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AN ASSESSMENT ON THE IMPORTANCE OF INTERNATIONAL HUMAN

RESOURCE MANAGEMENT IN MULTINATIONAL COMPANIES

Uluslararası İnsan Kaynakları Yönetiminin Çok Uluslu Şirketler Arasındaki Önemine İlişkin Bir

Değerlendirme

Ugur FILIZ Szent Istvan University, Doctoral School of Management and Business Administration, Godollo/Hungary

ORCİD NO: https://orcid.org/0000-0003-3032-2206

Cite As: Fılız, U. (2021). “An Assessment On The Importance Of International Human Resource Management In Multinational

Companies”, International Social Mentality and Researcher Thinkers Journal, (Issn:2630-631X) 7(43): 493-504.

ÖZET

Multinational companies (MNCs), as enterprises that have the ability to carry out their production activities in more than one

countries and to respond to the needs of multiple international markets, need to give significant importance to the management of

their human capital, as much as the importance they give to the management of their economic resources and advanced technology.

The significance of International Human Resource Management (IHRM) and its impact on the management of international

operations are recognised as one of the major determinants of success or failure in the global business environment for MNCs. It is

crucial to have the ability of effective international human resources management policies and practices since employees from

different cultures with different characteristics are one of the critical resources of the enterprises to maintain their operations

successfully on a regular basis. In this context, this proposal aims to study the importance of IHRM in MNCs and how it can affect

the success of their operations in the international business arena.

Keywords: IHRM, HRM, MNCs, Human Resources, Multinational Companies, Multinational Enterprise

ABSTRACT

Çok uluslu şirketler, iş faaliyetlerini birden fazla ülkede yürütme kabiliyeti ve esnekliğine ve uluslarası pazarların değişken ve çok

sayıdaki ihtiyaçlarına cevap verebilecek yapıya sahip kuruluşlar olarak, insan sermayelerinin yönetimine ekonomik kaynaklarının ve

ileri teknolojilerinin yönetimlerine verdikleri kadar önem vermeye özen göstermelidirler. Çünkü, Uluslararası İnsan Kaynakları

Yönetiminin önemi ve uluslararası işletme faaliyetlerinin ve operasyonlarının üzerindeki etkisi, çok uluslu şirketler için uluslararası

iş ortamında başarı veya başarısızlığın en önemli belirleyicilerinden biri olarak kabul edilmektedir. Etkili uluslararası insan

kaynakları yönetimi politika ve uygulamalarına sahip olmak büyük önem taşımaktadır, çünkü farklı kültürlerden ve farklı

özelliklerden çalışanlar, işletmelerin operasyonlarını düzenli olarak başarılı bir şekilde sürdürmelerinin temel kaynaklarından biridir.

Bu bağlamda, bu çalışmada, çok uluslu şirketlerde Uluslararası İnsan Kaynakları Yönetiminin önemini ve uluslararası iş

alanlarındaki faaliyetlerinin başarısını nasıl etkileyebileceğini incelemeyi amaçlamaktadır.

Anahtar Kelimeler: UIKY, IKY, ÇUS, İnsan Kaynakları, Çok Uluslu Şirketler, Çok Uluslu İşletme

1. INTRODUCTION

In recent years, the development of globalisation has changed the international business environment

completely by eliminating borders between nations, reducing political, cultural and social differences and

enabling the transfer of technologies faster. Globalisation has also brought some demographic changes to the

global economy through the free flow of capital, goods and services (Hill, 2011). Furthermore, the global

markets integrated at both regional and international levels, and it stimulated the emergence of new markets,

the increase of FDIs, and the production of services across the borders through multinational companies

(MNCs) (Cooke, 2005). In other words, cross-border corporations started to take over the global business

environment through acquisitions and mergers.

