High Performance Work System Practices in Foreign Subsidiaries of American Multinationals:

This study focuses on the utilization of high performance work systems (HPWS) by subsidiaries of American multinational companies (MNCs). It is based on the premise that American MNCs have a preference for HPWS utilization. However, institutional influences at the host-country level may limit the likelihood of HPWS implementation. This study examines HPWS implementation in a sample of subsidiaries across fourteen host countries in Asia, Africa, and Europe. The research provides considerable variability in host-country institutional environments. The model we propose is largely supported in the case of rank-and-file workers, though some anomalies are found in the case of managerial employees. The study of the diffusion of human resource management (HRM) practices across country borders has become increasingly important in international HRM research (Brewster, 2006). Research shows that the transfer of HRM practices from multinational corporations (MNCs) to their foreign subsidiaries may be contingent upon the country-oforigin of the MNC (Lau & Ngo, 2001), institutional distances between the local and parent country locations (Gaur, Delios, & Singh, 2007), and the institutional pressures embedded in the local environment (Björkman, Fey, & Park, 2007). Despite extensive evidence exists about the contextual factors related to the similarities or dissimilarities of MNC subsidiary HRM practices across country borders, it is still the case that “little is known about the extent to which high-performance HRM practices are found in foreign subsidiaries across countries” (Björkman et al., 2007: 431). In a similar vein, the global integration–local responsiveness (GI-LR) framework articulated by various scholars (e.g., Hannon, Huang, & Jaw, 1995) tends to highlight the determinants of the tension between MNCs’ decision to integrate their HRM practices across different countries at the corporate level or to be more responsive to local conditions at the subsidiary level, abiding by laws and other institutional influences. Although this GILR approach examines the complexity of environmental influences on subsidiary HRM practices, much of the investigation has been centered on different nationalities of MNCs located in a single host country rather than multiple host countries (Hannon, et al., 1995; Ferner, Almond, and Colling, 2005; Rosenzweig and Nohria, 1994). In addition, much of the work has been focused on the perceived influence of the parent company over its subsidiary (e.g., Fenton-O’Creevy, Gooderham, & Nordhaug, 2008) rather than the specific HRM practices being transferred. Another approach has taken the view from institutional theory (Björkman et al., 2007). Björkman et al. (2007) tested the degree of utilization of high performance work systems (HPWSs) by MNC subsidiaries operating in the U.S., Russia and Finland. They found subsidiary factors (i.e. the status of the HR department and the involvement of subsidiary in knowledge transfer) influenced the use of HPWSs. Although they examined subsidiaries in three host countries and addressed the significance of institutional pressures faced by the subsidiaries, they had not directly tested specific measures of various aspects of the institutional environment within host countries. The likely institutional factors include the favorableness of the political-legislative environment to business, the restrictiveness of labor legislation, professional norms, and aspects of the cultural-cognitive institutional environment. Scholars have yet to “disentangle the relative influence of MNCinternal and –external regulative, normative and cultural-cognitive processes” (Björkman et al., 2007: 444) in determining the adoption of HRM practices in the diverse context of subsidiaries. Our study seeks to address the above call by investigating the tension between institutional pressures and the adoption of HRM practices in foreign subsidiaries of American MNCs operating in fourteen host countries dispersed throughout Europe, Africa, and Asia. We focused specifically on the extent of implementation of HPWSs, defined as including performance-based pay, extensive training, employee empowerment, extensive effort and care in recruitment and selection, and merit as a basis for organizational advancement, in foreign subsidiaries of American MNCs when confronted with hostcountry institutional challenges. Unlike previous studies examining data from only one host country (e.g., Hannon et al., 1995; Rosenzweig & Nohria, 1994) or a few host countries 2