Human Resource Management in Developing Countries

Pawan S. Budhwar, Yaw A. Debrah

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781134594825
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Focusing on HRM developments in thirteen developing countries across Asia, Africa and the Middle East, this book explores the contextual functions of HR in these countries. In addition, it analyzes the more general issues of HRM in cross-national settings to give readers an understanding of HR that is both comparative and contextual. Covering the policies and practices of China, South Korea, Taiwan, India, Nepal, Pakistan, Iran, Saudi Arabia, Algeria, Nigeria, Ghana, Kenya and South Africa, each chapter follows a framework that draws out all of the unique and diverse configurations of HRM. This important text is an invaluable resource for all HRM practitioners, students and scholars of HRM, international HRM and international business.

1 Introduction

Pawan S. Budhwar and Yaw A. Debrah

Introduction

This chapter, first of all, provides the reader with a brief overview of the developments in the field of human resource management (HRM). Second, it highlights the need to understand HRM in developing countries. Third, it introduces a framework for conducting cross-national HRM evaluations and, finally, it presents the structure of the book and introduces each of the chapters.

Developments in HRM

The developments in the field of HRM are now well documented (see for example, Legge, 1995; Poole, 1999; Poole and Warner, 1998; Schuler and Jackson, 1999; Sisson and Storey, 2000). Nevertheless, the debate on HRM issues continues even though its focus has changed over time. The main issue which occupied academics in the 1980s was the evolution of HRM. In this regard, the debate was mainly on the exploration of the salient aspects of the transformation of personnel management into HRM. Having done so, it moved on to issues pertaining to the incorporation of industrial relations into HRM (Guest, 1991); then the integration of HRM into business strategies, devolvement of HRM to line managers (Brewster et al., 1997; Budhwar and Sparrow, 1997), and finally seeing HRM as a source of competitive advantage for organisations (see, for example, Barney, 1991; Schuler and MacMillan, 1984; Wright et al., 1994). Currently, there is an ongoing debate regarding the contribution of HRM to a firm’s performance (Guest, 1997; Huselid, 1995; MacDuffie, 1995; Schuler and Jackson, 1999). With these developments the nature of Human Resource (HR) function has changed from being reactive, prescriptive, and administrative to being proactive, descriptive and executive (Boxall, 1994).

While some seminal HRM research findings have been produced in recent years, research has often been based on a single country or the researchers look at issues in Western Europe or North America. Essentially, these studies have focused on HRM in advanced industrial societies in the West. As relatively very little work on comparative HRM research in developing countries has been done, some researchers have suggested the need for more comparative cross-national HRM studies (Brewster et al., 1996; Budhwar and Sparrow, 2002; Clark et al., 1999; Pieper, 1990; Poole, 1990).

This is all the more important because of the increasing levels of globalisation and internationalisation of business, the growth of new markets (such as in Africa, Eastern Europe, China, India, South-East Asia and Latin America), the growth of new international business blocs (such as NAFTA, the European Union, ASEAN) and an increased level of competition among firms at both national and international level. As the world develops into a ‘global business village’, there is a greater need to know how managers in various parts of the world cope with issues and problems related to management of human resources. Thus, we must highlight the major factors that impact on HRM policies and practices in different contexts as such an evaluation will contribute to the development of HRM theories and relevant policies and practices (Budhwar and Debrah, 2001).

Although academics have responded positively to the challenges raised by the globalisation of business by investigating a number of issues and problems related to international business (Hendry, 1996), again the comparative perspective has been put on the back burner. However, the typical questions pursued by comparative HRM researchers that require further attention include the following:

1 How is HRM structured in individual countries?

2 What HRM strategies are developed by organisations?

3 Do organisations implement such strategies?

4 What are the similarities and differences in the HRM systems in different countries?

5 What are the reasons for such similarities and differences?

6 What is the influence of national factors such as culture, government policy and education systems on national patterns of HRM?

7 Is HRM converging or diverging at cross-national level?

8 To what extent are HRM models established in Western nations applicable to other parts of the world?

One possible way to investigate such questions is by identifying and examining the influence of the main factors and variables that impact on HRM in different cross-national settings. Several scholars note that national HR practices are determined by both ‘culture-free’ factors (such as age, size, and nature of organisation) and ‘culture-bound’ factors (such as national culture and institutions) (Budhwar and Sparrow, 1998; 2002; Fisher and Shaw, 1992; Easterby-Smith et al., 1995; Hofstede, 1993; Jackson and Schuler, 1999). It is now accepted that management practices including HRM are not universal but are ‘socially constructed’ in each society (Boxall, 1995).

If the nature of HRM is known to be ‘context-specific’ (Boxall, 1995; Brewster, 1995; Jackson and Schuler, 1999), then the degree and direction of influence of both culture-bound and culture-free factors on HRM vary from country to country and are responsible for the context-specific nature of HRM (Jackson and Schuler, 1999; Locke and Thelen, 1995). For example, the strong impact of unions and other pressure groups on HRM in India presents the context-specific nature of such practices. On the other hand, the influence of competitive pressures marked by the downsizing of the workforce in the United Kingdom highlights the context-specific nature of the UK HR function (Budhwar and Sparrow, 1998). Similarly, the response of unions to competitive pressures such as the introduction of new production technologies, large-scale restructuring and increasing work flexibility varies across countries. Union membership has declined significantly in countries such as the UK, France and the United States, whereas it has remained quite stable in Canada and Germany. The above examples show that institutional configurations can mediate between environmental pressures and their effects on HR practices (Locke and Thelen, 1995).

