Diffusion of transferred human resource management practices in multinational enterprise subsidiaries: a multi-level approach

Given that multinational enterprises (MNEs) are facing an increasingly competitive environment, it has become imperative that they examine ways to create competitive advantages through the global transfer of successful human resource management (HRM) practices (Thomas & Lazarova, 2013). In this scenario, practice transfer and diffusion are critical issues in the international business literature (Adams et al., 2017; Ahlvik et al., 2016). Despite the valuable insights that the literature has provided on the factors driving diffusion outcomes, significant gaps remain. First, the overemphasis on a single conceptual lens has resulted in a limited understanding of how the national institutional environment interacts with other factors (Chiang et al., 2017). The second gap relates to the domination of ideas from new institutionalism, a subset of institutional theory. This body of work has emphasised the institutional environment’s determinism in shaping organisational behaviours but has paid insufficient attention to agency in MNEs and, particularly, the role of the actors involved (Kostova et al., 2008). Against this background, this study developed a multi-level model drawing on new institutionalism, the resource-based view, and microfoundations to account for the factors affecting diffusion outcomes. Unlike earlier studies, this thesis focuses on factors' direct influence and interaction effects across three levels (i.e., institutional distance, subsidiary HRM capabilities, and employee readiness). Adopting a mixed-methods approach, this study utilises a survey and multiple case study design. A total of 878 employees from 36 MNE subsidiaries in Ghana participated in the survey, whereas 28 in-depth interviews were conducted across 10 case firms. The survey results were supplemented with detailed insights from the interviews. This study finds that although the formal institutional distance is not significant, informal institutional distance is negatively and significantly related to implementing and integrating transferred HR practices. In contrast, the subsidiary’s HRM capabilities and employee readiness positively and significantly affected all three diffusion dimensions. More importantly, the study finds that subsidiary HRM capabilities and employee readiness can positively moderate the negative effects of formal institutional distance and some individual dimensions of informal institutional distance. Therefore, the findings highlight the possibility of employee readiness and subsidiary HRM capabilities limiting the significant negative effects of the informal institutional environment on diffusion. The integrated theoretical approach allows the study to draw on new institutionalism, resource-based approaches, and microfoundations to emphasise the multi-level dynamics and agency associated with the diffusion of transferred practices at the subsidiary level. The findings from this study suggest that MNEs can navigate unfamiliar contexts while overcoming likely resistance from employees and managers. Overall, this study contributes to the literature on the diffusion of transferred HRM practices within MNEs by showing how the process is subject to top-down effects from the firm’s institutional environment and bottom-up effects through employees’ actions within the subsidiaries.