Human resource management and industrial relations in multinational corporations in and from China: Challenges and new insights

• Published date: 01 September 2019
• Author: Fang Lee Cooke,Chao C. Chen,Leigh Anne Liu,Mingwei Liu
• DOI: http://doi.org/10.1002/hrm.21986
• Date: 01 September 2019

SPECIAL ISSUE ARTICLE

Human resource management and industrial relations

in multinational corporations in and from China: Challenges

and new insights

Fang Lee Cooke

1

| Mingwei Liu

2

| Leigh Anne Liu

3

| Chao C. Chen

4

1

Department of Management, Monash

University, Melbourne, Victoria, Australia

2

School of Management and Labor Relations,

Rutgers University, New Brunswick, New

Jersey

3

Robinson College of Business, Georgia State

University, Atlanta, Georgia

4

School of Business, Rutgers University, New

Brunswick, New Jersey

Correspondence

Mingwei Liu, School of Management and

Labor Relations, Rutgers University, New

Brunswick, NJ 08901.

Email: mingwei@smlr.rutgers.edu

Funding information

National Natural Science Foundation of China,

Grant/Award Numbers: 71832007, 71832012

Abstract

The purpose of this article is to provide an overview on the state of research in the

field in human resource management (HRM) issues in multinational corporations

(MNCs) in and from China. We integrate previous studies from multiple disciplines to

articulate the contextual importance of research on this topic, and suggest overarch-

ing themes to expand the field of research. HRM research in the intercultural, inter-

institutional context of MNCs in and from China has the potential to provide

contextualized insights for longstanding debates in the field such as HRM standardi-

zation versus localization and convergence versus divergence and contextual factors

behind these patterns. To this end, we call for future research to center on the

changing cultural, institutional, technological, and globalization context in under-

standing HRM and industrial relations issues in these MNCs. Practically, knowledge

in this area can help global managers and top management teams in multinational

organizations navigate various context complexity, foster more productive coordina-

tion and cooperation across borders, and gain legitimacy and MNCs in and from

China additional competitive edge in the global marketplace.

KEYWORDS

China, cultural perspective, digitalization, globalization, institutional theory, multinational

corporation

1|INTRODUCTION

The recent trade war between the USA and China highlights the dif-

ferences as well as the interdependence between China, USA, and the

rest of the world among complex global supply chains. The Fourth

Industrial Revolution (Schwab, 2016) would further exacerbate such

differences and complex connections at the same time. During the last

four decades, China has been one of the largest foreign direct invest-

ment (FDI) recipients and its indigenous businesses have been expan-

ding their overseas operations and service offerings, with growing

strengths but against formidable challenges. The rise of overseas busi-

ness has transformed—and continues to transform—the nature of

work and employment for many, as well as how firms are managed.

China's position at the center of global economic integration provides

an important entry point to a debate on transnational trends of human

resource management (HRM) and industrial relations (IR) in terms of

key characteristics, challenges, contextual factors, and impact on

workers. A particularly revealing lens to look at these trends is the

operations of multinational corporations (MNCs) in and from China.

As intercultural and interinstitutional agents, MNCs have long been

the focus of international HRM and IR studies (e.g., Wilkinson,

Wood, & Demirbag, 2014). Thanks to the growth of FDI in China,

HRM and IR in MNCs in China have attracted substantial research

attention since the early 1990s (e.g., Björkman & Fan, 2002; Chan,

2010; Smith & Pun, 2006; Zheng, 2014). Given the unprecedented

integration of the global supply chains, MNCs continue to play an

DOI: 10.1002/hrm.21986

Hum Resour Manage. 2019;58:455–471. wileyonlinelibrary.com/journal/hrm © 2019 Wiley Periodicals, Inc. 455

important role in connecting the world in many ways, if entrenching

and creating hierarchy to various extents. With its informal institu-

tions, relationship-oriented culture, and its rising technological compe-

tence and innovative capability, studying HRM and IR issues in the

context of MNCs in and from China offers a salient context to exam-

ine the human dynamics between developed and emerging markets,

as well as within emerging markets. However, research interest in

HRM and IR in Chinese MNCs overseas has only emerged in recent

years, albeit growing quite quickly (c.f. **Papers on HRM of Chinese

firms abroad). In comparison, research of MNCs among emerging mar-

kets remains rare and seriously lagging behind the business

development.

Advancing research of HRM and IR in MNCs in and from China

has both theoretical and practical rationales. Theoretically, this

approach may allow us to make a unique contribution to the core

debate in the field of international HRM and IR about the extent to

which MNCs can or should standardize their policies globally, versus

their need to respond to local peculiarities (e.g., Berry, Guillén, &

Hendi, 2014; Edwards & Kuruvilla, 2005; Schuler, Dowling, & de Ceri,

1993). To date, the debate has been largely based on empirical evi-

dence collected from MNCs originating from advanced economies.