In this era of globalisation, MNCs constitute significant differences compared to domestic companies in

terms of demographic, political, economic, cultural and social aspects. While they run their operations both

on the regional and global level, they also need to consider a wide range of global and local factors while

building their business management strategies. Therefore, human resources management for organisations

can be crucial as it can provide an edge to the companies on gaining and sustaining a competitive advantage

in the global competitive market. In other words, international human resources management efficiency and

effectiveness of multinational companies can be a key differentiating factor between their success and

failure.

As a result of globalisation and the emergence of MNCs running their operations across the borders, the

relationship between multinational companies and IHRM has been a common area of study in the literature

for academics from the multidisciplinary fields increasingly due to the critical role of human resources

Doı : http://dx.doi.org/10.31576/smryj.824

e-ISSN: 2630-631X

SmartJournal 2021; 7(43) : 493-504

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management in their business management strategies and its significant impact on the performance and

competitive power of corporations. In this regard, the importance of IHRM within multinational companies

emerged particularly in all processes, policies and practices they enforce between their headquarters and

local subsidiaries they have established overseas. Accordingly, after providing the theoretical background of

HRM, IHRM and MNCs, IHRM in MNCs and its importance will be discussed in the following sections.

2. THEORETICAL BACKGROUND

2.1. Conceptual Framework of HRM and IHRM

Human Resource Management (HRM) practices started to evolve and improve significantly during the

1990s, in which the European economy began to go through a rapid development (Roethlishberg &

Dickson, 1939). The quickly developing economy arose the need for another diverse methodology to ensure

HRM practices' efficiency in the rising work market of the time. A disciplined, well-organised and skilled

workforce was precisely what the production industry needed during the pre and post First World War

period. All these factors led to a major development in the labour management processes and practices that is

examined under four stages of welfare management, personnel administration, personnel management and

human resource management (Chruden & Sherman, 1984; Cuming, 1985). Particularly in the most recent

twenty years, there has been a wide range of major changes in the HRM field, which expanded the

significance of HRM even more for the new millennium organisations. Before, while HRM was perceived

with practices limited to payrolls and enrolment forms, now HRM presents greater importance for

organisations with the critical role it plays in the success of organisations by constituting a crucial part in

their business strategies (Frasch et al., 2009; Anderson et al., 2007).

The principal objective of HRM can be portrayed as to fulfil the vision, missions, and goals of organisations

with their employees' contribution as they are recognised as a critical factor with the significant and unique

input they provide towards the success of organisations. HRM also aims to utilise and benefit from

employees’ full potential to ensure their organisations' success. The third objective of HRM is concerning

their employees' dedication to their organisations and positions, which is a critical factor in creating an ideal

and harmonious workplace for everyone where they can maximise their performance and productivity.

Another objective of HRM is to create a robust hierarchical structure in the organisation that will help

employees to comprehend organisational norms and values better and earn their commitment. HRM also

carries a key role in utilising organisations’ resources with maximum efficiency to ensure that they are

allocated wisely through the business operations to minimise waste of resources. Another objective of HRM

is to create a work environment where employees can work together with synergy at all degrees of the

organisation. Last but not least, HRM plays a vital role in the teamwork, creativity and innovation activities

of organisations that will help them to reach corporate excellency (Beer & Spector, 1985; Cuming, 1985;

Armstrong, 1995; Dessler, 2005).

It is possible to encounter many definitions of human resources management by various academics and

experts in the literature. HRM can be described as the policies, practices, and systems that impact the

performance and behaviours of employees (Hollenbeck & Wright, 2011). However, it can be described as a

process that consists of employment, training and compensation of employees, and development of policies

and business strategies that have an impact on practices and commitment of people (Frasch et al., 2009).

Schuler (1993) described HRM as “HRM is the use of several activities to ensure that human resources are

managed effectively for the benefit of the individual, society and the business”.

