The Analysis Machines (2004) defined Multinational Corporation as an enterprise operating in two or more countries with headquarters in one country. In today’s world, most of the businesses are getting globalized by setting up there business operations abroad. There are various forces which facilitates globalization like liberalization of international trade, international integration of production, Research and marketing by major MNC’s and emergence of economic regions like European Union enabled companies to invest overseas to gain and maintain competitive advantage. With an MNC having foreign subsidiaries comes the responsibility to transfer the organisational practices of the home country i.e. the headquarters to transfer its practices to the subsidiaries in host countries. The transfer of organizational practices can also contribute to developing a common corporate culture, enhancing procedural justice within MNC’s (Kim and Mauborgne, 1993)
Human resource practices can be viewed as valuable resources to an organisation that increases the efficiency of business operations and its competencies (Zaheer, 1995; Szulanski, 1996). Bartlett and Ghoshal (1991) argued that human resource management policies and practices are becoming crucial because these practices can help in controlling international operations and co-ordination within subsidiaries and parent company. The ability to effectively transfer HRM practices that are proven efficient in the parent company to the overseas subsidiaries is a key characteristic of the successful MNC (Nohria and Ghoshal, 1997). HRM constitutes a major constraint when MNC’s implement global strategies due to the complex labour market and cross cultural environment in different countries of operation (Adler and Bartholomew, 1992). The effectiveness of human resource management can be seen as the key to success of MNC’s in the 21st century (Bartlett and Ghoshal, 1994, 1995; Pucik, 1992)
Transfer of Human Resource Practices
There are three approaches in which HR practices are adapted by subsidiaries in host countries i.e. ethnocentric, polycentric and global. According to this typology, the management practices in foreign subsidiaries of MNC could resemble to those of home country, manage with culture of host country or have a globally similar practice. The ethnocentric approach refers to following the practices of the parent country without any change. In polycentric approach the subsidiaries operates according to the local culture and practices of the country of operation while in global approach MNC’s have a worldwide standard, country’s local environment have no effect on the companies practices and policies. But most of the time when MNC’s set up subsidiaries in foreign country they have to manage their operations according to the rules and regulations prevailing in the national environment of those countries. They mainly include compliance with legal regulations, understanding the labour markets...