HRM practices, as the balancing power is committedboth to organizational competitiveness and to the long-term interests of the joint ventureprocess (Child and Faulkner, 1998). The objective of the analysis of HRM practices is toreveal how an investor's strategic expectations and managerial investment behaviourpatterns map the specific organizational properties of national culture using parameters.

Strategic orientation

Strategic orientation becomes critical ia situations when partners working in IJVsperceive (iifferences in beliefs, values, financial and strategic targets (Cirookell, 1986;Smith et al., 1996; Edstrom and Galbraith, 1997). These emerge when a controlmechanism, introduced by one partner to manage specific investments, results in theadoption of specific performance standards, task completion targets, policyinterpretations and organizational practices (Dowling and Schuler, 1990; Doz andPrahalad, 1992). Strategic/financial targets are aimed at ensuring the existence ofeconomic activities that include the acquisition of low-cost sourcing, minimizing the sumof production and transaction costs, increasing economic scale, improving a company'scompetitive position, gaining the knowledge to learn, enlarging business expansion tointernational markets and gaining a new source of skills to improve human capital(Shleifer and Vishny, 1997; Schuler, 2001: 4). It has been argued that the diffusion ofnational institutional patterns through the strategic application of HRM practices can bebetter understood in the context of an examination of the partners' strategic orientationthat includes vision, culture, practices, structure and strategy (Geringer and Frayne,1990). Ding et al. (1997) conclude that bundles of HRM practices are characterized byan integrated set of organizational targets that are contingent upon a parent's strategico"ientaticT Of particular importance are the organizational structure, design,recruitmen., caiecr management, remuneration and communication that are designed todevviop fa that the potential of employees who possess the required skills and relevantnterridt'cnal ventumg experience (Schuler, 2001: 10). The overall influences resulting

' OiTi ditlTent national origins will show variations if a company's strategic orientationsand It KHM piactices posit national uniqueness in organizational structures, systemszad behaviours. (Becker and Gerhart, 1996).

Hypothesis la: The greater the consideration given to strategic targets, the greaterthe likelihood that those targets will be important in defining thehuman resource activities of IJVs.


Hypothesis Ib: The greater the consideration given to financial targets, the greaterthe likelihood that those targets will be important in defining thehuman resource activities.

Task-related influence

A company's investment profile is regarded as pervasive when an IJV organization usesthe parent company's image to project its own management systems, quality and prestigeto its market and supply chain (Melewar and Saunders, 1999). This pervasive power canbe established in many forms that are typically used when the joint venture's business ischaracterized by decision-making urgency (Doz and Hamel, 1998; Schuler, 2001: 2).Task-related infiuence is used to manage those resources invested to achieve quality,productivity and efficiency and is culturally independent in nature (Kamoche, 1996).A partner's investment of capital, technology and marketing expertise can affect the long-term strategic development of the IJV, as the task-related influences occur when therequirements to be met are related to a 'globalized' operation. The due influences on theoperation require investors to provide a consistent and clear structure as to the conductof IJV management procedures in the handling of resource and knowledge inputs(Shenkar and Zeira, 1987). Resource-based views of task-related influence emphasize thestrategic relevance of knowledge-based competencies where the investor is directlylinked to the achievement of a sustained competitive advantage generated from resourcesthat are valuable, rare, inimitable and non-transferable (Barney, 1991). When IJVpartners' structural or functional specializations complement each other and they sharesimilar structural or organizational characteristics that build upon or create greater assetbases, enabling them to enter new markets by achieving organizational flexibility, thentask-related influences are likely to be more effective and dominant (Begin, 1992; Li andShenkar, 1996). Contextual factors include market conditions, business strategies,technology and management expertise, which generate economic value to organizationsby enabling organizational human capital to be more productive and adaptable.Economic literature indicates that human capital, technology, skills, experience andknowledge can play an important role in establishing preferences for the adoption ofparticular HRM practices within IJVs (Lei and Slocum, 1992; Nonaka and Takeuchi,1995). Assessment on complementary task should include an analysis of the nature of theimportance of the IJVs task to the partner, the type of knowledge involved and the natureof the partner's reward and control system.