On the other hand, international human resources management (IHRM) can be defined as “…a set of distinct

activities, functions, and processes that are directed in attracting, developing and maintaining the human

resources of a multinational enterprise” (Shen, 2005). Schuler et al. (1993) defined IHRM as “…with the

consideration of human resource management issues, functions and practices, the strategies of MNCs … take

into account the international concerns and the integrative goals of the enterprises”. In other words, they

referred to IHRM as the process of HRM in the global context with an international approach. Similarly,

IHRM is defined by Taylor et al. (1996) as ‘’…policies and practices entailing the attraction, development,

and maintaining of human resources with the distinction of activities, functions, and processes in MNCs. In

other words, it refers to a diversity of human resources management systems in MNCs, both at home and

abroad. According to the description of Dowling et al., six main factors can be given to explain the

difference between IHRM and domestic HRM, which are the additional number of HR activities. These are

the necessity of a broader perspective, involving the personal lives of the employees more, more diverse



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work environment where locals and ex-pats work together and exposure to risks more as a result of a wide

range of external influences (Dowling et al., 1999).

As can be seen in the literature, IHRM academics can be taken under two categories. The first group of

academics focuses on the IHRM processes in MNCs, such as recruitment and training. In the global context,

expatriate management and the role of international manager are the main points that attract the most

attention by these academics. On the other hand, mainly social and cultural factors of HRM are studied by

the other group academics who focus on the influence of several factors such as the cultural issues in a cross-

national context (Beardwell & Holden, 2001; Sculion, 2001). From a global management point of view,

development, management of expatriates, and internationalisation through the whole company and creating a

corporate culture considering the company's cross-cultural needs globally and locally can be given us focus

areas of IHRM.

However, the current development trend in the international business and economy literature of IHRM

considers several factors such as FDI, knowledge management, culture, and leadership in alignment with the

internationalisation process of the companies. IHRM related issues, strategies, and practices of MNCs are

also examined in this context (Sculion, 2001). Accordingly, Peltonen (2006) drew attention to the existence

of human resources practices given in the IHRM process in cross-cultural contexts. According to the

contemporary definition of IHRM with a modern approach introduced by Dickmann et al. (2008), IHRM can

be defined as “…the activities of MNCs to pursue their competing demands. In this way, organisations can

achieve the goals of international coherence and cost-effective methods to manage the staff member in all the

countries they operate. Moreover, at the same time, it can also be adaptable to the differences from one area

to another”.

As can be seen in the several definitions of IHRM above, the people management perspective is different

from the traditional personnel management as commitment and development of the employees and

enhancement of organisational performance aspects have a significant role in the modern approach to IHRM

(Wilton, 2013; Storey, 2007). Global coordination of headquarters and foreign subsidiaries, the influence of

cultural differences and some other local contexts were also internal and external factors attached great

importance by the modern approach in IHRM (Sculion & Linehan, 2005).

2.2. Conceptual Framework of Multinational Companies (MNCs)

The internationalisation trend for businesses and transition attempts to a global economy has been increasing

since the early 1980s (Barham, 1987). Internationalisation can be defined as “‘the process of increasing

involvement in international operations” (Welch & Luostarinen, 1988). Rapid globalisation and increasing

competition and cooperation among the firms have led to considerable changes in the international business

arena as well as increasing the significance of global business structure over the years (Briscoe & Schuler,

2004). Accordingly, Rosenzweig and Singh (1991) stated that firms started having control over activities in

more than one country due to the increasing interdependence in the business environment among the actors

of the world economy. Therefore, companies started adopting a global approach in their businesses through

exporting, international alliances, joint ventures, mergers and acquisitions, and building more production

facilities abroad.

Sundaram and Black (1992) defined MNCs as “The corporations which implement transactions in or among

several sovereign entities and the transactions tend to be influenced by factors different from the home

country of the corporations”. According to another definition of MNCs, it can be described as an enterprise

that engages in foreign direct investments (FDI) and has the ownership or control of value-added operations

in more than one countries (Dunning & Lundan, 2008).

