Transfer of Japanese HRM practices to the emerging economy of South Asia:
an empirical study based on Bangladeshi context
Introduction:
The concept of Human Resource Management (HRM) was developed initially in the U.S.
in the 1960s and 1970s (Brewster, 1995). Over a span of 20 years or so, the topic of human
resource management (HRM) has become one of the most documented in the management
literature (Boxall, 1995). And it is the demand of time to examine HRM systems of Asian
countries particularly the important emerging markets which are based in the south continent.
The elements of cohesiveness and collectiveness, such as harmony, information sharing, loyalty,
on-job-training, and teamwork etc. were key dimensions of the ‘new’ HRM paradigm, but had
existed in East Asian organizations for a long time. By combining the individualistic elements of
management practices with East Asian (particularly Japanese) management practices, the HRM
paradigm was expected to improve the competitiveness of organizations and the well-being of
both individuals and organizations (Schuler and Jackson, 1987).
In terms of the research issue on the transfer of human resource practices, Kostova and
Roth (2002) note that in institutional theory a key perspective is that organizations sharing the
same environment will employ similar practices. However, many elements of an institutional
environment, such as culture and legal systems, are often specific to a nation organizational
practices can be expected to vary between the countries like Bangladesh and Japan. Transfer
success could also be affected by the degree of national cultural differences of the home country
and the recipient country, with regard to the practice that is being transferred (Hofstede 1993). In
general it is argued that the success of transfer of a practice from a parent company to a
subsidiary is negatively associated with the cultural distance between the countries of the parent
company and the subsidiary (Taylor et al 1996). Transfer success and adaptation are also
impacted by a range of other factors such as the impact of the social, political, economic and
strategic context, the pressures for global integration versus local responsiveness and the
evolving mentality that the MNE is facing (Bartlett & Ghoshal, 2000).
At present the South and East Asian region produces more goods and services than either
North America or the European Union and this trend is likely to speed up in the years to come
(Stehle, 2004). Moreover, many of the important emerging economies are located in Asia.
Further, they attract enormous amount of foreign direct investment (FDI). It is also predicted that
most new members of the newly affluent nations would come from Asia in the 21st century
(Tan, 2002). Anyway, before we proceed further in this framework we need to understand the
complex context of Asia which makes it difficult to conduct a meaningful cross national HRM
analysis. It is very important to acknowledge that each nation within the region (Eastern region
such as Japan and Southern region properly known as “Asia-Pacific” or subcontinent that
includes, India, Pakistan, Bangladesh and Sri Lanka) has an independent set of socio-economic
components (Abdullah, Boyle and Joham, 2010). These differ from nation to nation, arising
unavoidably from the interplay of social relations unique to themselves. Hence, there is a clear
need to see the management phenomena as part and parcel of the distinctive political, socio-
economic, cultural and institutional system of a country in the region (Hasegawa, 2002;
Morishima, 1995).
Emerging economy of South Asia:
The subcontinent consist populous economies like Bangladesh, India, Pakistan and Sri
Lanka are attracting huge FDI (Parikh, 1999).
Bangladesh, India, Pakistan and Sri Lanka all share the common characteristic of being a
former British colony and all inherited the infrastructure, political and administrative structures
left behind by them after gaining independence (Kelegama, 1998). While the colonial era did
leave South Asia in an advantageous position with respect to administrative structures and
industrialization, there were also negative impacts on the colonies, which warrant recognition.
The most significant effect was the “denial of self-esteem” and also the aggravation of ethnic
conflicts amongst different ethnic groups by the ‘divide and rule’ policy. Still suffering from
these effects at the time of gaining independence, these South Asian nations, subconsciously or
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consciously acted to repudiate the policies of the British rule in order to seek out their own
identities and rebuild their cultures (Parikh, 1999).
During the 1950s and 1960s some South Asian countries such as India and Sri Lanka,
were predicted to be the most rapidly growing economies of the future. These nations were
comparable to and in some cases, exceeded their East Asian counterparts in terms of per capita
GDP and the advent of industrialization (Goyal, 1999). The South Asian nations also had a
significant advantage over East Asia in inheriting the modern legal, administrative and political
structures left over from British Colonial rule. However, fifty years hence these South Asian
economies have not been able to live up to popular expectation and are now burdened with low
rates of growth, political instability, poverty and indebtedness, amongst other stifling attributes
(Parikh, 1999). Like another author said, after independence the bureaucrats performed both
roles, despite their relative inexperience in leadership. This has carried on to the present day and
as a result the roles of policy makers and leaders are not distinct in South Asia but fulfilled by
inexperienced bureaucrats (Bardhan 1998).
