(Freescience - Ir) 10.1016 S1053 4822 (99) 80039 4

INTERNATIONAL HUMAN RESOURCE
MANAGEMENT IN DEVELOPING AND

TRANSITIONAL ECONOMY COUNTRIES:
A BREED APART?
Nancy K. Napier
Boise State University
Van Tuan Vu
National Economics University-Hanoi
What kind of challenges do developing countries offer for foreign firms as

they implement international human resource management (IHRM) practices? In this article, we suggest why it is important to explore IHRM in
developing countries and provide an approach for doing so. We examine why
developing countries' environments may differ from more developed ones, in
terms of the implications for IHRM. Secondly, we review the current state of
recent literature, with attention on IHRM in developing countries. Finally,
the article presents frameworks to help identify research and practical
questions.
In other countries, we've always hired people based on technical skills. Here
we've hired people who speak English well. We figure we can train them in
the technical skills as long as we can communicate with them. (Vice President, Human Resources, American motor vehicle manufacturing firm, Vietnarn)
We thought we'd hired the "perfect" instructor to help build the business
school--he was born in India, had worked in Kenya, taught and done research in China, lived in Canada--on paper he looked great. But he bombed
culturally, managerially and in adjusting to the physical environment. How
can we pick them better? (Manager of a project to build graduate management education, Hanoi, Vietnam)
Direct all correspondence to: NancyI~ Napier, Departmentof Management,BoiseState University,1910

University Drive,Boise,ID 83725.
Human Resource Management Review,
Copyright 1998
Volume8, Number1, 1998, pages 39-77
by JAI Press Inc.
All rights of reproductionin any form reserved.
ISSN:1053-4822
40
HUMAN RESOURCE MANAGEMENT REVIEW
VOLUME8, NUMBERI, 1998
In this article, we discuss reasons why developing countries may offer very
different challenges for foreign firms as they implement international human
resource management (IHRM) practices. Although firms have operated in developing and transitional economy countries for years (e.g., Channon & Dakin
1995; Messmer 1994; Rubens 1995), relatively little scholarly work has examined such settings (e.g., Amante 1993; Shore, Eagle, & Jedel 1993). Thus,
entering relatively uncharted territory in the international management field,
we are either fools or pioneers. We do not presume to offer "answers" but rather
wish to suggest why it is important for researchers to begin focusing on IHRM
in developing countries and to identify potentially interesting and useful research issues.
Before we do that, however, we broach two broad topics. First, we discuss
why developing countries in general, and transitional economies in particular,
are a significant and fascinating group of countries for practicing managers
and academics to understand, particularly in terms of what IHRM practices
are and can or should be in those countries. Second, we briefly review what the
literature has said in recent years about IHRM--how it is defined and what
authors say about it, especially as it relates to developing countries. Following
this, we propose ways to identify broad areas for future investigation. We have
used simple frameworks to illustrate the areas where information is lacking
and where research on IHRM issues might help firms operating in developing
countries.
Thus, the article has three sections. The first section discusses definitions
(i.e., developing countries, multinational enterprises, and international human
resource management) and generally why developing countries' environments
may be different from more developed ones, in terms of the implications for
IHRM. The next section provides a sense of"where we are" in recent literature,
with particular regard to what we know about IHRM in developing countries.
In addition, we review selected conceptual models that deal with IHRM to
understand how their critical variables might apply in developing countries.
Finally, the last section discusses critical differences in developing and transitional economies and presents frameworks to help identify research and practical questions to learn more about IHRM in those countries.
DEFINITIONS AND REASONS FOR DEVELOPING AND TRANSITIONAL
ECONOMIES' IMPORTANCE
This article starts from an assumption that firms that operate in developing
countries face issues that may affect IHRM differently than what they find in
developed countries. To pursue this topic, three terms need clarification: developing and transitional economy countries, multinational enterprises, and international human resource management.
