see the attachment below.
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CMSE 11464 Emerging Market MNCs: Internationalisation and HRM |
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2000 (+/- 10%, excluding references) |
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Weighting: |
40% of the module grade |
Essay question:
Compared with MNCs from advanced markets, what do you think is the key challenge faced by emerging market MNCs?
Guidance to Students
· We will be discussing a wide range of challenges faced by EMNCs in the lectures. You may choose any of them as your topic.
· In your discussion, you should explain: what is the challenge? What are the reasons for this challenge? You may also discuss the implications for human resource management as you see fit.
· When writing this essay, you may consider using examples (e.g. a specific company) to substantiate your arguments.
· Ramamurti (2012), Cuervo-Cazurra (2012) and Guillen and Garcia-Canal (2009) contain excellent discussions about key differences between EMNCs and AMNCs. They can be a good starting point to familiarize yourself with this strand of literature.
Marking Criteria
· Understanding of the selected topic: evidence of understanding of the key characteristics of EMNCs, and knowledge of related theories and debates
· Critical judgement and logical argument: Are the arguments provided logically developed and are the conclusions supported by the arguments in the essay? Does the essay reflect critical thinking?
· Examples and illustrations: Are the examples carefully selected? Do they support the argument?
· Organisation, presentation and clarity: essay is well structured, and ideas are communicated clearly.
· Referencing: Appropriate academic referencing.
WEEK 3: HOME COUNTRY EFFECT
Emerging Market MNCs: Internationalisation and HRM (CMSE11380)
Dr. Keyan Lai Office: 2.13
Email: keyan.lai@ed.ac.uk
EMNCs different from AMNCs
W1- dimensions including: accelerated speed, popular entry mode of M&As, simultaneous expansion path to both developing and developed markets
W2- OLI framework
Different O- advantages, e.g. relationship with governments
Different focus on L-advantages, e.g. innovation/knowledge seeking
Recap of W1 & W2 lectures
Also known as country-of-origin effect
Elements of the behaviours of MNCs can be traced back to the characteristics of the institutional environments of the home country
Cultural theory (Hofstede, 1980): the influence of cultural values and norms on managerial practices in overseas subsidiaries
Institutional theory (Hall & Soskice, 2001; Whitley, 2001): MNCs’ behavior at the international level will be informed by the operational models and organizational routines the MNCs developed at home in response to home-country institutional arrangements
Home country effect
Comparative Institutional Analysis
To identify, classify, and explain the distinctive configuration of institutions in (home) country
How the forms, behaviours and outcomes of firms are influenced and shaped by the institutions
What are the consequence. e.g. employment, innovation
Comparative Institutional Analysis
Hall & Soskice’s (2001) VoC is an institutional framework (in contrast to the cultural approach) for understanding how nations are different
Helps us to understanding how corporate strategy and management practices are linked to the wider societal institutional context
Four institutional domains
Corporate governance & finance
Industrial relation
Education & training
Inter-firm relations
Focuses on formal institutions (as opposed to informal/soft ones, e.g. norms and customs)
Revision of VoC
Corporate governance & finance Capital markets, banks and other financial intermediaries, state regulation of finance sector, the state
Industrial relation Labour unions, wage bargaining procedures, labour law, state, employers associations, the state
Education & training Vocational and educational institutions, professional bodies, state regulation, employers associations
Inter-firm relations Legal structure of contract enforcement, employers associations
Key institutions in four domains
Neo institutionalism includes three domains: regulative, normative, cognitive
Dimension Whitley (1999) Hall & Soskice (2001) Amable (2003) Redding (2005) Hancke et al. (2007)
Civil society role ✔
Education and skills formation ✔ ✔ ✔ ✔ ✔
Employment relations ✔ ✔ ✔ ✔ ✔
Financial system ✔ ✔ ✔ ✔ ✔
Interfirm networks ✔ ✔ ✔ ✔
Internal dynamics of firm ✔ ✔ ✔ ✔
Corporate governance ✔ ✔ ✔ ✔
Product markets ✔
Social capital (trust) ✔ ✔
Social protection ✔
State role ✔ ✔ ✔ ✔
General management profile
Standardized, formalised, centralised in international policy making
Tend to transfer organisational forms/ management methods to overseas subsidiaries
Broader management controls through budgeting, planning, etc.
Hostile to collective worker representation
Example: USA MNCs
US business system/ institutional profile
Market competition, mass production
State as weak economic actor
Shareholder capitalism
Flexible labour market
Deep-rooted anti- unionism
Source: Ferner, A. (2000). The embeddedness of US multinational companies in the US business system: implications for HR/IR. Working paper.
Weak institutions at home, or ‘Institutional voids’
The absence/ underdevelopment of institutions that enable effective markets, e.g. governance mechanisms that prevent corruption, and protect property rights; also political instability, government interference, unpredictable regulatory changes
Institutional voids create social, regulatory, and political uncertainty.
Institutional profile of emerging markets
Also see: Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of international business studies, 38(4), 481-498.
Based on the case of Tata Motors & Hero Group
What is the key institutional element that has impacted the development these two Indian MNCs?
How is the home country effect manifested in these two cases?
Quick discussion
1948-1991: pre-liberalization
Indian economy was heavily regulated and relatively closed.
“by the end of the 1970’s, India had acquired a reputation as one of the most protected and heavily regulated economies in the world”
1991 onwards: post-liberalization
Opening up of the Indian economy
Liberalisation of India’s outward FDI policy that allowed Indian firms to invest abroad
Also allowed foreign MNEs to enter India
(Munjal et al 2013)
India & Indian MNCs
The development of Indian firms into MNCs is a product of home country factors; particularly, Indian government policy.
Protectionist policies and a slow pace of liberalisation provide growth opportunities to domestic firms to serve a large unsaturated domestic market
Indian firms grew domestically and diversified because of a protected home market
Indian firms actively engaged in cross border acquisitions, which were financed by the accumulation of funds arising from super-normal profits in the large, protected Indian economy.
India & Indian MNCs
Buckley, P. J., Munjal, S., Enderwick, P., & Forsans, N. (2016). Cross-border acquisitions by Indian multinationals: Asset exploitation or asset augmentation?. International Business Review. 25. 986-996
Industrialization policies
Policy essentially directed to the attraction of foreign MNCs, negative impact on the development of local capabilities; local firms stood in low-tech sectors, inward looking
Macro-economic policies
Instable, unpredictable policies, volatile conditions lead to short-term perspective.
The Brazilian cultural legacies
Portuguese colonization legacy: rigid & hierarchical organization;
The natural resources curse: the blessing hinders diversification and innovation; conservatism; risk-aversion
Brazil & Brazilian MNCs
Brazil & Brazilian MNCs
Most Brazilian MNCs are expanding in traditional sectors; not in those regarded as knowledge-intensive and technologically dynamic.