The story of the four South Asian economies can be described as a case of a promising
beginning that never quite consolidated into sustained economic success. They were – or at least
some of them were – endowed with initial conditions that were, in many ways, better than those
faced by some of the East Asian economies (Hossain, Islam, and Kibria, 1999). Basically the
subcontinent region consists of a single large country, India, surrounded by a number of medium
and small nations such as Pakistan, Afghanistan, Bangladesh, Nepal, Bhutan, Sri Lanka and
Maldives. While India accounts for about 79 per cent of the region’s GDP, Pakistan contributes
11 per cent, Bangladesh, 6 per cent and Sri Lanka, another 2 per cent (Ahluwalia, 2005). Most of
the South Asian economies have made significant economic progress in the last two decades and
are well on track to becoming major regional or even world economic powerhouses (Abdullah,
Boyle and Joham, 2010).
Bangladesh is strategically located between the emerging markets of South Asia and the
fastest growing markets of Southeast Asia and the ASEAN countries (Abdullah, Boyle and
Joham, 2010). Bangladesh is also one of the pioneers in the region for economic liberalization. It
has adopted the best policies of South Asia to attract Foreign Direct Investment (FDI). Doing
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business in Bangladesh is much easier than most of the developing countries. A recent report
entitled “Doing Business in 2007: Creating Jobs” published jointly by World Bank and IFC
placed Bangladesh in 68th position in terms of ease of doing business among 175 countries
(World Bank, 2007). This places Bangladesh ahead of other countries in the region such as India
ranked 88th and China ranked 128th (Abdullah, Boyle and Joham, 2010).
HRM practices in South Asian Region
The economy of most of the South Asian countries especially; Bangladesh, India and
Pakistan are still based on agriculture while a very small industrial sector employing near about
40 percent of the active labor force (Ernst & Young, 2007). Smallness of industrial sector may
seem to be very affable to the development of a healthy industrial relationship but this could not
be realized even in 21st century mainly because of some historical and traditional cultural
background, some are in fact attributable to the poor administration system and legal system
regarding industrial relations in the country (Ernst & Young, 2007). Although during the British
rule, India, Pakistan and Bangladesh made remarkable headway in terms of industrialization. In
particular, India’s first industrialization experience was in the 1860s when India demonstrated
record levels of growth. By the early 1900s India had large textile and jute manufacturing
industries and, its total exports accounted for 11 per cent of national income (Srinivasan, 1991).
The colonial powers (British rule) did not support the growth of a significant industrial and
efficient HRM practices in the region of the subcontinent (Bangladesh India and Pakistan)
because of their own interest. HRM practices had suffered a relative neglect in most of the South
Asian countries. Largely, this had resulted from a past orientation of management in which HRM
was primarily viewed as the regulation of labor or employees relations (Qureshi, 1986).
Although at present there are some trade unions but most of them are politically biased which
actually hampering the real purpose of trade unions. South Asian trade unions are organized
mostly on the basis of political, regional and even personal loyalties which was encouraged by
the capitalists who often had restored to the policy of buying a fraction of the union or putting up
one of their own to divide the union movement by extending some “under the table favors” to a
group of union leaders (Miah, 2006).
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However, at present many companies have started to reorganize their HRM function on
traditional personnel administration lines. In several large size companies personnel departments
are playing a more active role in areas such as recruitment, selection, training, administrative
functions, welfare activities etc (Shetty and Prasad, 1971). Yet, their key responsibility remains
to be formulating action plans to manage unions, and on how to control employees to minimize
labor costs. Only in exceptional cases, some large business enterprises as well as MNCs have
asked their personnel managers to take up the role of culture builders by bringing management
and employees closer to each other for long-term performance gains. Qureshi, Z. I. (1994)
explained that, many organizations have also started to realize that HR managers must take a
proactive role consistent with two strands of thought in the current literature on HRM. The first
emphasizes the relationships between HRM practices and their short and long run impact on the
employees’ motivation and performance, on the effectiveness of the firm, and also upon the
society as a whole (Scarpello & Ledvinka, 1988).The second underscores the importance of
linking HRM practices and the corporate culture (Ulrich, 1990).
HRM practices in Japan
Among the world’s largest 500 companies, 64 are Japanese. So for the last few decades,
substantial attention has been given to Japan (Collinson, & Wilson, 2006). Though different
scholars have attributed Japan’s economic success to many different factors but it has been
believed that Japan’s secret lies in its approach to management. Human resource management
(HRM) has been argued by many as an important factor in the success of Japanese companies on
world markets when it experienced significant economic growth during the 1980s (Pudelko,
2004). Because of this fact many other nations not only Asian but also Europeans and American
nations tried to learn and apply Japanese style of management to attain success in their countries.