Generally, these operational activities are managed by the subsidiaries can be created in several formations

such as wholly-owned subsidiaries, minority equity investments, or joint ventures. Wholly owned

subsidiaries mean that majority or total of the share capital is held by the MNC. In contrast, minority equity

investments refer to companies where only a minority of equity share is owned by the MNC. However, joint

ventures occur when MNCs agree on sharing their capital with another company. Also, MNCs can be in

different forms, such as smaller companies making investments abroad or big companies with a considerable

number of subsidiaries in many countries (Mayrhofer, 2012). It is possible to observe that there is generally

cooperation among foreign subsidiaries and local companies as well as an autonomous interaction with other

regional actors in the business environment. Government, suppliers, distributors, and suppliers can be given

as some of the local business actors. In other words, MNCs engage in relationships with a wide range of



496

networks which potentially increase over time depending on the several factors in the business environment

they operate (Hennart, 2009).

There are major differences between MNCs and domestic companies. Due to operating in several countries,

a wide range of different factors needs to be taken into consideration by MNCs, such as cultural, economic,

political, social, and historical factors (Morgan et al., 2001). Parallel to development in the global market,

MNCs are large scale corporations that need to run their operations on both global and local levels across the

borders to gain and maintain competitive power (Merchant, 2000). In other words, MNCs are not limited by

the boundaries of the national business environment. Instead, they manage to carry out their operations

across international borders by creating and implementing their organisational structure, plans, and strategies

(Ferner et al., 2011). That is why it is possible to observe effective and efficient management of strategic

international human resources management by MNCs (De Cieri et al., 2007).

Even though there are different approaches to MNCs' evolution, the foundation of modern MNCs date back

to the 16th century as previous efforts were more based on the personal pursuit of natural resources and

agricultural products. Finally, as agreed on, MNCs reached their modern form in the 20th century

(Kaymakçı, 2013). In this context, trading companies operating in the 16th, 17th and 17th centuries in the

UK, France, and the Netherlands are considered the first MNCs. The first examples of these companies that

have continued their existence for many years; Muscovy Company is the East India Company and Hudson's

Bay Company. These companies, which have essential trade activities, have taken the first steps of MNCs

(Erdoğan, 2012).

In the 19th century, foreign investments from Western Europe to the underdeveloped countries of Asia,

Africa and America were widely spread. Especially, UK investments increased noticeably, and these

investments took place in the form of a share of the profits rather than taking over the enterprises'

management. Initially, the shift of profits from branches to headquarters was a rare case. Other countries in

Europe, especially Germany, the Netherlands, and France, followed the UK by making significant

investments. British enterprises invested in India in Australia and South Africa, while French businesses

invested in Korea, Tunisia, and other French colonies. In this period, American enterprises were in a stagnant

position. The main reason for slowing development was the lack of infrastructure investments in the country.

When the new Customs Duties Law was enacted in 1876, an American Weapon Operator, Du Pont, entered

the international arena by acquiring two existing Canadian powder mills. The Du Pont example represents

the first significant American foreign activity (Özalp, 1976).

By the end of the 19th century, the acceleration of economic activities, the progress made in transportation

and communication technologies, the growth of industrial companies, the investment of American producers

in Canada, South America and Europe encouraged the US to end the civil war. Singer, a leading company in

these developments, granted a French company a license to manufacture a new sewing machine in 1855 and

1867 established its first factory abroad in Glasgow. The Westinghouse company opened a workshop in

1879 to produce brakes in Paris. In 1882, American telecommunications companies Western Electric and

International Bell made a joint venture in Belgium. In the 1870s and 1880s, many American companies were

looking for new markets to export new products such as screws, cash registers, elevators, steam pumps,

locomotives, guns, while some of them started international production, but the scale of these initiatives was

limited due to restrictions in the process (Erdoğan, 2012).