There are no technological catching-up strategies
Ownership advantages: based on manufacturing excellence, and innovative business model
Internationalization strategy: characterized by opportunistic movements associated with conservative and risk-averse decision making process
(Fleury & Fleury, 2014; Fleury, Fleury, & Borini, 2013).
Consequence of ownership nationality
The nationality of MNCs (e.g. Japanese, German) explains differences in the strategies, policies, or practices of MNCs from different countries.
Transfer of home-country practices
MNCs’ host-country management practices mirror those in their home country
Manifestations of Home country effects
Transfer of management ethos
Subsidiary practices are dissimilar to their parent’s but reflect the prevalent management philosophy at home
Competitive disadvantage
MNCs’ competitive disadvantage is associated with their country of origin
(Please read Zhu, et al 2014)
Research has identified distinctive patterns of IHRM, taken by MNCs of different nationalities (Edwards & Ferner, 2004; Ferner, Quintanilla, & Varul, 2001; Ferner, 1997).
Japanese MNCs: a highly centralised management approach; heavily rely on expatriates to manage their overseas operation.
British/ US MNCs: budget-setting, tight financial and performance control.
German MNCs: influenced by the long-termism in their home environment, have much fewer short- term performance requirements; rely less on formal financial control measures, but more on formal feedback and communications.
Home country effect
Indian MNCs tend to use more temporary/contingent labour
Home country institutions
India has stringent laws against the retrenchment of workers. Until 1980 India was one of the most regulated labour markets in the world
A strong trade union movement also creates a situation where it is almost impossible to retrench workers.
This has naturally resulted in greater reliance on temporary workers or manufacturing outsourcing
Home country effect – Indian MNCs
Gomes, E., Sahadev, S., Glaister, A. J., & Demirbag, M. (2015). A comparison of international HRM practices by Indian and European MNEs: evidence from Africa. The International Journal of Human Resource Management, 26(21), 2676-2700.
Russian MNCs adopt HRM practices of Western origin, depending on host countries.
In developing countries that were member of former Soviet Union, the IHRM approaches adopted by Russian MNCs typically reflect a feeling of superiority.
In developed countries and non- Soviet developing countries, Russian MNCs mixed global best practices and local HRM practices.
Home country effect – Russian MNCs
“Our US operations form a business division, while our Latvian, Ukrainian, and Kazakh operations are business units. The latter are therefore one level lower [in the organizational hierarchy]. The subsidiaries’ budgets, levels of responsibility, and freedom depend on their status. ”
(Andreeva, et al 2014)
Based on your knowledge/ experience, discuss and identify: one HRM practice that could be problematic when it is transferred from EMNCs’ home country to the UK.
What would you do to tackle this if you were the HR manager?
Quick discussion
Home country effect manifested as competitive disadvantage; in other words, EMNCs’ competitive disadvantages derived from home country institutional environment. e.g. managerial weakness
A key mechanism through which home country effect plays out is the mind-set of managers (rather than formally established corporate control instruments, as in the case of AMNCs)
A unique challenge for EMNCs
A case study of Chinese MNCs (Zhu, Zhu, De Cieri, 2014)
Trade unions in China are an appendage of the party- state or a state organ.
Lack a capacity to represent workers’ interests in opposition to enterprise management; instead, serve business interests.
Have sided with government and employers, maintaining industrial harmony even during disputes
Labor relations management at the workplace level in China can be characterized as managerial unilateralism within a formalistic collective framework.
Industrial relations in China
Chinese MNCs’ failure to evaluate labor relations risks and to handle overseas labor relations.
Chinese managers’ lack of knowledge about the nature of labor relations in other countries and how to manage it.
The absence of specialized organizations that can provide quality advice on overseas labor relations in China.
Headquarters’ weakness in supporting and coordinating labor relations in subsidiaries.
Home country effect
“To be frank, I have little knowledge about overseas labor relations. Really very little. We have not come across labor relations problems. Overseas trade unions—I have learned about them largely through TV. Judging from media reports, it seems that trade unions have transformed into an irrational monster. …
The only thing I can say is that I cannot understand overseas trade unions. ”
Our environment is different from that faced by foreign firms. Those firms grow up in that environment and they are very familiar with union conflicts…. I was not warned about how deeply trade unions might seek to participate in the business operation. The concepts of dialoguing with trade unions, pre- paring for the dialogue, and devising dialogue mechanisms, all these were unknown to me.
Employer association (EA)
Strong preference of non-membership of EA in host country
Chinese managers attribute little value to EA
Chinese manager lack of awareness and interest in EA’s role in labour disputes
(Zhu & Jack, 2017)
Home country effect – Chinese MNCs
EA in China
EA in China are controlled and supported by the state
The China Enterprise Confederation (CEC) is the formerly monopolistic employers’ representative organisation
It functions like a ‘state-owned management consultancy bureau’, rather than a representative of employers
A very weak actor in China’s industrial relation system
“I knew that there existed an employer association. But I did not investigate it and we did not join it … I felt that EAs were sort of like a club. They (people) often gathered together to communicate. … We did not participate … because we at that time did not feel that there was such a need. At that time, we did not know how important and useful the EAs were and thus we did not consider the membership. “
“By nature, membership means to pay money. I do not know what benefit membership can bring us … In fact, it did not occur to me that there existed local employer associations.”
EMNCs, the most distrusted?
“A company’s headquarters location matters deeply when it comes to trust… companies headquartered in BRIC countries remain among the most distrusted of businesses. Brazil, China, Russia, India and Mexico all recorded trust levels well below 50 percent (38 percent, 36 percent, 35 percent, 34 percent, and 31 percent, respectively), a stark contrast to countries such as Sweden, Canada, Germany and Switzerland that registered as high as 76 percent. The trust challenge is particularly acute for developing country-based multinational companies seeking to do business in a developed country. ”
(The 2015 Edelman Trust Barometer, cited by Marano et al, 2017)
The behaviors of MNCs are deeply institutionally embedded, thus Comparative Institutional Analysis as good analytical tool
Home country effect may take different forms, but competitive disadvantages associated with country of origin is particularly prominent in the case of EMNCs
Next two weeks, we follow this line of inquiry
The role of state
The legitimacy problem
In Summary
WEEK 2: COMPARING EMNCS AND AMNCS
Emerging Market MNCs: Internationalisation and HRM (CMSE11380)
Dr. Keyan Lai Office: 2.13
Email: keyan.lai@ed.ac.uk
The case of Gazprom Energy
The case of Huawei
Speed: accelerated
Competitive advantages: weak
Political capabilities
Expansion path: simultaneous entry into both
Entry modes: external growth, e.g. M&As
Adaptability: high
Last lecture recap
How are EMNCs different from AMNCs?
