International human resource management is about the worldwide or global management of human resources. (Schuler et al., 2009). It can be referred to as the activities undertaken by an organization to effectively utilize its human resources. (Dowling, et al. 2008). Many organisations now compete on a worldwide scale. The vast range of technological developments available to business in modern times has changed the interface of business. As we move towards a more knowledge-based global economy, the importance on human resources has increased significantly in order to survive in an unstable economy. To operate in an international environment, human resources departments engage in a number of activities that would not be necessary in a domestic environment such as international taxation, relocation, administration services for expatriates; host government relations and translation services (Dowling et al. 2009). Human resources are the largest element of operating costs for a company, which is why many multinational companies operate in low-wage economies.
Until recently, the core focus of international human resource management (IHRM) was how to best manage human resources in the multinational enterprise, however it now incorporates two more perspectives; cross-cultural human resource management (HRM) and comparative HRM. HRM organisational processes vary from country to country. Even managers within the same firm will have different approaches to managing their own teams. Each unit within a company will function in a different way to other units. Countries have their own approaches to how HRM operates within cultural, institutional or regional specifics which is the very reason why IHRM is much more difficult than the HRM in one country considering most aspects of management are local. Today, as organisations become globalised, there are increasing challenges and opportunities presented to IHRM, with developments such as the global financial crisis, growth from emerging markets (e.g. China, India), foreign investment, cross-border alliances and the increasing trend in business to outsource to new economies. As organisations become globalised, there is an increasing challenge to use expatriates on international assignments to complete critical tasks (Brewster, 1998).
While operating during times of growth, multinational companies (MNCs) have an educational advantage as they are tied to systems in multiple nations. They therefore experience diversity in business practices, which increases their organisational scope and knowledge (Edwards, as cited by Sparrow 2009). MNCs are able to observe practices in operation in one country and transfer new knowledge to others. They are able to make predictions based on product margins from other areas. There is a hierarchy of economies according to their economic performance, with the country at the top viewed as the model that firms around the globe try to imitate and can be referred to as the concept of ‘dominance effects’ (Smith & Meiksins, 1995 as cited by Sparrow 2009).
During the 1980s, many MNCs looked to Japan as a strong economy, which led to interest among companies from other nations to emulate practices of the many successful companies in Japan. MNCs from less economically dominant areas of the globe are likely to search for new operating models as they move towards internationalising. Less dominant countries are open to change and are eager to learn the ways of dominant economies. China has recently undergone dramatic economic reform and is eager to learn from economically dominant countries to catch up with Western enterprise. A study of six firms was conducted which revealed that the UK is used as a base for the accumulation of knowledge concerning international management and human resource management. In all six companies, Chinese managers were given assignments in Britain to expose them to Western managerial operations (Zhang et al. 2006 as...
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