Assignment: IHRM and cultural characteristics
Whilst the global nature of multinational activity may call for increased consistency, the variety of cultural environments in which the MNE operates may call for differentiation. Workplace values and behaviors are widely regarded as being influenced by national as well as corporate cultural characteristics. As Laurent (1986) claims, ‘if we accept the view that human resource management (HRM) approaches are cultural artifacts reflecting the basic assumptions and values of the national culture in which organizations are embedded, international HRM becomes one of the most challenging corporate tasks in multinational organizations'.
Greece is clustered in the ‘Mediterranean culture' sector of managerial models, with native managers assumed to be less individualistic and more comfortable with highly bureaucratic organizational structures in order to achieve their objectives. In Hofstadter's terms Greece is characterized by large power distance and strong uncertainty avoidance (see Figure 14.4, p. 549). Since the early 1960s, Greece has been the host country for many foreign firms, initially in manufacturing and more recently in services. It is broadly accepted that management practices which reinforce national cultural values are more likely to yield better outcomes in terms of performance, with a mismatch between work unit management practices and national culture likely to reduce performance (Newman and Nolan, 1996). The suggestion here is that multinational firms, which have established their affiliates in Greece, will be more efficient if their management practices are better adapted to the national culture of Greece.
Theory suggests that this adaptation will be better achieved where the national culture of the home country of the MNE is close to that of Greece. In other words, MNEs from collectivist, large power distance and strong uncertainty avoidance countries will be at a small cultural distance from Greece and will better integrate into the organizational culture of the Greek affiliate. The following hypothesis is therefore suggested by Kessapidou and Varsakelis (2000). Hypothesis: MNEs from home countries at a large cultural distance from Greece will prefer to employ local managers and permit more decentralized IHRM practices.
This hypothesis would then predict that MNEs from home countries with national cultural characteristics of the individualist, small power distance and weak uncertainty avoidance variety (i.e. the opposites to Greece) will prefer to employ local managers and permit more decentralized IHRM practices. In their analysis of the operations of 485 foreign affiliates in Greece over the years 1994-96, Kessapidou and Varsakelis found considerable evidence to support this hypothesis. MNEs from home countries at a large cultural distance from Greece (e.g. UK, Netherlands, US with cultural distance factors 4.27, 4.03 and 3.47 respectively) were much more likely to employ local managers and adopt a decentralized approach to IHRM than countries at a small cultural distance from Greece (e.g. Italy, France and Spain with cultural distance factors 1.46, 0.99 and 0.58 respectively).
Question
1. What relevance does this case study have for IHRM aspects of multinational firm activity?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.