expatriate and repatriate policies practiced in MNE’s. Describe some expatriate and repatriate policies practiced in MNEs. As a consultant provide -

expatriate and repatriate policies practiced in MNE’s.
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6. book info- Peter J Dowling, Marion Festing, Allen Engle – International Human Resource Management-Cengage Learning (2013)

InternatIonal Human
resource management
Peter. J. Dowling, Marion Festing anD allen D. engle, sr.

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SIXTH EDITION

INTERNATIONAL
HUMAN RESOURCE
MANAGEMENT
SIXTH EDITION

PETER J. DOWLING
MARION FESTING

ALLEN D. ENGLE, SR.

International Human Resource
Management, 6th Edition

Peter J. Dowling, Marion Festing and
Allen D. Engle, Sr.

Publishing Director: Linden Harris

Publisher: Andrew Ashwin

Development Editor: Charlotte Green

Production Editor: Alison Cooke

Production Controller: Eyvett Davis

Marketing Manager: Amanda Cheung

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ISBN: 978-1-4080-3209-1

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Printed in China by RR Donnelley
1 2 3 4 5 6 7 8 9 10 15 14 13

BRIEF CONTENTS

Preface viii
Acknowledgements x
About the Authors xii
Walk-Through Tour xiv

Chapter 1 Introduction 1
Chapter 2 The Cultural Context of IHRM 22
Chapter 3 The Organizational Context 46
Chapter 4 IHRM in Cross-Border Mergers & Acquisitions, International Alliances and

SMEs 82
Chapter 5 Sourcing Human Resources for Global Markets Staffing, Recruitment and

Selection 109
Chapter 6 International Performance Management 150
Chapter 7 International Training, Development and Careers 174
Chapter 8 International Compensation 215
Chapter 9 International Industrial Relations and The Global Institutional Context 241
Chapter 10 IHRM Trends and Future Challenges 268
Case 1 Spanning the Globe 282
Case 2 Quality Compliance at the Hawthorn Arms 287
Case 3 Wolfgangs Balancing Act: Rewarding Healthcare Executives in a Dispersed

Yet Integrated Firm 289
Case 4 Strategic Forecasts and Staffing Formulation: Executive and Managerial

Planning for Bosch-Kazakhstan 298
Case 5 Local and International? Managing Complex Employment Expectations 305
Case 6 Expatriate Compensation at Robert Bosch GmbH: Coping With Modern

Mobility Challenges 312
Case 7 Balancing Values An Indian Perspective on Corporate Values from

Scandinavia 319
Case 8 Just Another Move to China? The Impact of International Assignments on

Expatriate Families 328

Glossary 334

Index 342

iii

CONTENTS

Preface viii
Acknowledgements x
About the Authors xii
Walk-Through Tour xiv

Chapter 1 Introduction 1

Chapter Objectives 1

Scope of the Book 2

Defining International HRM 2

Differences between Domestic and International HRM 4

Variables that Moderate Differences between Domestic and International HRM 8

The Cultural Environment 9

Industry Type 11

Extent of Reliance of the Multinational on its Home-Country Domestic Market 12

Attitudes of Senior Management to International Operations 14

Applying a Strategic View of IHRM 15

The Changing Context of IHRM 17

Summary 17

Discussion Questions 19

Further Reading 279

Notes and References 279

Case 1 Spanning the Globe 282

Case 2 Quality Compliance at the Hawthorn Arms 287

Case 3 Wolfgangs Balancing Act: Rewarding Healthcare Executives in a Dispersed
Yet Integrated Firm 289

Case 4 Strategic Forecasts and Staffing Formulation: Executive and Managerial
Planning for Bosch-Kazakhstan 298

Case 5 Local and International? Managing Complex Employment Expectations 305

Case 6 Expatriate Compensation at Robert Bosch GmbH: Coping With Modern
Mobility Challenges 312

Case 7 Balancing Values An Indian Perspective on Corporate Values from
Scandinavia 319

Case 8 Just Another Move to China? The Impact of International Assignments on
Expatriate Families 328

