A Critical analysis of the international convergence-divergence debate about International Human Resource Management (IHRM) practices drawing upon specific examples to contextualise academic theory.
IHRM is an essential attribute within an MNC, defined as ‘understanding, researching, applying and revising all human resource activities in their internal and external contexts…throughout the global environment.’ The growth of globalisation only increases the importance of IHRM as organisations rely even more heavily upon an international, multicultural workforce to compete. Regarding organisations with multiple international subsidiaries, the HR practices that should be utilised have been subject to much academic debate; convergence vs divergence.
Convergence puts forward that IHRM practices are becoming more similar and will eventually ‘converge’ so that the same best practices are employed globally. However, divergence opposes this, arguing that international human resources management practices will remain distinct from one another despite globalisation. This submission will first examine the convergence debate, adopting a critical view. While evidence suggests some practices have become more similar, they will never fully converge for various reasons. Then, an analysis of the divergence debate will take place. Finally, this submission will adopt a nuanced view, acknowledging that aspects of both arguments are accurate and that a hybrid model of the two is most likely.
The convergence thesis effectively portrays that IHRM practices will converge globally for two key reasons: globalisation and industrialisation. It is essential to acknowledge that there is substantial evidence supporting this theory. Regarding the industrialisation debate, Kerr et al. (1960) put forward that companies will have to converge their industrial practices to retain their competitive advantage for companies to compete in the global economy. This is further supported by Womack et al. (1990), who argued that manufacturing procedures would have to adopt lean production methods. If one MNC adopts these measures, but their competitors do not follow suit, they will risk losing customers due to low efficiency and price. This principle has been applied to IHRM practice and is known as a universalist approach.
Moreover, the link between globalisation and this argument is great. Historically, orthodox economists believed that the unfettered flow of international trade would effectively lead to poorer countries copying the practices of the richer countries. This would create uniformity in national business patterns (Rowley and Bae, 2002). Although this model was criticised as globalisation increased, it became increasingly relevant. Regarding IHRM, Clark and Claydon (2010, p.599) argued that ‘firms will increasingly tend to adopt, based on efficient markets, similar approaches to work organisation, training, pay, employee involvement, etc.’ There is a broad range of practices that convergent theorists believe will be affected by globalisation. This argument was then developed further to state that within IHRM, there are principles that operate superiorly to all others and that, eventually, these will be applied globally. This idea of ‘best solutions’ or ‘best practices’ believes that MNCs will be pushed towards homogenisation.
The following study is presented as evidence for this theory. Gould-Williams and Moamed’s (2011) comparative study of the effect of ‘best practices in Malaysia illustrated that a bundle of HR practices had a positive effect, which ‘supports the universal thesis.’ Moreover, Chris Brewster conducted a 3-year survey of 14 European countries, which promoted the notion of a New European HRM Model. This study recognised the increased homogenisation of trade unions and employment IHRM practices in its sample. However, it is important to acknowledge that Gould-William’s study also found negative effects on the best practices. Moreover, European countries are in a unique situation as most of these countries were in the UK; a political union already striving towards homogenisation. As European national institution patterns are so different that ‘no standard model is likely to emerge in the foreseeable future, this study cannot evidence global convergence. While the convergence debate is logical and has some evidence to support it, the overall thesis assumes that globalisation will automatically lead to convergence. Therefore, it is submitted that the convergence thesis is based on a false premise.
A Critical View: Convergence
As previously mentioned, globalisation does not automatically equal convergence. Ferner et al. (2006) evidenced this by stating that these ‘best practices are often transformed considerably when introduced to other domestic countries. Elenkov (1998) further supports this submitting that the distinct state of national contexts prevents convergence as cross-cultural differences are too broad to assume that Anglo-American IHRM techniques are directly transferrable. The convergence thesis is flawed for several reasons. Primarily, nation-states will still play a key role in regulating their economic affairs. The concept that MNCs are reducing nations’ sovereignty is overstated at best. Although MNCs are growing in number and power, there are few genuine examples of transnational companies. Often these international organisations merely operate between well-established networks of countries. Martienz-Lucio supports this:
‘MNCs continue to require a set of political and regulatory interventions and support from nations, which they as private organisations cannot supply. The idea that we are seeing the emergence of omnipotent companies such as Apple or Sony ignores the complex reality of globalisation and the continuing role of national regulatory systems. (2014: 18).’
This illustrates that national contexts are still significantly influencing IHRM practices through laws and regulations, and whilst MNCs can exploit this, total convergence cannot happen. Secondly, critics of the convergence debate also suggest that national contexts influence the effectiveness of ‘best practices.’ Rowley and Bae (2002) argue that successful implementation of IHRM practices depends on performance and internalisation. Essentially, even if there are a set of superior best practices, their success is still reliant on the employees within each country accepting them. For convergence to truly take place, far more is required than merely the existence of best practices. Thirdly, there is the issue of subcultures. Culture is a broad and elusive concept, and consequently, only considering convergence adapting to national culture is a vast simplification of culture itself. Rarely, if ever, does one country have ‘one culture’ with individual cities often having their subcultures. These subcultures can also influence IHRM, with Guirdham (2011) proposing that these differences can result in various communication styles, non-verbal communication, communication rules, politeness, and conversation constraints. Effectively, the convergence debate underestimates the issues discussed above and is further away from actualising than is often acknowledged in the literature.