Japanese HRM has attracted a significant degree of attention from the West over the years. With
the relative rise in the economic fortunes of Japanese companies, many have pointed towards the
Japanese style of HRM as a source of competitive advantage (Beechler, 1994).
Human Resource department in Japan play a vital role to harmonize and control the
evolution of all managers and workers, managing their careers according with the company’s
needs (Dalton and Benson, 2002). In opposition to the decentralized nature of most operations in
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Japanese corporations and corporate groups, the function of human resources is done with an
elevated degree of centralization. This duality, operational decentralization- human resources
centralization, constitutes one of the most distinctive characteristics of niponic companies (Miah,
2006). Moreover, decisions regarding recruitment, training and development, succession
planning, career management and retirement are also responsibility of human resource
department to make sure the complete integration of members of the organizational culture.
Given the long-term commitment of Japanese firms to their core employees, it is not
surprising that considerable care is taken when selecting them. The Japanese companies recruit
once a year (Ehsan & Jinnah, 1999). The employees are recruited at the entry level after high
school or graduation. They are recruited not because of some special ability but rather because
they are found to be conducive to the company’s vision (Ornatowski, 1998). The emphasis given
to general ability rather than specific vocational skills during selection reflects a preference on
the part of Japanese employers (Thomas, 1993). People are hired according to their academic
“curriculum” or personal qualities and also because they promise to be loyal employees whose
talents can be adapted to the particular needs of the organization without the vices of previous
experience (Miah, 2006).
Japanese enterprise based unions (kigyo-nai kumiai) have had a positive outlook in
respect to salary negotiations with preference on job security for their members (Selmer, 2001).
These unions assure supportive behavior by their members, in exchange for proper behavior by
companies and with the integration of the firms' training, wage setting, and redundancy systems
(Ornatowski, 1998).
HRM strategies, including an internal labor market, a company philosophy that expresses
concerns for employee needs, and focus on cooperation and teamwork in a unique company
environment (Beecher, 1994). With these three general Japanese HRM strategies, techniques of
open communication, job rotation and internal training, a competitive appraisal system,
importance of group work, consultative decision making, and concerns for employees are
expressed (Dedoussis, 2001).
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It was also noted that Japanese organizations put emphasis on human resources which are
reflected in three HRM strategies, including an internal labor market, a company philosophy that
expresses concerns for employee needs, and focus on cooperation and teamwork in a unique
company environment (Beecher, 1994). Moreover, Japanese firms use careful screening of job
candidates to ensure that the qualifications fit with the value system and corporate culture of the
business firm (Selmer, 2001).
However, Japan's greatest recession since the post-second world war has stressed
relationships among keiretsu members (the cooperation of manufacturers, suppliers and
distributors in closely knit groups) as key firms are forced to end established links with minor
companies (Dedoussis, 2001).The breakdown of the keiretsu system of cross-shareholding and
favored trading among member corporations of a business group has severely harmed the safety
net of supporting the long-term growth strategy of Japanese firms and their ability to protect
employees from downside market risks (Selmer, 2001; Gerlach, 1992). Deregulation is another
force for change and has made Japanese markets more accessible to competitors, both foreign
and domestic. In protected industries such as financial services, distribution and agriculture,
there are only a few firms that are prepared for the challenge of competition and uncertainty
(Lincoln and Nakata, 1997). Changes also have been made in the cultural aspects of Japanese
human resource management. Individual performance and results-oriented performance are
replacing group performance and loyalty due to the new criteria for creating salary levels, with
the principle of ‘freedom and self-responsibility' for the 'independent individual' (Takashi, 2003;
Sanford, 1995). There have also been changes to careers, recruitment and long-term
employment. Formal management and supervisory training is gradually replacing informal on-
the-job training (Selmer, 2001).
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Significance of transferring
Japanese HRM practices in Bangladesh:
Today’s world is becoming more competitive. All want to capture the world market. In
this situation many foreign countries are spreading their business in our country. Japan is one of
them. Many Japanese company are started their business here. Bangladesh can take some
positive HRM practices from them.
