HRM IN IRAN

HRM in Iran

HRM in Iran

Assignment 1

Outline

Introduction

This paper uses research findings from a preliminary sample of ten IJVs based in Iran to identify factors which permit joint ventures to standardise or localise HRM practices in the joint venture relationship and also examines what factors impact on the transferability of HRM practices.

Background

International joint ventures (IJVs), as a form of strategic alliances and through the expansion of multinational companies (MNCs) have been growing in number worldwide and are becoming recognised as a means of entering new and unexplored markets (Killing, 1983; Harrigan, 1985; Datta, 1988; Geringer, 1991; Cyr, 1995). With this increase in IJV activity globally, more interest and research is being conducted on human resource management (HRM) practices in the MNCs' local operation (Easterby-Smith et al., 1995; Lu and Bjorkman, 1997; 1998; 1999; Tayeb, 1998; Tsang, 1994; Wang and Satow, 1994; Wasti, 1998). An active area of academic debate is the degree to which HRM practices follow the multinational or local partners practice in international joint ventures (Beechler and Yang, 1994; Hannon et al., 1995; Monks, 1996; Rosenzweig and Nohria, 1994; Lu and Bjorkman, 1997, 1998). MNCs must decide how to manage their HRM policies and practices in host countries; whether these should be standardised to MNC global integration or localised to practices in the host country or a combination that blends both standardisation with local responsiveness (Doz et al., 1981; Lu and Bjorkman, 1997; Prahalad and Doz, 1987; Schuler et al., 1993; Hannon et al., 1995; Taylor et al., 1996).

Beechler and Yang (1994) argue that there are three sets of factors, which influence whether or not a multinational can transfer home-grown HRM practices to its subsidiaries. These are first, factors relating to the home country of the multinational, such as national culture and the extent it influences the company's administrative philosophy. Second, factors relating to the host country, for example culture and its distance from the home-culture, the labour market conditions and industrial relations rules. Third, factors relating to the company itself, such as the extent to which subsidiaries are an integral part of the strategic plans of the parent company.

HRM practices advocated in one culture may have serious limitations when directly transferred to another culture. In the case of developing countries, the political and economic situation will amplify this problem, which suggests that MNCs should adopt a polycentric strategy as opposed to an ethnocentric one. However due to reasons of global efficiency and local responsiveness this has varying degrees of pressure (Doz et al., 1981).

In terms of cultural differences, Schuler et al. (1993) proposed that the greater the socio-cultural differences between host and home country, the more likely it will be that MNCs will permit the development of HRM practices that are unique and adapted to the local interests and diversity. Lu and Bjorkman (1997) term the phenomenon “compatibility”, describing the choice MNCs have to make between standardising HRM policies and practices versus localising them across settings and cultures.

The conclusion to Lu and Bjorkman's (1997) study of 67 ...