Hypothesis 2a: The greater the degree of task-oriented infiuence, the greater thelikelihood of the complementary use of the IJVs resources and thegreater the chance that benefits will occur from human resourceactivities within IJVs.

Hypothesis 2b: The greater the degree of task-oriented influence, the more extensivewill be the use of the flow of information and the greater the like-lihood that there will be benefit from the human resource activitiesof IJVs.

Partner-related influence

Assessment of a partner-specific influence is used to identify the ability and the worth ofa partner within the organization by measuring the value of the necessary technologicalskill, management expertise and international venturing experience brought to the


venture by that partner (Gerioger and Frayne, 1990; Melewar and Saunders, 1999).Partner-related influence stresses the monitoring and co-ordination responsibilities ofHRM that are based upon differentiated provision of resources that are culturallyembedded with the technologies of the specific provider (Geringer, 1991). Making thenecessary organizational adjustments to partner-specific influence can play a particularlyimportant role in the way that such knowledge inputs, knowledge transformation andknowledge utilization are incorporated into the joint venture process (Lu and Bjorkman,1997). The provision of proprietary resources may expose a partner's beliefs or opinionsas to how work should be completed, how resources and tasks are distributed and wherepriorities should lie. It appears that the greater the partner-specific influence accruingfrom the possession of technology, management and marketing expertise, the easier itmay be for the provider to exercise its influence over an IJVs HRM practices (Doz andPrahalad, 1992). Such an argument tends to support the notion that an UV partner mayneed to use its specific skills and talents to create a team around senior managerialappointments, as this is how it can ensure that the necessary reporting systems areestablished and the fair reward and incentive policies necessary for the successfulimplementation of the resources invested can be set up (Martin and Beaumont, 1998). Onthe one hand, a partner-specific influence is leveraged from the relative endowment ofresources, skills and competencies. The sources of bargaining power of an individualpartner can be established through internalization of key value-added competencies, asknowledge flow, sharing and transfer can play an important role in supporting humanresource practices throughout UV development (Cyr, 1995; Lei et al., 1992). On theother hand, the partner-specific influences can also be more effective when theycommunicate internally consistent expectations in ways that are congruent with thepartners' behaviour requirements.

Hypothesis 3a: The greater the degree of partner-specific influence, the greater thelikelihood that the resource complementarities in the UV willdevelop and the greater the chance that benefits will occur from thehuman resource activities of IJVs.

Hypothesis 3b: The greater the degree of partner-specific influence, the greater willbe the emphasis upon learning, knowledge sharing and technologytransfer and the greater the likelihood that benefits will occur fromthe human resource activities of IJVs.

A company's strategic orientation will define how it will wish to influence the operationof organizations within its investment profile and how it will be affected by HRMpractices introduced by its pminers. When an UV is established, there is invariablyconsiderable disparity between the HRM organizational practices of the partners and thiscan cause difficulties in deciding which of the partner's performance standards should beadopted (Lu and Bjorkman, 1997). HRM issues can be particularly significant whena partner with a strong bargaining position derived from being able to bring technologyand management expertise inputs to the venture tries to impose specific practices (Harrishet al., 1998). Parent companies are likely to deploy their own HRM practices within UVaffiliates with the fundamental strategic objective of ensuring integration with their owncorporate investment policies and procedures. Thus, it is likely that observable HRMpractices will reflect the integrated impacts from a company's strategic orientation, and itsorganizational investment profiles.


Hypothesis 4: The general impact established by a company's strategic orientationtogether with the influence it derives from task and partner-specificinvestment will affect the ability of the IJV to conduct HRM activities.

