The Culturalist And Institutionalist Approaches Commerce Essay

With the rapid development of the world economy integration, MNCs will become a very important economic organizations, this set to the HRM new request. MNCs need selection, training, and compensation employees so they can in overseas offices for the organization work, at the same time MNCs also need recruit foreign staff. So MNCs will need to solve cross-cultural and institution problems in HRM activities. IHRM were more complex than domestic HRM. This is because of MNCs employees are from different countries, that would involve staff culture difference, as the development of economic globalization and the progress of science and technology, the western culture and eastern culture with unprecedented speed in the greater scope and deeper levels are fusion and communication, people’s thought is in constant change. In the eastern and western enterprise culture conflict and fusion process, learn from each other and reference to each other’s strengths, they constantly improve their management concept of human resources and strategy. In this essay, the main question is how culture and institution effect HRM in MNCs, there are four parts of the essay, first two is to introduce culture and institution, and the following two parts is about how they influence HRM in MNCs, some scholars’ ideas and literatures will help to support the essay.

Culturalist and institutionalist

HRM is a strategic function concerned with recruitment, training and development, performance appraisal, communication and labor relations (ICMR, 2010).

International human resource management is about the world-wide management of human resources (Adler & Ghadar, 1990 etc.). Human resource management of MNCs is one of an important part of International human resource management. Due to the internationalizations, quick development of global competition and rapid development of MNCs, at the same time, so that it leading to increase of human resources liquidity, thus to have efficient human resource management is becoming a key issue to influence the success of enterprises.

1.1 The definition and characteristics of culturalist

How much does culture difference influence human resource management in MNCs? There is no standard answer for this question. Because culture itself is intangible, it is difficult to measure. Geert Hofstede (2001) describe that culture just like the ‘software of the mind’, in the meantime, Hodgetts and Luthans (2003) has given some specific attributes for culture after analysis, they think—

It is learned. Culture is not only inherited, it is also experience in the study.

It is shared. Culture can be shared, it is not the product of a single individual or fortune, it is a group, organization, social jointly enjoy.

It is transgenerational. Culture is the cumulative throughout your generations, is not appeared without foundation.

It is symbolic. Culture is the human ability to represent or used to show to the others.

It is patterned. Culture has its structure, is a comprehensive, a part of the change will lead to the other part of the change.

Dahl (2004), drawing on the work of Hofstede (2001), Trompenaars and Hampden-Turner (1997) and Spencer-Oatey (2000), asserted culture has its level and grade, perhaps it is easy to change culture outside, just like tradition, custom, habits and actual behaviors, but the deep inside is very hard to change. The reason is culture is the specific consciousness of accumulation down. Besides, it is not difficult to find that culture has big influence for MNCs, for example, with the developing of global economy, many MNCs has appeared, but culture difference, culture conflict and prejudice will be serious problems and they will hinder MNCs’ grows. Therefore, effectively adjust the cultural conflict is one of the important factors to successful operation and develop multinational enterprises. Moreover, because of cultural subjects are mainly is the human, so human resources management is an important bearing the burden.

1.2 The definition and characteristics of institutionalist

According to the Concise Oxford English Dictionary (2012), an institution may be defined as ‘an official organization with an important role in a country’ or ‘an organization founded for a religious, educational, or social purpose’. Now in the age of globalization, people have serious debate on the institutional arrangements and the feasibility of the status, include nation State. Many people believe that now some institutions are shell, not the actual effect, and just forced arrangement execution. Even so, most of the social have a common a series of institution, including private and public enterprises, public facilities, the financial system established, education system, trade and government agencies jointly. The related strengths institution can be change, like habit can influence each other.

Dore, R. (2000:45-47) showed clearly that ‘institutional interlock’ as typifying national economies and the relationship between the economy and the broader society. So it can be proven in some social, because of the social party’s convention, institution operation is concatenated; it is support each other change. Of course, the institution all over the world have very big gap, some more focus on institutional autonomy and self-sufficient. As a result, there are many different types of economic institution states in the world, such as the United States is the market economic system, North Korea is planned economy system, China is under the state’s macro-regulation of market economy system. The system is in order to adapt to the present stage of national economic development, so international enterprise in different countries to establish the company also should to comply with the institution of the countries, and institution in different region will directly affect the multinational companies operating methods.

1.3 National and regional differences

According to the United States and Japan multinational enterprise human resources management activities of the comparative study, usually from recruiting and selection, advancement and evaluation, compensation system and incentive measures and the employer and employee career etc type to compare.

Ouchi(1978), Jaeger & Baliga(1985) has compared the US and Japan human resource management in MNCs, their conclusion were haply the same. The US employees are loyal to individual work, personal decision and responsibility; they are particular about the short-term job evaluation and motivation in the management, so the promotion is quickly and prefers short-term employment. Japanese enterprise employees can more loyal to the organization, the team’s decision and responsibility, they are particular about the long-term job evaluation and motivation in the management, therefore, the promotion is slow and prefers long-term employment.

Comprehensive different scholars point of view, here is the main difference collect from America, Japan multinational corporations and local enterprise in human resources management activities as shown in table 1.

Table 1. HRM activities comparison with Japan, U.S.A and local enterprise

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Resource from: Wen-Chin Liao, Wei-Tao Tai. (2002).

1.3.1 The factors of influence differences between domestic and international human resource management

Resource from: pp11

Institutional and cultural influences on HRM in MNCs

2.1 Institutional perspectives for HRM

When some MNCs invest in China, they find they have to offer accommodation for employees, expatriates from abroad to China might find their incomes were facing tax collection from both home country and host country, therefore, HRM in MNCs should consider different states’ institution.