As to the reason for transfer, one of the most developed arguments is that competition in
the global economy on the basis of competitive advantages is the incentive for MNCs to transfer
and recombine new knowledge and practices across borders (Bartlett and Ghoshal, 1995;
Kostova, 1999). Hall and Soskice (2001) believe that the existing social system of a nation
generates national comparative advantage. Thus one can expect that MNCs tend to possess those
‘superior’ HR practices that are developed in support of their national comparative advantage
and to transfer them to their subsidiaries worldwide. This can be regarded as a demonstration of
the “country-of-origin” effects (Ferner, 1997; Edwards, 2004). For example, In Japanese HR, all
the decisions are taken by the suggestions of each employee. Each worker and employee can take
part and give suggestion to the decision making process by QC circle (Jun and Muto, 1995: 127).
Also Management and subordinate relationship in Japan is very cordial. This make a good
relationship between senior and junior and it is an outstanding feature of Japanese HR practice.
Conversely, in Bangladesh the decision making process is very centralized (Ehsan, 1999).
Through the transfer of Japanese HR practices such Bangladeshi system may change. Such
practice can help to improve the total condition of the company, individual performance as well
as Bangladeshi economy.
Edwards (2004, p.401-402) distinguishes between two forms of international integration:
standardization and segmentation. He argues that “In those sectors in which MNCs have
developed standardized operations, the transfer of employment practices is likely to be more
attractive to management”; whereas “in MNCs which have segmented their international
operations”, even where the degree of integration is high, “there will be little incentive to transfer
practices across borders”. This is evident in many relevant studies. Examples include Japanese
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MNCs in Asian subsidiaries making low value-added products, which exhibit no transfer of
Japanese employment relations (Dedoussis, 1995).
Another approach explaining the incentives for MNCs to transfer HR practices looks at
political relationships within organizations (Edwards, 2004; Kostova, 1999). Edwards (2004,
p.393) terms this explanation “the political approach”, indicating that “actors in organizations
can be willing to engage in the process of transfer as a way of obtaining legitimacy and to
advance their own interests”. Furthermore, Kostova (1999, p.319) bases this approach on
resource dependence theory and institutional theory. She argues that MNC subsidiaries “may
develop perceptions of dependence on the parent” due to various resources such as technology,
capital, and promotion of the subsidiary staff, etc. She suggests that “under such conditions of
dependency and intra-organizational competition”, a subsidiary will try to implement parent
company’s practices as a way of gaining internal legitimacy.
Transferring the HRM practices is very important. It helps to change and modify our
MNC’s HRM practices. The bureaucracy of our country is hazardous. It is noteworthy that
transfers of HR practices can occur in various directions within the MNC, including transfers
from parent companies to foreign subsidiaries, from subsidiaries to parent companies, or from
one subsidiary to another (Taylor et.al., 1996; Kostova, 1999). However, According to the
culture and values of host country some practices can be taken. Like, Japanese are very sharing.
They love teamwork and want to do this. This is their uniqueness. This is practiced by all the
Japanese companies. But this practice is impossible to some other countries to implement.
Countries that are homogeneous and individual can never practice this (Szulanski 1996, Kostova
& Roth 2002).
So transferring has an effect to the emerging economy in the MNC in Bangladesh. There
is thus a need for closer attention to process dynamics in the design and implementation of
SHRM, given the more likely hybrid of human resource systems and practices in the South Asian
context, and the allied concept of reverse diffusion, where host-country practices may influence
those of the parent company (Miah et al., 2003, 2004, 2005, 2006).
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Theoretical framework
Home country characteristics:
Talking about home country characteristics is indicating the cultural and corporate local
environments of Japan. The first and the most important management system of Japanese
companies is the adaptation of convergence theory. Its management model and in particular its
HRM model has, at least until recently, been frequently depicted as very different from Western-
style management, yet competitive (Vogel, 1979; Ouchi, 1981; Dore 2000; Kono & Clegg,
2001). Deep-rooted and unique cultural and institutional characteristics are usually cited as the
key reasons for these differences (Inohara, 1990; Ballon, 2005; Pudelko, 2006b).
Japan is distinguished as a vertical society, one in which all human relationships are
based on a person’s hierarchical position, status, educational background, seniority, and gender
(Jun and Muto, 1995:126). Japan is nowadays moving very much forward to cross-national
convergence of management policies and practices. Authors following the convergence approach
assume that in management ‘best practices’ can be defined which are universally valid and
applicable, irrespective of national culture or institutional context. Efficiency imperatives and an
increasingly similar global competitive environment are perceived to force Japanese companies
to adopt such best practices in order to increase their competitiveness (Inohara, 1990).
