Cross-National Transfer of Employment Practices in Multinationals

cross-national delegate of employment entrusts in multinationals Abstract This paper argues for the systematic incorporation of former and interests into analysis of the cross-border take of designs deep down multinational companies (MNCs). Using a broadly Lukesian perspective on creator it is argued that the transfer of practices involves polar kinds of headache leader capabilities through which MNC actors entrance their institutional environment both at the macro-level of armament institutions and the micro-level of the MNC itself.The incorporation of an explicit account of the way post interacts with institutions at different levels, it is call downed, lowpins a much persuade account of transfer than is provided by the dominant neoinstitutionalist perspective in international business, and leads to a heuristic feigning capable of generating proposed patterns of transfer outcomes that whitethorn be tested empirically in future research. Keywords multinationals co mparative & cross-cultural HRM conflict international HRM strategic and international steering organisational theory.Introduction Much has been written astir(predicate) the cross-national transfer of way practices in multinational companies (MNCs). A recent conceptual development is the neoinstitutionalist contribution of Kostova and colleagues (Kostova, 1999 Kostova and Roth, 2002 Kostova et al. , 2008). In the international business literature, this approach shows signs of establishing a tender intellectual hegemony. 1 Given this salience, critical engagement is essential. The neoinstitutionalist approach to practice transfer in MNCs has provided fundamental insights.It argues that MNCs or to be more precise, their subsidiaries operate under conditions of institutional wave- activateicle dichotomy, facing both the institutional terrain of the international firm itself and that of the host environment in which they operate. These institutional spheres exert rival isomorphic obligates which come to the fore when practices be transferred from the p atomic number 18nt to host operations. Drawing on Scotts (2008) institutional pillars, Kostova uses the country institutional profile tool to characterize p argonnt- and host-country institutions.This provides the tooshie for appraiseing institutional distance (ID), the digression in institutional arrangements between the p atomic number 18nt country and host. In general, the greater the ID, the more problematic is transfer and the harder is the internalization of transferred practices, that is, their full assimilation to host employees cognitive mindsets and normative frame browses (Kostova, 1999). However, neoinstitutionalist positions on transfer in MNCs suffer from a neglect of old institutionalist questions around fountain, coalitions, interests and competing value systems (e. . Stinchcombe, 1997), despite change magnitude attention to much(prenominal) questions in broader neoinstitutionalis t theory (e. g. Oliver, 1991 Greenwood and Hinings, 1996 Lawrence, 2008 Lounsbury, 2003 Tempel and Walgenbach, 2007). The key concepts of institutional duality and institutional distance overlook the ability of actors in MNCs to shape institutions to their quests and thus influence the transfer process. in that respect is little sense of what is at stake for actors in the confrontation of cognitive, normative and regulative frame plant life that arise when practices atomic number 18 transferred.This paper discusses how the analysis of creator butt be coordinatedd into an taste of cross-institutional practice transfer. It builds on recent work concerning MNCs as political actors (e. g. Belanger and Edwards, 2006 Dorrenbacher and Gammelgaard, 2011 Dorrenbacher and Geppert, 2011 Edwards and Belanger, 2009 Ferner and Edwards, 1995 Ferner and Tempel, 2006 charge, 2008 Levy and Egan, 2003). It argues that cause and interests of actors shape transfer through processes that draw o n institutional imaginations both at the macro level of the host business system and the micro level of the MNC.These processes in turn shape the transformations and readings undergone by transferred practices. Power, it is suggested, has to be understood in its institutional circumstance, both in that it is deployed by fibrous MNC actors to shape, sustain and activate macro- and micro-level institutions a process that neoinstitutionalists refer to as institutional work (Lawrence and Suddaby, 2006) and in that institutional context provides actors with ply capabilities with which to facilitate, block or modify transfer.The cross-national transfer of practices in MNCs is labyrinthian, with an array of possible outcomes. tape transport has several marks the peak of adaptation or crisscross of practices internalization guideality and directionality. The introductory of these refers to the fact that transfer is not an either/or issue there may be degrees of transfer. The transferred practice may be modified in the course of implementation, or it may be hybridized, that is, combined with host practices (e. g. Becker-Ritterspach, 2009).Internalization denotes that, notwithstanding where a practice is transferred in its original form, it may be assimilated to a greater or lesser extent to the working assumptions, cognitive understandings and normative frameworks of subordinate word employees and managers. Functionality refers to the degree to which transferred practices perform the function intended for them by right on HQ actors, or work in ways that these actors would consider to be unintended or dysfunctional. Finally, directionality indicates that transfer does not occur only from HQ to appurtenant, but similarly between subsidiaries themselves, or from subsidiaries to HQ.Thus various outcomes atomic number 18 possible, and one of the principal aims of this paper is to provide a conceptual framework for understanding how might trans meet in MNCs influence the outcomes of practice transfer between different institutional domains. The paper illustrates the argument with empirical exercises drawn from human imagery and employment practices (HR&EP) in MNCs. The rationale is twofold. First, the cross-national dissemination of such(prenominal) practices is increasingly seen in a knowledge-based global economy as key for international competitive profit (e. . Lado and Wilson, 1994). Second, however, HR&EP are curiously subject to host institutional influence (e. g. Rosenzweig and Nohria, 1994). Moreover, relations between employers and workforces are characterized by a structured antagonism (Edwards, 1986) providing the basis for the ongoing exercise of power and resistance in relation to HR&EP this structured antagonism is carried into the international sphere, on to the contested terrain of the MNC (Belanger and Edwards, 2009). The paper inaugural discusses a conceptualization of power in relation to MNCs.Second, it examines power capabilities and interests of different groups of actors at heart the MNC, in incident at HQ and subsidiary level. Finally, it marshals the arguments on power, interests and institutions to look for different transfer outcomes. Power and MNCs MNCs are powerful actors, driving economic activity in many vault of heavens and one of the motive forces of globalization. They are also complex organizations, marked by the dispersion of power among groups, functions and operating units (e. g.Belanger and Edwards, 2009 Dorrenbacher and Geppert, 2011 Ferner and Tempel, 2006). In particular, the respective power of HQ and subsidiaries makes for the negotiation