– A theoretical understanding: OLI framework
What are the implications for HRM?
Today’s agenda
EMNCs are new species that can only be understood with new theoretical concepts (e.g. Matthews, 2002; 2006)
Existing theoretical models such as the OLI model are adequate to explain EMNCs (e.g.Narula 2006)
Existing theories provide partly satisfying explanations to some of the puzzles about EMNCs, and efforts need to made to extend and modify them (e.g. Ramamurti 2012)
Further reading: Cuervo-Cazurra, A. (2012). Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate. Global Strategy Journal, 2(3), 153-167.
Competing viewpoints
Also known as eclectic paradigm; developed by John Dunning (1977, 1981, 1988)
‘the dominant analytical framework for examining the determinants of MNE activity’ (Dunning, 2001, p. 187)
Mainly answer the question: Why do firms go abroad to invest and become MNCs?
Successful MNCs arise because they develop competitive advantages at home (O-advantages), which can be transferred to specific countries (L-advantages) through foreign direct investment (I-advantages).
Ownership advantages (O-advantages)
Locational advantage (L-advantages)
Internalization advantages (I-advantages)
OLI framework
Resources/capabilities of the firm that are transferable across borders, and enable the firm to attain competitive advantages abroad.
Tangible resources: proprietary technology, capital resources, human resources
Intangible recourses/capabilities: brand, organizational culture, knowledge
Developed at home; necessary for FDI to offset the costs/risks of going abroad
1. Ownership advantage
Contents Outcomes
Asset-based ownership advantages
e.g. product innovations, production management,
organizational and marketing systems, innovatory capacity, accumulated experience in marketing & finance, ability to reduce costs, capital, relational asset Efficiency, Market power
Advantages of common governance
e.g. advantages of scale and scope of multi plants, superior
coordination between business units in different locations Organizational effectiveness
Advantages of soft power
e.g. codes of conduct, norms, and corporate culture;
incentive systems and appraisal; leadership & management of diversity. ( “institutional advantage” in Lundan, 2010) Legitimacy and trust
Typology of ownership advantage
Considering various types of resources/capabilities (which lead to ownership advantage)
What are those that EMNCs most likely to possess?
What are those that EMNCs unlikely to possess?
Quick discussion
Ramamurti (2012: 42) suggests that these non-traditional firm specific advantages include
‘their deep understanding of customer needs in emerging markets, the ability to function in difficult business environments, their ability to make products and services at ultra-low costs, their ability to develop “good enough” products with the right feature-price mix for local customers, and so on’
EMNCs have different ownership advantages, which are equally valuable for their internationalization
Ownership advantage of EMNCs
Relational assets: the ability to engage in beneficial relations both within the firm and with other firms and agents (Dunning 2002; Erdener & Shapiro, 2005)
allow firms to access resources controlled by others, and to govern their joint use
The ‘political embeddedness’ (Kilduff & Brass, 2010) of EMNCs in general; close ties with the state and politicians
‘International champions’ for new state-supported ‘Multilatinas’ in Latin America (Henart, Sheng, & Carrera, 2017)
Russian Gazprom seen as the ‘powerful arm of Russia in foreign affairs and foreign conflicts’ ( Panibratov, 2012, p.63)
Relational assets & EMNCs
Case study:
Ownership advantage or disadvantage?
( Please read the case material)
The development of human resources within the company failed to keep with the rapid global expansion (which is accelerated by state sponsorship)
Reliance on expatriates, but shortage of qualified international managers
Shortage of local talents due to 1) insufficient time and investment in training local employees; 2) the under-developed working process
Teleman’s challenges
“Teleman is developing at light speed, and we are too busy
to have the time to train a new employee before he starts to
work. We mainly train on the job…the working hour is from 9
to 5:30;
however, in our company, we pay for performance,
we pay for your hard work. The more you work, the more
you learn, and the faster you develop.”
‘Foreigners come
to ask me about old
documentations,
but we don’t have
any…in Teleman,
things are passed
down mouth-to-
mouth!’
‘Sometimes, no one knows what exactly the procedure is, and when you have managed to figure it out, it changes after two weeks’
What are those unique challenges faced by Teleman?
If you were hired as HR director, what would be the first thing you do to tackle these challenges?
Discussion
Now that we have the resources/capabilities (ownership advantage), where shall we go to invest?
L-Advantages: advantages enjoyed by firms if/when operating in certain locations; factors to consider:
Markets: size and growth of consumer demand; income level
Location-bound human resources: skilled labor forces
Natural resources: Oil, gas, mining deposits
Policy & institutions: e.g. incentive schemes, low tax
Psychic distance: “defined as factors that make it difficult to understand foreign environments” (Johanson and Valhne, 2009, p. 1412).
2. Location advantage
Founded in 1953 in Florida, USA
In 2016, BK was the world’s largest flame- broiled fast-food hamburger chain.
Sales in 2013
USA & Canada: 58%
EMEA: 29%
Latin America and Caribbean: 9%
APAC: 5%
Location choice of Burger King
Colombia: First entered in early 1980s but departed; reentered in 2008
France: first entered in 1979, departed in 2001 (16 restaurants, vs. 450 McDonald’s), reentered in 2013.
China: 2004
Russia: 2010
India: 2014
Four strategic goals for entering foreign markets; while analytically distinct, they are not mutually exclusive (Peng and Meyer, 2016).
Natural resource seeking
Firms’ quest to pursue natural resources in certain locations
L-advantage: quality and costs of natural resources
Market seeking
Firms’ quest to go after countries that offer strong demand for their products and services
L-advantage: strong market demand and customers willing to pay
Strategic goals & location choice
Efficiency seeking
Firms’ quest to single out the most efficient locations featuring a combination of scale economies and low-cost factors
L-advantage: economies of scale, abundance of low-cost labour force and suppliers, transport and communication infrastructure
Innovation seeking
Firms target countries and regions renowned for generating world-class innovations
Innovative individuals, firms and universities, industry agglomeration
Strategic goals & location choice
EMNCs often undertake FDI to seek strategic assets and knowledge (i.e. innovation seeking) to improve their competitive position (Luo & Tung, 2007)
For instance, acquisition becomes very popular among EMNCs as ways to gain quick access to advanced technology and catch up with AMNCs
Reverse knowledge transfer from subsidiaries as an important way for EMNCs to build up their capabilities (e.g. ownership advantages)
Reverse knowledge transfer in EMNCs
Defined as ‘the degree of dissimilarity between the partners’ business practices, institutional heritage and organizational culture.’ (Simonin,1999: 473)
e.g. business practices, operational mechanisms, corporate culture, values, and management style
Organizational distance amplifies ambiguity
Could lead to lack of understanding of the logical linkages between actions and outcomes, inputs and outputs, and causes and effects
High organizational distance hinders the effectiveness of knowledge transfer.