Developing Countries
For this article, developing countries or emerging economies refer primarily
to countries that typically are in "early growth stages" in terms of economic
INTERNATIONAL HUMAN RESOURCE MANAGEMENT
41
development (Lyster 1997; Ohmae 1995), and have been growing more rapidly
than (often more than twice the rate of) "traditional" developed country economies of Japan, North America or Europe, often at an average of well over 7%
annually for the last 5-7 years (Sivy 1997). This includes most of South East
Asia, South Asia, and some Latin American countries (e.g., Mexico). Indeed,
the popular business press (e.g., Fallows 1994; Naisbitt 1996; Seagrave 1995)
has long discussed the importance of Asia, including its developing countries,
as a critical region for the developed world economies.
We also include "transitional economies" in the discussion, particularly
those moving from primarily planned economic systems to market oriented
ones. This includes, then, the countries of the former Soviet Union and Eastern
and Central European Bloc, as well as China, and parts of Southeast Asia (i.e.,
Vietnam). Thus, while Russia might exclude itself from the normally recognized group of "developing countries," its transition status has created conditions that appear similar to some in developing countries (e.g., rapidly changing economic and social conditions). Our expectation is that, while specific
country factors certainly differ, some environmental forces or their implications may be comparable and thus managers who understand one may be able
to apply that knowledge to other settings.
Several attributes make developing and transitional economy countries critical for global firms. Some of these countries offer substantial long-term potential
as raw material sources or markets for multinational enterprises, complementing saturated markets elsewhere. Many firms t'md investment opportunities,
even in hard to enter markets, often in their own regions. For instance, Japan
and the "four little tigers" are among the largest investors in Asia!s emerging
economies (e.g., Baum & Lee 1997).
Further, on a surface level, several countries have been moving toward becoming "market oriented economies" for, in some cases, more than a decade.
Vietnam established its doi moi (i.e., "renovation") policies in the mid 1980s,
after a decade of decline following the end of the American war. The Soviet bloc
"collapsed," symbolically and physically in late 1989, ushering in changes in
politics and economics. China has pursued more market oriented policies since
the mid 1980s, India, since the early 1990s.
Considering changes on the "surface," the progress is remarkable. Ohmae's
(1995) stages of economic levels (e.g., from "bicycles to motorbikes to cars") is
evident in many transitional economics. In Hanoi, Vietnam, for example, between 1993-1996, the percentage of bicycles dropped from an estimated 90% of
the vehicles on city roads to less than 50%, with the slack absorbed by motorbikes and the odd sedans and trucks.
Yet, such chaotic and dramatic surface level changes can clash with more
fundamental values and issues, suggesting that changes may not fully penetrate the economy. For instance, despite nearly a decade of training given
managers on "market oriented economics" in such countries as the Czech Republic, Poland, China, or Vietnam, one frequently finds that, while managers
use the "proper words," the concepts are not truly "living" in their minds and
hearts. Managers talk of "empewerment" and then comment that they could
never "trust employees to make decisions." Consultants speak of "customer
42
VOLUME8, NUMBER1, 1998
service" but then choose to ignore certain client information requests as being
"too hard to fred~ or "not really that important for this client." Mindsets and
thinking seem slow to follow words and (some) actions. Understanding this
process of change, then, its pace and method, becomes crucial for multinational
enterprises that want to succeed over time.
In addition, political leaders, particularly in countries where economic
change is occurring but political systems are holding steady (e.g., China, Vietnam), often fear that market oriented policies will undermine the cultural or
social fabric of the countries. The "social evils~ brought by foreign products,
advertising, and information threaten to entice younger generations from long
treasured traditions. Thus, the tensions between "old and new" products, values, and generations may influence the ease with which foreign firms are
allowed to conduct business. For instance, Coca Cola was forced to curtail an
extremely successful promotional campaign in the Saigon region of Vietnam
because of social pressures and fears that the campaign was "tempting children from their studies."
Finally, developing and transitional economy countries also frequently have
unpredictable political and social situations that make interactions with them
fascinating (and frustrating!) potential business sites for global firms. The July
1997 "coup~ in Cambodia will likely reduce its chances to become a full participant in the global and regional growth exhibited elsewhere in the region; the
US firm Enron's difficulties in India (Business Week, 24 February 1997; Karp
1996b) could dampen enthusiasm by other western firms. A recent wave of
"Sinophobia" (e.g., The Economist, 29 March 1997) has led United States politicians, in particular, to review even more carefully their policies relating to
China, especially as they link to business (e.g., human rights, Most Favored
Nation status). Reports of crime and chaos in the former Soviet Union in turn
raise questions about its continuous (or not) move toward market oriented
economic policies. The 1 July 1997 handover of Hong Kong to the People's
Republic of China, riots in Rumania, shake ups in Pakistan, elections in Mexico--such events tend to spark concern, at least perceptually, that doing business in developing countries is tenuous at best and high stakes gambling at
worst.
