Skip to main content
SpringerLink
Log in

Explaining stakeholder evaluations of HRM capabilities in MNC subsidiaries

  • Article
  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

This paper examines how functional and line-management stakeholders evaluate operational human resource management capabilities in multinational corporation (MNC) subsidiaries. We suggest that such evaluations are a function of two key structural factors: (1) that focal subsidiary human resource (HR) departments respond differentially to the expectations of differently located stakeholders; and (2) that the structural position of the stakeholder determines what cues he or she relies upon to construct the evaluation. Our findings show that the focal HR subsidiary department is likely to exert more effort towards meeting the expectations of line-management stakeholders, and we suggest that this is a function of line management’s co-location with the focal HR department. Second, we find that co-located line-management stakeholders are more likely to rely on experience-based cues when constructing evaluations, whereas headquarters-located functional stakeholders tend to rely on cognition-based evaluation, driven by their ability to compare across different subsidiary HR departments. We contribute to the literature by going beyond existing research that has tended to focus on evaluation from the perspective of organizational behavior, by providing a structural perspective on capability evaluation in MNCs that combines the insights of role theory and cognitive choice heuristics.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1

Similar content being viewed by others

Notes

  1. The term “structural position” refers to the network position of the stakeholder vis-à-vis the focal subsidiary HR department in terms of reporting line and geographical location.

  2. In line with social network terminology, the term “focal actor” refers here to the subsidiary HR department as a whole (i.e., as an organizational entity). It does not refer to any particular individual working in the focal HR department, unless specifically indicated.

  3. Of course, the weight of a subsidiary HR department is a function not only of its size, but also of its mandate and network position in the MNC-internal network (Birkinshaw et al., 2007). For example, R&D and other centers of excellence with a strategic task may have relatively small HR departments, yet require sophisticated people management capabilities, given the knowledge-worker type of employee mix. Similarly, HR departments of subsidiaries located in strategically important markets often attract relatively more attention from HQ regardless of their size (although they often also tend to be larger). Given that the focus of this paper is not on HQ attention as such, and that our variables do not allow full examination of the “weight” argument, we use the size of the HR department as a proxy for its perceived weight, and control for subsidiary type and orientation (see the next section).

  4. In total, 123 subsidiaries of 12 MNCs participated in the study, but one MNC pulled out during the process as a result of major organizational changes. Moreover, two more units had to be excluded because we were not able to obtain data from either the GM or corporate HR.

  5. We also tested a model in which we added unit performance as a control variable, as good business performance can produce a halo effect in that better-performing units could be perceived by both stakeholders as having better HRM capabilities. However, the variable at our disposal was a perceptive measure obtained from the subsidiary GM questionnaire, and therefore unfortunately introduced a degree of common method bias. This was indicated in the results, in that the performance variable was highly significant (p<0.000***) for the GM and non-significant for the HR evaluations. We thus omitted the variable from the final model. It is worth noting, however, that the independent variables showed a similar pattern as in our original model when a performance measure was included, giving further validity to our findings.

  6. We also tested alternative variables assessing cultural and/or geographical distance and obtained broadly similar results. Nevertheless, we chose HR manager nationality for the final model because it operates on the interpersonal level, directly addressing another aspect of the “voice” element discussed above and minimizing the noise arising from exogenous national-level factors (see, e.g., Shenkar, 2001, for criticism related to using national-level measures in organizational-level research).

References

  • Ambos, T., Andersson, U., & Birkinshaw, J. 2010. What are the consequences of initiative-taking in multinational subsidiaries? Journal of International Business Studies, 41 (7): 1099–1118.

    Article  Google Scholar 

  • Andersson, U., Forsgren, M., & Holm, U. 2001. Subsidiary embeddedness and competence development in MNCs: A multi-level analysis. Organization Science, 22 (6): 1013–1034.