Organizational distance
EMNCs’ strong political tie enlarge the dissimilarity between HQs and overseas subsidiaries
HQ faces the pressure to align with strategic goals and mandates of home state (e.g., maintaining bilateral relationships); might not be entirely market-oriented, thus a high level of organizational bureaucracy and hierarchy and less entrepreneurial orientation
Overseas subsidiary: less politically motivated; tend to pursue their own business interests (e.g., profits) and efficiency
The case of EMNCs
The motivation of the source unit
Local manager: Why should I transfer my knowledge?
How are you going to utilize this knowledge?
The absorptive ability of the recipient unit
Lost in the bureaucratic process: prolonged decision making process
HQ’s superiority mentality
The transmission mechanisms
How to contribute while (not) being part of the big family
The HRM implications
Now that we have the resources/capabilities (O- advantage), and have decided where to go (L- advantage), how are we going to do the business?
I-advantage: advantages of organizing activities within a multinational firm, rather than using an external market transaction (e.g. exporting, outsourcing; licencing; franchising; these are not FDI).
3. Internalization advantage
3. Internalization advantages
I-advantages: avoiding possible market failure FDI as a better option
Asset specificity FDI vs. exports or outsourcing
Information asymmetry FDI vs. outsourcing where monitoring of the actual process is important
Dissemination risk FDI vs. licensing of technology
Tacit knowledge transfers FDI vs. licensing/franchising of complex knowledge
What could Coca-Cola do?
Exports (transporting millions of bottles from USA to China?)
Outsourcing (asking an firm in India to do marketing?)
Licensing/ franchising (giving permission to a Russian firm to produce and sell Coca-Cola in Russia? )
FDI
Set up R&D centre
Production centre
Distribution centre
Marketing & sales
(Introduced in 1886)
Dunning’s OLI framework focuses on ‘advantage’ that a firm should possess when conducting FDI
EMNCs possess different types of ownership advantage, and seem to concentrate on particular type of location advantage; both have important HRM implications
It draws our attentions to the issue of ‘disadvantage’ (e.g. escaping home country negative institutional environment; poor country image); topic of Week 3
To conclude
WEEK 5: ORGANISATIONAL LEGITIMACY AND EMNCS
Emerging Market MNCs: Internationalisation and HRM (CMSE11380)
Dr. Keyan Lai Office: 4.10
Email: keyan.lai@ed.ac.uk
Home country and host country states play important role in internationalization of all MNCs.
Home country state seems particularly relevant to EMNCs
Support and sponsorship
Double-edge effect (e.g. legitimacy challenge)
Recap of last week: the state
Legitimacy is “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman, 1995: 571)
In the process of legitimacy judgement, social actors evaluate various aspects of organization’s activities, structure and outcomes (Bitektine, 2011).
Organizational legitimacy
Rests on the self-interested calculations of an organizations most immediate audiences
Often involves direct exchanges between organization and audience; also involves broader political, economic, or social interdependencies (Suchman, 1995)
‘captures the degree to which an organization represents its constituents’ self-interests or provides them with favorable exchanges, relative to alternative forms or structures’ (Bitekline, 2011:158).
Key concern: How/whether we can benefit from this organisation?
Pragmatic legitimacy
Moral legitimacy reflects a positive normative evaluation of the organization and its activities
To evaluate whether the activity conducted by an organization is ‘the right thing to do’ (i.e. rightness)
Organization gains moral legitimacy when evaluators believe that it is acting in accordance with norms and values shared by that society
Key concern: Does it do the right thing? Does it promote societal welfare?
Moral legitimacy
Refers to the “acceptance of the organization as necessary or inevitable based on some taken-for-granted cultural account” (Suchman, 1995: 582).
Represents the most subtle and the most powerful source of legitimacy
A category-based judgment (Bitektine, 2011).
The organization is categorized as belonging to a certain known organizational form, based on a set of recognizable organizational characteristics (i.e. member of the legitimate class)
Cognitive legitimacy helps organizations avoid evaluation and questioning by their audience
Cognitive legitimacy
Compared with domestic firms, MNCs face greater challenges in establishing and maintaining legitimacy in multiple host environment, because
The stereotyping and different standards applied to foreign firms by the host environment (e.g. the liability of foreignness)
The increased potential for conflict that that they face between the requirement for internal versus external legitimacy
Legitimacy spillovers (from sister units, MNCs as a whole, home country)
(Kostova & Zaheer, 1999)
Legitimacy and MNCs
The largest private agricultural company in USA
Entered India market to create and distribute hybrid seeds
India government introduced Seed Policy in 1988, ‘to upgrade seeds and provide the Indian farmer with the best planting materials in the world so as to optimize his output.’
Cargill encountered substantial resistance from local farmers
Some offices and warehouses were burned down by angry farmers.
The story of Cargill
The local farmers claims the seeds project
Lead to dependence on MNCs, financial distress and economic exploitation
Take away their traditional self-sufficiency in seed production
Destroying their traditional way of life
The first step toward a ‘new’ colonization of India by the West
(Kostova & Zaheer, 1999)
“It is generally assumed that emerging country firms suffer from a legitimacy deficit due to their home countries’ weak institutions and poor reputation” (Fiaschi, 2017:556)
“Significant aspects of the liabilities of origin include adverse attributions such as those denoted by negative country images and negative product country images” (Pant & Ramachandran, 2012:227)
“Chinese firms are often perceived as having less legitimacy than the firms they are acquiring” when they pursue acquisitions in Europe and USA (Zhang et al, 2018)
Legitimacy and EMNCs
A wide range of legitimacy evaluators and a wide range of challenges
Host country consumers may consider their products and services lower quality because of poor business environment at home
Host country governments may worry about the spill-over of corruption from home to foreign operations
Host country civil societies may have concerns about their ethical operations given weak environmental or labour rights protections at home
Host country investors may be wary of poor corporate governance practices due to weak enforcement at home
Legitimacy and EMNCs
Liability of origin
Liability of advantages
Liability of emergingness
Liability of Asianess
Indian software service firms in USA
Enhancing legitimacy
Listing on U.S. stock market
Establishing trade association for Indian software firms (e.g. policy recommendation, industry study commissioning)
Aligning to industry standard, e.g. ISO 9001 certification
Personal connection with Indian American
“…despite a roster of big name North American clients, Infosys was battling the crass Western perception that a smart, honest reputable company could never come out of a country where cows still run in the street”
(Forbes magazine,1999; cited in Pant & Ramachandran, 2012)
Countries No. of SOEs
UK 24
USA 19
France 48
Germany 72
China 147,000
India 1097
Russia 1147
SOEs, a global phenomenon
Interesting read: Cuervo-Cazurra, A. (2018). Thanks but no thanks: State-owned multinationals from emerging markets and host-country policies. Journal of International Business Policy, 1(3-4), 128-156.
