Introduction
The globe has changed dramatically as a result of globalization. Growth in the number of TNCs and their scale may be attributed to two factors: increased international competitiveness and more prospects for foreign investment. Developing business strategies in tandem with human resource management is essential to gaining a competitive edge. Organizations that are considering relocating their workforce to another country or area across the globe should consult with an expert in IHRM (International Human Resource Management) to assess the benefits and risks of doing so. Consistent human resource procedures are needed to allow the successful execution of business strategy by firms. In TNCs, one of the most crucial challenges for the practice of IHRM is how to manage the conflict between global integration and local response. Studies of multinational firms’ worldwide human resource management tactics and strategies often make use of the concepts of local receptiveness and global integration.
Integration and Responsiveness in the Context of IHRM
Global integration is the degree to which a business function of an MNE can be controlled and coordinated across borders. Control means making sure that the activities of subsidiaries match up with what the corporate center wants, while coordination means connecting units in different places. G.I. is operationalized in two ways: the integration methods and the results. It is defined as “the degree of efficacy in general of the use of integration modes” in terms of results when it comes to global coordination and control (Brewster, 2007). One of the most general definitions has been that HRM is a contested area with competing soft and harsh approaches. The gentle approach to human resource management is often connected with the Harvard Business School, namely the publications of Michael Beer and associates. The soft school stresses the significance of aligning H.R. policies with corporate strategy and the role of people as a source of competitive advantage via their dedication, flexibility, and quality. It emphasizes establishing employee loyalty by implementing a cohesive set of HRM rules. The notion of human development, which is key to soft HRM, is reminiscent of ‘all-American’ incentive theories.
The goal of multinational corporations, often known as MNEs, is to establish integration and control among their internationally scattered units while at the same time adhering to the specific local regulations of each host nation. This duality challenge in MNEs, which may be described as the simultaneous pursuit and accomplishment of integration and responsiveness while working across various local contexts, has been recognized as a fundamental strategic difficulty that an MNE has to address to be successful (Chung, 2018). MNEs are increasingly depending on concepts such as local responsiveness and global integration (L.R.) to record and evaluate the strategic choices in light of this concern. Furthermore, conceptual frameworks were adopted in human resource management (HRM) to study the global HRM strategies and practices employed by multinational organizations.
When attempting to define the environmental difficulties that a multinational firm is confronted with, local responsiveness and global integration were developed. As a framework for examining diverse international business strategies pursued by MNEs, the principles have dominated international business research. By adding the word ‘forces’ to the words, the writers were able to identify and categorize the environmental pressures that result in the comprehensive management approaches (Nkomo, 2011). The relevance of multinational consumers, the significance of multinational rivals, the intensity of investment and technology, the drive to reduce costs, universal customer requirements, and the availability of raw materials and energy are the elements that are associated with the pressures for G.I. As shown by these elements, the notion of G.I. focuses primarily on harnessing the advantages of size and scope across several units of an MNE.
In light of shifting geopolitical dynamics, multinational corporations’ political roles and the ethical position in their HRM practices are under scrutiny. The goal is to build an ethical research agenda for international human resource management (HRM). A worldwide HRM ethical research agenda will be developed (Chung, 2018). To provide a theoretical foundation for this plan, one can look to cosmopolitanism and differentiate between three primary perspectives: the social, the political, and the cultural. These viewpoints indicate a different understanding of the self–other relationship in the global environment. The ethical implications for multinational corporations, the study goal, methodological suggestions, and inherent limits are all three unique focuses of an ethical research agenda. When each perspective is applied to international human resource management (HRM), its core and ethical attitude are translated.
