Factors Affecting the Adoption of High Performance Work Systems in Foreign Subsidiaries: an Empirical Investigation in Hong Kong

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Factors Affecting the Adoption of High Performance Work Systems in Foreign Subsidiaries: An empirical investigation in Hong Kong

FACTORS AFFECTING THE ADOPTION OF HIGH PERFORMANCE WORK SYSTEMS IN FOREIGN SUBSIDIARIES: AN EMPIRICAL INVESTIGATION IN HONG KONG Ngo, Hang-Yue The Chinese University of Hong Kong Sharon Foley Tsinghua University, China

ABSTRACT High performance work systems (HPWS) have been increasingly used in multinational corporations (MNCs). Drawing upon institutional theory and alignment theory, we examine the determinants of the adoption of HPWS in foreign subsidiaries of MNCs. Our data were collected via a survey of HR directors/managers of MNCs operating in Hong Kong. The results of regression analysis show that the use of HPWS in foreign subsidiaries is related to headquarters’ control, strategic HRM orientation, and adaptability of HRM, but not related to mimetic HRM orientation. We further find that strategic HRM orientation and adaptability of HRM has a significant interaction effect on the adoption of HPWS.

INTRODUCTION Over the past two decades, high performance work systems (HPWS) have attracted a substantial amount of attention from management and organisational researchers. HPWS refers to a set of coherent human resource (HR) practices that can enhance firm performance (Delaney & Huselid, 1996; Huselid, 1995; Wright, Garner, Moynihan & Allen, 2005; Youndt, Snell, Dean & Lepak, 1996). As a potential source of competitive advantage for firms (Becker & Huselid, 1998), HPWS has been widely employed by many 2011 IJES VOL 19 NO 2 Page 1

Ngo, Hang-Yue and Sharon Foley

organisations in Western countries (Godard & Delaney, 2000; Kaman, McCarthy, Gulbro & Tucker, 2001). In recent years, it has become a standard system in the area of human resource management (HRM), and has diffused beyond national boundaries (Bae, Chen, Wan, Lawler & Walumbwa, 2003; Bjorkman, Fey & Park,2007; Guthrie, Flood, Liu & MacCuitain, 2009; Lawler, Chen & Bae, 2000). As observed by some researchers, an increasing number of multinational corporations (MNCs) have adopted HPWS in their overseas subsidiaries (Chen, Lawler & Bae, 2005; Gunnigle, Murphy, Cleveland, Heraty & Morley, 2002; Marchington & Grugulis, 2000; Yalabik, Chen, Lawler & Kim, 2008). However, we know little about what factors affect subsidiaries’ use of HPWS (Bjorkman et al, 2007; Foley, Ngo & Loi, 2011). This knowledge is useful for MNCs in designing an appropriate HRM system in their foreign subsidiaries. To fill the above research gap, in this study we investigate the determinants of HPWS adoption in foreign subsidiaries of MNCs. MNCs have been viewed as major vehicles for the dissemination or transfer of ‘best management practices’ (Bartlett & Ghoshal, 1989; Edwards & Ferner, 2005; Rubery & Grimshaw, 2003), and they play a salient role in the global diffusion of international standards. Operating in a dynamic environment, MNCs are subject to the influences of various cultural, institutional, organisational, and competitive forces (Bartlett & Ghoshal, 1989; Geppert & Matten, 2006). Drawing on institutional theory and alignment theory, we evaluate the impact of several internal and external factors on the use of HPWS in foreign subsidiaries. These factors pertain to mimetic isomorphism, relationship with headquarters, strategic orientation, and adaptability to the dynamic environment. By formulating and testing several hypotheses that link the above factors to the adoption of HPWS in foreign subsidiaries, we attempt to contribute to international HRM literature. To control the possible influences of legal, socio-cultural, and institutional factors across different countries, our study focuses on foreign subsidiaries of MNCs operating in a 2011 IJES VOL 19 NO 2 Page 2

Factors Affecting the Adoption of High Performance Work Systems in Foreign Subsidiaries: An empirical investigation in Hong Kong

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