Although liberalization and privatization policies in 1980s and 1990s have reduced the number of SOEs in most countries, the existence of SOEs persists in all countries, including all OECD countries (Cuervo- Cazurra, 2018; Musacchio, Lazzarini, & Aguilera, 2015).
SOEs, in general, face legitimacy challenges abroad, e.g. opposition from host countries, stricter scrutiny and screening
Considered to pose threat to local business because of their advantageous, unfair position in the competition resulted from their supports from the home government (Christiansen & Kim, 2014).
Their positive spillover to the host economy called into questions because of poor business performance as a result of their problematic corporate governance (Globerman & Shapiro, 2009)
SOE’s objectives have caused suspicions. Owned by the home country government, SOEs have been perceived by host countries not only as economic agents, but also as political actors of their home government.
The legitimacy of SOEs in IB
How are EDF and CGN judged in a different way?
What are the key concerns for EDF?
What are the key concerns for CGN?
How are these concerns translated into the questioning of the three aspects of legitimacy (i.e. pragmatic, moral, cognitive)?
What are the legitimation strategies would you propose to CGN?
Case study: legitimacy evaluation of SOEs
Local isomorphism
Isomorphism legitimates! (Deephouse, 1996)
Conform to local formal/informal rules through mimicry behaviours and adaptation of products, operations, and organisation
Behave in a way that are viewed as locally legitimate
Local affiliation
To ‘borrow’ legitimacy from partners (David, Sine & Haveman, 2013)
People often rely on more easily observed signals (e.g. status, legitimacy of affiliates) to evaluate the legitimacy of new commers
Partner with local actors, integrate with local networks
Legitimation strategies
Local isomorphism
CSR and CSR internal/external communication (part of employer branding)
Local talent recruitment & development
HR philosophy and practice localization
Local affiliation
Local community embeddedness (e.g. professional body, NGO)
Legitimation strategies & HRM
EMNCs are subject to liability of origin, i.e. negative perception in host countries about their willingness and ability to conduct legitimate business
CSR and CSR reporting enable EMNCs to
Convey to the global legitimacy-conferring stakeholder that the firm conforms to meta-norms and expectations
Join a globally legitimate class of organizations
Disassociate themselves from their home countries
(Marano, Tashman & Kostova, 2017)
CSR as legitimation strategy
‘The firm’s consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks’
The definition and pyramid of CSR
(Davis, 1973)
(Source: Carroll, 1991: 42)
Wages
Wage comparison: foreign firms pay higher wages than domestic firms
Wage spillovers: payment of higher wages by foreign firms results in higher wages in domestic firms
Productivity
Productivity comparisons: research generally indicates that higher productivity in foreign plants, due to higher capital intensity or larger scale of production in the foreign-owned plants
Productivity and knowledge spillovers to local firms
Economic impact & responsibility
New industry and export
One of the main contributions of foreign investment has been to introduce new industries, or dramatically change the composition of production (e.g. subindustries, or new varieties of products).
Thus, shifting production toward tradable goods, and toward export.
Technological and industrial upgrading: e.g. transfer of technology, supplier linkages
Economic growth
Research on the effects of FDI inflow on national economic growth are inconclusive; almost all studies find positive effects in some periods, or among some groups of countries, but there are no universal effects.
Economic impact & responsibility
Case study: Huawei’s economic
impacts on the UK
( Source: The Economic Impact of Huawei in the UK, May 2019, Oxford Economics)
MNCs have a wide range of positive and negative impacts on host counties, but much more difficult to discern, e.g. HRM related issues:
human capital development
Diversity, equality, and discrimination
human rights
Workers’ rights and voices
Best scenario: MNCs as powerful and wealthy actors are able to contribute to social development (e.g. greater respect for human rights) through adoption of voluntary codes of conduct and CSR policies.
MNCs’ social impact
Chinese MNCs may be contributing to employment, but not to upskilling of workers, mutual learning, or engagement with local communities (Jackson, 2014)
“Although working conditions at Chinese companies in Africa differ across countries and sectors, there are some common trends such as tense labour relations, hostile attitudes by Chinese employers towards trade unions, violations of workers’ rights, poor working conditions and unfair labour practices.
There is a virtual absence of employment contracts and the Chinese employers unilaterally determine wages and benefits. African workers are often employed as “casual workers”, depriving them of benefits that they are legally entitled to. ”
Chinese MNCs in Africa
Use of casual/temporary workers (142 out of 250)
Many incidents of violations of national labour law (but no action taken against the company)
No record of any form of CSR, or any involvement in any development-oriented projects
All profits made are allegedly transferred back to the owner in China
Employees sometimes resorted to strike action, but afraid to do so, because striking could lead to dismissal
Chinese and Indian firms in Ghana
Only junior workers are allowed to join the union
Senior staff, managerial staff and temporary workers have no freedom of association
Very low wage level, with salary increase of 0% or 2%
Limited provision of health and safety: 22 occupational injuries and accidents in the last 5 years
(Akorsu & Cooke, 2011)
EMNCs in general do not perform strongly in CSR, particularly in the aspect of social & environmental impacts. Why?
Quick discussion
Note: several slides are missing here intentionally to facilitate better discussion. Full set of slides will be uploaded to LEARN after lecture.
All MNCs face challenges in building and maintaining their legitimacy when in a foreign market.
Pragmatic
Moral
Cognitive
Such challenge is particularly difficult for EMNCs due to their country of origin (e.g. weak institutions, relations with the state)
CSR as legitimation strategy
Conclusions
A mixed picture of EMNCs’ CSR efforts. While their economic responsibility and impacts can be clearly felt and measured, other aspects of social responsibility and impacts received some attentions by some EMNCs in some parts of the world.
From a legitimacy building perspective, positive economic impacts may lead to enhancement of pragmatic legitimacy of EMNCs, but more efforts required for building moral and cognitive legitimacy.
Conclusions
WEEK 4: THE STATE AND ORGANIZATIONAL & NATIONAL IDENTITY
Emerging Market MNCs: Internationalisation and HRM (CMSE11380)
Dr. Keyan Lai Office: 2.13
Email: keyan.lai@ed.ac.uk
Last week: home country effect
The behaviors of EMNCs are deeply embedded in home country institutional environments. e.g. a strong state
the example of Tata Motors & Hero Group
The example of Chinese MNCs
Home country effect may take different forms, but competitive disadvantages associated with country of origin is particularly prominent in the case of EMNCs
This week: why states matter? How to deal with the issue of trust and legitimacy
“[they are] both cooperative and competing, both supportive and conflictual. They operate in a fully dialectical relationship, locked into unified but contradictory roles and positions, neither the one nor the other partner clearly or completely able to dominate” (Gordon, 1988)
Relationships between MNCs and states
Objectives of MNCs
Performance Maximize profits and shareholder value.