The cultural tradition leans heavily on the work of Geert Hofstede, and in particular the
indices of national cultural dimensions he developed who has shown that there are five
dimensions of culture that influence a wide range of business and market behaviors; these
dimensions appear to be closely related to a variety of economic, political, and social
characteristics that develop in different cultures (Toncar, Alon, and McKee, 1999). Hofstede’s
(1980) research shows that Japanese are moderately high on power distance, moderate on
individualism, very high on uncertainty avoidance and high on masculinity.
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Host country characteristics:
For the case of successfully transferring HRM activates from overseas affiliates to host
country Bangladesh, the characteristics of that host country explicitly plays very important role.
Discussion of characteristics most preferably includes HRM practices and other philosophies that
actually signify any country’s overall cultural or traditional framework of Bangladesh. A widely
applied and validated approach to values is that of Hofstede (1980, 2001), developed a model
that identifies four primary Dimensions: Power Distance, Individualism, Masculinity and
Uncertainty Avoidance. Geert Hofstede added a fifth Dimension after conducting an additional
international study based on Confucian dynamism is Long-Term Orientation.
Power Distance Index (PDI) that is the extent to which the less powerful members of
organizations and institutions (like the family) accept and expect that power is distributed
unequally (Hofstede, 1984). Most of the Asian countries under the survey of Hofstede are found
having large power distance. The PDI scores found in India, Pakistan, and Japan are 77, 55, and
54 respectively (Hofstede, 1994:28). The position of Bangladesh would be the average of the
highest and lowest of these three scores (Ehsan & Jinnah, 1999). Most of the Bangladeshi
companies maintain a hierarchical organizational structure along with high power distance. In
Bangladesh is observed a large power distance due to colonial legacy of hierarchical power
structure, differences in family status, inequality in socio-economic conditions of the people
(Abdullah, Boyle & Joham, 2010).
According to Hofstede (1984) Individualism (IDV) on the one side versus its opposite,
collectivism, that is the degree to which individuals are integrated into groups. India, Japan and
Pakistan are referred as collectivist having 48, 46, and 14 respectively (Hofstede, 1994: 51). The
position of Bangladesh will be nearer with the scores of India and Japan (Ehsan & Jinnah, 1999).
Bangladesh tends to have quite a larger degree of collectivism than individualism.
Masculinity (MAS) versus its opposite, femininity refers to the distribution of roles
between the genders (Hofstede 1984). Japan, India and Pakistan all fall within the masculine
category having scores of 95, 56 and 50 respectively (Hofstede, 1994: 82). Bangladesh definitely
falls in the masculine category (Ehsan & Jinnah, 1999).
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Hofstede mentioned that Uncertainty Avoidance Index (UAI) deals with a society's
tolerance for uncertainty or ambiguity. Pakistan and India are labeled as medium to low
uncertainty avoidance countries having 70 and 40 UAI scores respectively. The position of
Bangladesh in UAI is expected to be in between India and Pakistan (Ehsan & Jinnah, 1999).
Usually Strong uncertainty avoidance in Bangladeshi culture as a result of widespread poverty in
the country, high unemployment rates, difficulty in finding a new job, uncertainty in economic
progress, latent fatalism because of religious influence (Abdullah, Boyle & Joham, 2010).
Finally, Values associated with Long Term Orientation (LTO) are thrift and
perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling
social obligations, and protecting one's ‘face (Hofstede, 1984) In Bangladesh short term
orientation is more popular than the long term orientation.
The scenario of cultural dimension in Bangladesh almost resembles Japanese cultural
dimension. Japanese are more collectivist and they prefer hierarchical organizational structure. In
order to proper transfer of HRM activities from parent country to host country, commonalities
regarding cultural factors are essentially need to be ensured. The smaller the cultural distance
between two countries, the more success can be expected in terms of adaptation of HRM
practices and philosophies. Above discussion eventually leads to the following proposition:
Proposition 1: Japanese MNCs, because of the smaller cultural distance between
Japan and South Asia, will be more likely to transfer the parent’s HRM system to their
overseas affiliates.
Miles and Snow (1984) suggest that two strategic fits must be managed: an external fit
and an internal fit. Inside any organization proper HRM systems can only be conducted when
these two fits are acquired. The importance of fitting structure, systems, and management
practices to an organization's stage of development is widely accepted (Davis, 1981; Kimberly,
Miles, & Associates, 1980; Meshoulam, 1984).External fits leads to several HRM philosophies
like Life Cycle and Hierarchical Models, Evolutionary Models, Stage Models, Metamorphosis
Theory, Stages of Human Resource Management etc. In case of internal fit, Woodward (1965)
and Burns and Stalker (1961) suggested that organizational success is determined by how well
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structure, technology, human resources, and so forth, both fit with and support each other. In
terms of the first research issue on the transfer of human resource practices, Kostova and Roth
(2002) note that in institutional theory a key perspective is that organizations sharing the same
environment will employ similar practices Therefore, both home country and host country should
have same corporate business culture and that is the way how parent country HRM system can
be transferred and well executed in host country’s local culture. This discussion eventually can
form a following a proposition:
Proposition 2: When the HRM system of the overseas affiliate fits with the
characteristics of the MNC and its local environment, the affiliates will enjoy higher levels
of performance than when the HRM system does not fit with these internal and external
environments.