Method

The study incorporates parameters to evaluate the impact of HRM practices derived fromnational origin, a company's strategic orientation and its investment profile. The researchwas conducted in collaboration with staff from the University of Cambridge. The sampleconsists of eighty-seven IJVs formed between Chinese and foreign-owning companies.The foreign share of IJV equity ranged between 25 and 95 per cent. The interviews wereconducted in English or Mandarin Chinese depending upon the nationality of theinterviewees. The interviews with the Japanese joint ventures were conducted throughinterpreters. One hundred and sixty-one of the interviews focused on issues as seen fromthe foreign perspective and 193 on the same issues as regarded from the Chineseperspective, with a total of 354 managers interviewed face-to-face in the eighty-sevenIJVs. Two hundred and thirty-one interviews were conducted with parent-firm personnelat managerial levels above the IJV nominee manager and, of these, ninety-three werewith expatriate respondents and 138 with Chinese parent officials. On average, fourinterviews were conducted per case, where the interviewees included general managers,deputy general managers and functional heads. Two researchers visited each IJV and theresearch project was completed in April 1998. The information provided has beencrosschecked against answers proffered by at least two respondents. In cases where therewas more than one foreign partner or more than one Chinese parent company, only theforeign and Chinese parent companies with the most active involvement in theIJV's management were taken into consideration. The interviews were conducted withmanagers on an individual basis and were tape-recorded when that was acceptable to themanager. All data were transcribed onto separate schedules from the original notes andtapes immediately following the interviews. The IJVs are located in five industry sectorswhere a significant number of Sino-foreign joint ventures are found, namely chemical,electronics, engineering, fast-moving consumer goods and telecommunications. At thetime of this study, these sectors were the largest in terms of output value among foreign-invested firms in China {China Statistical Yearbook, 1998). Companies of varying sizewere included in the sample as there is evidence that company size may also influencethe adoption of specific human resource practices (Deshpande and Golhar, 1994).Additionally, all cases had been in business operation for not less than three years. Theintention of the research was to identify IJV managers' preferences for theimplementation of their respective parents' management practices. Quantitative andqualitative information has been used to compile a profile of each IJV. Records wereconsulted to obtain financial information where permission was granted, and backgroundcompany documentation was also collected. The conclusions drawn are based upon thesemultiple responses of the interviewees, and the following variables have been used tostructure the data collected.

The research questionnaire is divided into four sections. The first contains questionson factors of national origin that might have an impact on the approach taken to HRMpractice. The assessment of the national cultural impact is in line with Anthony andQuintanilla's study (1998), as they suggest that the national affiliation of an organizationcan affect the degree of available organizational choice in HRM system designs.Furthermore, their findings are useful in explaining how variations of managerial rolesmay be impacted upon by the different national regulatory systems of company law and


corporate governance. Cross-national cultural groupings in this study, such asAnglo-Saxon, Continental European, Japanese and ethnic Chinese groups, are contrasteddespite the presence of some heterogeneity within the first two (Hofstede, 1991;Hampden-Tumer and Trompenaars, 1993; Hickson and Pugh, 1995). The ContinentalEuropean group is much less homogeneous, though it is considered by some toshare similar 'communitarian' values (Choi et al., 1996). Calori and De Woot (1994) notethat some of the European company directors they interviewed perceived a narrowing ofthe gap between American, European and Japanese management philosophies andpractices. The IJVs' foreign parent companies were headquartered in Anglo-Saxoncountries (USA and UK), Continental Europe (France, Germany, Netherlands, Sweden,Spain, Switzerland), Japao and ethnic Chinese territories (Hong Kong, Taiwan andSingapore). Scott (1995) indicates that national origins tie organizational practices toa set of interaational institutional expectations and regulations. The national originclassifications used in this study to define strategic application of HRM are based on hiswork. He warns that the national institutions may possess mandatory powers to enforcecertain organizational arrangements that are based upon strong cultural and social valuesof the parent's home country.