Yet, developing and transitional economy countries are bound to be increasingly important because of their potential as markets, as raw material sources
of production sites, and as strategic regional centers for expansion in other
areas (Dohlman & Lalvorson-Quevedo 1997). Even so, multinational enterprises will continue to find them different and challenging because of the speed
and nature of change they encounter as well as the implications that various
environmental factors will have on doing business and IHRM.
Multinational
Enterprises
For our discussion, multinational enterprises (MNEs) are firms that have
operations that involve international HRM (e.g., Amante 1993; Bjorkman &
Schaap 1994; Kesler 1995; Miller, Glen, Jaspersen, & Karmokolias 1997) in a
developing country. The firms can be quite large, as are the typical multina-
INTERNATIONALHUMAN RESOURCE MANAGEMENT
43
tional firms that have been so widely and extensively researched (Bartlett &
Ghoshal 1989; Hamel & Prahalad 1994; Lei & Slocum 1991; Prahalad & Doz
1987; Rosenzweig & Nohria 1994), or small and medium sized firms that operate abroad (Asdorian 1992).
An MNE's investment may range from a wholly owned subsidiary or joint
venture, to a representative office on the road to becoming a branch office. In
any of these cases, a multinational enterprise will typically have at least one
parent country national (PCN), expatriate or "transferee" employee, and will
have at least one host country national (HCN) or locally hired employee who is
from the culture of the host country (Dowling, Schuler, & Welch 1994). The firm
may hire on site "independents'--PCNs who live in the country already
(Napier & Taylor 1995). Finally, the MNE may also employ in the host country
one or more third country nationals (TCNs), or persons who hold citizenship in
neither the host or parent country (Dowling et al. 1994). Thus, the firm has
operations in its "home base" and also in some developing country or transitional economy.
International Human Resource
Management
I H R M as a topic has garnered increasing attention in recent years (Bania

1992; Bartlett & Ghoshal 1992; Cascio & Serapio 1991; Chowanec & Newstrom
1991; Herman 1994; Kesler 1995; Locke, Kochan, & Piore 1995; Schuler, Dowling, & DeCieri 1993; Taylor, Beechler, & Napier 1996; Welch 1994a, 1994b).
The definitionsare wide-ranging but typically share similar basic components.
For this article,we use a straightforward definition of international h u m a n
resource management (IHRM) as a collectionof policies and practices that an
M N E uses to manage the local and non-local employees it has in a developing
country or countries (adapted from Dowling et al. 1994). Following Dowling et
al. (1994), IHRM then is the "glue" that holds together a global firm's activities
relating to acquiring, developing, appraising, and rewarding employees, both
local and non-local. The practices and policies should be consistent across units
within the firm (Milliman, Von Glinow, & Nathan 1991; Schuler et al. 1993;
Taylor & Beechler 1993; Taylor et al. 1996), while adjusting to local conditions.
WHERE ARE WE: OVERVIEW OF RECENT LITERATURE
In this section, we discuss four issues: (1) the (challenging!)process of accessing literature while based in a developing country; (2) general findings from
the recent literature; (3) observations about several conceptual models in
terms of their possible application for developing countries; and (4) general
conclusions from the literature review.
Process of Finding Literature
To gain a sense of the state of knowledge about IHRM in developing countries, we sought to review the literature (while we were in a developing coun-
44
try, a challenge in itselfl.),mainly since 1990. By luck, in March 1997, the

university where we worked in received ABI Inform C D - R O M s for the period
January 1990-December 1996. W e say "luck,"because the C D - R O M s had been
expected in the library for six months. There were customs problems, the
shipment was returned to Singapore, reshipped, and arrived and then sat in
customs again.