MNC strategy:
The field of strategic management has increased its focus on the development of
typologies as a means of studying the concept of strategy (Porter 1980). Currently there are a
number of identifiable business strategy typologies being developed, each involving a different
pattern of competitive position objectives and competitive advantage. Business strategy typology
developed by Miles and Snow (1978) is, by far, the most popular and frequently cited (Parnell
2000). This typology developed from the theory of strategy, structure and process, typifies
organizations by their adaptive decision patterns, ranging from being a prospector, analyzer, and
defender to the least adaptive category, that of a reactor. Porter (1980) also argues that the nature
and extent of competition within an industry is dependent on the business strategies used by the
organizations to compete.
There are two world famous business strategy of differentiation and cost leadership
strategy. The cost leadership strategy requires the sale of a “standard or no-frills” product
(Porter, 1985: 13) combined with “aggressive pricing” (Porter, 1980: 36). Thus, the strategy
involves making a “fairly standardized product and under pricing everybody else” (Kiechel,
1981b: 181). Porter’s (1980: 37) differentiation strategy calls for a product or service that is
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“perceived industry-wide as being unique” (italics in the original). In a differentiation strategy, a
firm seeks to be unique in its industry along some dimensions that are widely valued by buyers.
It selects one or more attributes that many buyers in an industry perceive as important and
uniquely positions it to meet those needs. Compared to firms following a differentiation strategy,
MNC following a low cost strategy are more concerned with output measures, particularly
productivity (Porter, 1986). As cost leadership is a quality strategy or scheme adopted and
implemented by MNCs that are adopting measures for lean manufacturing, which is known as a
process of minimizing production costs to boost overall valuation of a MNC. Cost leadership
strategy might not be appropriate in every part of the world because cost effectively production
needs certain demographic, environmental and technological factors those are not available or
substantially difficult to transfer from home country to overseas MNC subsidiaries. On the other
hand differentiation strategy calls for the unique and creative management, business policies,
idea generation and implementation, effective ways of decision making in terms of establishing
effective HRM policy in the organization. That is why home country HRM systems can be
transferred and executed comparatively more easily in host country than the transfer of factors
regarding firm’s cost leadership strategy. Therefore, from the perspective of MNCs, the
following proposition can be provided:
Proposition 3: MNC following a differentiation strategy will be more likely to
transfer the HRM system of the parent company to their overseas affiliates than will MNCs
following a cost leadership strategy.
MNC Business Strategy:
A general model is employed to conceptualize linkages between environment, business
strategy, HRM strategy and performance. Business strategy can be thought of as a set of
decisions about the direction of a firm. Firms select business strategies in accordance with
evaluations they make about their distinctive competencies and the environment in which they
wish to compete (Mintzberg, 1990). Implementation of a business strategy necessitates breaking
it down into smaller, manageable components. Functional units within an organization establish
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underlying strategies which provide a foundation that helps to guide them in the development
and implementation of policy (Beechler, Schon and Bird, 1994).
Another concept which is very much important for the proper transfer and the
sustainability of HRM and other business activities is the level of interdependence between home
and host country affiliates. Interdependence is determined by both the volume and the direction
of resource flows between organizational subunits (Gupta & Govindarajan, 1991).When
managing interdependence, international managers must go beyond general issues of social
responsibility and deal with the specific concerns of the MNC subsidiary and host-country
relationship. Numerous conflicts arise between MNC companies or subsidiaries and host
countries, including conflicting goals (both economic and noneconomic) and conflicting
concerns, such as the security of proprietary technology, patents, or information. Overall, the
resulting trade-offs create an interdependent relationship between the subsidiary and the host
government based on relative bargaining power. The power of MNCs is based on their large-
scale, worldwide economies, their strategic flexibility, and their control over technology and
production location. The bargaining chips of the host governments include their control of raw
materials and market access and their ability to set the rules regarding the role of private
enterprise, the operation of state-owned firms, and the specific regulations regarding taxes,
permissions, and so forth.
