Subsidiaries of Multinationals are the Source of Novel Practices - Assignment Example

Why some subsidiaries of multinationals are the source of novel practices while others are not: National, corporate and functional influence Institution: Date: Edwards, Sanchez-Mangas, Belanger and McDonnell’s (2015) study mainly directs its focus on the field of human resource and to achieve this, the authors have analyzed data set in four host countries. It is an examination of how subsidiaries have input newly developed HR practices into the rest of multinational. Previously, Pla-Barber and Alegre (2013) had suggested that innovation development process should not be neglected in knowledge transfer studies and needed to be scrutinized further in the multinational contexts. The researchers have identified several gaps that exist in this research. First, the issue of multinational organizations moving towards network form has not extensively studied to propose a reliable conclusion. Second, the issue of diffusing human resource practices from global operations of multinational companies to the rest of the organization has only been studied in part. The researchers argue that this is a form of reverse diffusion because diffusion assumes a direction that differs with that of the main focus of research concerning multinational organizations (Edwards et al. 2015). The researchers have further argued that previous studies have strictly relied on case studies to draw their conclusions. First, in regard to theoretical review, the understanding that has been generated is very shallow in terms of how national context contributes to shaping how multinational subsidiaries can manage to initiate diffusion. The other existing gap is related to limited quantitative evidence comparing data from multiple countries. The researchers have indicated that these research gaps have motivated the contributions of their study. This article claims that it attempts to fill these gaps through investigating data from four countries. The results of this article provided some valuable theoretical implications to global business literature especially in relation to innovation transfers. Subsidiaries in particular are developing closer connections with local counterparts through frequent collaborations and transactions. Pla-Barber and Alegre (2013) have too observed that external relationships are strong drivers of innovation and that the subsidiaries developed with these external counterparts often contain more novel ideas. On the contrary, in multinational networks, subsidiaries often share higher similarity both in technical background and organizational culture and hence less novel ideas in developing new knowledge. Regarding the selection of countries of study, these researchers have argued that the United Kingdom, Ireland, Canada, Spain present essential features that make them attractive contexts in which to examine reverse diffusion. Although these countries have important features, they make the study lack a global representation. Three of these countries are in Europe and the other one is from America. Therefore, these researchers have not strike a balance in regard to global representation. There are other countries outside Europe and America that have established property rights and market. For example, in 2013, New Zealand ranked 2nd, Singapore ranked 7th, Australia ranked 11th and all these countries ranked above the United Kingdom which was in position 12, Ireland in position 18, and Spain in position 33 (IRPI 2013). The ranking on property rights and markets changes rapidly. The researchers used 1994 data which is rather outdated and cannot display the current state of property rights and markets. Additionally, the data used for comparison of institutional differences between the four countries is also not representative of the current state of affairs. Theoretically, this article is based on three theories; country’s position in the global economy, internationally integrated production in MNCs and human resources networks in MNCs (Edwards et al. 2015). To support their theoretical framework, these researchers argue that the possibilities and support offered to MNCs by national and regional business systems significantly influence how knowledge within MNCs is disseminated. They further argue that countries that host major financial and business centers occupy core positions within the firm because they offer firms with multiple channels to connect with what is outside. Conventional economic theories take the position that a country’s factor endowments do not provide it with the best combination to maximize welfare. Therefore, each country needs to import and export products and factors of production (Onyemelukwe 2009). It was important to use this theory and this is supported by numerous previous studies. The MNCs are not in the business of development and will go to countries and regions with the best financial returns and greatest perceived safety for their investment. There will be no reverse diffusion between the developed and undeveloped country but reverse diffusion will be witnessed between two developed countries. Therefore, the position a country occupies in the global economy is one of the key determinant of the level of reverse diffusion (Edwards et al. 2015). Methodologically, the article uses comparative, parallel nationwide surveys of multinational companies with operations in selected countries. Therefore, their study instruments were collaborative in nature. The authors observe that data being used to develop accurate and up-to-date population listing is insufficient. The surveys incorporated in this study were done