MNCs from emerging market economies, particularly China, may have

different motivations and strategies of internationalization from their

counterparts in advanced economies; thus, whether various argu-

ments developed in this debate hold true in their case warrants closer

examination. Moreover, with major goals of acquiring strategic assets,

be it natural resources or managerial and technical know-how, Chi-

nese MNCs' HRM and IR practices may have distinct features that

provide fresh insights into the debate in international HRM focusing

on standardization/localization/integration, and convergence/diver-

gence. Further, although there is already a body of literature on HRM

and IR of MNCs operating in China, this has been rather heavily ori-

ented toward the manufacturing sector. It is important to broaden the

research domain to include other growing sectors and to update our

knowledge, since the Chinese financial, product, and labor market, as

well as other institutions, have been constantly changing. These

changes may significantly affect firms' HRM and IR strategies and

practices as foreign MNCs in China embed themselves to the local

operational environment and adopt local practices. Lastly, through

comparing and contrasting MNCs in and from China, we may gain a

better understanding of convergences and divergences of MNCs'

HRM and IR practices, and the role of the underlying contextual

factors.

Practically, knowledge on HRM and IR in Chinese MNCs overseas

will meet the urgent demands of various stakeholders. While China

has become a major source of FDI in many countries, Chinese MNCs'

knowledge of international operation lags dramatically behind, partic-

ularly with regard to HRM and IR practices that are highly context

sensitive (e.g., Cooke, Wu, Zhou, Zhong, & Wang, 2018). Meanwhile,

there are substantial and growing interests, concerns, and controver-

sies about the impacts of Chinese investment on host countries'

national security, economy, laws, business, and labor. A deeper under-

standing of Chinese MNCs' management and employment practices

and their broad economic and political impacts, therefore, is of tre-

mendous value for policy makers, business, labor, and other organiza-

tions. In addition, recent changes in China's politico-economic

landscapes have posed new challenges as well as opportunities for

foreign MNCs in China; these include the end of various preferential

treatments of foreign firms and policy support for industrial upgrading

and innovation, the implementation of new labor laws, growing labor

shortage and rising labor costs, and the increasing competitiveness of

Chinese domestic firms. More recently, there have been growing signs

of withdrawal of FDI from the country. Research findings of HRM and

IR in MNCs in China will have the potential to inform policy and man-

agement decisions both in and outside of China.

MNCs operating in China and those based in China have

employees who are spread across cultural and institutional bound-

aries. It is therefore critical to enable employees to become produc-

tive parts of the MNCs while they grapple with new cultures,

languages, legal systems, technological applications, and time zones.

The global marketplace demands that MNCs build culturally diverse

and competitive workforces to capitalize effectively on the benefits of

the global economy. Effective operations at the host and the home

markets depend on the MNCs to communicate and cooperate across

different national and sub-national contexts, while managing widely

dispersed, and often fragmented, employees and organization struc-

tures. Distance and barriers in culture and institutions can often sty-

mie operations and cause dismal flops. These distances and barriers

can be complicated by the unique cultural and institutional traditions

in China (e.g., Pan, Rowney, & Peterson, 2011) and thus raise specific

challenges for HRM in MNCs in and from China. First, MNCs need to

navigate the complexity of convergences and divergences in HRM

practices across cultural and institutional borders. For example,

Farndale, Brewster, Ligthart, and Poutsma (2017) compared HRM

practices across nine countries and found that practices in compensa-

tion and wage-bargaining show evidence of being institutionally con-

strained, and hence are less likely to converge than practices of

employment, training, and direct information provision that are con-

tingent on particular circumstances. Second, HRM managers in both

the host and home countries need to manage distance, diversity, and

conflicts in order to coordinate and collaborate as a part of the geo-

graphically dispersed team within the MNC. Although the cultural and

institutional distances between China and advanced economies have

been studied in previous literature (e.g., Björkman & Fan, 2002; Chan,

2010; Smith & Pun, 2006; Zheng, 2014), new challenges emerge for

foreign MNCs, such as labor and skill shortages (JP Morgan, 2016).

Third, intercultural communication needs to be managed at the indi-

vidual, subsidiary, and MNC organizational levels. Extant research

(e.g., Liu, Adair, Tjosvold, & Poliakova, 2018; Liu, Chua, & Stahl, 2010)

found that intercultural partners can have asymmetrical experience of

communication, and quality of communication is critical for coordina-

tion and cooperation at multiple levels, such as between Chinese and

foreign partners. Failure to meet these challenges can result in ineffi-

ciency, drained resources, frustration, and failure.

In this introductory article of this special issue, we review the

state of the art of the literature on HRM and IR practices by MNCs in

456 COOKE ET AL.