    Article  Google Scholar 

  • Ashforth, B. E., & Mael, F. 1989. Social identity theory and the organization. Academy of Management Review, 14 (1): 20–39.

    Google Scholar 

  • Bartlett, C. A., & Ghoshal, S. 1989. Managing across borders: The transnational solution. Boston, MA: Harvard Business School Press.

    Google Scholar 

  • Bhanji, Z., & Oxley, J. E. 2013. Overcoming the dual liability of foreignness and privateness in international corporate citizenship partnerships. Journal of International Business Studies, 44 (4): 290–311.

    Article  Google Scholar 

  • Biddle, B. J. 1979. Role theory: Expectations, identities, and behaviors. New York: Academic Press.

    Google Scholar 

  • Birkinshaw, J., & Hood, N. 1998. Multinational subsidiary evolution: Capability and charter change in foreign-owned subsidiary companies. Academy of Management Review, 23 (4): 773–795.

    Google Scholar 

  • Birkinshaw, J., Bouquet, C., & Ambos, T. 2007. Managing executive attention in the global company. MIT Sloan Management Review, 48 (4): 39–45.

    Google Scholar 

  • Black, J. S., & Gregersen, H. B. 1992. Serving two masters: Managing the dual allegiance of expatriate employees. Sloan Management Review, 33 (4): 61–71.

    Google Scholar 

  • Bouquet, C., & Birkinshaw, J. 2008. Weight versus voice: How foreign subsidiaries gain attention from corporate headquarters. Academy of Management Journal, 51 (3): 577–601.

    Article  Google Scholar 

  • Carley, K. 1991. A theory of group stability. American Sociological Review, 56 (3): 331–354.

    Article  Google Scholar 

  • Collis, D. J. 1994. Research note: How valuable are organizational capabilities? Strategic Management Journal, 15 (Winter Special Issue): 143–152.

    Article  Google Scholar 

  • Combs, J., Liu, Y., Hall, A., & Ketchen, D. 2006. How much do high-performance work practices matter? A meta-analysis of their effects on organizational performance. Personnel Psychology, 59 (3): 501–528.

    Article  Google Scholar 

  • Daft, R., & Lengel, R. 1984. Information richness: A new approach to manager information processing and organization design. In B. Staw, & L. L. Cummings (Eds), Research in organizational behavior. Vol. 6, 191–233. Greenwich, CT: JAI Press.

    Google Scholar 

  • Daft, R. L., & Lengel, R. H. 1986. Organizational information requirements, media richness and structural design. Management Science, 32 (5): 554–571.

    Article  Google Scholar 

  • Denrell, J., Arvidsson, N., & Zander, U. 2004. Managing knowledge in the dark: An empirical examination of the reliability of competency evaluations. Management Science, 50 (11): 1491–1503.

    Article  Google Scholar 

  • De Winne, S., Delmotte, J., Gilbert, C., & Sels, L. 2013. Comparing and explaining HR department effectiveness assessments: Evidence from line managers and trade union representatives. International Journal of Human Resource Management, 24 (8): 1708–1735.

    Article  Google Scholar 

  • Dosi, G., Nelson, R., & Winter, S. 2000. Introduction: The nature and dynamics of organizational capabilities. In G. R. Dosi, R. R. Nelson, & S. G. Winter (Eds), The nature and dynamics of organizational capabilities, 1–24. Oxford: Oxford University Press.

    Google Scholar 

  • Doz, Y. L., Santos, J., & Williamson, P. 2001. From global to metanational. Boston, MA: Harvard Business School Press.

    Google Scholar 

  • Eisenhardt, K. 1989. Agency theory: An assessment and review. Academy of Management Review, 14 (1): 57–74.

    Google Scholar 

  • Eisenhardt, K. M., & Martin, J. A. 2000. Dynamic capabilities: What are they? Strategic Management Journal, 21 (10–11): 1105–1121.