In an attempt to ascertain the extent to which such strategic orientation is viewed asimportant, respondents were asked whether any strategic and financial targets wereformally endorsed and actively supported by senior management at the time of IJVestablishment. This line of questioning is in line with Child and Faulkner's findings(1998) that an investing company's strategic orientation should be consciously tailoredto meet the needs of an individual partner in an IJV. The most senior foreign managersin the joint venture were asked to define the most important objective benefits that theirparent companies sought from the IJV. For an IJV partner the most important strategicbenefits identified include: (i) to gain a strategic position in China vis-a-vis competitors,(2) to establish a strong business presence/credibility in China, (3) to establish anopportunity for long-term profit, (4) to leam how to do business in China. The mostimportant financial benefits included are: (i) to acquire low-cost sourcing, (2) to achievelow labour cost, (3) to gain benefit from transfer pricing, (4) to obtain benefit from taxincentives. A 5-point Lickert scale was used in which the range for objective importancewas from 1 = not at all important to 5 = extremely important. The most senior foreignand Chinese managers were asked to rate whether those objectives identified are beingachieved. Those objective achievements were scaled from 1 = not achieved to 5 = fullyachieved. These scores were aggregated to provide indicators of the achievement offoreign parent strategic targets (alpha = .71) and financial targets (alpha = .73)respectively. A crosscheck of internal reliability coefficients suggested that it isacceptable to aggregate these indicators into an overall measure of strategic and financialtargets by the foreign parent companies (Nunnally, 1978). In this study, only the foreignpartner's perspective is taken although responses were received from both foreign andChinese paiiners.

The task-oriented influence derived from an IJVs investment profile is examined asfollows. The most senior foreign and Chinese managers in the joint venture were firstasked to identify the importance of specific inputs available from an IJV partner ininfluencing its partner selection. The paitner's knowledge and resource commitmentsconsist of five items measuring the parent company's perceived importance overacquisition of links with major customers, distribution channels, production technology,product technology and training. The assessments of task-related influence are binaryscored (0 = not at all provided, 1 = provided). The most senior foreign and Chinesemanagers in this study include the general manager, deputy general manager, and heads


of finance, HRM, marketing, production and technical functions. The assessment is madeusing binary scores for whether people in these management positions were appointed bythe Chinese or the foreign parent firms (0 = not appointed by parent; 1 = appointed byparent). A partner-specific influence derived from an IJV's investment profile is examinedas follows: the partner's knowledge and resource commitments consist of five itemsmeasuring the importance of the parent company's influence over the competence of thepartner's management, previous intemationai experience, favourable past association withpartner, technology collaboration and the adoption ofthe parent's symbols, slogans, ritualsand ceremonies. The assessment is made using binary scores for the partner-relatedinfluence (0 = not provided, 1 = provided). The most senior foreign and Chinesemanagers in the joint venture were asked to rate the degree of partner influence over theIJV. Assessment of the partner's control was based on the four 7-point scales measuringthe achievement of their respective parent company's perceived influence over formalizedrules, target-setting, organizational, cultural and personal supervision (1 = not at allachieved; 7 = actually achieved).

The application of the strategic role of HRM is assessed by examining howIJVs achieve consistency of behaviour and process through the development ofhigh-quality competencies among those key personnel who are loyal to their nationalculture or origin in terms of: (a) recruitment vs relationship: the perceived reliance onpersonality assessment in the recmitment of, or emphasis on, Chinese relationshipconcepts; (b) reliance on contracts: the level to which the UV was limited by contractualprovisions drawn up by the foreign parent company as measured in the areas of: brandnames, marketing, product technology, production technology, suppliers, professionalservices; (c) formalization vs personalization: the perceived reliance of IJV control onformalized rules and procedures, target setting and organizational culture contrasted withcomparable assessments of the extent of group control through personal supervision;(d) training: the trend in expenditure on training for IJV personnel after the formation; theprovision of managerial, technician and operative training by the foreign parent, within theIJV or outside China, was also recorded; (e) integration: an assessment was made withreference to different bases of integration based upon ownership, control, personalcontacts, systems, transactional integration between IJV and the parent, and by personneldeployment; (f) reward system: the perceived reliance on staff development and emphasison the bonus reward system. Indicators used are based upon the senior managers'perceptions of the extent of foreign parent control over the IJV and of IJV autonomy(7-point scales: 1 = not adopted, 7 = fully adopted).