There are also sources related to the MNC as well as the Industrial Revolution. Influential industrial

companies operating in the international arena began to emerge in the west after the industrial revolution and

became more popular after World War II (Kıvılcım, 2013). After the Second World War, European countries

started to invite American companies to invest in electronics, automotive, telecommunications, aerospace,

and other companies that need to expand their markets to grow. Because of the obstacles they face in foreign

trade, the most appropriate way for these companies was direct investments. The market for American

MNCs to be most interested in their investments until the 1970s was the Western European market. It is

because the consumers' taste and preferences were similar to those of the US consumer, and the per capita

income in Western Europe was high. In this period, direct investments in the US had about 60% of direct

investments in the world. England, France, and Germany were more interested in portfolio investments in

the same period (Erdoğan, 2012).

The rise of technological developments in the post-1980 period and the desire of international organisations

such as the IMF, World Bank, and WTO to create a more free world economy have brought MNCs into the

most affected and most influential actors (Saraç, 2006). In the last quarter-century, direct investments that



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the MNCs have in their own country, in partnership with governments or domestic entrepreneurs, or the

licenses they sell directly to these countries, have enabled the technology created in a country to be used on a

world scale in a short time. Thus, MNCs have become an effective tool for spreading new technologies

among countries today. However, it is argued that economic reasons play a role in the development of new

technologies rather than technical reasons. In other words, the MNCs' investments in this area are not

intended to be technically advanced but aim to raise their profits by establishing monopolistic power in

various markets. Indeed, it is this opinion that MNCs are trying to make rapid investments and prevent

market losses, especially in countries where similar technologies may be developed by other companies

(Alpar, 1980).

It would also be useful to explain the frequently encountered terms in the literature related to multinational

companies such as main country, host country, third country, main enterprise, and fattening business. To

begin with the definition of the origin/parent country, “it refers to the origin country of the multinational

company or the country where it was first established. For example, while Toyota Motor's origin country is

Japan, the origin country of Samsung is South Korea. While the origin country of Nestle is Switzerland,

Microsoft's origin country is the United States. On the other hand, “the host country” can be defined as the

country where the multinational company invests. For example, for Toyota Motor's joint investment in

Turkey, Turkey becomes the host country (Bolat & Seymen, 2005).

“The third country”, other than the origin country and the host country, refers to other countries in which the

multinational corporation provides its products as well as providing staff. The third country is the country

involved in various ways, such as the provision of any of the factors of production or the transfer of

knowledge. For example, in the branch of Toyota Motor in Turkey, besides the Japanese and Turkish

citizens, Toyota Motor employs staff from different nationalities such as British and American citizens.

These are classified as third-country nationals (Filizöz, 2003). “The parent company” is the central company

that makes the investment. The parent company owns the ownership of subsidiaries and has the authority in

the management of these companies (Bolat & Seymen, 2005).

Finally, “the subsidiary company” can be described as the companies owned and located in foreign countries.

MNCs make investments through establishing a new company in the destination country, buying an existing

company, or establishing a joint company with local capital. In this way, the company acquired in a foreign

country is called a subsidiary company (Gedikli, 2011).

3. IHRM IN MULTINATIONAL COMPANIES

As a discipline, IHRM focuses on developing an understanding of human resource management policies,

practices and strategies within organisations regarding their goals and competitiveness in the global business

environment (Stahl & Bjorkman, 2006). There are three orientations, such as adaptive, exportive, and

integrative, introduced for examining IHRM in MNCs that provided a framework for general policies. These

policies help the top management level of MNCs to design their IHRM strategies. First orientation, adaptive,

brings a more flexible approach to the process of designing HRM system as the local environment is taken

into account more by the top-level management of MNCs (Taylor et al., 1996). Organisation integration is

left one step behind by putting more emphasis on the local differentiation by recruiting more local HR

practitioners (Adler, 1991; Tung, 1984).