    Article  Google Scholar 

  • Evans, P., Pucik, V., & Björkman, I. 2011. The global challenge: International human resource management, 2nd edn. New York: McGraw-Hill.

    Google Scholar 

  • Fowler, F. 1988. Survey research methods. Newbury Park, CA: Sage.

    Google Scholar 

  • Gavetti, G. 2005. Cognition and hierarchy: Rethinking the microfoundations of capabilities’ development. Organization Science, 16 (6): 599–617.

    Article  Google Scholar 

  • Gavetti, G., & Levinthal, D. 2000. Looking forward and looking backward: Cognitive and experiential search. Administrative Science Quarterly, 45 (1): 113–137.

    Article  Google Scholar 

  • Gibson, C. B., & Birkinshaw, J. 2004. The antecedents, consequences, and mediating role of organizational ambidexterity. Academy of Management Journal, 47 (2): 209–226.

    Article  Google Scholar 

  • Gupta, A. K., Smith, K. G., & Shalley, C. E. 2006. The interplay between exploration and exploitation. Academy of Management Journal, 49 (4): 693–706.

    Article  Google Scholar 

  • Guthrie, J. 2001. High-involvement work practices, turnover, and productivity: Evidence from New Zealand. Academy of Management Journal, 44 (1): 180–190.

    Article  Google Scholar 

  • Guthrie, J. P., Flood, P. C., Liu, W., MacCurtain, S., & Armstrong, C. 2011. Big hat, no cattle? The relationship between use of high-performance work systems and managerial perceptions of HR departments. The International Journal of Human Resource Management, 22 (8): 1672–1685.

    Article  Google Scholar 

  • Helfat, C., & Peteraf, M. 2003. The dynamic resource-based view: Capability lifecycles. Strategic Management Journal, 24 (10): 997–1010.

    Article  Google Scholar 

  • Henderson, R., & Cockburn, I. 1994. Measuring competence? Exploring firm effects in pharmaceutical research. Strategic Management Journal, 15 (Winter Special Issue): 63–84.

    Article  Google Scholar 

  • Hillman, A. J., Withers, M. C., & Collins, B. J. 2009. Resource dependence theory: A review. Journal of Management, 35 (6): 1404–1427.

    Article  Google Scholar 

  • Hindin, M. J. 2007. Role theory. In G. Ritzer (Ed), The Blackwell encyclopedia of sociology, 3959–3962. Hoboken, NJ: Blackwell Publishing.

    Google Scholar 

  • Holm, U., & Pedersen, T. 2000. The emergence and impact of MNC centres of excellence: A subsidiary perspective. London: Palgrave Macmillan.

    Google Scholar 

  • Huselid, M. A. 1995. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38 (3): 635–672.

    Article  Google Scholar 

  • Katz, U., & Kahn, R. L. 1966. The social psychology of organizations. New York: Wiley.

    Google Scholar 

  • Knudsen, T., & Levinthal, D. A. 2007. Two faces of search: Alternative generation and alternative evaluation. Organization Science, 18 (1): 39–54.

    Article  Google Scholar 

  • Kostova, T. 1999. Transnational transfer of strategic organizational practices: A contextual perspective. Academy of Management Review, 24 (2): 308–324.

    Google Scholar 

  • Kostova, T., & Roth, K. 2003. Social capital in multinational corporations and a micro-macro model of its formation. Academy of Management Review, 28 (2): 297–317.

    Google Scholar 

  • Lefkowitz, J. 2000. The role of interpersonal affective regard in supervisory performance ratings: A literature review and proposed causal model. Journal of Occupational & Organizational Psychology, 73 (1): 67–85.

    Article  Google Scholar 

  • Lievens, F., Conway, J. M., & De Corte, W. 2008. The relative importance of task, citizenship, and counterproductive performance to job performance ratings: Do rater source and team-based culture matter? Journal of Occupational and Organizational Psychology, 81 (1): 1–18.