of relationships within the MNC (Ferner and Edwards, 1995). MNC actors manoeuvre among institutional contradictions that bury considerable scope for praxis (Geppert and Dorrenbacher, 2011). Transfer buttocks be viewed as a specific instance of HQsubsidiary relations, in which the power capabilities of actors at each level influence outcomes. How are such capabilities to be conceptualized?This paper builds on a Lukesian perspective (Lukes, 1975 2005) that identifies three dimensions of power. Each may be cogitate to the behaviour of MNC actors in the realm of practice transfer. The first concerns the nature of decisions that are made, and the deployment of resources to affect them. The second relates to conflicts around non-decisions, reflecting the ability of powerful actors to shape the agenda, exclude or include issues, and envision the processes and predominates by which decisions are arrived at.The third concerns the way in which powerful actors exercise domination over others by influencing, formation or find out their very wants (Lukes, 1975 27). As Lukes admits (2005 ch3), the notion of power as domination over other actors who may consent to domination requires the imputation of real interests to actors (i. e. interests that are masked by the third dimension of power). Given the d ifficulties of the undertaking, he argues (p148) that what count as real interests is a function of ones explanatory purpose, framework and methods.Without wishing to astound enmeshed in this debate, we would note that the paper is premised on the notion that interests are constructed by MNC actors in ways that are variable and issue-specific, and the process gives rise to bundles of interests that are complex and not needs internally coherent (cf. Lukes, 2005 ch3). There may be a hierarchy of interests, with economic security or survival, for example, being a primary and persisting interest for most actors. Beyond that, interests may be more diversityable and context-dependent.Such interests may be collective, emerging, for example, around a particular model of teamworking in a subsidiary that allocates particular roles to different groups of employees, supervisors and managers or individual, deriving notably from personal and biographical considerations to do with career paths and aspirations within the MNC, rather than from organizational or group affiliations (see e. g. Dorrenbacher and Geppert, 2009a). Hardy (1996) has applied a Lukesian model to a business context, and her terminology is adopted here.She labels the first dimension the power of resources, which concerns power derived from the date of hardly resources, such as hiring and firing, rewards and sanctions, and expertise, in order to influence behaviour in the face of opposition. The second, the power of processes, resides in organizational decision making processes which incorporate a variety of procedures and political routines that slew be invoked by dominant groups to influence outcomes by preventing subordinates from participating fully in decision making (p7) equally, spick-and-span groups may be brought, or force their way, into decision-making processes.The third dimension is labelled the power of entailment Hardy explores the way in which organizational groups legitimize thei r stimulate demands and delegitimize those of others through the management of inwardness and the deployment of symbolic actions. As a result, H actors may be impeded from exercising agency. As Levy argues (2008 also Levy and Egan, 2003), the control of meaning has important linkages with the Gramscian concept of hegemony (Gramsci, 1971), emphasizing that the control of meaning, or the discursive realm, relates to power relations in the real economic and expert realms.In other words, in the case of MNCs, the power of meaning is built upon the resource power that derives from the primary economic activity of the firm and its constituent parts. This third dimension of power also provides a crucial link with neoinstitutionalist analysis, by illuminating in particular how the cognitive and normative pillars (Scott, 2008) of institutional arrangements embody power relations and serve the interests of powerful actors, and how such pillars may be susceptible to contestation rather than being seen as external givens.While all three dimensions of power are important for an understanding of cross-institutional transfer, the power of meaning is especially crucial. When institutionalized practices are transferred cross-nationally, this hidden dimension is rendered visible (Ferner et al. , 2005) by the collision of two sets of institutional rationalities. Transfer thus creates an important condition for the exercise of agency that actors become conscious of taken-for-granted institutional processes (e. . Clemens and Cook, 1999 Seo and Creed, 2002). In short, transfer leads to potential conflicts of institutional rationality that are contumacious through the deployment of power capabilities. For example, individual execution of instrument appraisal and reward is a norm taken for granted and generally regarded as legitimate in promiscuous market economies. Even if disliked, it merchantman only be legitimately contestd on grounds of its violateure to light upon its performance-enhancing functions.But cross-institutional transfer allows the shared norms to be laid supernumerary and challenged on grounds of alternative normative frameworks, emphasizing (for example) social equity, solidarity and fairness (e. g. Liberman and Torbiorn, 2000). MNC actors in situations of transfer Power capabilities and organizational interests To understand transfer outcomes in the context of power relations, two questions must be addressed. First, what power capabilities do actors in MNCs possess?As an initial approximation, we explore the power capabilities of actors at HQ compared with those of the subsidiary. This reflects the carrier bag of arguments (e. g. Geppert and Dorrenbacher, 2011 Kristensen and Zeitlin, 2005 Morgan and Kristensen, 2006) that the relationship between the HQ and subsidiary constitute a primary axis of power relations within MNCs. Second, what interests are constructed or present in relation to transferred practices? The answer to this question requires a more nuanced analysis of actors at HQ and subsidiary level.It determines whether, given respective power capabilities, the subsidiary acts as part of a monolithic MNC bloc opposite number host institutions, seeking ways of overcoming institutional constraints or maintains HQs efforts to transfer. Also possible is some complex configuration of interests where some groups in the subsidiary support transfer, sequence others oppose it (and the resembling may be true of HQ actors). In other words, interests determine how power capabilities are deployed in relation to transfer.We first explore the power capabilities of MNCs as unitary entities with uncouth organizational interests (Morgan, 2011) vis-a-vis the macro-institutional settings in which they operate. We then unwind the assumption of unity and analyse separately the capabilities of HQ and subsidiary actors. Finally we examine the array of interests that are probable to be constructed around HR&EP practi ce transfer. The power of MNCs to shape macro-institutional settings The Kostovian approach to transfer neglects the power of MNCs to shape macro-institutional settings on two key counts.The first concerns the broader systemic context within which institutional duality is played out. Smith and Meiksins (1995) argue that the fundamental global dynamics of capitalist