Glossary 334

Index 342

CONTENTS vii

PREFACE

According to the 2012 World Investment Report issued by the United Nations the foreign affiliates of
MNEs employed an estimated 69 million workers, who generated $28 trillion in sales and $7 trillion in
value-added, some 9% up from 2010. In 1990, when the first edition of this textbook was published, a
total of 24 million workers were employed. This is merely one of many metrics that demonstrate the extent
of the globalization of business. With this increase in scale, the role of human resource management in sus-
taining this increase in international business activity is a central theme of this Sixth Edition of our text-
book. In writing this new edition we have responded to feedback from users of previous editions and
reorganized the format for the Sixth Edition into 10 chapters instead of 12 chapters. In carefully revising
and updating the chapter Endnotes for this new edition we have been very careful to avoid the common
trap of multiple editions simply piling on more and more endnotes and leaving the reader to wade
through the growing lists. By carefully culling Endnotes and the Further Reading sections at the end of each
chapter our intention is to provide a reader just being introduced to the fascinating topic of HRM in a mul-
tinational context with a reasonable set of critical references as a starting point for their studies. At the same
time, our more advanced readers will be able to evaluate our assessment of the most recent significant cita-
tions along with what we consider classic empirical or conceptual articles and books.

The more significant changes to the Sixth Edition include the following:

l In response to feedback from teaching and professional colleagues, we have included a new chapter (Chapter 2)
on The Cultural Context of IHRM. We decided to place this new chapter early in the book so that we now cover
Culture in Chapter 2 and the Organizational Context in Chapter 3.

l Chapter 4 is now titled IHRM in Cross-Border Mergers & Acquisitions, International Alliances and SMEs to
provide specific contextual information on these important developments in international management.

l Chapter 6 International Performance Management has been moved from later in the book to earlier to better
reflect the importance of Performance Management in the IHRM process.

l Chapter 7 International Training, Development and Careers has been moved from later in the book to earlier to
better fit with Chapter 6. The important issue of career planning has also been moved to this chapter to better fit
with contemporary IHR practice to link career development more systematically with training and development.

l Chapter 9 International Industrial Relations and the Global Institutional Context has been extensively revised and
updated and replaces two (Chapters 9 and 10) in the previous edition.

Several of the IHRM in Action cases embedded throughout the chapters have been replaced or significantly
updated. These changes will help students grasp the principles and models in the chapter and better apply
these ideas to a range of settings or contexts. The eight in-depth cases at the end of the text have been writ-
ten by the co-authors or solicited from global experts to provide a range of in-depth applications for all of
the major functional areas of IHRM. Extensive teaching notes are provided for adopters of the text. Long
time users of the text will find a more systematic and extensive set of cases, but hopefully our loyal adopters
will still find some of their favorite cases remain as well. Our feedback on these end-of-text cases was out-
standingly positive in the fifth Edition and we feel this new edition builds on that strength.

viii

As in previous editions, the challenge of this Sixth Edition has been to organize the complexities particu-
lar to HRM activities in MNEs in such a way that provides teachers (of both undergraduate and graduate
students) real choice as to how they will present the material. We have tried to find a balance that is mean-
ingful and appropriate to the varying cultures represented by potential adopters and readers, and across
educational traditions, institutions and forms, while accurately capturing the compelling realities facing
HRM professionals in MNEs. As always, we welcome your comments and suggestions for improvement in
this task.

The author team remains an excellent example of collaborative work (across a significant number of
time zones) in the 21st century with tri-continental representation from the Asia Pacific, Europe and North
America.

PREFACE ix

ACKNOWLEDGEMENTS

First we would like to thank the scores of academics and practitioners who have come up to us at conferen-
ces and workshops, as well as communications by emails sent over the last four years, sharing with us their
comments and suggestions. Many of the improvements to this new edition of the book outlined above are
the direct result of these conversations. The tricky task of balancing the need for continuity and meeting
expectations for an enduring and highly successful title with the need to update and revise materials in
what is still a very young and dynamic academic area of study is made easier by the support of our peers
and colleagues around the world. We thank you for your patience, ongoing interest in and commitment to
our book.

As with previous editions, we have received a great deal of assistance from numerous colleagues in vari-
ous educational institutions and organizations across the globe. Particular thanks go to the following col-
leagues for their assistance with this edition of the book:

Ruth Alas; Estonian Business School

John Boudreau; University of Southern California

Helen De Cieri; Monash University

Barry Gerhart; University of Wisconsin-Madison

Wolfgang Mayrhofer; Vienna University of Economics and Business

Mark Mendenhall; University of Tennessee-Chattanooga

Molly Pepper; Gonzaga University

Jozsef Poor; Szent Istvan University Godollo, Hungary

Susanne Royer; University of Flensburg

Hugh Scullion; National University of Ireland, Galway

Gunter Stahl; Vienna University of Economics and Business

Shuming Zhao; Nanjing University

Cherrie Zhu; Monash University

Particular thanks go to Maike Andresen, Manfred Froehlecke, Martine Cardel Gertsen, Yvonne McNulty,
Ihar Sahakiants and Mette Zlner for their case contributions.