The nature of the resource flows between the parent company and its overseas affiliates is
important in understanding the transfer o HRM overseas because resource flows determine the
need for coordination and control mechanisms to manage the resulting interdependence (Pfeffer
1998). According to Bartlett & goshal (1995) , interdependence is greater in firms which are
following global strategy rather than multi-domestic and there are level of interdependence in
every organization. So, we can develop the following proposition based on overall discussion.
Proposition 4: The higher the interdependence between the parent company and the
overseas affiliate, the more likely the parent company will transfer its HRM system to its
overseas affiliate.
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MNC HRM Strategy:
Japanese HRM systems are quite based on traditional pattern of practicing and managing
human resource. Choudhury (2000: 4) stated that while some Japanese style management
practices are easily implemented in other countries, there are also others that are conditioned by
the local condition. Then, there are the three treasures; lifetime employment, seniority-based
wage system and enterprise unions- which some researchers claim are unique to Japan while
others claim that these exist in different forms in other countries. Choudhury’s model considers
these to be unique to Japan. Values and HR system help to shape organizational culture and the
people who operate within and influence that culture; and MNCs therefore attempt to transfer
their HRM practices abroad. On the other hand, it is also been argued that HRM constitutes a
major constraint when MNCs try to implement global strategies (Adler and Bartholomew,
1992).Although MNC may face similar environmental constraints, use similar technologies, and
have equivalent experience in international operations, the companies’ HRM competencies,
because they are reflective of the firms’ administrative heritage and unique past, are to some
extent firm-specific (Bartlett and ghoshal,1989).Eventually, based on the above discussion we
can have the following proposition.
Proposition 5: The greater the MNC’s experience in successfully transferring its HRM
systems overseas, the more likely the parent firm will transfer its HRM systems to its
overseas affiliates.
Like business organizations, public organizations in Japan try to promote a harmonious
working environment, one in which the individual members can satisfy most of their life’s needs
(Jun and Muto, 1995: 127). A high level commitment to a particular organization makes the civil
servants more loyal to organizational policies and its overall objective. Another major
characteristic of the Japanese management system is the seniority system. For core employees,
advancement within the hierarchy is automatic at the lower levels but becomes more competitive
once the ranks of management are reached (Thomas, 1993:138). Another important component
of the administrative heritage of a firm is the strength of its corporate philosophy and
management's belief that the MNC's overseas subsidiaries should adopt the parent company's
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management philosophy (Beechler, and Taylor, 1992). Apart from the transfer of these policies
to host country; MNC needs to develop strong belief that these HRM policies should be adopted
by the host country as well. Without the urgency and the feeling of inevitability regarding
adopting HRM strategies over MNCs subsidiary, management cannot ensure proper practice of
parent country’s HRM strategies in host country. Discussion of these facts leads us to following
assumption:
Proposition 6: The stronger the parent company management’s belief that the firm’s
HRM system represents a distinctive competency, the more likely the parent firm will
transfer its HRM system to its overseas affiliates.
17
Conclusion & Implication
So from the prior research we have understood that the HRM practices in South Asia are
traditionally very poor and sometimes autocratic in managerial style. Given the competitive and
future environment surrounding both domestic and foreign subsidiaries/joint venture companies,
which are highly dependent upon the abundant and low cost human resources, establishing
effective human resource management (HRM) constitutes a major challenge for gaining potential
viable improvement in South Asian human resources( Miah, Wakabayashi &Takeuchi 2003).
Subcontinent is trying to professionalize management practices in recent years. Despite of such
efforts, emloyees’ indiscipline, politicized labor unions, low individual productivity, and
unsatisfactory enterprise performance are some of the commonly observed realities in most of
the organizations. Because of the prevalent socioeconomic conditions, these countries are placed
at a competitive disadvantage even when they have huge reservoirs of technically competent
human resources (Qureshi, 1994). In contrast, Japanese HRM practices are standardized based
on advanced industrial and managerial expertise with a global applicability (Miah, 2006). In this
report we try explore how it is possible for a developing country like India, Pakistan and
Bangladesh to develop positive beliefs and to improve effective firm performance. In South
Asia, there remains a need to develop a sort of national plan in order to establish an efficient
management practices of local human resources (Abdullah, Boyle and Joham, 2010). The result
of the present research is expected to make contributions by providing valuable information that
will explain the incompetence in the use of human resources in South Asian domestic companies
as compared to Japanese firms operating in South Asia (Miah et al., 2003, 2004, and 2005).
HRM is increasingly viewed as a crucial component of the firm’s overall strategy
(Schuler & Rogovsky, 1998). Some have even identified it as the glue that holds global
organizations together (Teagarden & Von Glinow, 1997), and hence many MNCs attempt to
transfer their HRM practices to their overseas subsidiaries. As a matter of fact many previous
reports have discussed about the transferability of Japanese HRM in to South Asian countries.