development create system effects that may be distinguished from institutional variations, or societal effects. The global economic system, and the associated concepts of globalization, the world market, competition, and so on, are themselves the highly institutionalized outcome of the active agency (e. g. Campbell, 2004 ch. 5) of powerful actors, including states, supranational bodies and MNCs (e. g. Djelic and Quack, 2003 Levy and Egan, 2003).As Morgan (2011 also Sklair, 2001) argues, an emerging global managerial elite has assumed an important role in international standard-setting and transnational institution buildi ng. MNCs need played an important role in building this context. Sell (2000), for example, shows the role of US multinationals in shaping the rules of international commerce on TRIPS (Trade- colligate aspects of intellectual berth rights) and GATS (General Agreement on Trade in Services) (see also Djelic and Quack, 2003). The interrelationship between the global system and national institutional lengths has implications for transfer.In particular, the world economic system is hierarchically structured by the power of national actors (Smith and Meiksins, 1995). Dominance effects allude to the influence of practices developed in leading economies, sectors or firms. They influence all three dimensions of power. MNCs from dominant business systems present greater resource power by virtue of their economic success. They pay off power over processes that facilitates transfer. Such power can be at a systemic level through their ability to shape the decision-making rules governing inte rnational economic activity.It can also be more immediate, for example through the concentrated presence of MNCs from a dominant economy in a host country, as in the case of the dense networks of US subsidiaries in the UK or Ireland. This presence creates a stratum of organizations familiar with parent-country practices, and a pool of employees and managers with appropriate cognitive and normative expertise. Dominance also shapes systems of meaning as the dominant power becomes hegemonic. On the one hand, it creates a presumption by actors from dominant countries and firms that their practices have superior efficiency, providing a motive for transfer.On the other, this view may be shared by actors in the host, including form _or_ system of government-makers, subsidiary managers and workforces, and then increase receptiveness to transfer. Thus transfer is smoothed because practices are accorded legitimacy by a broad range of MNC actors and are regarded as global best practices (e . g. Pudelko and Harzing, 2007). One may therefore expect that where the transferred practice derives from a parent country that is dominant vis-a-vis the host, the inhibiting effect of ID on transfer will be adulterated. Dominance effects evolve.One illustration of this is that the dominant position of US carmakers in the period immediately later the Second World War had been lost by the 1970s and 1980s, with Japanese firms assuming dominant status. Indeed, the Japanese economy as a whole achieved a dominant position in the 1980s, albeit briefly with Japans Lost Decade and major corporate bankruptcies, the US regained a position of handedness, although the conditions that underpinned this renewed dominance, such as easy access to cheap capital, also proved transient (Schwartz, 2009), illustrating the dynamic nature of dominance effects.Dominance, moreover, is felt at sectoral level as headspring as at the level of business systems as a whole. As the above discussion implies, Am erican MNCs should not be seen as dominant crosswise all sectors. The point that national institutional configurations provide conducive conditions for firms to flourish in some sectors but not in others is central to the varieties of capitalism literature (Hall and Soskice, 2001) and also has a long history in economics through the theory of comparative advantage.The success of US MNCs in sectors like IT and pharmaceuticals, together with the sexual intercourse decline of American firms in sectors like consumer durables and automotives, confirms this. In short, dominance effects, even of the hegemonic economic power, are apt(predicate) to be particularly strong in the sectors in which it has a competitive advantage, and weaker or absent in others. Secondly, Kostova and colleagues neglect that MNCs as powerful organizations commonly act as rule-makers as thoroughly as rule-takers (Streeck and Thelen, 2005) vis-a-vis host institutional contexts. Rule-makers are actors involved in setting and modifying in conflict and competition, the rules with which rule-takers are expected to comply (p13). MNCs routinely engage in what Oliver (1991) calls manipulation of institutional settings, exerting direct pressures on the sphere of policy-making (e. g. DeVos, 1981, on get downs by US MNCs in Germany to influence reform of codetermination formula). Sometimes such pressure and rule-making is passive in other words, host actors adapt institutional rules to what they see as the preferences of MNCs, without active intervention by the latter.An example is the move by the Irish authorities in the 1980s away from the previous policy of encouraging incoming MNCs to adopt post- innovation closed shop union agreements and to bargain collectively the change reflected the desire of policy-makers to enhance rules they considered attractive to a new wave of largely US direct investors in sectors such as pharmaceuticals, electronics and IT where such provisions were seen as hamper ing investment (Gunnigle et al. , 2006). Moreover, MNCs may shape institutions in more bottom-up fashion through their distinctive practice (e. g. Djelic and Quack, 2003).Thus the scope for macro-institutional manoeuvre may exist even in highly-regulated institutional settings such as Germany. MNCs have been able to find space (e. g. Singe and Croucher, 2005 Tempel et al. , 2006) by exploiting weaknesses in formal institutions such as works councils that are quite heterogeneous in their operations (Kotthoff, 1994) and as Streeck and Thelen (2005 14) argue, there is always a gap between the ideal pattern of a rule and the real pattern of life under it thus the rules of codetermination in Germany are characterized by deep ambiguities reflecting the conditions under which they had been drawn up.MNCs power to shape processes and structures through which decisions are made is seen in their ability to engage in what Streeck and Thelen (2005) call institutional layering and conversion, whe reby living structures are bypassed, or subtly changed in function. Singe and Croucher (2005) in their synthesis of research on US firms in Germany suggest these firms adopted a dichotomous approach of formal compliance combined with content turning away towards codetermination institutions, deploying power resources to colonize works ouncils and exert high levels of pressure on works councillors to divorce themselves from unions (p134). US subsidiaries have moved between bargaining jurisdictions to supplement distinctions in how these operate in one such firm, the German subsidiarys deft institutional manoeuvring allowed it to be the first subsidiary in europium to implement the MNCs global variable overcompensate model (Tempel et al. , 2006). Even where regulative systems potentially constrain action, regulations need to be invoked and enforced. In Germany or Spain, works-council-style prototype has to be triggered by the workforce.There is thus a terrain of action for manag ement to deploy power to avoid macro-institutional coercive