Effects of Integration and Responsiveness on how Organizations are Structured
A variety of issues influence an MNC’s IHRM strategy. This list includes the company’s degree of international expertise, how global subsidiaries are established, the technology, and the type of the MNC’s product or goods; host nation legislation and laws may limit IHRM’s ability to operate effectively. For example, in nations with a weak educational system, multinational corporations (MNCs) might be seen as a way to build up local knowledge, which is particularly true in developing countries (Cheng et al., 2021). Subsidiaries in impoverished countries and affluent nations confront radically different IHRM challenges. When there is a well-educated workforce with technical and managerial knowledge, there is a potential to establish polycentric or geocentric IHRM initiatives. As technologically enhanced goods and services become more prevalent, nations in emerging regions must have a more centralized IHRM policy. To be successful in the local market, certain items, such as food, must consider the host nation’s preferences.
Differentiation occurs when companies delegate authority and responsibility to various divisions and departments. Integrating all of a company’s many divisions under a single leader or a single goal is called integration. Both the company’s internal and external components need to be in harmony to integrate the organization successfully. When the company’s priorities are aligned, collaboration and cooperation are promoted across all its departments. Integration occurs when a firm unites its divisions under a single leader or a common goal (Redman and Wilkinson, 2009). The capacity of leaders to guide their teams is shown via the usage of integration and coordination in the workplace. Workers lose trust in their supervisors’ leadership talents when they aren’t on the same page and fail to execute corporate plans. As a result, companies do not have to replace or trash their whole infrastructure in order to keep their software up to date. For example, system integration helps businesses to continue using their existing infrastructure while integrating new technologies, software, and applications.
Effects of Integration and Responsiveness on the Nature of the Parent-Subsidiary Relationship
Regarding strategic orientations at the subsidiary level, the degree of integration and emphasis on localization varies greatly, as subsidiaries are scattered across several host nations. The integration-response (I.R.) paradigm is beneficial for developing and articulating the international strategy a company requires to flourish in an increasingly competitive global market. According to the I.R. framework, subsidiaries evaluate the costs and advantages of reacting to integration and localization before optimizing resource deployment (Jack and Westwood, 2006). Local responsiveness and global integration (I/R) are important international strategy frameworks at the subsidiary and corporate levels. Global integration is driven by economies of scope and size, emphasizing cost reduction via global standardization of production and distribution, which is why it is called global integration. A multinational firm’s subsidiary must adjust its operations to local market conditions to respond to local market conditions. MNEs can prioritize one dimension over the other or pursue both.
To achieve global integration, multinational corporations’ overseas subsidiaries use non-location-bound (NLB) free trade agreements based on home country-specific advantages (CSAs). Because they are based on host CSAs, location-bound FSAs are characterized by their ability to respond to local needs. Because Chinese parent companies lack NLB firm-specific advantages (FSAs), overseas subsidiaries of Chinese MNEs can only play a minor role in integrating these firm resources (Jack and Westwood, 2006). A more common strategy employed by Chinese multinational enterprises is to make acquisitions and mergers with international companies to acquire new strategic resources and assets. As a result of the added challenges these firms face due to being a Chinese MNE subsidiary in a foreign market, local responsiveness is more important than ever.
Because Chinese parent companies do not often have NLB FSAs, their subsidiaries are less likely to depend on the resources available at the parent level to develop a competitive advantage. Overseas subsidiaries are the primary determinant of local response because of their in-depth knowledge of local market circumstances. Foreign subsidiaries are generally responsible for local responsiveness, while H.Q.s are primarily responsible for global integration because of the requirement to internalize existing FSAs (Janssens and Steyaert, 2012). It is now possible for subsidiaries to make strategic decisions on reacting to existing local business orientations, accessible business opportunities, and complementing resources in the host countries to achieve performance objectives. Information about I/R frameworks that are now accessible was mostly developed by Western multinational firms operating in industrialized or developing nations.