Results and discussion

The objectives listed in Table 1 indicate that there was significant differentiation inachievements of strategic and financial targets across four national groups. A highervalue indicates that the particular strategic or financial target was, on average, moreimportant to the category of parent companies in question. Strategic targets in this studyinclude the creation of strategic position, the establishment of a strong business presence,learning how to do business in China and acquisition of an opportunity for long-termprofitability. There is no striking evidence to suggest the strategic benefits sought bya partner from an IJV vary significantly from one national culture group to another. Thereis a comparative distinction, however, within the strategic target achievements of Anglo-Saxon joint ventures and the Continental European joint ventures where high values,which are statistically significant, are placed on the establishment of a strong businesspresence and in gaining a strategic position in China. Acquisition of an opportunity to

Yan; A comparative study of HRM in IJVs 499

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establish long-term profitability was most highly rated by the Anglo-Saxon, theContinental Europe and Japanese joint ventures. The strategic objective achievement of'learning how to do business in China' is more highly rated in Anglo-Saxon jointventures in comparison with other groups. The results may imply that acquisition of localmarket knowledge and local management practices, on the one hand, may incorporateand reconcile a foreign parent's distinctive economic market expansion strategies, asleaming from a local environment encourages creative behaviours and reduces highdegrees of risk-taking. On the other hand, the increased pace of technological change,knowledge development and increasing intemationai competition in China require thatthe strategic targets of foreign investing companies are relevant to the environment ofrapid market change. The findings suggest that most Continental European and Japanesejoint ventures need to acquire cmcial market and local knowledge capabilities that canbe provided only by Chinese partners and they will offset the influence that this gives theChinese partner by the influence that accmes from their technological and managerialknowledge. From the results of our interviews, it has been deduced that the strategictargets ofthe Japanese joint ventures tend to be established around a corporate vision thatbuilds synergistically upon the different organizational foundations. Overseas Chinesecompanies give less emphasis than others to the long-term strategic objectives of: gaininga strategic position, the establishment of a strong business presence in China andopportunity for long-term profitability.

The financial targets in this study are found to focus mainly on the acquisition of low-cost sourcing of materials, low labour costs and the achievement of benefit based upontransfer pricing policy. There is a relatively high emphasis on low-cost sourcing and lowlabour costs among Hong Kong, Taiwan, Singapore and Japanese joint ventures, whichis understandable in view of the factor-cost profile combined with the geographicalproximity to China. Hong Kong joint ventures were particularly concemed with thefinancial gains to be obtained from low labour costs, transfer-pricing benefits and taxbreaks. This is in line with the assertion of most overseas Chinese joint ventures that acompany's strategic targets are often affected by the successful bridging of internal andexternal company links under the orchestration of HRM activities and the specificationof acceptable organizational performance standards, as such links are needed to establisha well-motivated and skilled workforce that enables a company to compete effectively inthe global marketplace. The results of the study also show a distinction in that thestrategic objective achievement emphasis of Anglo-Saxon and Continental Europeanjoint ventures is slightly different from those of Japanese, Hong Kong, Taiwan andSingapore joint ventures. There is, however, no significant difference in terms of theemphasis on financial target achievements, particularly in the acquisition of low labourcosts, tax incentives and benefits from tax incentives.