Minimize cost base consistent with customer need.
Technology Undertake R&D at locations optimal to the needs of the firm as a whole
Gain access to all necessary technology
High-order function Locate headquarters and other high-order functions to fit optimal pattern of the firm’s overall operations
Responsive- ness Retain flexibility to move profits in optimal manner
Retain flexibility to modify the geographical configuration of the firm’s production network to meet changing conditions
Retain flexibility to use the labour force as required.
Objectives of state
Performance Maximize growth of GDP.
Maximize quantity and quality of employment
opportunities.
Technology Stimulate the development of locally-rooted technology
High-order function Maintain indigenous headquarters.
Attract and retain key operations of MNCs
Responsive- ness Retain power to gain a fair return on local operations of MNCs through taxation policies
Maximize the extent and benefits of local supplier
linkage.
Prevent the closure/scaling down of local MNC operations
Develop a high-skill, high-earning labour force
The state’s policies relating to inward FDI
Entry
Government screening of investment proposals
Exclusion of foreign firms from certain sectors or restriction on the extent of involvement
Restriction on the degree of foreign ownership Finance
Restrictions on the remittance of profits and/or capital
abroad
Level and methods of taxing
profits of foreign firms
Operations
Insistence on involvement of local personnel in managerial positions
Insistence on a certain level of local content in the firm’s activities
Requirements relating to the transfer of technology Incentives
Direct encouragement of foreign investment, e.g.
overseas promotional agencies and investment incentives
The state’s policies relating to outward FDI
Restrictions on export of capital (e.g. exchange control regulations)
Necessity for government approval of overseas investment projects
Policy & capital support and sponsorship
States need firms to generate material wealth and provide jobs for their citizen
Some states view MNCs as extensions of state foreign policy
Home country state and MNCs
MNCs need states to provide the infrastructural basis their continued existence, both physical and social
MNCs look to home-country governments to provide protection abroad
Home-country trade policies can open up access to markets in foreign countries
Why do countries generally welcome foreign investments from MNCs? What are the benefits to have these MNCs operating here?
Quick discussion
The states look to MNCs for investments to provide employment, stimulate economies, and upgrade the industry/nation economically and socially.
Host country state and MNCs
MNCs in need of favourable institutional environments, e.g. market access, preferential policy, etc (the states have the power to exclude or appropriate a particular investment)
The ‘political embeddedness’ (Kilduff & Brass, 2010) of EMNCs in general
Close ties with the state and politicians
The role of the state keenly felt in EMNCs, e.g.
‘International champions’ for new state-supported ‘Multilatinas’ in Latin America (Henart, Sheng, & Carrera, 2017)
Russian Gazprom seen as the ‘powerful arm of Russia in foreign affairs and foreign conflicts’ ( Panibratov, 2012, p.63)
Strong government sponsorship and support in internationalization process of Chinese MNCs (Cui & Jiang, 2012; Hong, Wang & Kafouros, 2015)
EMNCs and home country states
For economically and politically critical industries (e.g. electricity, defense and aerospace, mining, oil and gas)
Legislative protection through creation of framework of laws
Provision with state contracts and orders
Supervision of nationwide programmes and projects
Incentives and subsidies
Promotion of the industries and firms via media and officials
Personal involvement of top government officials
(Panibratov, 2016)
Russian state and Russian MNCs
Creation of national champions has been a crucial strategic public policy in Brazil
Loans from Brazilian Development Bank (BNDES) to prepare large domestic firms for competition and internationalization
A special department at BNDES to fund Brazilian firms’ expansion abroad
Brazilian state and Brazilian MNCs
“the presence of Brazilian firms abroad strengthens the general lines of the country’s foreign policy”
— Brazilian Minister of Foreign Affairs in 2007
(Finchelstein, 2017)
The role of Chinese state in the internationalisation of Huawei & ZTE
Creation of favourable policy environment for science & technology research and development
e.g. China development strategy: ‘Revitalising the Country through Science, Technology, and Education’
e.g. In 2006, China launched its 15-year ‘Medium- to Long-Term Plan for the Development of Science and Technology’, in an effort to make China an ‘innovation-oriented society’ by the year 2020, and a world leader in science and technology by 2050
Policy development
Financing and policy support in R&D research
‘national-banner enterprises’ will be picked by the central government to enjoy financing from the state to work on new technology research
e.g. the Ministry of Information Industry began sponsoring R&D activities for the creation of a domestic 3G standard in the 1990s.
Furthermore, to facilitate knowledge transfer through policy, the government has placed pressure on foreign companies to ensure knowledge transfer occurs
Financial support
Domestic market protection
Objective: to protect domestic firms from the competition of foreign firms, and maximises the market shares of the former, particular of those national champions
e.g. to encourage telecoms operators to purchase equipment made by indigenous manufacturers, in 1996, the Chinese government began to impose tariffs on imported communication equipment, dramatically increasing the market share of local firms from 63.1% in 1995 to 84.8% in 1996, and 94.9% in 1997
Market protection
International market expansion support
national champion firms receive large amounts of support from the government in developing international markets
e.g. senior managers from Huawei and ZTE are often invited to accompany Chinese officials in visiting other developing countries so that they can donate their products to these countries and further develop important business opportunities
e.g. the China Development Bank extended a credit facility of USD 10 billion to help overseas customers buy Huawei’s products.
e.g. a state-owned insurance company has helped Brazil’s biggest telecommunications operator Telemar NorteLeste SA to finance the purchase of Huawei’s equipment
Overseas expansion
Accelerate internationalization of EMNCs, and enable EMNCs to compete with western MNCs
Have created different forms of firm-specific advantages, but at the same time resulted in lack of certain organizational capability, and being incapable of dealing with certain issues such as industrial relations
A major challenge for EMNCs: legitimacy and trust issue
The double-edged effect
Sponsorship and support from the Chinese state government enhance the competitiveness of Chinese firms, it also provokes a negative reaction from politicians and the public in the host countries (Zhang, Zhou and Ebbers, 2011)
Chinese firms are under suspicion that they are not really market- oriented or profit-driven; instead, their business activities are motivated by a political agenda.
Acquisitions by Chinese firms have become a concern for US policymakers and policymakers in other developed countries because Chinese MNCs are believed to acquire companies to ‘pursue non-commercial objectives’, thus imposing costs and risks on the hosting countries (Globerman and Shapiro, 2009)
The double-edge effect
Organizational Identity & National Identity
Describes how members of an organization think about ‘who we are’ (Albert & Whetten,1985).