pressures. Managers can use power over resources to emanation the costs for the workforce of invoking statutory rights thus the Spanish subsidiary of a US MNC threatened to offer only minimum statutory redundancy pay if the workforce activated its right to union representation during the redundancy process (Colling et al. , 2006). Therefore, actors are involved in a process of deploying power capabilities more or less creatively on a particular institutional terrain.MNCs are able to engage in institutional arbitrage (Morgan et al. , 2003), manoeuvring between institutional variations within a given host setting, assembling and reassembling institutional elements in a process of bricolage to create new variants. In sectors most exposed to global competition, such as finance and business services (Morgan, 2009), or in periods of institutional instability, MNCs may have greater freedom to create innovative institutional arra ngements within the dominant host framework, leading to what Thelen (2009) calls the segmentation of business systems.The ability of powerful institutional entrepreneurs, including MNCs, to shape institutional settings is a key factor in a current strand of comparative institutionalism that questions the monolithic character of national-institutional configurations and emphasizes internal heterogeneity (e. g. Almond, 2011 Crouch et al. , 2009 Lane and Wood, 2009 Saka, 2002). For Crouch (2005 Crouch et al. , 2009) intra-model variety is the norm rather than an anomaly, hence firms may be less bound by national constraints than much theory suggests.In practice, institutional elements are more loose-coupled, and the national model less determinant. heterogeneousness has substantial implications for the Kostovian concepts of institutional distance and country institutional profile. While multiplicity in institutional settings has been discussed by neoinstitutionalists (e. g. Clemens an d Cook, 1999 Delmestri, 2009 Oliver, 1991) and is acknowledged by Kostova et al. (2008 997), the implications for transfer have not been thoroughly assimilated (cf. Phillips et al. , 2009).Chief among them is that MNCs rule-making capacity within institutional configurations may facilitate the transfer of practices even to institutionally distant hosts. The boilersuit country institutional profile may not be the appropriate level of analysis, and more fine-grained examination of topical anesthetic host arrangements may be needed. An alternative instrument, based on constructing the institutional profile of the subnational variant, would seem to offer a conceptual way forward, although practical problems may be foreseen of access to adequate subnational data on institutional arrangements.Power capabilities of MNC actors go now to classify the power capabilities2 of MNC actors in situations of transfer, these capabilities may be derived from the micro-institutional domain of the MN C itself, or from macro-institutional arrangements in the host (and beyond). Crucially, MNCs may use power to shape macro-level institutions, bear upon the processes whereby they are established, maintained over time, revised in function or scope, or replaced by other arrangements (e. g. Knight, 1992 Lawrence, 2008 Lawrence and Suddaby, 2006). Agency is not confined to HQ policy-makers.Actors in the subsidiary have their own sources of power. Where power capabilities of different kinds are disseminated across organizational levels, groups and individuals within a MNC, pressures to adopt transferred practices are susceptible to deflection, avoidance, negotiation or challenge by subordinate actors (cf. Oliver, 1991). In order to predict transfer outcomes, it is therefore necessary to assess the balance of capabilities between the centre and the subsidiary (Dorrenbacher and Geppert, 2009b). However, while there has been much discussion of the decentred or networked nature of contempor ary MNCs (e. . Andersson and Holm, 2010) an authoritative central HQ remains the norm. As Egelhoff (2010) argues, network structures provide inadequate good specialization, which is required to perform functions such as providing accountability to shareholders and imposing tight-coupled coordination on units where careful synchronization of operations is required. Thus, the overall power of HQ positions it as a field dominant (e. g. Levy, 2008) in relation to the organizational field constituted by the MNC. The power capabilities of headquarters actors.HQ actors have specific capabilities relating to each of the dimensions of power. The first aspect of HQ micro-institutional power is control of the allocation among subsidiaries of key organizational resources, such as finance, investment, and knowledge and expertise, through budgeting and management control processes. Decisions over resource allocation have critical impacts on the economic security and survival of subsidiaries. HQ also controls career opportunities and rewards of key subsidiary actors recalcitrance may imperil remuneration or career advancement, particularly where aspirations are international (e. . Dorrenbacher and Geppert, 2009a). However, as discussed below, power resources are unlikely to be monopolized by HQ. Moreover, the big guns at HQs disposal, such as the threat of closure or investment allocation, may be disproportionate weapons for resolving downstream conflicts over the transfer of HR practices and the threat of closure may be unavailable if an MNCs investment is market-seeking or resource-seeking, rather than efficiency-seeking. If a subsidiary is performing well economically, it is less likely to be penalized for not adopting transferred HR practices.Conversely, poorly-performing subsidiaries are more vulnerable to pressure from HQ to conform (e. g. Tempel et al. , 2006). Thus there is considerable scope for HQsubsidiary negotiation (cf. Ferner and Edwards, 1995). Turning, seco nd, to power of processes, within the MNC there is a transnational authority structure that legitimates the exercise of power by hierarchically senior actors (units, groups, individuals, etc. ). semi-formal hierarchical authority shapes the way decisions are made and resources allocated within the firm (cf.Hardy, 1996). HQs role as apex of the authority structure gives it the power to determine mechanisms for transferring practices to subsidiaries abroad. In particular, it can specify which actors at which level are able to intervene in decisions, for example on the introduction of a new global HR policy. Decision-making rules frame how practices are codified into policy and transferred to subsidiaries. Generally, HQ can define formal policies for subsidiaries with a prima facie expectation that subsidiaries comply.It can reduce enforcement and monitoring mechanisms and benchmark practice across subsidiaries, facilitating transfer. Finally, HQ has power over meaning. It can influe nce cognitive and normative aspects of the micro-institutional frame of action by shaping corporate cultures, codes of practice and standard operating procedures, which then become institutionalized. This third face of power helps shape the mindsets of those in subsidiaries whose job it is to implement transferred policy.Research suggests that formal policies need shared understandings in order to function effectively (Ferner, 2000). HQ actors control the creation of legitimatory rhetorics (Suddaby and Greenwood, 2005) concerning, for instance, competitive advantage, profitableness, or site closures (Erkama and Vaara, 2010). This is important where there is causative ambiguity about the impact of a transferred