    Article  Google Scholar 

  • Lippman, S., & McCall, J. 1976. The economics of job search: A survey. Economic Enquiry, 14 (2): 155–187.

    Article  Google Scholar 

  • Maertz, C. P., & Campion, M. A. 1998. 25 years of voluntary turnover research: A review and critique. In C. L. Cooper, & I. T. Robertson (Eds), International review of industrial and organizational psychology, 49–86. London: John Wiley & Sons.

    Google Scholar 

  • Mäkelä, K., Björkman, I., & Ehrnrooth, M. 2010. How do MNCs establish their talent pools? Influences on individuals’ likelihood of being labeled as talent. Journal of World Business, 45 (2): 134–142.

    Article  Google Scholar 

  • Mäkelä, K., Sumelius, J., Höglund, M., & Ahlvik, C. 2012. Determinants of strategic HR capabilities in MNC subsidiaries. Journal of Management Studies, 49 (8): 1459–1483.

    Article  Google Scholar 

  • March, J. 1991. Exploration and exploitation of organizational learning. Organization Science, 2 (1): 71–87.

    Article  Google Scholar 

  • Martinez, J., & Jarillo, J. 1991. Coordination demands of international strategies. Journal of International Business Studies, 22 (3): 429–444.

    Article  Google Scholar 

  • Mitchell, T. R., Holtom, B. C., & Lee, T. W. 2001. How to keep your best employees: Developing an effective retention policy. Academy of Management Executive, 15 (4): 96–108.

    Article  Google Scholar 

  • Mitsuhashi, H., Park, H. J., Wright, P., & Chua, R. 2000. Line and HR executives’ perceptions of HR effectiveness in firms in the People’s Republic of China. International Journal of Human Resource Management, 11 (2): 197–216.

    Article  Google Scholar 

  • Monge, P. R., & Contractor, N. S. 2003. Theories of communication networks. New York: Oxford University Press.

    Google Scholar 

  • Monge, P. R., Rothman, L. W., Eisenberg, E. M., Miller, K. I., & Kirste, K. K. 1985. The dynamics of organizational proximity. Management Science, 31 (9): 1129–1141.

    Article  Google Scholar 

  • Monteiro, F., Arvidsson, N., & Birkinshaw, J. 2008. Knowledge flows within multinational corporations: Explaining subsidiary isolation and its performance implications. Organization Science, 19 (1): 90–107.

    Article  Google Scholar 

  • Morris, S. S., & Snell, S. A. 2011. Intellectual capital configurations and organizational capability: An empirical examination of human resource subunits in the multinational enterprise. Journal of International Business Studies, 42 (6): 805–827.

    Article  Google Scholar 

  • Morris, S. S., Wright, P. M., Trevor, J., Stiles, P., Stahl, G. K., Snell, S., Paauwe, J., & Farndale, E. 2009. Global challenges to replicating HR: The role of people, processes, and systems. Human Resource Management, 48 (6): 973–995.

    Article  Google Scholar 

  • Nelson, R. R., & Winter, S. G. 1982. An evolutionary theory of economic change. Boston, MA: Harvard University Press.

    Google Scholar 

  • Nohria, N., & Ghoshal, S. 1997. The differentiated network: Organizing multinational corporations for value creation. San Francisco, CA: Jossey-Bass.

    Google Scholar 

  • Ocasio, W. 1997. Towards an attention-based view of the firm. Strategic Management Journal, 18 (S1): 187–206.

    Article  Google Scholar 

  • O’Donnell, S. W. 2000. Managing foreign subsidiaries: Agents of headquarters, or an interdependent network? Strategic Management Journal, 21 (5): 525–548.

    Article  Google Scholar 

  • Paauwe, J. 2009. HRM and performance: Achievements, methodological issues and prospects. Journal of Management Studies, 46 (1): 129–142.

