Institutional influences on HRM in the Asian business environment: the case of Indonesia
| DOI | https://doi.org/10.1108/JABS-07-2015-0110 |
| Date | 07 August 2017 |
| Pages | 262-277 |
| Published date | 07 August 2017 |
| Author | Neil Semuel Rupidara,Roger Darby |
| Subject Matter | Strategy,International business |
Institutional influences on HRM in the
Asian business environment: the
case of Indonesia
Neil Semuel Rupidara and Roger Darby
Neil Semuel Rupidara is
an Academic at the
Department of
Management, Satya
Wacana Christian
University, Salatiga,
Indonesia. Roger Darby
is Course Director at
Cranfield Defence and
Security, Cranfield
University, Shrivenham,
UK.
Abstract
Purpose –The purpose of this paper is to analyse the isomorphism phenomenon in the Indonesian HR field. It
also attempts to identify characteristics of a highly isomorphic field which tend to be overlooked in institutional
analysis.
Design/methodology/approach –The research was conducted within a qualitative, interpretive
paradigm. Both primary and secondary data sources were utilized in this study. Primary data were
obtained from more than 56 interviews, including informal talks and observations. Two types of
interviews were conducted, i.e., face to face, narrative, open-ended interviews with HR professionals,
consultants and academics and e-mail interviews with several of the HR professionals who were
involved in several HR mailing lists in Indonesia.
Findings –HR field in Indonesia shows how institutional influences work, characterized by the diffusion
and adoption of human resource practices among foreign multinational and large local companies in
Indonesia. HR actors within organizations interact with multiple, and often competing, ideas within
complex and overlapping multi-institutional settings and take decisions explained by the characteristics
of Indonesian HRM as an isomorphic field.
Research limitations/implications –Further research is needed to be conducted in similar
isomorphic fields to identify the characteristics and whether or not they confirm the results of this
research. Further research into the HR field in Indonesia is also suggested to uncover deep-seated
institutional logics and mechanisms that can facilitate or constrain future changes in the field. As a
transitional field usually contains different, sometimes conflicting, institutional pressures in influencing
the direction of change, a better knowledge of how the conflicting forces work is needed to provide
understanding about how to steer a well-informed institutional change.
Practical implications –Involvement in the networks of diffusion of ideas can benefit the HR
professionals of participating firms. The study suggests an active but critical participation in the
networks of HR ideas diffusion to obtain greater benefits. The study has shown the existence of different
channels of HR knowledge transfer. HR actors therefore need to decide which channels might be more
effective in the knowledge transfer. Because the different sources of ideas may provide conflicting
ideas, HR actors may need to be mindful in their participation in the different networks to take advantage
of them, rather than being confused by the conflicting forces.
Originality/value –This research contributes empirically to studies of isomorphism of HRM practices by
providing evidence that connects the micro-organizational and the broader organizational field levels. A
significant methodological contribution of this research is the use of observations and the participation in
professionally oriented electronic mail-list groups as a method of investigating knowledge diffusion within a field.
Keywords Diffusion of HR practices, Indonesian HRM, Institutional influences, Isomorphic field,
National institutional context
Paper type Research paper
Introduction
Institutional environment has long been regarded as a key determinant of management
practices within organizations (Carney et al., 2009;Scott, 1987,2008). Organizational
Received 30 July 2015
Revised 22 February 2016
11 May 2016
14 June 2016
Accepted 22 June 2016
PAGE 262 JOURNAL OF ASIA BUSINESS STUDIES VOL. 11 NO. 3, 2017, pp. 262-277, © Emerald Publishing Limited, ISSN 1558-7894 DOI 10.1108/JABS-07-2015-0110
fields, in particular, are seen to provide behavioural or life scripts for human actors within
organizations and therefore facilitate or constrain their actions accordingly (DiMaggio and
Powell, 1983). Furthermore Kostova et al. (2008, p. 997) argue that:
Fields determine the socially acceptable patterns of organizational structures and actions.
Due to the importance of an organizational field for organizations and their members,
analysing the dynamic processes within a field is important in understanding how such
fields have influence upon actors within them.
It is well understood in neo-institutionalism literature that isomorphism, a phenomenon of
increasing similarity of features among organizations functioning within the same
organizational field, comes as a result of multiple interactions of actors within that field in
their search for legitimacy (DiMaggio and Powell, 1983). Such interactions are facilitated by
different institutional mechanisms within and across organizational fields, also from wider
institutional contexts. It is therefore argued here that organizational fields have to be seen
as constantly open and connected spaces that allow the transfer of ideas within and across
the fields, with the role of actors as carriers of institutionalized ideas and practices. It is
further argued here, the connectivities of the multiple actors, ideas and institutions
determine the growing similarities between organizations in different institutional contexts,
although multiple differences exist within those contexts as well. The flow of knowledge
from one field to the other increase the dynamics within organizational fields, as different
and often competing ideas do co-exist.
Beside arguing that institutional mechanisms facilitate the flow of knowledge, we
acknowledge that institutions may also impede the flow, especially of new ideas (Bjorkman
et al., 2007). This institutional mechanism may limit isomorphism taking place more deeply
and widely and at the same time allow variations to exist within an institutional field (Lee and
Lansbury, 2012). This explains how institutions maintain stability (Campbell, 2004;Guler
et al., 2002). Dissimilarity in institutional arrangements manifested for example in national
business systems (NBS) usually contribute to tensions (Jackson and Deeg, 2008;Ralston,
2008), a subject that this Special Issue particularly addresses.
Adopting the NBS heuristic framework, this research addresses the phenomenon of
growing similarities in the main elements of human resource management systems across
companies in Indonesia. This is particularly seen among large firms using similar HR
practices developed in more advanced HRM contexts, despite the possible impeding role
of national institutional context (Edwards and Rees, 2009). Due to sizable institutional
distance between a national context such as Indonesia and developed economy contexts,
the phenomenon has usually been overlooked and taken for granted. The main research
question is, how can isomorphism be explained in such a setting. In trying to understand
the phenomena, pertinent questions are raised about the role played by overseas MNC
affiliations in diffusing HR knowledge into the field. In general, MNCs have played a
significant role in the Indonesian economy, particularly in the manufacturing sector and
have made a stronger contribution to the economic growth, in terms of value added and
productivity (Takii and Ramstetter, 2005). Drawing on longitudinal data from 1975-2001,
Takii and Ramstetter (2005) demonstrate a large increase in the number of employees and
the share of MNCs in total employment of large and medium-sized firms. The same trend
was also evident in labour productivity in manufacturing MNCs up to the present day
(Horwitz and Budhwar, 2015).
The presence and role of MNCs in Indonesia is indicative of the competitive power of the
firms’ specific advantages or capabilities which, when transferred successfully to
subsidiaries, allow them to outperform local firms, as witnessed in Indonesia (Thite, 2015).
As Kobrin (1991, p. 18) has argued, integrated MNCs gain competitive advantage from
bargaining strength, the flexibility of an international network, and internal economies of
scale, scope and learning which can be leveraged across different international locations.
VOL. 11 NO. 3 2017 JOURNAL OF ASIA BUSINESS STUDIES PAGE 263
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