Investigators have identified how important contingency variables such as the size, age, nature, life cycle stage of an organisation, level of technology used and presence of formal HR department can influence HR practices (Budhwar and Debrah, 2001; Jackson et al., 1989; Tayeb, 1988). However, other researchers in the field (such as Brewster 1995; Budhwar and Sparrow, 1998; Easterby-Smith et al., 1995; Hofstede, 1993; Sparrow and Hiltrop, 1997) while acknowledging the role of contingency factors, have noted that more complex culture-bound arguments must be applied to the field of HRM.

Research on the influence of the main factors on HRM in a cross-national context is therefore crucial for the growth and development of the field of HRM. This is particularly so in view of the major developments taking place in developing nations which have liberalised their economies and opened their doors to foreign investors. It is essential for practitioners to know the pattern of HRM systems prevalent in such developing countries. However, the achievement of such an objective does require more research. Focusing on developing nations would add a new impetus to HRM research and allow researchers to go beyond the current predominant emphasis on research in countries in the European Union and North America. Such an approach would also help researchers to examine the transferability of management systems and practices.

Until the 1970s, the view that management theories are universally applicable was quite pervasive. However, the influence of the ‘convergence hypothesis’ has now waned as sufficient evidence has been gathered against it (Hofstede, 1993). But the question still remains, to what extent does this contingency view apply to the relatively new field of cross-national HRM, given that most HRM models have been developed in the Anglo-Saxon world?

McGaughey and De Cieri (1999) argue that organisations are becoming more similar in terms of macro-level variables (convergence), but are maintaining their culturally based dissimilarities in terms of micro-level variables (divergence). This is a significant finding which perhaps can be applied to HRM in developing countries.

Although both contingent variables and national factors (mentioned above) are known to influence cross-national HRM, it is suggested that more meaningful cross-national HRM comparisons can be made by examining the influence of national factors on HRM (see, for example, Brewster et al., 1996, Boxall, 1995; Budhwar and Sparrow, 1998; Murray et al., 1976). This thesis is based on the premise that national factors such as national culture and national institutions form the very basis of HR functions in any country. Therefore, in order to evaluate and highlight the context-specific nature of HRM in different national or regional settings, we need to delineate the major national factors that influence HR practices in such settings. The dilemma of which factors to include under broad concepts of ‘national culture’ or ‘institutions’ then needs to be resolved (Budhwar and Sparrow, 2002; Sparrow and Hiltrop, 1997).

Later in this chapter we will present a framework suitable for examining cross-national HRM. First, we highlight the need to examine the scenario of HRM in developing countries.

Need to examine HRM in developing countries

The term ‘developing countries’ is used in a broad generic sense and is used to represent all countries other than advanced industrialised societies which we refer to as developed countries. Some authors have used other terms such as ‘less developed countries’, ‘newly industrialised countries’, ‘third world countries’, ‘emerging nations’, ‘emerging markets’, and ‘transitional economies’ interchangeably for developing countries (Austin, 1990; Kiggundu, 1989; Warner, 2000). For us, developing countries are the ones which are in their early growth stages of economic development and are in the process of industrialising or are still non-industrialised (Napier and Vu, 1998). This is an ideal-type description as we know that all developing countries are at different stages of economic development.

The existing literature shows that apart from a few journal articles dealing with single countries and the work of a few researchers (see Austin, 1990; Jaeger and Kanungo, 1990; Kanungo, 1995; Kiggundu, 1989; Kiggundu et al., 1983; Warner, 2000), relatively very little has been written about HRM in developing nations. This was probably due to the limited number of researchable topics in mainly small economies with small companies and small wage employment sector. However, over the past two decades, foreign direct investment (FDI) has come to the developing parts of the world, bringing its share from 23 per cent in the mid-1980s to 37.2 per cent in 1997 (United Nations, 1998: 9). Though this amount decreased to 28 per cent in 1998 due to the financial crisis in Asia, FDI to Latin American countries has been rising continuously and is projected to rise in Asia (UNCTAD, 1999). As a consequence, of 53,000 multinational corporations (MNCs) with 450,000 affiliates operating around the world, a total of 230,696 affiliates are now based in developing countries (United Nations, 1998). As a result of such developments, there is now a sudden research interest in management in developing countries (see, for instance, Special Issue of Academy of Management Journal, June 2000).

Further, the majority of the world’s population live in developing countries. Apart from this, developing countries also perform the following functions:

1 significant buyers;

2 important suppliers of different resources (both natural and human) to industrialised nations:

3 competitors to developed countries with lower labour costs;

4 strategic regional centres for expansion of MNCs;

5 production sites for MNCs;

6 capital users, i.e. from private creditors such as international banks, FDI, and foreign official governmental assistance.

(Austin, 1990; Kanungo, 2000; Napier and Vu, 1998)

The above facts highlight the great extent to which both developed and developing countries have now become interdependent on each other. This is also evident from the creation of various economic international trading blocs and ‘growth triangles’ (Debrah et al., 2000). However, it is important to recognise that the ‘state-of-the-art’ management practices and techniques which are dictated by unique configurations of different cultural and institutional factors, developed in the context of Western cultural values, cannot be uncritically adopted in developing countries (Mendonca, 2000). Therefore, there is now a need to research and highlight what kind of HR policies and practices are relevant for developing countries.

Considering the above, what decision-makers in developing countries do, or fail to do, is of significant interest to both academics and practitioners in the rest of the world (Blunt and Jones, 1991; Kiggundu et al., 1983). Therefore, for the development of appropriate theory and practice, it has now become important for researchers to understand how HRs are managed and what key factors determine HRM in developing countries.

Framework for examining HRM in developing countries

In order to develop a conceptual framewor...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Foreword by Randall S. Schuler
• Preface
• Acknowledgements
• 1 Introduction
• Part 1 Human resource management in Asia
• Part II Human resource management in Africa
• Subject index
• Name index