practice in the subsidiary (Szulanski, 1996), which may be the case particularly for downstream activities such as HR (Boxall and Purcell, 2011).HQ actors can also shape meaning systems in subsidiaries by, for example, recruiting key host individuals whose mindsets are less classifiable of host norms and more in tune with organizational norms (Evans and Lorange, 1989) this allows them to bypass barriers to internalization and helps create alternative micro-institutional settings within the host institutional context. The power capabilities of subsidiary actors Subsidiary actors have the capacity to challenge transfer and nourish host institutional arrangements.There has been much work in recent years conceptualizing subsidiaries as active strategizers within the wider MNC (e. g. Belanger et al. , 1999 Bouquet and Birkinshaw, 2008 Dorrenbacher and Geppert, 2009b Dorrenbacher and Gammelgaard, 2011 Kristensen and Zeitlin, 2005 Morgan and Kristensen, 2006), rather than passive transmission belts for HQ policies and practices. The ability to strategize depends on power capabilities stemming from both the micro-level of the MNC and the macro-level of the host institutional environment.Considering first the micro-political power of subsidiary actors, subsid iaries may achieve power over resources from the competent performance of their productive activities (e. g. Andersson and Forsgren, 1996). For example, they may generate a substantial proportion of the MNCs profit,3 offer access to key markets, create competitively significant knowledge or expertise, or perform functions that are critical to the success of the firms value chain (Dorrenbacher and Gammelgaard, 2011). Possession of resources allows subsidiaries to negotiate to some degree its relationship with HQ.Power over processes is primarily the province of HQ and the hierarchical authority structure, but not exclusively so. Subsidiaries may use their bargaining power deriving from control of resources to achieve a modification of decision-making processes, with an impact on transfers. For example, in a US engineering firm, HR managers from subsidiaries generating a large proportion of global revenue win a revision of the policy-making process that accorded them a greater role i n the definition of global HR policies (Edwards, T. et al. , 2007).In terms of transfer, the exercise of process power is likely to result in policies that are more sensitive to host institutions, and hence more easily transferable. HQ is also likely to dominate power over meaning, yet subsidiaries again may have some influence at least to contest dominant systems of meaning within the organization. The transfer of practices and their associated meaning systems across institutional spaces makes visible taken-for-granted normative and cognitive frameworks and hence renders them susceptible to purposive action.One example is the transfer of workforce diversity policies to the UK subsidiaries of US MNCs. Transfer exposed underlying discourses concerning the business case and equal employment opportunities, through the collision of very different diversity rationalities in the US and the UK (Ferner et al. , 2005). Another instance is an attempt by an American business services firm to i mplement a global performance-related pay scheme for professional consultant staff in the German subsidiary.These employees strongly opposed the new system which clashed with normative frameworks of fairness and was seen as leading to culturally unacceptable pay differentials (Almond et al. , 2006 138-9). MNCs micro-institutions are beset with ambiguities, complexities and inconsistencies, particularly when applied to real choices in a complex business world. These give actors room for idiosyncratic interpretation of norms and rules. Even if subsidiaries do not have the power to shape micro-institutional frameworks of meaning, they can selectively respond to ifferent parts of a complex configuration. In short, rival micro-institutional norms provide alternative rhetorics legitimating or de-legitimating particular courses of action (Suddaby and Greenwood, 2005). at bottom the HR function, whose activities are largely downstream, one source of ambiguity is that they may be only par tially nested within upstream strategic objectives related to competition, profitability and growth. In other words, they may have relative autonomy. HR&EP norms may be at odds with upstream norms concerning economic performance, and can be deflected on that basis.Where transferred HR practices are seen as disrupting existing relationships or practices regarded as functional for subsidiary performance, subsidiary actors may deploy what Suddaby and Greenwood (2005) term ontological rhetorics asserting the existential incompatibility of economic goals and transferred HR practices. Even within the HR domain, there may be contradictions within highly complex normative frameworks for example, between principles of pay determination and approaches to union recognition.Thus UK subsidiary managers in one US MNC resisted a global pay freeze on the grounds that it conflicted with a competing corporate norm of favouring non-union employee relations (Almond and Ferner, 2006). In short, subsidia ry actors can exploit rival appeals to legitimacy within the MNC, and are likely to do so when they oppose transfer. Turning to macro-institutional resources, subsidiary actors derive power capabilities from their status as skilled negotiators of the host institutional context, both of the overarching national-institutional framework, and the subnational niches and variants in which they are located.Where the subsidiary operates essentially as the willing local agent of the wider MNC, these powers may be utilise to promote transfer. However, where conflicts of interest exist between subsidiary and HQ, the same capacities may be used to block or amend transferred practices. First, subsidiaries derive power resources from the institutional complementarities (Hall and Soskice, 2001) of the host business system that generate certain competitive advantages.Given the increasing importance of intra-model variants, subsidiaries local embeddedness is often crucial for the generation of reso urces such as scarce knowledge and expertise of value to the economic activity of the MNC, and that the MNC cannot otherwise access (Andersson and Forsgren, 1996 Dorrenbacher, and Gammelgaard, 2010 Sorge and Rothe, 2011). Almond (2011) points to the significance of locally embedded flexible high-skills ecosystems that drive innovation and provide actors with power resources for shaping practice transfer.Second, the regulatory framework of the host gives subsidiary actors some bribe over the power of process by exerting coercive isomorphic pressures, for example in employment relations and the workings of the task market. Thus German codetermination legislation gives employees rights to representation on company supervisory boards, and to set up works councils with statutory rights over a range of work-related issues. Changes to payment systems resulting from transferred pay and performance practices are subject to codetermination.Even where the MNC deploys resources to mitigate th is issue of process control (see above), it nonetheless increases the costs for MNCs of shaping decisions, and necessitates some degree of negotiation with local actors and/or the application of power resources. Thus the power of process provides subsidiary actors with a capability to resist practice transfer. Third, subsidiary actors are able to exploit host institutional settings to