    Article  Google Scholar 

  • Palmer, J. K., & Loveland, J. M. 2008. The influence of group discussion on performance judgments: Rating accuracy, contrast effects and halo. Journal of Psychology, 142 (2): 117–130.

    Article  Google Scholar 

  • Park, J. H., Gardner, T. M., & Wright, P. M. 2004. HR practices or HR capabilities: Which matters? Insights from the Asia-Pacific Region. Asia Pacific Journal of Human Resources, 42 (3): 260–273.

    Article  Google Scholar 

  • Pfeffer, J., & Salancik, G. R. 2003. The external control of organizations: A resource dependence perspective. Stanford, CA: Stanford University Press.

    Google Scholar 

  • Podsakoff, P., MacKenzie, S., Lee, J. Y., & Podsakoff, N. 2003. Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88 (5): 879–903.

    Article  Google Scholar 

  • Rosenkopf, L., & Nerkar, A. 2001. Beyond local search: Boundary spanning, exploration, and impact in the optical disk industry. Strategic Management Journal, 22 (4): 287–306.

    Article  Google Scholar 

  • Rosenzweig, P., & Nohria, N. 1994. Influences on human resource management practices in multinational corporations. Journal of International Business Studies, 25 (2): 229–252.

    Article  Google Scholar 

  • Roth, K., & Kostova, T. 2003. The use of the multinational corporation as a research context. Journal of Management, 29 (6): 883–902.

    Article  Google Scholar 

  • Rotundo, M., & Sackett, P. R. 2002. The relative importance of task, citizenship, and counterproductive performance to global ratings of job performance: A policy-capturing approach. Journal of Applied Psychology, 87 (1): 66–80.

    Article  Google Scholar 

  • Shenkar, O. 2001. Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences. Journal of International Business Studies, 32 (2): 51–535.

    Google Scholar 

  • Spreitzer, G. 1996. Social structural characteristics of psychological empowerment. Academy of Management Journal, 39 (2): 483–504.

    Article  Google Scholar 

  • Sumelius, J., Björkman, I., & Smale, A. 2008. The influence of internal and external social networks on HRM capabilities in MNC subsidiaries in China. International Journal of Human Resource Management, 19 (12): 2294–2310.

    Article  Google Scholar 

  • Teece, D. J., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18 (7): 509–533.

    Article  Google Scholar 

  • Tetlock, P. E., & Manstead, A. 1985. Impression management versus intrapsychic explanations in social psychology: A useful dichotomy? Psychological Review, 92 (1): 59–77.

    Article  Google Scholar 

  • Thomas, K. W., & Velthouse, B. A. 1990. Cognitive elements of empowerment: An “interpretive” model of intrinsic task motivation. Academy of Management Review, 15 (4): 666–681.

    Google Scholar 

  • Tsai, W., & Ghoshal, S. 1998. Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41 (4): 464–476.

    Article  Google Scholar 

  • Tsui, A. S., & Ohlott, P. 1988. Multiple effectiveness of managerial assessment: Interrater agreement and consensus in effectiveness models. Personnel Psychology, 41 (4): 779–803.

    Article  Google Scholar 

  • Tsui, A. S., Ashford, St., S. J., Clair, L., & Xin, K. R. 1995. Dealing with discrepant expectations: Response strategies and managerial effectiveness. Academy of Management Journal, 38 (6): 1515–1543.

    Article  Google Scholar 

  • Tversky, A., & Kahneman, D. 1973. Availability: A heuristic for judging frequency and probability. Cognitive Psychology, 5 (2): 207–232.

    Article  Google Scholar 

  • Tversky, A., & Kahneman, D. 1974. Judgment under uncertainty: Heuristics and biases. Science, 185 (4157): 1124–1131.

    Article  Google Scholar 

  • Tziner, A., Murphy, K. R., & Cleveland, J. N. 2005. Contextual and rater factors affecting rating behavior. Group & Organization Management, 30 (1): 89–98.

