INTERNATIONAL HRM

International HRM

International HRM

Introduction

The development of a business and corporate culture are the foundation of a successful market oriented business. The successful execution of a business strategy requires the involvement of employees and management to jointly accept the corporate culture and style of doing business. The transition economies in Central and Eastern Europe (CEE) continued along the challenging transition path from a state control to a free market economy with much progress made in the last 13 years.

It is also important to remember the starting point in these transitional economies is different in each country. The economic reform in Hungary involved introducing decentralized decision making for managers, although based on state ownership. Understanding the impact of business culture on transition economies requires analyzing the managers' role in the old, planned economy compared to their new role and the level of adaptability (Nagy, 1992).

The flow of foreign direct investment into the former communist countries increased rapidly with many Western firms setting up international joint ventures, green fields, and strategic alliances. Since 1989, Hungary alone has received a cumulative foreign investment of 28.9 billion as of December 2002 (Hungarian Investment and Trade Agency). During the privatization process, which started much earlier in Hungary than the Czech Republic, many international enterprises established subsidiaries or joint ventures. In Hungary, by the end of 1997, there were in excess of 30,000 joint ventures

(Borgulya, 2000). The presence of multinationals through greenfield developments and international joint ventures resulted in the introduction of foreign cultural values, norms, and codes of conduct to the host countries.



Transferability of Managerial Ideas

International joint ventures (IJVs) were a popular entry strategy for many foreign companies considering international expansion. In many cases, success did not come easily to this form of foreign entry. Failure rates were high (Collins & Doorley, 1991) and problems in IJVs resulted from people related issues.

Complexity was added when the partners were from diverse cultural backgrounds (Yah & Gray, 1994). The degree of support provided by the Western partner in addressing the local needs was one of the most important elements in the successful business relationship.

In the IJVs where a minority group of employees were merged with a larger group partner, Cyr (1997) reports building trust between the IJV stakeholder groups was essential. In international ventures, control is usually determined by technological or managerial expertise combined with the financial stability of a partner.

In CEE countries, the Western partner had primary management control by virtue of technological and financial position (Lyles and Salk, 1995).

At Polyelectro, greater success was achieved in creating a shared understanding of management concepts and goals. This was attributed to the French parent company hiring a consultant who surveyed the Polish workers. Polish workers developed a greater willingness to change and the French developed confidence in the local's skills (Cyr & Schneider, 1996).

Expatriates' role in facilitating cultural adaptation

Expectations of foreign direct investment benefits in Hungary and the Czech Republic were thought to be one of the driving forces of economic prosperity and ...