On the other hand, the organisational integration is prioritised over local distinction as the HRM policies and

practices of the parent country of MNCs are replicated to the subsidiaries in the exportive orientation of

IHRM (Taylor et al., 1996). Finally, in the integrative orientation of IHRM, on account of achieving to

maintain the ‘best’ HRM practices, an effort is made to establish a global system (Barlett & Ghoshal, 1989).

It means that IHRM policies and practices can be implemented and transferred among both subsidiaries and

the headquarters in both directions that would link the characteristics of the HRM system to each other.

There are some core competencies for organisations to fulfil for running their operations successfully. These

core competencies are the knowledge and skills of their employees, the physical and technical systems they

own, management systems they follow, and organisations norms and values they create. Accordingly, it is

important to note that MNCs run their operations across the borders while coping with different regulations,

cultures and standards. Therefore, they need to consider and meet the needs of their local subsidiaries

through their IHRM activities. In other words, they need to be responsive to local external and internal

factors. Considering the production scale and range of MNCs and innovative physical and technical systems

they own, they are under the pressure of developing international strategies that will ensure the global



498

integration of IHRM and will connect their global operations across the borders among their subsidiaries

(Hamel & Prahalad. 1994).

However, the IHRM policies and practices adopted by MNCs in a foreign country depend on its

internationalisation stage and how much the company is willing to be involved in the local subsidiaries

accordingly (Tayeb, 2005). Bartlett and Ghoshal (1989) point out that there are various stages of

internationalisation MNCs go through. In case of adopting an international strategy, MNCs choose to rely on

the parent company’s expertise and develops technology and research in the home country. On the other

hand, in a decentralised strategy, they choose to provide more freedom to their subsidiaries to follow local

practices as well. When a global approach is preferred, the parent company’s practices are replicated by the

subsidiaries, whereas there is centralised control over them. Finally, global standards and practices are

followed by both the parent and host country in case of adopting the transnational strategy. Depending on the

chosen internationalisation strategy, the role of IHRM and its involvement in policies and practices also

change (Farndale et al., 2010).

4. IMPORTANCE OF IHRM IN THE OPERATIONS OF MNCS

Beginning from the late 20th century until today, the interest in IHRM has kept growing significantly. Also,

rapidly increasing competitiveness in the global market led to the rising number and importance of MNCs in

the international business arena (Tayeb, 2005). Following the changes brought into the international business

area by the development of globalisation, MNCs began to face some challenges in terms of competitiveness

that forced them to focus on the strategic management of their human resources in their operations (Ghoshal

& Bartlett, 1995). In other words, MNCs faced some challenges emerging from the necessity of maintaining

operations both globally and locally. To gain and sustain a competitive advantage in the global market, while

MNCs needed to have a global management approach as they are operating in one overall market, they also

needed to reckon with many markets which are not directly related (De Cieri et al., 2007).

Compared to the traditional role of IHRM regarding expatriate management in the past, nowadays, the

modern IHRM approach requires management of a wide range of factors such as cross-cultural management,

performance, reward and career management. In addition to that, the policies and practices need to be

developed carefully by considering the company's global and local context (Stiles, 2007). In terms of

functionality, despite there are plenty of similarities between domestic HRM and IHRM, IHRM has a

broader perspective equipped with some more additional and complex functions comparing to HRM as it

requires more involvement in the personal lives of the employees. Considering the more complex nature of

MNCs comparing to the domestic companies, there is also a need for developing more complex IHRM

strategies to be able to respond to the diverse character of the organisation, changing external and internal

factors, higher risk exposure and necessity of more involvement in employees’ life (Dowling et al., 1998).

Also, some IHRM functions provide a significant support for the business strategy of the companies. In this

context, the human resource planning function helps companies to define the exact number of required

employees and which specific knowledge and skills they need to carry according to the business

requirements of the company. While the recruitment function coordinates the process of attracting potential

employees to the company, new employees are chosen from the applicants as part of the selection function.