Of the task-related investments, two measures (resource investment profile andmanagerial position profile) stand out as being perceived by the partners to be important.The impact of technology development in joint ventures has played a significant part inthe way in which tasks are accomplished. Table 2 suggests that the four national groupsdo not perceive their levels of achievement in the areas of technology and managementexpertise to differ significantly. No group likes to provision their resources unless theyhave an ability to influence the task-related parameters hsted. Most of the Anglo-Saxonand Continental European joint ventures in this study are quite keen to commit market-related knowledge, such as the provision of links with intemationai customers and theestablishment of distribution channels. This finding reinforces the literature suggestingthat the geographic dispersion of an investing firm's investment portfolio may have nosignificant impact on its ability to influence task-related parameters (Child and Faulkner,


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1998). On the whole, there are no significant national differences in provision of thepartners' resources, including production technology and product technology, to jointventures by their parent companies across the four national groupings. The appointmentof senior managers and the establishment of communication channels in the Anglo-Saxon joint ventures via their intemal reporting lines are used to consolidate the partner'sinfluence and control arising from their resource investments in the IJV. The ContinentalEuropean joint ventures place a greater emphasis on the ability to appoint a foreigngeneral manager and they are highly likely to appoint a foreign chief financial officer.This study finds that behef in the importance of appointing to senior managerial rolesexists equally across the four national groups, and includes their desire to appointnominees to managerial positions such as general manager, deputy general manager,marketing and HRM functional managers. There are, however, differences associatedwith appointments of the chief financial controller and production managers. Withrespect to the employment of expatriates in joint ventures, the approach to personneldevelopment in Hong Kong joint ventures is distinctive as they have fewer non-PRC jointventure general managers in comparison with other cultural groups, but a greater numberof deputy general managers. In absolute terms, their expatriate deployment tends to below but this result could be biased by the generally smaller sizes of their joint ventures.

Table 3 lists the partner-specific influences over joint ventures that are predicted bytheir national cultural groupings. The listed items of partner-specific influence in jointventures were found to exhibit no significant difference in terms of the control prioritiesand control mechanisms adopted by nationalities. The Anglo-Saxon joint ventures relyrelatively heavily on control emanating from formalized mles rather than to personalsupervision. Formalized mles are seen as methods by which ideas are shared across theorganization and can be perceived as business integration mechanisms, because theyshape and constrain courses of action for the IJV. The target setting provided by theAnglo-Saxon joint ventures is perceived as a tool that is used to correct skill deficienciesand disseminate information about IJV management policies and procedures. The Anglo-Saxon joint ventures rarely adopted the overt signs of their foreign parent's corporateculture, whereas these signs are apparent in the Continental European joint ventures. Theinfluences of Anglo-Saxon companies that are derived from the competence ofa partner's management, previous international experience and favourable pastassociation with a partner are found to be positively correlated with the preference for theadoption of HRM practices in subsidiaries abroad. The findings indicate that the trade-off in partner-specific influence is between the complementary expertise and knowledgethat a partner is willing to transfer to the IJV and the critical resource decisions that mustbe dominated by the resource providers. Corporate organizational cultural influences inthe Continental European joint venture appear high in areas such as the adoption ofparent companies' symbols, slogans, rituals and ceremonies. There is qualitativeevidence from our interviews that, where IJV subsidiaries have foreign HRM managers,organizational practices based upon the expatriate culture will be favoured by the jointventures. In particular, staff development tends to be monitored closely by US partnersto evaluate whether the required strategic benefits are being achieved by the overallbusiness and whether the economic activities are being efficiently operated at all timesthrough the necessary commitments of human resources. Hong Kong, Taiwan andSingapore joint ventures were found to operate under a relatively high degree of parentalcontrol. The main national differences in the Hong Kong, Taiwan and Singapore jointventures are apparent in the frequency of meetings or visits between the foreign parentand the IJV, and the frequency of reporting of control information. Hong Kong jointventures have between three and four times the frequency of meetings with their foreign


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parent than do the other national categories although this can be explained by geographicproximity. As a consequence, they require correspondingly less frequent formal reportingof IJV results. The Hong Kong, Taiwan and Singapore joint ventures relied relativelyheavily on control emanating from personal supervision rather than depending on targetsetting and corporate culture. The results suggest that complementary resourcespossessed by the Hong Kong, Taiwan and Singapore joint ventures show that the qualityof the partner's management, rich marketing expertise and favourable past businessassociation can bring positive influence to market distribution networks.