The divergence debate is based on the premise that IHRM practices and strategies will differ in different countries. These practices are embedded in socio-economic contexts, and often best practices require adaptation to suit national contexts. Hall and Soskice (2001) demonstrate continued diversity in local and national patterns through their varieties of capitalism frameworks. Within VoC, academics highlight each country’s different socio-economic characteristics based on national culture, economic and political conditions, institutions, and historical legacies that substantially shape employment relations (Bryson and Frege, 2010). Despite the financial pressures pushing towards divergence, there is remarkable resilience in cultural and institutional contexts, maintaining divergent employment relationships and resultantly IHRM practices (Clark and Pugh, 2000).
The divergence thesis is based on two main grounds: divergence through culture and institutions. Regarding divergence through culture, the argument is that the cultural orientation of national contexts shapes the IHRM practices. The specific practices that can be affected include international negotiations, the importance of distributive justice, and the nature of relationships between managers-subordinate. Moreover, it can also affect wages, a central concept within IHRM. An example will contextualise this. Within the Netherlands, a ‘feminine’ culture (using Hofstede’s cross-cultural framework) encourages Dutch workers’ antipathy towards ‘hard’ HRM practices. Whereas ‘Sweden’s strong collectivist culture counters the development of an individualist orientation to the employment relationship.’ (Clark and Pugh, 000, p.96). This illustrates how cultural differences influence divergent IHRM practices. Additionally, Ngo et al. (1998) examined the effect of the country of origin through US, UK, and Japanese MNCs in Hong Kong – the result showed that several distinct aspects of home country practices influenced the IHRM implemented in the foreign branches. The home country of an MNC used its culture to implicitly or explicitly influence IHRM practices. Moreover, this divergence is even more apparent in Asia, where Paik et al. (1996) found strong support for the divergence hypothesis even among Chinese-based countries, e.g. Hong Kong, Singapore, and Taiwan. Even countries with seemingly similar cultural backgrounds diverge.
Secondly, the formal and informal institutions within a national context influence the IHRM practices regarding divergence by institutions. Whitley (1999, p.3) put forward that despite global economies being more interconnected:
‘Societies with different institutional arrangements will continue to develop and reproduce varied systems of economic organisation with different economic and social capabilities in particular industries and sectors.’
An example of these differences will contextualise this. In Germany, trade unions and work councils ensure that industry-wide wages have a noticeable influence on recruitment and pay HR practices. In stark contrast, the US has no such arrangement. Moreover, in Europe, there is generally greater regulation regarding recruitment and dismissal, more formalised educational certification, and quasi-legal aspects to the industrial relations framework (Gold, 2009). This differs massively again from America, allowing unregulated and decentralised systems to give organisations the power to hire and fire almost entirely free of regulation. These countries could not embody one ‘best practice’ re IHRM as their national institutions led to differing employment laws and norms.
Hybridisation has been the critical result of these debates. Essentially, this is an IHRM strategy that combines different orientations and is arguably more appropriate than convergence or divergence. Chung, Sparrow, and Bozkurt (2014) did a study, and in all nine of the companies used, their IHRM system embodied that of hybridisation. However, this submission will not detail this topic as it is vast in itself. Merely, it will use to present a nuanced picture of the convergence-divergence debate. Like with most things, neither side of this debate is entirely correct. However, it is also important to note that they are not wrong.
Chris Brewster summarises this:
‘Those looking to defend one position or another can easily find evidence to support their case. Thus, there do seem to be trends…that are widespread, even if they do not seem to be diminishing the differences between the countries in the way they manage their HRM.’
Various scholars have now adopted a nuanced view, basically stating that whilst globalisation has promoted ‘homogenisation’ (convergence), the extent to which it is happening must be re-evaluated from early literature on the topic. This submission adopts the view that ‘convergence is always tempered by divergence.’ The two arguably go hand in hand, as it is unfair to say IHRM practices are getting less similar. Still, the idea that they will converge into one set of principles is a vast simplification of globalisation, culture and IHRM itself.
In conclusion, whilst both sides have empirical evidence and logic supporting their theories, the debate is regarding an increasingly complex topic. Globalisation is neither leading to people becoming exclusively more similar nor more different; it is simultaneously doing both: ‘Paradoxically, at the same time as transactional boundaries weaken, there is an increased awareness of cultural differences and a growing celebration of cultural diversity…Globalisation may therefore be stimulating divergent as well as convergent developments….’ Child (2002):