We also gratefully acknowledge the support of the following institutions:

LA TROBE UNIVERSITY

Peter Dowling thanks Leigh Drake, Executive Dean of the Faculty of Business, Economics and Law at La
Trobe University, Tim Majoribanks, Head of the Department of Management and his colleagues in the
HRM and International Business group for providing a supportive environment for writing and research.

ESCP EUROPE, BERLIN CAMPUS

Marion Festing thanks the Dean of ESCP-Europe, Professor Pascal Morand and her colleagues for provid-
ing a supportive environment for writing and research. Special thanks go to the team of the Chair of
Human Resource Management and Intercultural Leadership for outstanding support.

EASTERN KENTUCKY UNIVERSITY

Allen Engle thanks the EKU Foundation Board as well as Robert Rogow, Dean of the College of Business
and Technology for their ongoing financial support of research and travel. He would also like to acknowl-
edge the longstanding technical and creative help of Ron Yoder and Florencia Tosiani.

The assistance from staff at Cengage Learning UK has been greatly appreciated. In particular, we thank
our Publishing Editor, Andrew Ashwin, for his ongoing assistance and advice with this edition and
Charlotte Green for her work on the production of the book.

The Publisher would like to thank the following academics who supplied feedback on the original pro-
posal and during the writing process:

Elaine Farndale; Tilburg University

Rosmini Omar; University Teknologi Malaysia

Nancy Long; San Jose State University

Peter Mclean; University of Wollongong NSW

Jay Leighton; Curtin University of Technology

Anne-Marie Francesco; Hong Kong Baptist University

Alan Burton-Jones; Bond University

Finally, our personal thanks to the following individuals for their understanding, support and encourage-
ment throughout the process of completing this Sixth Edition:

Fiona Dowling

Christian Daubenspeck, Janik and Annika

Fred and Mary Engle, and Elizabeth Hoffman Engle

Peter J. Dowling,
Melbourne

Marion Festing,
Berlin

Allen D. Engle, Sr, Richmond,
Kentucky

ACKNOWLEDGEMENTS xi

ABOUT THE AUTHORS

PETER J. DOWLING (PhD, The
Flinders University of South Australia) is
Professor of International Management &
Strategy at La Trobe University, Mel-
bourne, Australia. Previous academic
appointments include The University of
Melbourne, Monash University, the Uni-
versity of Tasmania and Victoria University
of Wellington. He has also held visiting
appointments in the United States at Cor-
nell University and Michigan State Univer-
sity and in Germany at the University of
Paderborn and the University of Bayreuth.
He has co-authored a number of books

including Strategic Management: Competitiveness and Globalization (Pacific Rim 3rd Ed.) and Human
Resource Management in Australia (2nd Ed) and written or co-authored over 70 journal articles and book
chapters. He serves on the editorial boards of International Journal of Human Resource Management,
Journal of World Business, Management International Review, Journal of International Management,
Thunderbird International Business Review, Asia Pacific Journal of Human Resources and ZfP-German
Journal of Research in Human Resource Management Research.

Peter is currently President of the Australia & New Zealand International Business Academy, a Life Fel-
low of the Australian Human Resources Institute and a Fellow of the Australian & New Zealand Academy
of Management. Former roles include past President of the Australian & New Zealand Academy of Man-
agement, past President of the International Federation of Scholarly Associations of Management and
Founding Editor of Asia Pacific Journal of Human Resources.

MARION FESTING (PhD, University of Paderborn) is Professor of Human Resource Management
and Intercultural Leadership at ESCP Europe and Rector of the Berlin Campus of this business school. Pre-
vious appointments include the University of Paderborn, Germany. Marion has gained educational,
research and work experience in France, Australia, Tunisia, Taiwan and the USA. She has co-authored and
edited a number of books including a monograph on Strategic International Human Resource Management
(Strategisches Internationales Personalmanagement Second Edition) and a co-authored text on Interna-
tional Human Resource Management (Internationales Personalmanagement Third Edition). Marion has
also written or co-authored over 90 book chapters and journal articles and published in international jour-
nals such as Academy of Management Perspectives, Human Resource Management Review, Thunderbird
International Business Review, Economic and Industrial Demography, European Management Journal,
European Journal of International Management, Journal for East European Management Studies and
International Journal of Globalization and Small Business.

xii

Marion is the Co-Editor of ZfP-German Journal of Research in Human Resource Management and
serves on the editorial boards of International Journal of Human Resource Management, Career
Development International, International Journal of Globalization and Small Business and Zeitschrift fur
Management. She was co-organizer of the sixth conference on International Human Resource Management
in Paderborn in 1998, and co-chair of the various IHRM tracks at the International Federation of Scholarly
Associations of Management (IFSAM) conferences including in Limerick in 2012. Her current research
interests focus on transnational HRM strategies, global performance management, global careers and
global compensation.