Table 4 shows the adoption of HRM practices in joint ventures across the four nationalculture groupings. The reliance of Anglo-Saxon joint ventures on contracts and formalreward systems are characterized by the extensive use of personnel deployed in buildingformalization, training and integration. Ownership equity in the Anglo-Saxon jointventures has a bearing on task accomplishment goals, as majority equity-based influencecan be partially used to force an UV to accept certain HRM practices, such asstandardized management practices and technology systems, that are in line with theinterests of the majority shareholder. The Continental European joint ventures exhibitHRM priorities targeted at information sharing and technical training, whereas they ratethemselves as only mediocre for reliance on formalization and contracts as methods ofestablishing HRM practices. Japanese joint ventures exhibit relatively high scores relatedto long-term strategic orientations, but these scores are lower than either Anglo-Saxon orContinental European scores. The Japanese stress the importance of personneldevelopment in the sharing of technical information and integration between parent andUV subsidiary. Reliance on contracts and formalization in their joint ventures isrelatively low in comparison with other groups. All the national groups place a similaremphasis on training, although the Japanese joint ventures are particularly active in

Table 4 Adoption of HRM practices in IJVs predicted by national grouping (N = 87 IJVs)

Application of HRM practice

Formal recruitment vsrelationship

Reliance on contractsFormalization vs

personalizationEmphasis on trainingIntegration between

parent and affiliatesReliance on formal reward

system

Nationality (mean scores:

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5.52

5.716.11

2.77'4.23^

4.80

ContinentalEuropean

3.26

3.4P4.06

2.652.73

2.98

analysis of variance)

Japanese

3.93

2.422.54

2.69"5.435

3.93

Hong Kong/Taiwan/Singapore

1.94

1.231.32

2.564.90'̂

4.72'

NotesHigh > 4.5; medium between 3.5 and 4.4; low < 3.4.

'Medium (emphasis on training, especially on managerial training); ^ medium (integration betweenparent and affiliates via systems and ownership); ^medium (reliance on contract, but it is moderated bytrust); *high (emphasis on training, especially on technical training ); ^high (integration between parentand affiliates via personnel deployment); ^high (integration between parent and affiliates viarelationships); 'high (reliance on formal reward system via money vs manager promotion).


extensive technical training and in-house managerial training both within the IJV and inthe home country. The HRM practices observed in this study are reinforced by a systemof rewards, including training, career development, promotion and remuneration. TheOverseas Chinese joint ventures take a relatively short-term strategic view of IJVdevelopment. The integration between the parent and an IJV subsidiary is operated viapersonal relationships. Their reliance on formal reward systems is heavily financiallyoriented rather than relying oo staff development programmes and this leads to lessdependence on control, formahzation and training. It was found that the application ofHRM practices is predictable from the organizational contextual variables of ownershipstatus, size, location, technology and resource availability.