‘Who are we as an organization?’,
‘What business are we in?’
‘Who do we want to be as an organization?’
An internal and self-descriptive concept, capturing the central, enduring, and distinctive characteristics of an organization
Organizational identity
“Internally, OI can be a potent means of developing and managing the motivation and ‘engagement’ of staff, thereby extracting ‘discretionary effort’ – that is, labor performed beyond the contractual obligation of employees – at no extra cost” (Kenny, et al, 2016:143)
Executives, managers, individual employees are engaged in the construction and formation of OI.
Organizational identity
Chapter 8. Organizational identity: the significance of power and politics. In Pratt, M. G., Schultz, M., Ashforth, B. E., & Ravasi, D. (2016). The Oxford Handbook of Organizational Identity..
National identity as one element of organizational identity (Anteby & Molnár, 2012:521), e.g.
– “We are a German company”; “We are a Chinese firm”, “We are a Russian firm”.
How do MNCs engages in the construction organizational identity by making varying degree of references to the national identity?
National identity
Rising nationalism in India between World War I (1914-1918) and World War II (1939-1945).
Nationalist movement aimed to free the nation from political and economic dependence of ‘British masters’
Siemens & Bayer positioned themselves as “outsiders” to colonialism, a (better) alternative to British rival MNCs
Capitalized on shared anti-British sentiments
“It became increasingly apparent to German MNEs that non-British origin could be cultivated into a political advantage in the context of growing anti- colonial sentiments”. (p.408)
Siemens & Bayer in India
Lubinski, C., & Wadhwani, R. D. (2020). Geopolitical jockeying: Economic nationalism and multinational strategy in historical perspective. Strategic Management Journal, 41(3), 400-421.
A case study of Shein
Based on the Economist article, discuss the issue of organizational identity and national identity in the case of Shein
How do you evaluate Shein’s strategy in dealing its national identity?
What can other EMNCs learn from Shein?
The notion of “national identity Anchoring”
The emergence of a particular identity trajectory, which may be difficult to reverse
Important stakeholders retain a perception of a strong national identity component when evaluating an organization’s identity, despite attempts at downplaying it.
Distancing from national identity?
“Since the very first day of its birth, Huawei has firmly taken as its inescapable responsibility the prosperity of the national industry and the people of the Motherland; without hesitation, it has taken on the historical mission of revitalizing the national industry…without fear Huawei people launched a strong attack on those big foreign companies. This has gone far beyond the simple purpose of securing survival and development for the company, but it represents Huawei people’s national spirit of never giving up, never admitting defeat, fighting bravely, and winning glory for the country.”
(source: Huawei People Newspaper, Issue 37: 4; November 1996)
“We have already helped most people on this planet to connect with each other. We will enable broader connections between people and things in the future. At the best of times, being the enabler of this Better Connected World is the ideal role for Huawei.”
( Source: Huawei People Magazine, Issue 255: 4; January 2015)
“First of all, I don’t know much about the clash between China and the United States. I am not clear about the conflicts between them either.
What we are studying is
how Huawei can survive.”
(Huawei People Newspaper, Issue 349: 3; July 2020)
The heavy reliance on the national identity element has constrained Huawei in its ability to navigate the ensuing geo- political tensions between the US and China
Huawei is unable to distance itself from these struggles but rather is one of the most prominent victims of the ‘trade war’ between the two global superpowers
Strengthening the national identity in the past can anchor this identity element in the eyes of key stakeholders and audiences. As a result, attempts at weakening it are less effective.
Distancing from national identity?
The states, both home country and host country, play important role in internationalization of all MNCs.
While much research discusses the complex relation between host country state and (western) MNCs, home country state seems particularly relevant to EMNCs.
The support and sponsorship of the home country state have double-edge effect on EMNCs, and have important managerial implications for managers, e.g. who are we?
Some conclusions
WEEK 6: SIGNALS, ATTRACTIVENESS AND RECRUITMENT IN EMNCS
Emerging Market MNCs: Internationalisation and HRM (CMSE11380)
Dr. Keyan Lai Office: 2.13
Email: keyan.lai@ed.ac.uk
Home country effect, e.g. competitive disadvantage associated with their country origin
The complex relationship between EMNCs and their home country states, which may lead to problematic relationship between EMNCs and host country states
Legitimacy issue, i.e. pragmatic, moral, and cognitive legitimacy, and legitimation strategies (e.g. CSR and economic, social impacts)
How do these issues translate into a challenge for EMNC in recruitment?
Recap on previous lectures
A survey of 626 German, French and American respondents (including students and working professionals)
In general, EMNCs (i.e. Chinese and Indian firms) have significantly lower organizational attractiveness than European and American MNCs.
Working professionals attribute higher level of attractiveness to European and American MNCs; students with no significant difference
American respondents significantly less attracted to EMNCs, compared to French
(Alkire, 2014)
Some empirical evidence!
The attractiveness of EMNCs differs significantly in terms of industry
Auto-motive, consultancy, banking/insurance are least attractive industries ( the first two most attractive for local German firms!)
Chinese MNCs: IT & electronics, transport & logistics, consumer goods most attractive as employers
Indian MNCs: IT & electronics, media, and consumer goods
Russian MNCs: transport & logistics, consumer goods, engineering
Compensation and job security the most important factors to consider ( compared with career development and work atmosphere for local German firms)
(Holtbrugge & Kreppel, 2015)
Chinese, Indian & Russian firms in Germany
Korean
Chinese vs. US MNCs in Korea
Korean job seekers perceived China’s image significantly lower than the US in terms of economic and technological development
As a result, less attracted to Chinese firms compared to US firm
CSR activities of Chinese firms have strong influence on Korean job seekers’ job-pursuit intentions
CSR provide EMNCs with the opportunity to
– To overcome the image of their country of origin
– To build trust and reliability to increase attractiveness
(Hong & Kim, 2017)
Defined as ‘an amalgamation of transient mental representations of specific aspects of a company as an employer as held by individual constituents’ (Lievens & Slaughter, 2016)
Made up of specific attributes that an individual associates with the organization as a place to work
Employer Image
Functional attributes: job seekers’ association about more tangible attributes that have utilitarian value (e.g. location, pay, career opportunities)
Symbolic attributes: inferences that describes the organization in terms of subjective and intangible attributes (e.g. innovative, prestigious, stylish)
Experiential attributes: actual experiences with the employer through past classifications or recruitment events
Decision making benefits: better recruitment outcomes, e.g.
– People would accept 7% lower pay to work at an organization with a strong image (Cable & Turban, 2003)
Emotional power: good image inferences increase organizational attractiveness of potential applicants, and lead to satisfaction and loyalty of current employees.