Marginson (2004) suggest as in the United States or Britain offer free market economy should be more focus on short-term financial status, and to use pure financial standards to push to take investment strategy. For example, the management of large and medium-sized enterprises may be more willing to pay attention to individual employers of the effect achievement, like to use financial rewards and punishments to motivate staff training and development, and make the company internal individual competition is fierce. Management team and line management personnel authorized to control many human resources management and employees incentive, make it more flexibility.

Organizational and HR principles associated with liberal market economies are as follows:

‘Freedom to manage’;

Emphasis on short-term competition;

Flexible deployment of staff;

Pay linked to individual performance;

Training regarded as an ‘overhead’. (Kerrypress Ltd,2009)

One side¼ŒMarginson¼ˆ2004¼‰said like Germany control economic market will pay more attention to in effect achievement of long-term investment strategy. Employees are thought to be lasting assets, is to improve the competitive advantage of favorable resources. Organizational and HR principles associated with Control market economies are as follows:

Constraints on managerial freedom through state regulations and other influences;

Longer-term orientation;

Investment in training;

Relative job security;

Employee involvement and participation. (Kerrypress Ltd,2009)

The analysis of the institution can help to better understand the across national of the management of human resources policies and practices, using commercial system and the relevant methods to effect is the demand of the national diversity.

Firstly, According to Pollert (1999), the business system provides an imperfect device to explain the human resource structure in national varieties. It proved the concept of national commercial system covering the different of non-national institution, like different enterprise culture in national country. For instance, via pan-European integration policies.

Then, in actuality, there is no perfect relationship is to business system and practice of human resource management. Hardy (2002) claims, ‘local isomorphism’, is to adjust the local environment, more like for some countries’ institution leads to some regional different human resources management. Such as salary, working time and work contract are all influence by local institution. In addition, about the work equal employment opportunities and health security, the enterprise will be affected by the constraints of the state institution.

2.2 Culture perspectives for HRM

In a sense, all countries on the way in the decision-making differences are fundamentally can be attributed to diversity and interaction of each culture scale. Many scholars has researched cultural in different levels, one Dutch researcher Geert Hofstede’s Cultural Dimensions has been accept and it has huge impact for HRM, show as Figure 1.

Figure 1, Geert Hofstede’s Cultural Dimensions

Resource from: Business Mate.Org. (2009).

1. Individualism VS. Collectivism

Cultural individualism and collectivism level of different social reflects the attitudes of collectivism are different. In collectivism countries, people must take into account the interests of others, members of the organization have the spirit of obligation and loyalty. And in individualistic society, everyone only for its own interests, each person has freedom to choose a course of action.

In this way a management decisions on the culture difference that presented for—Generally speaking, in the collective tendency company, managers in the decision-making often encourage employees to actively participate in decision making, and the decision will take a long time, but enforcement and carries out the decision quickly because almost everyone involved in the decision-making process, and understand the purpose of making a decision and content. And individualism strong company managers often make decision independent. The decision quickly but enforcement need a long time, because they need more time to “sell” their decision purpose, content to stuff.

2. Power Distance

Power distance in the organization management is often link with centralized degree, leader and decision-making. In a high power distance organization, subordinates often rely on their leaders, in this case, the managers often taken centralised mode of decision-making, manager make decision, subordinates accept and execution. And in low power distance organization, manager and subordinate just keep a small gap, subordinates partake decision-making.

3. Uncertainty Avoidance

Uncertainty avoidance tends to influence an organizations activities, also will effect an organization risk attitude. In a high uncertainty avoidance organization, the organization incline to build more work regulations, processes or rules to deal with uncertainty, the management is also based on work and task, managers’ decisions making are programmed decisions. In a weak uncertainty avoidance organization, little emphasis on control, work rules and process standardization level is relatively low

4. Masculinity VS. Femininity

In cultural values, masculinity and femininity, and long-term orientation two dimension will influence in different degree to the manager’s decision method.

5. Long VS. Short Term Orientation

Michael Bond and some Chinese partner did not take Hofstede’s questionnaire survey method, the prefer based on Asian researcher’ confucianist value and present a new survey method. Geert Hofstede added his theory on the new survey. The long-term vision culture play attention on future, save and reserve, they do anything all leave room. For example, Japan, with a long-term vision for investment, the annual profit is not important; the most important is to achieve a long-term goal year after year. In the short term orientation culture, values are toward the past and the present. People respect traditional, pay attention to the social responsibility, but at present is more important. In the management, the most important is profit in now, their estimate cycle is short, and require seeing efficacy quickly, no delay. For instance the US Company pay more attention to quarterly and yearly profit results, managers only care the profits in performance evaluation.


This essay has offered two complementary strands of analysis to understand diversity in HRM in MNCs – institutional and cultural. Institutional structure and characteristics, which might be think as the ‘hardware’ of national and regional Commercial system, impact fundamentally on the comparative status of the HR.

Cultural may be thinking as the ‘software’ conditioning international variations in values and mindsets. Solve the cultural conflict, establish unified and harmonious enterprise culture, cross-cultural management the most troubling is that cultural conflict. Different forms of culture collide each other; mutually exclusive process is the cultural conflict. According to the survey of different cultural background employees, if poor management staff, will lead to serious for the enterprise, and undeserved decision, low efficiency, have an impact to MNCs daily basic operations. On the surface, MNC is a union from different countries technology, capital and management, but from the connotation is concerned, is different culture collision and integration. So to the cross-cultural management, the only way is to find a balance point for different culture, the implementation of the balance mode of management, the cultural conflict can be solved.

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