Determinants of central control and subsidiary autonomy in HRM: the case of foreign‐owned multinational companies in Spain

• Date: 01 July 2013
• Published date: 01 July 2013
• DOI: http://doi.org/10.1111/j.1748-8583.2012.00204.x
• Author: Mike Morley,Maria Jesus Belizon,Patrick Gunnigle

Determinants of central control and subsidiary

autonomy in HRM: the case of foreign-owned

multinational companies in Spain

Maria Jesus Belizon,Patrick Gunnigle and Mike Morley, Kemmy Business School,

University of Limerick

Human Resource Management Journal, Vol 23, no 3, 2013, pages 262–278

This article examines the factors affecting HRM subsidiary autonomy within multinational companies

(MNCs). Drawing on institutional theory arguments, along with an analysis of the impact of

international HRM structures, it attempts to identify the multiplicity of factors influencing subsidiary

autonomy with regard to HRM. Using data gathered from a highly representative survey of foreign

MNC subsidiaries located in Spain, the results identify a number of factors that hold explanatory power.

First, the distance between the home and the host country in terms of variety of capitalism is crucial in

explaining variations in subsidiary autonomy. In addition, international HR structures, such as the

existence of an international policy-making body and the use of HR shared service centres or HR data

reporting mechanisms, are also important in accounting for the degree of autonomy over HR issues

experienced by the MNC subsidiaries in our study.

Contact: Maria Jesus Belizon, Kemmy Business School, University of Limerick, Ireland. Email:

maria.belizon@ul.iehrmj_204262..278

INTRODUCTION

There is little doubt that multinational companies (MNCs) are important drivers of

globalisation (International Labor Organization, 2012). Within this context, there is a

significant debate in the international business literature on the extent to which MNCs

transfer their HR policies and practices. While we find evidence that MNCs attempt to transfer

managerial policies from the home to host countries (Guillen, 2001; Pudelko and Harzing,

2007), the extent to which the same HR policies work equally effectively in diverse contexts,

and the likelihood of their gaining legitimacy therein, is open to question (Almond et al., 2005).

Indeed, it is precisely this conundrum that has encouraged MNCs to adapt managerial policies

to the local context, and thereby attempt to accommodate different national idiosyncrasies and

distinctive organisational forms commonplace in the host locations in which they operate

(Guillen, 2001; Djelic and Quack, 2003).

Studies examining the nature and extent to which HR policies and practices are transferred

by MNCs have increased considerably in the last decade (Pudelko and Harzing, 2007;

Fenton-O’Creevy et al., 2008; Lavelle et al., 2009; Ferner et al., 2011). However, with a few

exceptions, there remains a distinct lack of quantitative empirical research in this field due to

the challenge of gathering such data directly from the specialist HR function among

representative samples of MNCs (Ferner et al., 2005). In taking up this challenge, our study is

characterised by three distinguishing features.

First, the manner in which home and host country differences are dimensionalised is an

important feature of our research effort. We use the theoretical lens of varieties of capitalisms

(VoC) as explicated in detail by Amable (2003) in order to provide what can be considered a

bs_bs_banner

doi: 10.1111/j.1748-8583.2012.00204.x

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 23 NO 3, 2013262

© 2012 John Wiley & Sons Ltd.

Please cite this article in press as: Belizon, M.J., Gunnigle, P. and Morley, M. (2013) ‘Determinants of central control and subsidiary autonomy in

HRM: the case of foreign-owned multinational companies in Spain’. Human Resource Management Journal 23: 3, 262–278.

more nuanced perspective in observing and explaining the extent to which different labour

market rigidities impact HRM subsidiary autonomy.

Second, there is dearth of research on the relationship between subsidiary autonomy over

HRM and international HR structures (Ferner et al., 2011). Where the impact of international

HRM structures have been analysed, this has often involved combinations or groups of

structures rather than unearthing the potentially differential impact of individual international

HR structures (Ferner et al., 2011). The present research addresses this weakness through

examining individual international HR structures separately, and dissecting possible differences

they might have on HRM subsidiary autonomy.

Third, the analysis of HR practices in foreign-owned MNCs in Spain has been the object of

few quantitative-based studies. While recent works present some insights on HRM in Spain

(Ferner et al., 2001; Cabrera and Carretero, 2005; Quintanilla et al., 2008, 2010), we know little

of the factors impacting on the extent of subsidiary autonomy over HR issues in MNC

subsidiaries. This article provides a rigorous analysis using data on HR practices collected from

foreign MNC subsidiaries located in Spain.

Against this backdrop, the precise research gap which we address is the identification of

those factors influencing the extent of local autonomy over HR practices in foreign-owned

MNCs in Spain.

CENTRAL CONTROL AND SUBSIDIARY AUTONOMY IN MNCS

The question of HR policies pursued by MNCs in their globally dispersed subsidiaries has been

extensively studied over recent years (Pudelko and Harzing, 2007; Brewster et al., 2008;

Fenton-O’Creevy et al., 2008). Authors from the institutional strand of the literature have pointed

to the ‘global-local’ tension, namely the countervailing pressures for standard, centrally

developed and managed policies versus the need to ensure HR policy and practice is sensitive

to and reflective of the norms and traditions of the host context (Brewster et al., 2008;

Fenton-O’Creevy et al., 2008). In other words, there is potential for conflict between a desire

to maintain central control on the part of MNC headquarter (HQ) and the countervailing demand

for autonomy on the part of the subsidiary in certain domains of HRM policy and practice. In this

article, autonomy can be viewed as the extent to which the subsidiary acts as a policy-making

‘authority’ (Fenton-O’Creevy et al., 2008; Ferner et al., 2011). The extant literature identifies a

number of possible approaches. Some HQs do not accord subsidiaries any effective level of local

autonomy, and these are therefore expected to implement policies set by HQ. At the other

extreme, some HQs allow subsidiaries full autonomy in setting HRM policy (Ferner et al., 2011).

There clearly is room also for intermediary approaches whereby subsidiaries are afforded some

local autonomy to develop HR policies within certain guidelines or frameworks set by the

HQ or in certain domain HR areas approved by HQ (Harzing, 1999; Ferner et al., 2007; 2011).

HOME AND HOST COUNTRY EFFECTS ON HRM CONTROL

A ‘VoC’ approach

In an attempt to discern the impact of different home and host environments on management

practice, some scholars have employed the lens of ‘VoC’ as articulated by Hall and Soskice

(2001). This focuses especially on the role of markets, firms, state ownership and regulation.

Although the dichotomous differentiation between coordinated market economies (CMES) and

liberal market economies (LMEs) simplifies analysis and the application of the VoC to different

Maria Jesus Belizon, Patrick Gunnigle and Mike Morley

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 23 NO 3, 2013 263

© 2012 John Wiley & Sons Ltd.