Financial benefits: organizations on the Best Companies to Work For list deliver strong financial performance (Fulmer et al 2003)
Outcomes of employer image
A two step process: screening (i.e. compatibility test), followed by choosing (i.e. profitability test).
Screening is based on the evaluation of incompatibility
Whether an object fits their image of what is desired
Whether the object is compatible to his/her values, principles, goals, and the plan to achieve the goals
non-compensatory violation of fit: good aspects do not
compensate for incompatible aspects
Image and job choice
(Held & Bader, 2018)
Applicants’ job choice based on signaling and image theory
(source: Held & Bader, 2018, based on Beach, 1990, 1993, and Spence, 1973)
Sponsorship of university activities
Strategic design of websites
Training recruiters
Use recruitment media that provide personal focus
Has a presence at career fairs and clearly communicates its values
“Dare to be different” by using recruitment media that other organizations are not
Have a strong Facebook, LinkedIn presence
Treat employees well so that they spread positive word-of-mouth information about the company
And others…
A long list of image management strategy
A concept in marketing focusing on the country-of-origin effects on consumers’ perceptions of product quality and purchase intension (e.g. Knight & Calantone, 2000)
Country-of-origin image as a multifaceted construct (e.g. Roth & Diamentopoulos, 2009, Froese, Vo & Garrett, 2010)
Perceptions of product quality
Perceptions of people
Perceptions of economical, political and technological environment
Country-of-origin image
Country-of-origin image significantly influence corporate image (Zhang, et al 2019)
Affective CI
Economic CI
Political CI
Affective CI: “focuses on psychological and ideological characteristics, such as negative sentiments stemmed from political, religious, or ideological conflicts.”
Country-of-origin image
Let’s talk about national security!
Class activity: an experiment
Spencer (1973) defines signals as “those observable characteristics attached to the individual,” e.g. education background
– these observable characteristics inform the employer’s judgment of this individual candidate.
The signals we receive about a person or company influence our perception of the quality of the person or company
Signaling theory
A central idea of signaling theory is concerned with reducing information asymmetry between two parties (Connelly et al., 2011).
One party (the sender) holds information that the other party (the receiver) does not; the first party then decides to send relevant information to the latter
The signal is subject to perception and interpretation by the receiver.
The relationship between signals/signal quality and the interpretation of the signal
Signaling theory
Organizational actions and characteristics, e.g.
Substantive organizational investments, e.g. investing in human capital, product development
Symbolic organizational investments, e.g. advertising, PR, CSR policies
Being state-owned
Information disseminated by the organization, e.g.
Job advertisements, web pages
The behaviours of recruiters
Information disseminated by non-organizational sources, e.g.
Words of mouth
Media
NGOs
Categories of signals
Employers as the sender can influence applicants’ perceptions on organization
Applicants also receive signals the employers do not have control on (e.g. country image, home country institutional voids; industry scandals)
Three signal-based mechanisms that affect organizational attractiveness (Jones et al 2014)
Anticipated pride
Perceived value fit
Expected treatment
Signaling theory & recruitment
Anticipated pride: Affiliation with a particular company partly defines who we are; we feel a sense of pride from being affiliated with a good company (Tajfel & Turner, 1986). It enhances self-esteem and helps us gain social approval and impress others (Highhouse et al., 2007).
Perceived value fit: Person–organization (P–O) fit defined as “the congruence between the norms and values of organizations and values of persons” (Chatman, 1989, p. 339); the greater the value fit we perceive, the more attracted to the organization.
Expected treatment: expectations about how favorably the organization treats its employees and by extension, how favorably they would be treated if they worked there; instrumental inference.
Signal-based mechanisms
Objectives
To test the impact of national security accusations on organizational attractiveness
To advance our understanding of the impact of national security concerns on MNEs and their strategies
Research questions
How do accusations of being a national security threat impact organizational attractiveness?
To what extend does employer branding mitigate these negative impacts?
Our experiments
The hypothetical effects
Anticipated pride:
It perceived as representing the interest of and working as an agent for the home government; status as an independent commercial entity questioned;
Affiliation with companies that work for their home government does not evoke a strong sense of pride;
particularly when their owners (i.e., the state government) are frequently plagued by such accusations as human rights abuse, intellectual property theft, and cyber hacking.
When the firm becomes a security threat…
Perceived value fit
Bad signals regarding what it values and what it might not.
The interest of the home government may come before the responsibility for the local community; the political agenda may be prioritized over business growth and profits; transparency and integrity may be sacrificed for secrecy and corruption
The values represented by the company can be perceived as problematic, and accordingly, the perceived value fit and ultimate attraction to the company are undermined.
When the firm becomes a security threat…
Expected treatment
State ownership and sponsorship amplify the issue of corporate governance and send out a message about who the real boss is.
The issue of participation and inclusion: to what extent can an individual be included in the decision-making process, be able to voice opinions, be able to feel valued, and be able to make career progress within the company?
Job seekers’ intention to join these companies will be reduced, because they may infer that the interests and rights of the government and politicians will be prioritized over those of the employees.
When the firm becomes a security threat…
The hypothetical effects
The market leadership signal
Highly successful companies, partly owing to the support and sponsorship provided by their home government
Cutting-edge technology and products (for example, Huawei is a world leader in 5G technology, and Kaspersky is a long-time market leader in security software); on the Fortune 500 list
Prestigious organizations: “organization[s] that [seem] superior to other organizations in the industry, and [may be] considered impressive by others” (Highhouse et al., 2007, p. 142).
Hypothesis: the market leadership signal can be applied to induce pride anticipation
The signals to be sent
The social responsibility signal
An organization that sends out signals of being respectable and honorable will attract job seekers because people want to join a respectable and honorable organization, and associations with such organizations will satisfy job seekers’ need to express their value and to project the image of being a good person with good values (Highhouse et al., 2007).
Is this company a responsible corporate citizen? Does it act ethically? Does it value transparency and integrity?
Hypothesis: the social responsibility signal can induce the value fit perception
The signals to be sent
The learning and growth signals
Technical leadership allows them to provide opportunities for training and learning for employees (Huawei in 5G, Kaspersky in cybersecurity, TikTok in immersive technology )
They tend to experience rapid growth, and with it, uncertainty and change. This also means that growth can be a key benefit of working for these companies.
Hypothesis: learning and growth signals can induce positive treatment expectations
The signals to be sent
Experiment 1
Experiment 2
Employer image is individual’s perception of various aspects of a company as an employer
Varieties of sources send out signals to existing/prospective employees about what it might be like to work with the company.
For EMNCs, employer branding and other HRM activities could send out a positive signal
Some conclusions
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