challenge dominant actors power of meaning in the MNC.In particular, significant macro-institutional capabilities derive from subsidiary actors competence as skilled interpreters of the host institutional frame. In other words, they can shape the normative and cognitive understandings of what is possible, desirable and contextually rational. Even the most highly regulated and juridified systems leave spaces for interpretation based on expert institutional knowledge. More subtle and tacit cognitive and normative elements of institutional frameworks are even more subject to insider exegesis.While subsid iary actors may use such institutional expertise to gain transfer, in situations of interest conflict with HQ, they may equally draw on such capabilities to construct a rhetoric legitimating opposition to transfer. Naturally, subsidiary actors interpretations of the viability of transfer are liable to challenge and counter-interpretation, notably by expatriate managers, and sceptical HQ actors may demand that local managers claims be thoroughly tested. This may especially be the case where dominance effects are present, notably in US MNCs which may have a strong presumption of the efficacy of HQ practices (e. . Almond et al. , 2006 Tempel et al. , 2006). Again, therefore, the host institutional context provides a contested terrain (cf. Edwards and Belanger, 2009 also Geppert and Dorrenbacher, 2011), in which interest groups at different levels within the MNC struggle to further their agendas. A final point concerning the power capabilities of subsidiary actors is that their issue-s cope of power (Lukes, 2005 74-5) the range of issues over which an actor can determine outcomes is likely to be limited because of the overall power of HQ.As a result subsidiaries are likely to have to prioritize the issues over which they expend capabilities that are scarce relative to those of HQ actors. Moreover, their power is likely (again using Lukes terminology) to have a lower contextual range, to be largely restricted to the specific institutional setting in which they operate whereas that of HQ is likely to be more context-transcending, deployable under a wider range of circumstances, especially where dominance effects come into play.A possible exception to this is where the subsidiary is located in a host that is more dominant in the global economy than is the MNCs country of origin. This may provide greater context-transcending capacity to the subsidiary, leading for example to additional possible transfer outcomes such as reverse diffusion (Edwards and Ferner, 2004) i n which practices are transferred from subsidiary to HQ. These arguments are summarized in Table 1. Table 1 about here MNC actors and interests in the context of HR&EP transferWe are now in a position to examine HQ and subsidiary interests in relation to transfer. Together with the power capacities of HQ and subsidiary explored above, the constellation of interests will determine the stance of subsidiary actors towards transferred practices. Who are the relevant MNC actors in situations of institutional duality and transfer? A first approximation is to divide actors into those associated with the headquarters perspective and those in the subsidiary.In reality, finer-grained distinctions may become necessary to include for example actors at regional or business-unit headquarters with interests and power capabilities distinguishable both from those of corporate headquarters and national subsidiaries. Moreover, HQ is not a homogeneous block but comprises different groupings (e. g. by m anagement function and level) with potentially different interests in relation to transfer. At subsidiary level, a core distinction is between managers and workforce (Edwards and Belanger, 2009).There may be both common and divergent interests. Managers and workforce may both have an interest in the sites survival, for example. In contrast, particularly where the impact of a transferred practice on the sites performance is ambiguous or contested, interests may diverge. Depending on the practice, further disaggregation may be appropriate for example, subsidiary operations managers may see the transfer of practices such as teamworking as useful for efficiency while HR managers may oppose transfer on the grounds that they disrupt existing accommodation with employees.An important distinction is between managers whose career ambit lies within the host country and those whose careers trajectories and aspirations are international in scope (Dorrenbacher and Geppert, 2009a Morgan and Krist ensen, 2006). The former may engage in subversive strategizing (Kristensen and Zeitlin, 2005), acting counter to HQ norms and prescriptions in order to strengthen the effectiveness of the subsidiary while the latter may have less stake in the sites survival, and see it as in their career interest to overcome local obstacles to transfer.Nor is the subsidiary workforce needfully homogeneous. There may be differences of interest between high-skilled workers with core competences and lower-skilled workers with more generic competences, and transferred practices may differentially impact on such interests. Whether subsidiary actors deploy capabilities to resist or promote transfer will depend on how the practices affect existing interests. Resistance or contestation is likely to emerge under conditions of criticality, that is where the issue is seen as critical to the interests of actors in the subsidiary.For example, resistance may be expected where a transferred practice embodies insti tutional norms or requirements that disrupt accommodations seen as vital to the effective conduct of the economic function of the subsidiary, and hence to the economic security, rewards and career interests of groups and individual actors in the subsidiary. Where a transferred practice disrupts workforce interests but not those of managers (or vice versa), there is likely to be an internalization of the clash of rationalities within the host.In the area of HR&EP, it is more likely that interests in the subsidiary will be differentiated, with say employees and their representatives resisting transfer, while managers promote it. This may be manifested in managementworkforce conflict, or as Tempel et al. (2006) suggest, subsidiary managers may function as a Trojan horse for imported practices such as global performance management systems, working to neutralize institutional obstacles. Transferred practices may selectively disrupt interests of particular management groups, or particular workforce groups, or both.In such cases coalitions of support for and opposition to transfer may be complex and cut across the managementworkforce divide. However, where transfer disrupts a wide range of subsidiary interests, a subsidiary-wide oppositional coalition may emerge. Power, institutions and transfer outcomes These arguments are now synthesized into a model of transfer outcomes, in which constellations of institutional distance, macro- and micro-level power capabilities, and actors interests determine the fate of transferred practices.We argue, first, that there is a need to revise the Kostovian idea (e. g. Kostova, 1999) that MNCs operate between fairly fixed institutional entities, as implied by the notion of institutional distance. The impact of ID upon transfer is modified by the power of MNCs in two ways. In the first place, dominance effects, where they exist, smooth transfer by providing MNCs with abundant power over resources, power of process over the rules of th e game, and power to manage meaning by reducing