Chinese multinationals’ foreign subsidiaries are forced to seek external resources and acquire strategic assets in technology and brands to compete in the local and worldwide markets. This is the case either because their parent companies have flaws or because no FSAs are globally transferable (McSweeney, 2020). Businesses operating in other countries must design a local responsiveness plan that considers distribution methods and sales, regulatory laws, local client needs, and market structures. By interacting with indigenous stakeholders, subsidiaries create learning capacity and new knowledge and build innovation in host countries. According to the “local responsiveness” strategy, local resources may be tapped, and subsidiaries can help them satisfy regulatory requirements and the local market’s demands.
Effects of Integration and Responsiveness on the Flow of Knowledge Across them
Inter-MNE trade in goods and services and large-scale lateral information exchanges are linked to the transnational strategy that blends global size and learning with locally adapted products and processes. This is because the transnational approach combines the advantages of learning and global scale with locally tailored processes and products. In addition, a global strategy allows some subsidiaries to develop as important centers for a particular product or technology (Chung, 2018). As a result, it is related to significant information exchanges between the subsidiaries and headquarters and between the subsidiaries themselves. In spite of this, each subsidiary participates actively in its own specialized local community of practice. When it comes to multinational MNEs, a significant competitive advantage is the capacity to link and use the company’s diverse knowledge bases. Consequently, subsidiaries are beneficiaries of information from the parent and significant contributors to the MNE’s resource base and competitiveness.
A company’s horizontal information sharing is made possible by a matrix structure, organizational competence, and collaborative culture. Networks and matrix structures have been utilized by companies to achieve high levels of local market reaction and coordination throughout the world. The most difficult coordination issues arise when implementing global initiatives. They entail considerable commerce, strategic coordination, and information sharing within and among organizations, not only between headquarters and subsidiaries (Cheng et al., 2021). There is a considerable degree of strategic and operational interdependence among the many MNE companies. A common organizational culture and organizational capabilities that fosters information sharing and collaboration are needed to enable the MNE to perform such sophisticated coordination, according to the proposed requirement for different organizational capabilities and formal structures. There are countries where it is difficult to transfer business concepts and tradeoffs between responsiveness and integration.
Knowledge management is critical when multinational corporations (MNCs) implement a localization plan. Knowledge is disseminated and created centrally throughout the organization via the home replication approach employed by MNEs. The capacity to absorb new information is a prevalent challenge in retaining knowledge. Knowledge-based actors that are entrepreneurially building new value-creating company possibilities need international integration and openness, informality, and heterarchy in associations (Nkomo, 2011). By creating a level playing field where reputation and contribution are more important than a person’s position in authority, knowledge may be sought, produced, and merged more effectively. Multinational corporations’ structural strategies have shifted significantly due to globalization. Global competition has led to the disintegration of value-added activities between MNEs and their suppliers and subcontractors. Because of this mega-trend, MNEs must effectively manage their global supply chain links with local suppliers.
Critical thinking and relevant information
Using IHRM, one may adapt more swiftly to changes and to the demands of decision-making. Using IHRM, one can keep tabs on the budget, screen and track potential hires, manage your workforce, assess training requirements and match your employees’ abilities to open positions, provide feedback, and more. Local responsiveness and global integration are substantially larger concepts than previously considered, particularly in international HRM research, according to a comprehensive literature study. To address the difficulties raised by a thorough literature analysis, empirical study into the different forms of global integration and local responsiveness, as well as the ways in which these modes are implemented by subsidiary and corporate HR players in MNEs, is definitely required.
Conclusion
There must be a greater focus on the strategic demands of an organization in order to fulfill both organizational and personnel objectives. The HR department’s principal issue is how to staff a global corporation. This necessitates workers with a wide range of talents, experiences, and other traits. These practices must be coordinated and controlled by the HRM department in order to represent the company’s worldwide features. Expats and local workers are paid and rewarded differently. It is important to consider the performance of workers when determining compensation and awards. Workers from different cultural backgrounds need to work together to create synergy. The HR department has additional difficulties when workers return to their home countries. Multinational companies should use training and development programs to help their staff grow and improve their ability to work together across different departments and divisions.
References
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