using structured questionnaires which were used to conduct face-to-face interviews, and questionnaires posted over the internet in cases where face-to-face interviews were not possible. It appears that the researchers were limited by their geographical location and this can be explained by their inability to reach participants in Canada for a face-to-face interview. The data was drawn from 883 foreign-based MNCs with 258 from UK; 165 from Canada; 213 from Ireland; and 247 from Spain (Edwards et al. 2015). The representation was fairly balanced between the four study countries. The researchers have indicated that 13 percent of all MNCs involved appeared in at least two countries and this percentage was rather high. Although the researchers argue that this had insignificant influence on the model, it could make the overall results to vary. The study also used a single respondent design instead of multiple respondents design arguing that the latter would have adversely affected the response rate and made it difficult for comparative analysis. Reliance that HRM research places on single respondent design has been criticized by several researchers. Sanders, Cogin and Bainbridge (2013) has evidenced that single respondent measures of HR research contain large amounts of error. Edwards, Sanchez-Mangas, Belanger and McDonnell (2015) have discredited multiple respondents design arguing that it would have affected the response rate. However, on a more negative side, in using single respondent designs, there are inconsistencies across studies. Based on a study from 14 large organizations, Gerhart et al. (2000) found reliabilities for single respondent assessments of HR practices were generally below 0.50. As a result, they argued that the assessment of HR practices based on single respondent designs are subject to unacceptable high levels of measure error and may give rise to spurious statistical relationships, particularly if the informant exaggerates his/her own effectiveness and impact on performance. The common method variance (CMV) may also have posed a threat to the validity of the research results. To reduce the errors in their study, Edwards et al. (2015) should have increased the number of respondents. This may have meant surveying all HR or all line managers within all the organizations that were participating in the study. In summary of methods used, there are several concerns in this research including overreliance on a single method, particularly surveys; the prevalence of cross-sectional research design, and a dearth of a multi-level perspective. Greater emphasis should have been laid on development oriented mixed method because it provides the foundation for the creation of quantitative measures of concept. However, it would even have been more appropriate to utilize quantitative and qualitative approaches to provide complementary perspectives to expand understanding, and to triangulate the research. Such a method would have provided additional confidence about study relationships and address common method variance (CMV) concerns. The two dependent variables are in form of two questions: i. Has subsidiary provided any new practices that have been adopted anywhere else in the worldwide company? The code used was 1=yes and 0=no. The respondent who answered ‘yes’ were the only ones who proceeded to the next question. ii. Does the practice you have indicated being used in some units of the company, in major businesses, or has been adopted internationally? The researchers have also developed five independent variables; country dummies, integrated production, skills, HR network intensity, and controls (Edwards et al., 2015). The proposed hypotheses have been used effectively to examine the relationship between the dependent variables and independent variables, and to provide a foundation for further examination between these variables. The role of these hypotheses was to examine the relationship between the position of UK, Ireland, Canada, and Spain in the global economy. United Kingdom as the counterpoint has been highly examined. For instance, hypothesis 1 (H1a) examines the relationship between UK and Canada; H1b examines the relationship between the UK and Ireland; while H1c examines the relationship between UK operations and Spain. Canada’s relationship with the United States has boosted its position in the global economy and this has made these researchers to suggest similarity between MNCs operations in UK and Canada as sources of reverse diffusion. UK operations of MNCs were hypothesized to be more regularly the source of RD than subsidiaries in Spain and Ireland. The researchers used United Kingdom as a counterpoint in emerging countries hypotheses. The degree of sophistication of this study was very high; therefore, a counterpoint was necessary. Advanced statistical techniques may be beneficial in some cases and crucial in others. The probabilities that subsidiaries (Ireland – 15 and Spain – 17) provide new practices in training and development are 7 and 9 lower than in UK subsidiaries (Edwards et al., 2015). The results of this study highly supported all the study hypotheses. In the discussion and conclusion part, Edwards et al., (2015) have focused on the variables that attained significance and then relate them to previous studies. They have also recognized several areas where further research is desirable arguing that there are certain issues that have not been comprehensively examined before. This study used a large sample size 258 from UK; 165 from Canada; 213 from Ireland; and 247 from Spain (Edwards et al. 2015). Statisticians term a large sample as n>250, and a small sample as n Read More