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High-performance work systems in foreign subsidiaries of American multinationals: An institutional model

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Abstract

This study examines the implementation of high-performance work systems (HPWSs) in 217 subsidiaries of American-based multinational enterprises operating in 14 countries in Asia, Africa, and Europe. Specifically, this paper explores the effect of host-country institutional factors on the extent of HPWS implementation in subsidiaries, and focuses on “strong agency” influences and dominance effects. The proposed model was more successful in explaining the effect of HPWSs on rank-and-file employees than on managers. Of particular interest is the strong positive association between host-country economic growth and HPWS implementation, which suggests a possible cyclical sensitivity of subsidiaries regarding human resource management strategy.

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Notes

  1. “Principles” represent the highest and most general level.

  2. Appendix A reports only the items ultimately used to construct the rank-and-file employees and managerial HPWS scales.

  3. The 10 items were randomly collapsed into three “parcels” (summated subscales) for the CFA. There were two three-item parcels and one four-item parcel.

  4. The nine items were randomly collapsed into three “parcels” (summated subscales) for the CFA, each parcel consisting of three items.

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Acknowledgements

The current study was supported under a grant from the Society for Human Resource Management (SHRM) Foundation, with additional support provided by the University of Illinois Center for Human Resource Management and the University of Illinois Research Board. The authors are thankful for the many useful suggestions made by the JIBS reviewers and the SHRM Foundation reviewers. Special thanks are extended to Herb Heneman III for his efforts in the grant process with the SHRM Foundation, and to Jeff Ericksen for suggestions regarding scale construction. Also, we would like to express our thanks for financial support from Korea University Business School and National Science Council of Taiwan.

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Authors and Affiliations

  1. School of Labor and Employment Relations, University of Illinois at Urbana-Champaign, USA

    John J Lawler

  2. Institute of Human Resource Management, National Sun Yat-sen University, Taiwan

    Shyh-jer Chen

  3. School of Business, National University of Singapore,

    Pei-Chuan Wu

  4. Business School, Korea University, Seoul, Korea

    Johngseok Bae

  5. School of Business, University of Redlands, USA

    Bing Bai

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  1. John J Lawler
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Additional information

Accepted by Rosalie Tung, Area Editor, 25 April 2010. This paper has been with the authors for three revisions.

Appendices

APPENDIX A

Selected Questionnaire Items

This appendix contains the items used in the high-performance work system (HPWS) scales, the business strategy scale, the knowledge inflow/outflow scales, and both the state efficiency and labor regulation scales. The methods section describes all other variables used in this study.

HPWSs scale

The HPWS scale for rank-and-file employees included the following items (after the item exclusions described above). Respondents answered all questions using five-point anchors ranging from “strongly disagree” to “strongly agree”.

illustration

figure a

Business strategy scale

Business managers were asked to rate the importance of each of the following two items in defining the subsidiary's business strategy. Both items were answered using five-point anchors ranging from “very low” to “very high”.

1. Providing customers with a variety of different products or services.

2. Differentiating our products or services from competitors based on quality.

Knowledge inflow/outflow scales

Business managers were asked to rate the following four questions for knowledge and technology flows to and from the subsidiary. All items were answered using five-point anchors ranging from “little or none” to “very substantial”. Separate scales were constructed for knowledge inflow and knowledge outflow.

1. What is the extent of knowledge and/or technology transfer related to research and development and/or the development of new products and services?

2. What is the extent of knowledge and/or technology transfer related to production and/or operations?

3. What is the extent of knowledge and/or technology transfer related to sales, promotion, distribution, and other aspects of marketing?

4. What is the extent of knowledge and/or technology transfer related to general management and administrative procedures?

State efficiency scale

This scale consisted of five items taken from the World Competitiveness Yearbook (2004). The following items were scored on a 10-point scale for each of the countries in the study.

  1. 1

    The legal framework encourages the competitiveness of enterprises.

  2. 2

    The adaptability of government policy to changes in the economy is high.

  3. 3

    The transparency of government policy is satisfactory.

  4. 4

    Bureaucracy does not hinder business activity.

  5. 5

    Bribing and corruption do not exist in the economy.

Restrictiveness of host-country labor legislation scale

This scale consisted of four items taken from Doing Business in 2005. Countries were ranked from 1 to 100: the higher the ranking, the more restrictive labor legislation for employers.

  1. 1

    The flexibility of hiring in the host country.

  2. 2

    Regulation of conditions of employment in the host country.

  3. 3

    The flexibility of firing in the host country.

  4. 4

    Overall index of employment law.

APPENDIX B

Model Specification

This study uses country-level and subsidiary-level variables, and presents the following two-level model:

where HPWS=high-performance work system implementation (rank-and-file workers and managers); c=constant; Σ i b 1i X 1i =fixed effects for the i subsidiary-level variables; Σ j b 2j X 2j =fixed effects for the j host-country-level variables; ζ k =random intercept for country k; and ɛ hk =random error for subsidiary h in country k.

The error variance for Eq. (1) can be represented as

where ψ=Var(ζ k ), θ=(ɛ hk ) and Cov(ζ k , ɛ hk )=0.

The ratio of the random-intercept variance to random error variance is the intraclass correlation (ρ), which indicates the extent to which between-country random effects explain residual error:

If ρ=0, then there are no country-specific residual effects on subsidiary HPWS implementation.

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Lawler, J., Chen, Sj., Wu, PC. et al. High-performance work systems in foreign subsidiaries of American multinationals: An institutional model. J Int Bus Stud 42, 202–220 (2011). https://doi.org/10.1057/jibs.2010.42

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