    Article  Google Scholar 

  • Ulrich, D. 1997. HR of the future: Conclusions and observations. Human Resource Management, 36 (1): 175–179.

    Article  Google Scholar 

  • Ulrich, D., & Barney, J. B. 1984. Perspectives in organizations: Resource dependence, efficiency, and population. Academy of Management Review, 9 (3): 471–481.

    Google Scholar 

  • Ulrich, D., Brockbank, W., Yeung, A., & Lake, D. 1995. Human resource competencies: An empirical assessment. Human Resource Management, 34 (4): 473–495.

    Article  Google Scholar 

  • Vora, D., & Kostova, T. 2007. A model of dual organizational identification in the context of the multinational enterprise. Journal of Organizational Behavior, 28 (3): 327–350.

    Article  Google Scholar 

  • Webster, C. 1997. Effects of researcher presence and appeal on response quality in hand-delivered, self-administered surveys. Journal of Business Research, 38 (2): 105–114.

    Article  Google Scholar 

  • Westney, E. 2001. Multinational enterprises and cross-border knowledge creation. In I. Nonaka, & T. Nishiguchi (Eds), Knowledge emergence: Social, technical, and evolutionary dimensions of knowledge creation, 147–175. Oxford: Oxford University Press.

    Google Scholar 

  • Wood, R. E., & Marshall, V. 2008. Accuracy and effectiveness in appraisal outcomes: The influence of self-efficacy, personal factors and organizational variables. Human Resource Management, 18 (3): 295–313.

    Article  Google Scholar 

  • Wright, P. M., & Nishii, L. H. 2007. Strategic HRM and organizational behavior: Integrating multiple levels of analysis. CAHRS Working Paper #07–03, Center for Advanced Human Resource Studies, School of Industrial and Labor Relations, Cornell University.

  • Wright, P. M., Dunford, B., & Snell, S. 2001a. Human resources and the resource based view of the firm. Journal of Management, 27 (6): 701–721.

    Article  Google Scholar 

  • Wright, P. M., McMahan, G. C., Snell, S. A., & Gerhart, B. 2001b. Comparing line and HR executives’ perceptions of HR effectiveness: Services, roles and contributions. Human Resource Management, 40 (2): 111–123.

    Article  Google Scholar 

  • Wright, P. M., Gardner, T., & Moynihan, L. 2003. The impact of HR practices on the performance of business units. Human Resource Management Journal, 13 (3): 21–36.

    Article  Google Scholar 

  • Yang, Z., Wang, X., & Su, C. 2006. A review of research methodologies in international business. International Business Review, 15 (6): 601–617.

    Article  Google Scholar 

  • Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38 (2): 341–363.

    Article  Google Scholar 

  • Zollo, M., & Winter, S. 2002. Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13 (3): 339–351.

    Article  Google Scholar 

Download references

Acknowledgements

We wish to thank the Finnish Funding Agency for Technology and Innovation (Tekes) (No. 53/31/08) and the Academy of Finland (No.122402) for their generous support for this research.

Author information

Authors and Affiliations

  1. Aalto University School of Business, Aalto, Finland

    Kristiina Mäkelä & Ingmar Björkman

  2. Hanken School of Economics, Helsinki, Finland

    Mats Ehrnrooth & Jennie Sumelius

  3. University of Vaasa, Vaasa, Finland

    Adam Smale

Authors
  1. Kristiina Mäkelä
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ingmar Björkman
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Mats Ehrnrooth
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Adam Smale
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Jennie Sumelius
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

Accepted by Paula Caligiuri, Area Editor, 22 April 2013. This paper has been with the authors for two revisions.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Mäkelä, K., Björkman, I., Ehrnrooth, M. et al. Explaining stakeholder evaluations of HRM capabilities in MNC subsidiaries. J Int Bus Stud 44, 813–832 (2013). https://doi.org/10.1057/jibs.2013.27

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/jibs.2013.27

Keywords

Search

Navigation