normative opposition to dominant-country practices in the host.In the second place, the power of MNCs as active rule-makers, engaging in institutional work to construct institutional variants or niches within the host setting, mitigates the constraining impact of institutional distance. In order to incorporate these considerations, we therefore propose that Kostovas notion of institutional distance, which we refer to as raw ID, be replaced by the concept of modified ID, (mID). Here, the predictions of our framework are significantly different from those of Kostovas.Second, transfer outcomes depend on the specific configuration of power capabilities and interests of actors at different levels of the MNC. Where interests of subsidiary and HQ actors are broadly harmonic, the power capabilities of the subsidiary are likely to be deployed in a manner supportive of transfer, for example by removing or circumventing host institutional obstac les to transfer. However, where there are strong interests within the subsidiary in conflict with those of HQ, the outcome is likely to be an oppositional stance.This does not necessarily entail overt resistance (cf. Oliver, 1991). Power capabilities may be deployed to resist, modify, neutralize, or quarantine the transferred practice through ritual observance that does not affect real practice. Which of these oppositional outcomes occurs is likely to depend on the homogeneity of interests within the subsidiary, and the power capabilities of the subsidiary (or at least of oppositional actors) relative to those of HQ.An outcome of ceremonial compliance in which nonconformity is masked by a facade of acquiescence (Oliver, 1991 154) is likely where opposition is high due to a collision of normative/cognitive frameworks (e. g. concerning what will promote unit profitability in the subsidiary), but where subsidiary actors control of resources and/or processes is relatively low, precludi ng overt resistance. Alternatively, opposition may lead to adaptation or hybridization (e. g. Becker-Ritterspach, 2009 Szulanski and Jensen, 2006) in which the practice acquires elements characteristic of the host setting.In some cases, this may make a practice more effective within the host, or allow it to be internalized by subsidiary employees. Survey evidence suggests that it is common for MNCs to disseminate practices by means of broad framework policies, with local adaptation being expected in HR&EP areas such as performance management, variable pay, and employee involvement (Edwards, P. et al. , 2007). This may be termed functional hybridization. In other cases hybridization may frolic a practice from its normal function and hence subvert HQs intention.For example, a supposedly standardized employee performance appraisal system in a US MNC operated with major variations in practice thus in the German subsidiary the works council was able to reject individual assessment, mini mize quantification, and reduce the scheme to occasional informal, unrecorded evaluations (Liberman and Torbiorn, 2000). Such resistive hybridization is likely where transfer disrupts internal accommodations and/or is seen as dysfunctional for subsidiary performance, and where subsidiary actors have sufficient power capabilities, such as interpretive control of local meaning frames.Third, the three dimensions of power are likely to affect transfer outcomes in different ways, other things being equal. Where a subsidiary has significant power of resources, this is likely to facilitate a bargaining process in which the terms of entry of a transferred practice are negotiated between subsidiary and HQ. Where a subsidiary has significant power of process, it may use it to influence how global policies or practices are designed within the MNC, for example by contributing to central policy-making bodies.This provides it with the opportunity to ensure that the transferred practice is from th e start compatible with the cognitive/normative (or so regulatory) frames of the host. Finally, a subsidiary may be skilled in the management of meaning, whether in highlighting or concealing normative/cognitive discrepancies provoked by the transfer of a practice, or by mobilizing appropriate legitimatory discourses within the micro-institutional sphere of the MNC. This power may affect transfer outcomes in different ways.Where the subsidiarys stance is oppositional, it may evoke host macro-institutional impediments, drawing on its skilled interpretation of institutions-in-practice. Equally, where its other power capabilities are relatively weak, it may use its skills in managing meaning to construct the ceremonial aspects of the practice without impinging on the subsidiarys core activity. Where the subsidiarys stance is supportive of transfer, the power of meaning may be brought to bear to secure the internalization (Kostova, 1999) of transferred practices.Returning to the outc ome parameters outlined in the introduction, we can synthesize the above arguments (see table 2) in terms of typical scenarios, based on differentiation of functionality, internalization, adaptation and directionality. The table indicates that the conditions most conducive for successful transfer in which functional practices are internalized are where HQ actively wants to transfer practices, ID is low, dominance effects are high, institutional space is high, HQs power capabilities are relatively strong, HQ and subsidiary interests are concordant and the interests of subsidiary actors are homogeneous (model 1).To take a stylised example, a US business services firm i. e. an MNC from the hegemonic business system, in a sector in which that business system is internationally dominant transfers a performance appraisal system to its professional employees in its non-unionized Irish subsidiary as part of the global dissemination of standardized HR policies. Many of the employees have worked for American firms before US MNCs predominate among foreign employers in Ireland and have studied or worked in the US.Their cognitive/normative frames are attuned to American performance-management systems, especially since there is a strong values-based corporate culture, and there are unlikely to be unlike interests with regards to the policy, so the practice is likely to be easily internalized. There are few macro-institutional constraints to the introduction of such policies and few variant constraints stemming e. g. from the presence of trade unions. This can be contrasted with five other scenarios.As ID increases and capabilities, particularly resources, controlled by the subsidiary grow, the prospect of transfer taking the form of functional hybridization increases (model 2). To illustrate, a US electronics MNC attempts to transfer a performance-related pay system to the more constrained and institutionally distant context of Germany. 