Had we not received the data base, we would have had no access to journals
or articlesfrom our location in Vietnam. The university's library has a few
journals, almost none up-to-date; there are no other libraries of note in the
capital city of 3 million people. The government currently prohibits access to
Internet so we had no means of finding literature through that source. One
author traveled to the U S periodically and carried back as m a n y articles as
possible on each trip. Our final source (which we did use and appreciated
greatly!) was to prevail on colleagues in the U S to find and send us (courier
mail, at $40/envelope) packets of articles.
Our experience, however annoying, is not unusual. Foreign managers we
spoke with during the year voiced similar frustrationsin terms of lacking easy
access to data or literature bases for compensation or legal information that
affected their h u m a n resource practices.Thus, we were fortunate to have access to the ABI Inform data base. Through it, we could survey books and
articles from several thousand journals during the 1990-1996 period.
Our point is that operating in a developing country has challenges that we
would not have faced (at least to the extent we did) if we were in the United
Kingdom, Japan, or Canada. If scholars and teachers have difficultiesfinding
information, managers face even more formidable tasks, including implementing h u m a n resource practices.
General Findings from the Literature
The literature comprised several broad topics and findings. In this section,
we discuss (1) the general topics that appear in recent literature, (2) the geographic areas of emphasis, (3) the nature (practitioner or research oriented) of
recent literature, and (4) the possible application of existing models to developing and transitional economies.
General Topics. On the whole, the literature supports the notion that international human resource management is increasingly an important topic (Busbin 1996; DeLacy 1993; Dowling et al. 1994; Harvey 1993; Locke et al. 1995;
Milliman et al. 1991; Schuler et al. 1993; Taylor et al. 1996; Warner 1993; Welch
1994a). Most of the focus, clearly, has been on IHRM issues in MNEs (Feldman
& Tompson 1993; Keys & Wells 1992; Kopp 1994; Schuler, Fulkerson, & Dowling 1991; Selmer & Luk 1995), usually in more developed (e.g., Bartlett &
Ghoshal 1992; Locke et al. 1995) but sometimes in developing countries
(Amante 1993; Shaw, Fisher, & Randolph 1991; Yuen & Kee 1993). Further,
much of the literature deals specifically with managing expatriates (e.g., Bania
1992; Bjorkman & Schaap 1994; Derr & Oddou 1993; Domsch & Lichtenberger
1990; Dowling et al. 1994; Harvey 1993; Kerfoot & Knights 1992; Swaak 1995).
INTERNATIONALHUMAN RESOURCEMANAGEMENT
45
Given the significantenvironmental change in developing and transitional

economy countries,much of the literature actually considers what happens in
human resource practices within certain developing countries, particularly in
state owned enterprises (e.g.,Cyr & Frost 1991; Groves, Hong, McMillan, &
Naughton 1994; Ivancevich, DeFrank, & Gregory 1992; McCarthy & Puffer
1992; Zhu & Dowling 1994). So, rather than being truly "international~ HRM, a
good portion of work discusses H R M as practiced within domestic firms in
developing or transitional economies. Thus, there is a splitbetween literature
that addresses M N E issues versus that concerned with domestic firms and the
implications for their H R M practices internally.
As suggested, the environment and its impact has received major attention
and appears in general overviews of environmental factors (e.g.,Naisbitt 1996;
Staudt 1994) as well as studies that examine impacts of specific factors. The
primary factors that appear across most articles include economic, political,
technological, and socio-culturalfactors.Their impact appears widespread, on
specifichuman resource practices,such as stalling(e.g.,Allmendinger & Hackman 1996; Channon & Dakin 1995), performance appraisal (e.g.,Herman 1994;
Welsh, Luthans, & Sommer 1993), compensation (Townsend, Scott, & Markham 1990), and training and development (Markoczy 1994/1995; Zhu & Dowling 1994), and labor relations (e.g.,Locke et al. 1995; Zhu 1995).
