Human resource management practices of Japanese companies in India: dealing with the transfer-adaptation dichotomy
| Date | 07 August 2017 |
| DOI | https://doi.org/10.1108/JABS-09-2015-0152 |
| Published date | 07 August 2017 |
| Pages | 323-341 |
| Author | Mohan Pyari Maharjan,Tomoki Sekiguchi |
| Subject Matter | Strategy,International business |
Human resource management practices
of Japanese companies in India: dealing
with the transfer-adaptation dichotomy
Mohan Pyari Maharjan and Tomoki Sekiguchi
Mohan Pyari Maharjan
and Tomoki Sekiguchi are
both based at the
Graduate School of
Economics, Osaka
University, Toyonaka,
Japan.
Abstract
Purpose –Based on the international human resource management perspective, this paper aims to
explore and explain the human resource (HR) practices of Japanese multinational companies (MNCs)
operating in India.
Design/methodology/approach –This paper applies a qualitative methodology. The study is based
on 17 semi-structured interviews that were conducted within the subsidiaries of 10 Japanese MNCs in
India.
Findings –The respective HR practices are differently influenced by cultural and institutional factors.
Cultural similarity, unique social context and the evolving labor market shape the HR practices of
Japanese MNCs in the Indian context.
Research limitations/implications –The generalizability of findings might be limited because of the
nature of methodology. Future research could collect additional qualitative data and conduct
quantitative studies to test the findings of this research.
Practical implications –A unique combination of HR practices could be formed by addressing the
changes in the local institutional environment and retaining the core philosophy of the parent company.
Originality/value –This research adds value to the transfer-adaptation dichotomy by presenting how
institutional and cultural factors differently influence the transfer of respective HR practices.
Keywords India, Human resource management, Japanese MNCs, Local adaptation,
Transfer of HR practices
Paper type Research paper
Introduction
Japan is the fourth largest foreign investor in India accounting for around 7 per cent of the
total foreign direct investment inflows into India (FDI Statistics, 2014). The Japan Bank for
International Cooperation (2014) reports India as the top most promising country for
overseas business operations in the medium term (next three years or so) and long term
(next ten years or so). For the successful operation of any international business, human
resource management has increasingly been referred to as one of the top most crucial
aspects of management (Schuler et al., 1993;Dowling et al., 2008). Scant literature is
available on how Japanese companies manage their human resources in India (Jain, 1987;
Sparrow and Budhwar, 1997;Miah and Bird, 2007;Budhwar et al., 2009).
Every country has a different way of conducting business that is based on their national
business systems (Edwards and Rees, 2006), which contains cultural and institutional
factors (Ferner and Quintanilla, 1998). Multinational companies (MNCs), thus, need to
understand the management practices prevalent in the host context. It is imperative for
them to acknowledge the ways to create a blended set of practices that represent both the
parent company and the host country’s ways of doing things (Pudelko and Harzing, 2008).
Received 1 September 2015
Revised 24 November 2015
3 December 2015
Accepted 3 December 2015
DOI 10.1108/JABS-09-2015-0152 VOL. 11 NO. 3 2017, pp. 323-341, © Emerald Publishing Limited, ISSN 1558-7894 JOURNAL OF ASIA BUSINESS STUDIES PAGE 323
Whether it is preferable to transfer the human resource (HR) practices from the parent
company or follow the practices prevalent in the local environment has long been argued
(Beechler and Yang, 1994;Ferner, 1997;Khilji, 2003;Myloni et al., 2004). These decisions
about the transfer-adaptation dichotomy depend on various cultural and institutional factors
that are embedded in the national business system of both the MNCs’ parent and host
countries.
In light of the above background, this paper investigates the HR transfer-adaptation
dichotomy of Japanese companies in India. Japan is considered as a pioneer of modern
managerial practices in Asia (Nakamura and Fruin, 2012), while India is one of the most
prominent emerging economies of the world. Hence, the paper contributes to the field of
Asian business and management by investigating various mechanisms, specifically the
role of cultural and institutional factors that shape the HR practices of MNCs from a
developed country operating in an emerging country within Asia. The findings also have
practical implications regarding what factors managers should consider in developing HR
practices for foreign subsidiaries of MNCs, especially in India.
Theoretical background
Several theoretical frameworks have been developed to understand the HR practices of
MNC foreign affiliates (Perlmutter, 1969;Rosenzweig and Nohria, 1994;Pudelko and
Harzing, 2007). For the research purpose, this paper refers to the cultural and institutional
approach, as well as the standardization versus localization framework.
The cultural approach states that different nations have different cultural dimensions
(Hofsetede, 1991;Trompenaars and Hampden-Turner, 1998), and these differences cause
cross-national differences in most management functions (Schneider and De Meyer, 1991
“strategic decisions”; Puffer, 1993 “leadership styles”; Jackson, 2002 “human resource
management”). National culture is defined as the values, beliefs and assumptions
embedded in the particular environment (Hofsetede, 1991), which are also reflected in the
organizational culture (Hofstede, 1985;Mead, 1990). Therefore, while transferring parent
HR practices in a culturally distinctive country, MNCs must be sensitive to the predominant
values and attitudes of the host environment (Edwards and Kuruvilla, 2005). The
transferability of HR practices across countries depends on the national cultural distance
(Kogut and Singh, 1988;Liu, 2004). That is, the cultural distance between the MNC parent
country and the subsidiary host country inhibits the implementation of parent company HR
in the subsidiary (Aoki et al., 2014), while cultural closeness facilitates it (Ngo et al., 1998;
Wasti, 1998).
The institutional approach argues that the organizations in a particular context become
similar due to the traditional values and practices embedded in it (Whitley, 1992) and that
they are under social influence and pressure to adopt appropriate practices (DiMaggio and
Powell, 1983;Scott, 2001). DiMaggio and Powell (1983) maintained three kinds of such
pressures: coercive, normative and mimetic. Some practices may have to act in
accordance with laws and regulations (coercive), and some may require modification
based on the professionalization of an employee group (normative isomorphism), while
some need to be imitated to avoid uncertainties (mimetic isomorphism). In uncertain
situations, organizations tend to adopt standards with either benchmarking or imitating
other similar and successful organizations in a given context (DiMaggio and Powell, 1983;
Scott, 2001).
The distinctive cultural and institutional characteristics of a host country limit the transfer of
HR practices from the parent company, and thus, MNC subsidiaries need to pursue
localization (Beechler and Yang, 1994;Ferner, 1997;Khilji, 2003;Myloni et al., 2004).
However, subsidiaries are also an integral part of MNCs, and therefore are subject to a
significant amount of control (Martinez and Jarillo, 1989), as well as facing pressures to
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