ALLEN D. ENGLE, SR. (DBA, University of Kentucky) is a Professor of Management in the
College of Business and Technology at Eastern Kentucky University. He is a national and regional profes-
sional member of World at Work (formerly the American Compensation Association) and of the Society
for Human Resource Management and a long time member of the US Academy of Management. While at
Eastern, he has taught courses in management (undergraduate and graduate), a number of areas within
human resource administration, organizational behavior, organizational theory and international manage-
ment (undergraduate and graduate). Allen holds a three-year appointment as Visiting Professor at ESCP-
Europe in Berlin. He has been Visiting Lecturer at the FHS Hochschule Fur Technik, Wirtschaft und
Soziale Arbeit, St Gallen in Switzerland and Visiting Professor of International Management at the Univer-
sity of Pecs in Hungary.

His research interests are in the topic areas of compensation theory and practices, global performance
management, leadership and organizational change, job analysis, managerial competencies and organiza-
tional design, particularly as they impact on multinational firms. He has published in regional, national
and international academic journals, presenting academic papers on many of the topic areas presented
above at conferences in the USA, Australia, Canada, Estonia, France, Germany, Hungary, Ireland, Italy,
Slovenia, Spain and the United Kingdom. Allen has consulted for regional firms and presented professional
seminars in the areas of performance appraisal systems, executive team building, strategically responsive
compensation systems, intercultural management issues and organizational change.

ABOUT THE AUTHORS xiii

WALK THROUGH TOUR

Mode of operation abroad
When addressing the mode of operation, it is helpful to examine this from the level of the local
affiliate. Thus, we turn to firm-endogenous factors to determine the balance between global
standardization and localization. Later in the chapter we will discuss the various modes of for-
eign operations and their associated HRM practices. A study by Buckley et al.36 provides two
examples of how the mode of operation either inhibits or facilitates work standardization. In
late 1978, the Chinese government announced an open-door policy and commenced economic
reforms aimed at moving the country from a centrally planned to a market economy. Western
firms that entered China early were more or less forced to enter into joint ventures with state-
owned enterprises (SOEs), whereas those entering later have been able to establish wholly
owned subsidiaries (WOSs).

One case in the Buckley et al. study is Shanghai Bell a joint venture formed in 1983 between
a Belgian telecommunications firm (now Alcatel Bell), the Belgian government and the Chinese
Postal and Telecommunications Industries Corporation (PTIC). There was a gradual transfer of
relevant technology by the Belgian firm, with a long-term reliance on Belgian expatriates. The
Belgian firm had limited control over the Chinese employees in the joint venture and was con-
strained by its partners expectations and differing goals.

The second case researched was much different. The US telecommunications firm, Motorola,
established a wholly owned operation in Tianjin, China, in 1992. Changing conditions in China
meant that Motorola could effectively build a transplant factory: importing production equip-
ment, organizational processes and practices from either the parent or other subsidiaries in its
global network. This enabled Motorola to integrate the Chinese operation into the broader cor-
porate network and to localize management. These have been supported by HRM initiatives
such as a special management training program (China Accelerated Management Program
CAMP)37, English language training and transfer of Chinese employees into the US operations.

TABLE 3.1 Examples of the impact of the cultural and institutional context on HRM practices

HRM practices Impact of the institutional context

Recruitment and selection Education system
The reputation of educational institutions such as public and private uni-
versities varies in different countries. This is reflected in the recruiting
processes (i.e., HR marketing) and selection criteria of the firms in those
countries.

Training and development Education system
Education systems differ between different countries (existence of a dual
vocational training system, quality and reputation of higher education
institutions). This has an effect on the training needs perceived and ful-
filled by MNEs.

Compensation Legislation and industrial relations
Legislation such as the regulation of minimum wages or respective union
agreements with respect to compensation have an impact on the firms
compensation choices with Respect to pay mix and pay level.

Task distribution Legislation and norms
Legislations and respective norms Support gender-based division of
labor to a differing extent in different countries. While in some countries
the percentage of female managers is relatively high, in other countries it
is not common that women work at all.

54 CHAPTER 3 THE ORGANIZATIONAL CONTEXT

Tables help to order significant data and trends.