4 There is a perceived disjunct ion between the policy and cognitive/normative frames of employees, i. e. the cross-institutional transfer reveals the cognitive/normative underpinnings of the system.The subsidiary is large, successful and powerful, giving it power over resources with which to negotiate with HQ a modification of the practice for example, by reducing the amount of pay at risk, to make it more acceptable within the host context (e. g. Tempel et al. , 2006). Where dominance effects weaken, institutional space is more constrained, the subsidiary possesses significant power of resources and process relative to HQ, and has divergent interests from HQ, then the likelihood of resistive hybridization and low internalization rises (model 3).For example, Lindholm et al. (1999) show how performance appraisal systems in Nordic MNCs in China were subverted because the systems provoked extensive clashes with cognitive/normative frames, e. g. with regards to the priority given to performance rather than seniority , and issues around loss of face and around managerial authority in setting targets. If dominance effects are absent, ID is high, and subsidiary interests clash with HQs, transfer may fail altogether (model 4).To illustrate, a British MNC seeks to internationalize a policy of outsourcing support functions to reduce labour costs. It pressurizes foreign subsidiaries where the ratio of outsourced workers to internal employees is significantly lower than in UK domestic operations. This is the case in the German subsidiary, one of the largest in the company and with important production facilities for key products.Subsidiary managers are sceptical as to the efficiency of outsourcing and the HR manager uses his detailed knowledge of German employment law to circumvent the need to outsource functions (e. g. Tempel, 2002). Where institutional space is moderate, the subsidiary is not particularly powerful (in resource or process terms) in relation to HQ, and has quite different interests to actors at HQ, the prospects for ceremonial adoption are at their highest (model 5). To take a stylized example, a British MNC attempts to internationalize its comprehensive diversity management practices.In its medium-sized production facilities in Germany, there is considerable scepticism among managers and primarily male employees as to the business case for diversity management. Lacking power of resources or process to openly block HQ practices, managers go through the motions of introducing diversity management measures, for example by organizing social events under the label of diversity management, but do not implement real changes in recruitment processes to encourage more female applicants or introduce diversity awareness training for employees.Finally, where interests are concordant and where the subsidiarys power capabilities are considerable especially when its institutional embeddedness allows it to develop scarce resources of value to the wider MNC conditions exist fo r reverse transfer (model 6). That is to say, practices operating in the subsidiary are transferred to headquarters (Edwards and Ferner, 2004). These conditions are heightened in situations of reverse dominance, that is where the subsidiarys host system is more dominant than the MNCs parent system.For example, a German chemical company developed a global system of allowance pay for executives that was modelled closely on schemes already developed in the US subsidiary of the company (Ferner and Varul, 2000). These models are not, of course, exhaustive other outcomes are possible and the same transfer outcome may be obtained through different combinations of variables. But they illustrate the heuristic value of the approach. It should be noted that a certain degree of interaction of explanatory variables is likely.For example, MNCs from dominant parent countries are likely to be able to influence subnational variety because of their greater capacity for rule-making rather than mere r ule-taking behaviour. Table 2 about here Conclusion This paper has argued for a revision of the Kostovian approach to practice transfer in MNCs in two key respects systematically incorporating actors power capabilities, and taking account of how power problematizes ID by rendering it more susceptible to the purposive action of MNC actors.We have argued for an analysis of power that incorporates both macro-institutional and micro-institutional capabilities of MNC actors in which these are able to a greater or lesser extent to manipulate and construct elements of the institutional settings in which they operate. The implications of the argument are methodological as well as conceptual. First, there is a need to develop credible measures of the variables in the model. The concept of mID implies the need to assess dominance effects, for example, and these will vary tally to the pairs of parent and host business systems in play dominance may also vary e. . by sector. Much work needs to be through on measuring notions such as institutional space, and to map the dimensions that characterize institutional variants. This has to be accomplished at a disaggregated level notions of country institutional profile may be too crude where MNCs power allows them to construct niche institutional micro-climates. One of the most difficult tasks is to operationalize actors power capabilities and to empirically assess different levels of capabilities in relation to resource, process and meaning.Moreover, empirical tools capable of identifying and distinguishing interests are needed, a task complicated by the fact that while some underlying interests may be long-term and durable for example, around organizational survival others may well be issue-specific, constructed anew around each instance of transfer. These points suggest a critical role for in-depth case studies. They allow deeper exploration both of the process of transfer and of how transferred practices are implemented in the routine life of the subsidiary.They are more suited than surveys to developing nuanced operationalizations and unpicking the complexities of power, how different kinds of power capabilities are deployed by different actors in the transfer process, and how configurations of interests are constructed around different transfer cases. They are more appropriate for exploring in depth the way transferred practices operate in reality. Finally, there is the question of the generalizability of these arguments to other areas of management activity.Inasmuch as transfer provokes challenges to existing modes of action and to institutional frameworks, much of the same processes of power are likely to be observed in other areas. The cross-national transfer of technical know-how, for example, exposes underlying cognitive assumptions about how the production of knowledge and development of products should be organized (e. g. Lam, 1997 Szulanski and Jensen, 2006). It is also likely to create con flicts of interest over control of knowledge as a resource, or concerns about the impact of transferred knowledge on the structuring of activities and actors roles in the recipient unit.Beyond that, however, HR&EP may have distinctive characteristics, relating partly to the structured antagonisms between capital and labour (Edwards, 1986). More immediately, as a downstream business activity, HR&EP is particularly prone to the normative principles that may be at odds with the prescriptions of upstream strategy, increasing the space for actors to exploit micro-institutional ambiguities between, for instance, directives on growth, profitability or efficiency on the one hand, and principles of employee management on the other. Funding statementThis research was supported by reenforcement from the Economic & Social Research Council, grant numbers R000-23-8350 and RES-000-230305. Notes ? According to Scopus, the number of citations for three of Kostovas articles concerning transfer (as at 15th September 2011) are as follows Kostova, 1999 321 Kostova and Zaheer, 1999 329 Kostova and Roth, 2002 281. 2 The term capabilities is preferred to resources since power over resources constitutes only one dimension of power (one that is the focus of resource-based views of power that predominate in the business literature). Perceptions of profitability in an MNC can be shaped