Afterwards, the training and development function creates a training program for employees to acquire the

necessary knowledge on how to perform their routines tasks in their job positions as well as setting their

expectations in their new positions. After onboarding is completed, the performance management function

ensures monitoring and evaluating the employees' performance regularly according to the quality standards

defined. Accordingly, employees with high performance are rewarded as part of the compensation

management function. Finally, activities by employee relations function are maintained continuously in the

most efficient way to create a harmonious work environment where the employees can maximise their

productivity and performance. Effective management of these functions and practices has a major impact on

the performance of an organisation since not only it will ensure employee satisfaction and customers but also

prepare a work environment where innovative and productive activities can reach maximum efficiency (Hitt

et al., 1998; Delaney & Huselid, 1996).

International human resources management (IHRM) has been recognised as a crucial factor that can

significantly differentiate the MNCs between reaching success or having failure since the 1990s (Taylor et

al., 1996; Schuler et al., 1993). As constituting one of the key strategic means for MNCs, IHRM allows them

to formulate and implement their business strategies to improve their performance (Wright & McMahan,

1992; Peffer, 1994; Taylor et al., 1996). According to the resource-based theory of the firm, internal



499

resources and competencies of the firms are more important than the influence of factors in the business

environment. Due to the unique character of human resources practices and strategies, they cannot be

replicated or imitated by other competitors. Therefore, human resources can be a vital instrument for firms to

gain and sustain a competitive advantage in the global market (Barney, 1991; Wernerfelt, 1984).

These internal resources and competencies can be seen at the parent-company level on tangible and

intangible values and skills developed by MNCs overtime with increasing experience in the international

market. Accordingly, based on the top managers' capabilities and competencies, their contribution to the

international experience, knowledge, and strategy of the parent company can be given as an example

(Carpenter et al., 2001). On the other hand, it is possible to see the presence and impact of these internal

resources and competencies in generating a competitive advantage with the subsidiary resources at the

subsidiary level. Managers at subsidiary levels can also make a significant contribution to the organisational

performance and competitive power of the entire MNC through their organisation capabilities, competencies

and knowledge (Birkinshaw et al., 1998; Peng, 2001). However, it is essential to note that MNCs'

competitive power relies on all HRM system at a subsidiary level as much as the human capital aspects and

individual HRM policies and practices related to them (Lado & Wilson, 1994).

There is a close relationship between the efficiency and effectiveness of IHRM of MNCs and their

performance and competitive power in the global market as international strategy and management of

expatriates in the MNCs are directly determined by their human resources management decisions (Sparrow,

2009). Possession of a workforce with the required skills, knowledge and experience and development of the

right human resources policies for their management is a crucial factor for MNCs to be successful and gain a

competitive advantage in the business environment (Briscoe & Schuler, 2004). MNCs need to attract and

retain expatriates that are capable and experienced because they play a critical role in the success of the

organisations (Sims and Schraeder, 2005). The part of the human resources strategy in MNCs is vital for

determining the internationalisation strategy, its implementation and control processes. Human resources

need to be utilised efficiently and effectively according to the planned corporate strategy of the company.

Therefore, IHRM strategy constitutes to be a critical determinant for the successful implementation of MNC

strategy (Bartlett and Ghoshal, 1998).

However, MNCs' IHRM strategy has a high impact on their organisation performance within the framework

of integration and response rate to local contexts and efficiency. MNCs can survive in the competitive global

market only if they can have a globally competitive power in the market. Therefore, it is more than necessary

for MNCs to pay attention to some main points during their IHRM operations. Firstly, MNCs should

consider the local characteristics such as culture during the implementation of their human resources

practices to make sure that they have a fast response rate to the local contexts (Barlett & Ghoshal, 1989).