Japanese subsidiaries/joint ventures and South Asian domestic companies are culturally very
different, but it is interesting to note that Japanese joint venture and subsidiaries are strongly
influenced by the Japanese parent country corporate culture, resulting in creation of a hybrid
HRM strategy (Miah, M.K., 1995, 2001, 2003, 2005). It is clearly demonstrated that human
18
resource management is not a monolithic function, but consists of practices which differ in their
relative resemblance to local practices and to parent practices (Jaeger & Kanungo, 1990). Now
taking the results together, there is a significance similarity between Japanese and Bangladeshi
firms. Overall we have found that the company performance is higher for both Japanese joint-
venture/subsidiaries and Bangladeshi local firms when the companies putting more concentration
on knowledge creation and execution of knowledge properly, group activities or collectivism and
long-term employment relationship. Bangladesh is a developing country with significant
socioeconomic development opportunities. To maximize the outcome from those opportunities,
business organizations need to attract, retain and manage their human resources effectively by
managing their expectations effectively (Abdullah, Boyle and Joham, 2010). Furthermore, as
stated above, a belief in the parent's HRM competence seems related to high levels of HRM
transfer from the parent company to the joint-venture/subsidiaries. This finding certainly
confirms the numerous reports of the ethnocentric approach of Japanese firms to their overseas
operations (Fucini and Fucini, 1990), in which there is an attempt to mold the overseas
subsidiary into as close a replica of the home plants as possible, at least with regard to
management practices (Beechler, Schon & Bird 1994).
Cultural context plays a significant role in managing an organization’s Human Resources
effectively as management practices can be influenced by a country’s historical, social and
political difference (Tanure & Duarte, 2005). As such, HR practices can lead to long-term
competitive advantage for the organization only when they are aligned with these cultural and
other contextual factors (Ahmad & Schroeder, 2003; Guest 1997). Japanese management is
entirely centered on men. Although women account for nearly half the nation’s workforce, only a
few are on the career track. Most of the female have part-time jobs offering with little long-term
security or opportunity for advancement (Yamguchi, 1999: 2). On the other hand, In Bangladesh,
though job opportunities remain equal and special quota is reserved for women in both public
and in some cases private sectors, participation of women is far below their male counterparts.
Masculine observed in Bangladesh because of wide gender differences, assertiveness of the
people for money and other things because of poverty (Abdullah, Boyle & Joham, 2010).
Through the research it is found that the company performance will be better in both Japanese
subsidiaries/joint-venture and Bangladeshi local firms when practices high power distance,
masculinity and long term orientation.
19
Whereas HRM practices are most strongly influenced by local isomorphism, it was found
that marketing and manufacturing practices also tend to resemble local practices, although to a
distinctly lesser degree than HRM, but that financial control practices more closely adhere to
parent practices, and are therefore shaped mainly by a need for internal consistency in the MNC
(Rosenzweig & Nohria 1994). The research also found that, both Japanese
joint-venture/subseries and local firms in Bangladesh when companies can successfully “offering
something more and selling it at an attractive price” (best cost provider strategy) having positive
relation with company performance. That clearly indicates that the companies that follow best
cost leadership strategy in this country context have more opportunity to succeed.
Decision making in Japanese system is considered to be more time-consuming and
because of the degree of participation, examination of details and speed of implementation is
much faster. Each employee at individual level participates through the Quality Control Circle
(QCC) and the Suggestion system (Ehsan & Jinnah, 1999). Alternatively, decision making in
Bangladesh is highly centralized in most cases. Private organizations do have a system of
consensus building with labor union members, but authorities prefer to take management
decision at the top of the hierarchy keeping the members of the lower level away which reflects
the top-down approach of decision-making. In South Asian based Japanese Company both
managers and employees’ teamwork relationship and rely on a sense of unity and a flat
organization system (Miah, 2006). However, the study shows that in Bangladeshi context both
local firms and Japanese subsidiaries/joint-venture gain better company performance when
decision flow from top to down.
In this new stage, the focus of Japanese corporate strategy will shift away from the
localization of production to an emphasis on balancing localization and global integration
(Bartlett and Ghoshal, 1989). A complex and sophisticated HRM system which can effectively
utilize the human resources in the organization, regardless of their nationality, and create not
only global products but global mind sets, will be an essential competency for the transnational’s
which leading the way into the 21st century (Beechler and Taylor, 1992).
20
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