Coacinsions

Th-s paper u:es comparative data across four national culture groups to analyse how thestrategic roies cf HRM practice at the individual IJV level are affected by the nature andthe impact of national origin. The analysis is consistent with previous research indemonstrating that foreign multinationals do diffuse several organizational behaviours andpractices '.hat are characteristic of their national origin into their IJV subsidiaries. In thisstudy, analyses at the individual IJV level are undertaken to offer a better understandingof a company's strategic orientation and its investment profile as predictors of HRMactivities preferences, but the evidence presented suggests that there is little support fornational origin being a major independent influence. It is the strategic orientation andirivestment profile of an investor company, factors that are weakly affected by nationalorigin, *'hich correlate positively with HRM activities. Those foreign-investingcompanies that pursue international strategies consistent with creating a strategic positionin China iire most likely to seek to diffuse task-related business practices across nationalborders trom wherever they originate. Only when there is a technological resource baseavailable "o transfer to an IJV can a partner's corporate headquarters specify the strategicinientions for the IJV. In this study, the differences in companies' strategic orientation thatmight be expected between the Anglo-Saxon IJVs and other European nationalities are notapparent The strategic orientations measured show that the Anglo-Saxon and theContinenal European IJVs both place importance on the long-term orientation ofestablish'.nent of strategic presence vis-a.-vis competitors in China, while the strategicorieniation of Japanese and Overseas Chinese IJVs consistently emphasizes acquisition oflow-cost jabour and sourcing. The Hong Kong joint ventures in the sample are clearlymore opportunistic in their strategic targets and their business interests lie in realizing themore immediate benefits of investing in China. These differences suggest that geographicproximity may be a facto^ in the strategic orientation of given companies.

The use of participant interview techniques in comparative research have achieveda conceptual understanding of the nature of the diffusion mechanisms used bymultinat'tnial companies to spread best practice to their UV subsidiaries by usinga methodology whereby the linkages, such as strategic orientation, task-related infiuence,or partner-specific influence, can be tested empirically. The results suggest that importationof foreign technology and management practice can be successfully achieved through task-reiaied influences alone. The analysis suggests tliat UV management has a high degree oforganiza'donal and managerial autonomy in the implementation of the company's task-related ccnirol of activities regardless of the national background of the foreign partner.The evidijnce indicates that it is the task-related influence in an UV that plays an importantrole in directly shaping HRM practices. In most cases the individual partners do notactually possess sufficient control to impose HRM organizational practices in line with the


specific economic or strategic interests of their companies and there is no strong evidenceto suggest that partner-related influences have significant impact on HRM in the IJVsstudied. A company's strategic orientation and investment profile define the strategic roleof HRM only within the context of providing the incentive and ability for IJV subsidiarymanagers and employees to respond positively to the pressures from a specific partner.National distinctiveness does define the types of coOaboration and integration betweenparent companies and IJVs in China, but these differences do not necessarily reflect anyspecifically cultural or national institutional bias. The largest effect found is that of geo-graphical proximity of Hong Kong parents to their UVs and to a lesser extent of Japanesecompanies to their subsidiaries in Northem China. In most respects, the other OverseasChinese parents and their IJVs display a rather similar profile to those of Westem andJapanese origin. The few instances in which the Japanese differ from Westem cases canalso be accounted for primarily by the geography of Japan in relation to China.

This study has examined important factors that facilitate or hinder UVs in developingbeneficial HRM practices. It reveals that the partner's investment profile defines the task-related influence on such practices, and the desire to establish a strong business presencein China is a prerequisite to the achievement of integration and synergy between partners.There is little evidence that national cultitre-based obstacles to diffusion processes existin IJVs. This leads to the important finding that the implementation of task-orientedprocesses leads to HRM practices that transcend national culture groupings. Analysis ofnational cultural effects on strategic orientation shows that any predisposition postulatedwith respect to specific national groups is not strongly reflected in the responses of themanagers interviewed. The findings show that the greater the interdependence betweenparent and UV subsidiary, the greater will be the benefits that accme from at least somedegree of integration of HRM practices across these units, and in this respect HRMpractices in Sino-foreign UVs follow global management standards that are notsignificantly affected by the nationality of ownership.

Acknowledgements

Grateful acknowledgement is made for funding provided by the UK Economic & SocialResearch Council to defray the cost of the research from which this paper is drawn. Theauthor would like to thank all those who have contributed to this paper: Dr John Fawn,Prof. John Child, Prof. Malcolm Wamer and Ms Shirley Hockin for their valuablecomments and Prof. John Child, Dr Yuan Lu, Mr Shiquan Zhang and Mr Xinjian Wangfor their assistance in fieldwork.

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