Geographic Areas of Emphasis. Articles about specific countries or regions
tend to focus on (1) which HRM practices are on going or changing because of
environmental impacts (e.g., Holton 1985; Zhu & Dowling 1994); (2) how HRM
practices compare across different countries (e.g., Locke et al. 1995), or (3) how
MNEs, joint ventures or alliances deal with I H R M practices and issues in
specificcountries (Tongren, Hecht, & Kovach 1995; Wang & Satow 1994). Furthermore, recent articlesseem to focus on a few countries, typicallythe former
Soviet Union (e.g.,Ivancevich et al. 1992; Shaw et al.1991; Tongren et al. 1995;
Vance & Zhuplev, 1992), some of the former Eastern Bloc countries (e.g.,Dornberg 1993; lankova 1996; Markoczy 1993; Markoczy 1994/1995; Pearce 1991)
and China (Cyr & Frost 1991; Groves et al. 1994; Osigweh, Hui, & Huo 1993;
Zhu & Dowling 1994).
By far, beth research and practitioner articles use those sites to illustrate
changes in environmental conditions, their impact on how firms do business,
and their impact on I H R M (where discussed). Despite the popular press focus
on Asia, few practitioneror academic articlesin the I H R M area have examined
Southeast Asia, Latin America, South Asia or Africa (Amante 1993; DeLacy
1993; Domsch & Lichtenberger 1991; Eade 1996; Flynn 1994).
The focus on Russia and China is logical, given their roles as two huge
market areas where political and economic shifts have been significant. In
addition, and important for researchers, these countries have been relatively
accessible to scholars--both in terms of the number of years of"openness ~ and
in terms of funding available to study them, ranging from the U S federal
government and sources such as the University of Michigan's William Davidson Institute. Clearly, the lessons from these two countries are useful for
46
understanding transitional economies generally. Yet, given changes in India

and its potential,given the growing general attention to countries like Indonesia and Vietnam, Mexico and Turkey, a focus limited to Russia, China, and
the Eastern Bloc represents a significantbeginning point for our understanding but we should nevertheless expand our geographic research range!
Nature of the Literature. Interestingly, literature on I H R M comes both from
the academic and practitioner perspectives. Indeed, there appears to be nearly
an even split between the two. Both groups tend to provide case examples
(Cascio & Serapio 1991; Kesler 1995; Messmer 1994; Shaw et al. 1991) to
illustrate how select firms "carried out" h u m a n resource practices or what
problems they encountered and overcame (or did not).
Although the interest in I H R M is growing, systematic research is embryonic, thus partiallyaccounting for the case study, comparative and descriptive
approaches. Simply gaining access to firms, finding enough and the right
people or firms to survey, and relying on respondent information as being
accurate represent serious challenges for scholars seeking to understand
I H R M practices in developing countries.
Perhaps one conclusion from the significantnumber of practitioners writing
about I H R M in developing countries is that they are seeking help in conducting business, and are trying to learn from one another because there is so little
academic research (or perhaps knowledgeable scholars available as consultants?).This would support the sense that foreign managers gave us about not
being able to find good sources of information about "what problems come up
and how to solve them," thus strengthening the argument for more research in
the area.
Existing Models and Their Application for Developing Countries

Several conceptual models seek to describe and predict how M N E s will
conduct IHRM. We examine five (i.e.,Milliman et al. 1991; Rosenzweig & Singh
1991; Schuler et al. 1993; Taylor et al. 1996; Welch 1994a), for their possible
application in developing country settings. For each model, we give a brief
review and some observations about what might or might not apply in developing countries. W e selected these models for their breadth of variables (e.g.,
environmental to individual) but also because of some of their similarities(e.g.,
that environment is crucial for any set of I H R M practices).
Milliman et al. (1991) argue that the lifecycle stage of an overseas subsidiary will influence the "fit"between how subsidiary and parent company managers work to respond to local (subsidiary) environmental changes. They suggest that in an overseas start up, entrepreneurial managers are criticalat
early stages and they will tend to need more of a "results orientation" than
"cultural sensitivity."This approach makes sense in settings where "achieving
results" is expected and feasible. In some developing countries, however, it
could pose an interesting "balance" question: what does "achieving results"
mean and is it possible without some "cultural sensitivity?"In certain transitional economies, for example, achieving "results" can be difficultat best and
INTERNATIONALHUMAN RESOURCE MANAGEMENT
47
sometimes become almost surreal--gaining licenses and approvals to begin

projects, finding and negotiating with a partner, trying to "explain" the situation to the home office.Nike's decade long attempt to start up in China (Katz
1994), for instance, would drive some "results oriented managers" mad. Thus,
while the notion of matching managers to stages of an overseas operation's "life
cycle" makes sense, the ideas could be refined and adjusted to developing
countries somewhat.