CHAPTER 1
INTRODUCTION

Chapter Objectives

In this introductory chapter, we establish the scope of the book. We:

l Define key terms in international human resource management (IHRM) and consider several
definitions of IHRM.

l Introduce the historically significant issue of expatriate assignment management and review the
evolution of these assignments to reflect the increasing diversity with regard to what constitutes
international work and the type and length of international assignments.

l Outline the differences between domestic and international human resource management, and
detail a model that summarizes the variables that moderate these differences.

l Present the complexity of IHRM, the increasing potential for challenges to existing IHRM practices
and current models, and an increasing awareness of the wide number of choices within IHRM
practices due to increased transparency and faster and more detailed diffusion of these practices
across organizational units and firms.

Chapter Objectives appear at the start of every
chapter and help you monitor your understanding and
progress through the chapter.

THE CULTURAL ENVIRONMENT

In Chapter 2, The Cultural Context of IHRM, we cover the concept of culture in considerable
detail, so our comments in this introductory chapter are necessarily brief. There are many defini-
tions of culture, but the term is usually used to describe a shaping process over time. This proc-
ess generates relative stability, reflecting a shared knowledge structure that attenuates (i.e.
reduces) variability in values, behavioral norms and patterns of behaviour.18 An important
characteristic of culture is that it is so subtle a process that one is not always conscious of its
relationship to values, attitudes and behaviours. One usually has to be confronted with a differ-
ent culture in order to fully appreciate this effect. Anyone traveling abroad, either as a tourist or
on business, experiences situations that demonstrate cultural differences in language, food,
dress, hygiene and attitude to time. While the traveller can perceive these differences as novel,
even enjoyable, for people required to live and work in a new country, such differences can
prove difficult. They may experience culture shock a phenomenon experienced by people who
move across cultures. The new environment requires many adjustments in a relatively short
period of time, challenging peoples frames of reference to such an extent that their sense of
self, especially in terms of nationality, comes into question. People, in effect, experience a shock
reaction to new cultural experiences that cause psychological disorientation because they mis-
understand or do not recognize important cues. Culture shock can lead to negative feelings
about the host country and its people and a longing to return home.19

Because international business involves the interaction and movement of people across
national boundaries, an appreciation of cultural differences and when these differences are im-
portant is essential. Research into these aspects has assisted in furthering our understanding of
the cultural environment as an important variable that moderates differences between domestic
and international HRM. However, while cross-cultural and comparative research attempts to
explore and explain similarities and differences, there are problems associated with such
research. A major problem is that there is little agreement on either an exact definition of culture
or on the operationalization of this concept. For many researchers, culture has become an

FIGURE 1.3 A model of the variables that moderate differences between domestic and international HRM

Complexity involved in
operating in different

countries and employing
different national

categories of employees

Attitudes of
senior management

Extent of reliance of
the multinational on

its home-country
domestic market

The industry
(or industries) within

which the multinational
is primarily involved

The cultural
environment

Domestic and
international

activities of the
HRM function

Source: P. J. Dowling, Completing the Puzzle: Issues in the Development of the Field of International Human Resource
Management, (mir) Management International Review, Special Issue No. 3/99 (1999), p. 31. Reproduced with kind
permission from VS Verlag Fur Sozialwissenschaften.

CHAPTER 1 INTRODUCTION 9

Figures give a visual representation of key concepts or
data.

In principle, performance appraisal systems are designed carefully and often presumed to be static.
Valid reasons exist for maintaining standard, traditionally used appraisals (e.g., when the system has
been tested, has identified baselines, and reduces future development costs). These reasons are valid
as long as the context of the performance does not change. In the expatriate setting, however, the
performance context does change, and sometimes it changes dramatically. Given a global context,
previous testing and established baselines grounded in domestic situations can become meaningless.

IHRM in Action Case 6.1
A rainy expatriate performance appraisal

Richard Hoffman, a Quebecois Chemical Engineer working for a Canadian-based energy firm, was given a three-year ex-

patriate assignment in Venezuela as a technical liaison and environmental protection project manager. His local project

supervisor was Jean, a French engineer who had lived in French Guiana and then Venezuela for over 20 years. Richard

thought that as a Francophone from Quebec, he and Jean would be able to build a quick working relationship. Rich sent

Jean an early email (in French, and not the usual corporate English) containing what he thought of as the five most signifi-

cant goals associated with his assignment similar to the management by objectives section of the more or less standard

performance appraisal forms he had filled out for years during earlier assignments in Edmonton, Toronto and at corporate

headquarters in Montreal. After several months with no r

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