Secondly, MNCs should have the ability to develop and implement effective methods and processes to

ensure efficiency in providing their products and services (Schuler et al., 1993). After reaching the desired

efficiency level, quality improvement should be the primary concern for MNCs as it is one of the drivers of

global competitive power. Therefore, human resources policies and practices should be developed in

alignment with the quality management strategies by finding and implementing the most suitable methods

and process for the MNC (Ghoshal & Bartlett, 1995). As a general approach, during the process development

and implementation of HR practices, MNCs should always consider integrating the organisation as HR

practices are always parts of a whole system that is integrated vertically and horizontally. This approach

would ensure the ideal balance between headquarters and subsidiaries in MNCs (De Cieri et al., 2007).

Considering that not only the internal organisational environment but also external national and business

international environment constitute the main operation of MNCs, their operations may be challenged by

complex and uncertain activities originate from socioeconomic, cultural, political and institutional

differences they have across the national borders (Gronhaug & Nordhaug, 1992). Therefore, the importance

of human resources function will reveal once companies are especially in the formation of wholly-owned

subsidiaries or joint ventures as management of employees from the host country or other nationality will be

defined by HR management (Welch & Luostarinen, 1988).

There is also a consensus that the success of IHRM has a more critical impact on the operations of MNCs

compared to domestic operations as the failure would cause a more extensive loss of human and financial

capital (Dowling et al., 2004). Therefore, especially expanding companies across the borders need managers

with higher capabilities to run the business successfully by considering both cultural and economic factors

from the global and local point of view. This means more area of responsibility covered by IHRM related



500

activities (Black et al., 1999; Morgan et al., 2003). However, it is also necessary for MNCs to carry some

characteristics to ensure effectiveness and efficiency of their IHRM policies, practices and strategies in the

competitive global market, such as being an efficient company, having a competitive power in the market,

global standards, ability to realise knowledge transfer and adaptation skills to different local market

conditions knowledge transfer (Schuler et al., 1993; Sparrow & Braun, 2006).

5. CONCLUSION

IHRM in MNCs consists of processes related to the appointment of managers, experts, and employees who

will be responsible for managing the organisation and investments in foreign countries by considering the

cultural, legal and political characteristics, differences, and relations of the host countries. Above all, the

achievement of MNCs' objectives and goals are closely related to their human resources management

policies and practices as it would ensure superiority against their competitors and increase their revenue,

influence, and power in the foreign markets. With the increasing influence of globalisation and

internationalisation; technology, capital and other inputs that can be used in the production process are

provided in a short time and easily, and in today's market conditions, where the competition is very intense

and destructive, the need for more qualified and distinguishable human resources who have the knowledge

and skills are more than ever. In this context, the element of human resources management constitutes one of

the main factors and challenges that need to be addressed in MNCs' management strategies.

Following the development of globalisation, MNCs had to experience new emerging challenges during the

past two decades to gain and sustain their competitive power during their internationalisation process. As a

result of the transition of the enterprises from the national to the international dimension, the enterprises need

to take into account both international and regional factors while developing their human resources

management policies and practices, such as they used to for their production, marketing, and financial

activities as well. Because when multinational companies operate outside of their home countries, they are

not only employing their national citizens but also citizens of third countries or third-country nationals.

Especially multinational enterprises that use different labour force from different countries and cultures

should pay more attention to evaluating and developing their staffing policies on a global scale. However,

they should try to make the best rational decision in terms of economies of scale and location and need to

consider the needs of local subsidiaries carefully.

In conclusion, developing a clear understanding of human resources management in the MNCs is more

critical than ever, parallel to the increasing number and importance of multinational enterprises entering

foreign markets in the international business arena. It is crucial to have the ability of effective IHRM since

people from different cultures with different characteristics are one of the critical resources of the enterprises

to maintain their operations successfully. Therefore, MNCs should focus on achieving a balance between

organisational efficiency and subsidiary responsiveness to maximise organisation performance and gain

competitive power in the global market.

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