Rosenzweig and Singh (1991) contend that subsidiary and parent objectives
and systems should be consistent and integrated, within a context of several
influences. Many of those are quite applicable in any setting, including developing and transitional economies, e.g., legal constraints, industry situation,
technology, culture of the MNE's home country, distance between cultures of
the parent and subsidiary countries, subsidiary work force characteristics, and
extent to which the subsidiary country is "dependent" upon the MNE. This
model is generic enough for ranges of countries, but focuses primarily on
wholly owned subsidiaries. Often, in countries like Russia, China, or Vietnam,
MNEs may initiallyuse other business venture options, such as joint ventures
or other partnership arrangements. Thus, the model would need to be "adjusted" to adapt to situations where the MNE parent may have less direct
control. Nonetheless, the criticalenvironmental variables are valuable and the
idea that they will influence the consistency of IHRM systems between parent
and host country operations may also be valid.
Schuler and colleagues (1993) combined thinking from earlier models to
create broad propositions suggesting how the extent and nature of integration
across units (affiliates or parent-affiliate) will vary, while providing enough
flexibility for local units to adapt to conditions in their settings. Like the other
models, they contend that "exogenous variables" affect this link. Those variables include industry characteristics (e.g., available technology; competitors;
and extent of change facing the company and industry) and country or regional
characteristics (i.e., political, economic, legal and socio-cultural conditions).
While discussing country/regional characteristics, Schuler et al. (1993) mention conditions that exist in developing countries (e.g., religious codes, political
risk), but not a clear way to measure "risk," or how to adapt to local conditions.
Further, when they discuss industry as becoming "more global," which will
cause firms to focus on linkage, integration and management of resources, it
sounds as if those activities could be done equally effectively in any setting.
Yet, interunit linkages of human resource practices within Europe (e.g., Belgian and German units exchanging employees and information on cooperative
projects) might be easier than links between the Philippines and China, where
basic infrastructure obstacles, like power outages or limits to information access, may thwart closer ties.
Taylor et al. (1996) sought to incorporate previous models' ideas (e.g., Milliman et al. 1991; Schuler et al. 1993) to develop a "strategic" IHRM (i.e.,
SIHRM) model with several features: that MNE's home human resource management system can be a resource for building a global system, that IHRM may
and should differ across affiliates, that SIHRM should apply to all types of
48
employees (not just transferred managers and professionals), and that SIHRM
systems change over time. Their variables focused mostly on MNE level (e.g.,
international strategy) or affiliate ones (e.g., affliate's strategic role, method of
establishment, such as greenfield versus acquisition). The two "environmental" variables that came into play are culture and legal "distance" between the
parent and attiliate. For instance, for an affiliate in a country that is widely
different from a parent, such as China and the US (as are many other developing and transitional economies), legal regulations limit MNE abilities to hire
and fire (Taylor et al. 1996, p. 977). While the model includes the notion of
similarity (or not), it does not directly address the issue of change in environmental factors (e.g., speed or nature of change). Thus, while it is possible to say
that "current legal regulations" limit actions, in many countries those regulations or constraints can be nearly a moving target, making them "more similaff (or more distant) within a short time.
Finally, Welch (1994a) focuses less upon influences on IHRM from exogenous variables, maintaining instead that "IHRM approaches and activities
are a function of firm-specific and situation variables" (1994, p. 150), set within
country contextual variables (i.e., legal system and cultural distance). The
in'm-specific variables support earlier models (i.e., stage of internationalization, industry, strategy and structure, and organization) but add the idea of
"situation variables:" staff availability, assignment location, need for control,
time factor and locus of decision. Unlike Taylor et al. (1996), Welch (1994a)
focuses on expatriates or transferees as the work force group.
The existing models seem to converge in terms of several features. First, all
acknowledge environment as an important influence of IHRM outcomes; legal
and cultural "contextual" or "exogenous" variables are common across all models; political (which may be subsumed under legal in some situations) and
economic variables are monitored explicitly by two (Rosenzweig & Singh 1991;
Schuler et al. 1993), or appear to be part of "industry related variables."
Second, the models contend that integration, consistency or at a minimum
compatibility of IHRM systems--between parent and affiliate and across
units--is increasingly important for global firms. Third, the models pay tribute to the issue of how systems evolve or that there will be differences at
various stages of an MNE--afliliate relationship. Finally, all appear to focus on
IHRM or SIHRM from the perspective of "western" (principally American)
multinationals. We acknowledge that the models were "biased" in terms of
having primarily North American authors, although one Australian (Welch)
works in Europe; two others (Dowling and DeCieri) remain in Australia. All
(including Singh, who did graduate work in India) were based in North America when they published their articles. This may suggest that the literature has
a more western perspective and, perhaps, bias.
General Conclusions
The general literature review and examination of selected models generated

several conclusions that were useful in helping us identify areas for future
49
study. First, both the research and practitioner literature stress the momentous change that developing countries face. On the surface, in countries like
Poland, Thailand, or Vietnam, the number and extent of legal, political and
economic policy decrees that affect business are striking. Yet, while much
literature suggests changes are rampant and significant, an undercurrent
emerges that some change is less dramatic than initiallyexpected. In comparing discussions from Holton (1985) and Zhu and Dowling (1994), for example,
the impression is that changes in China and their implications are significant
but not as widespread as predicted in the mid-1980s. Thus, initialexpectations
that, particularly transitional economies, would move toward market oriented
practices seem to be going through a tempering.
The literature also supports the sentiment that developing countries, especiallytransition economies, are quite "different"from developed countries. The
pace of change is one distinctive feature--generally, on the surface it appears
meteoric; underneath the surface it seems sluggish, and some elements move
faster than others. For example, demand for state of the art technology clashes
with the slower shift in mindset toward "serving customers" with that technology. Likewise, changes in economic systems confront more traditional social
and cultural values, creating new challenges of how to mesh the components.
A continuing thorn in the expatriate literature is the difficultyof selecting,
training, and managing transferred expatriates. Implied in the quote at the
beginning of the articleand in recent literature (e.g.,on China or Russia) is the
challenge of finding transferees to go to developing or transitional economies
(e.g., Bjorkman & Schaap 1994; DeLacy 1993; Swaak 1995). Predicting who
will succeed appears even more tenuous than it usually is! The "normal" challenges for transferees (e.g., dual careers, concerns of leaving a firm when the
economic situation in the home country is questionable, fear of reorganization
while one is away from the home base) (e.g., Harvey 1993, forthcoming a, b;
Welch 1994a) are magnified by issues relating to working in a more physically,
culturally and emotionally demanding setting. Such potential issues make
IHRM that much more challenging and speculative for an MNE.
As implied in the previous section, the literature (especially the conceptual
models) has addressed the issue of control and links between headquarters
and affiliates (e.g., subsidiaries, joint ventures) or among affiliates. IHRM
then, becomes one of the means for achieving such links (and control). Balancing the need for integration with demands for localization is difficultin any
global firm (e.g.,Barkema et al. 1997; Rosenzweig & Singh 1991; Schuler et al.
1993; Taylor et al. 1996). Yet, given the often unpredictable and chaotic situations in developing countries and transitional economies, for example, that
tension could have new dimensions, unexplored in the current literature. For
instance, in countries developing new legal systems, legal decrees and regulations may simply not exist or may conflict with requirements for MNEs.
Next, the research literature, as would be expected in any early stage of
learning, is piecemeal and scattered. Systematic "building~ upon existing work
is not extensive. There is littleapplication of existing models (e.g.,MiUiman et
al. 1991; Schuler et al. 1993; Taylor et al. 1996) at all,let alone in developing
50
country settings. Longitudinal examination of changes and their impacts is

woefully lacking (Allmendinger & Hackman (1996) is a notable and excellent
exception). While empirical and conceptual literature discuss the importance
of environmental factors at least, no clear overall sense emerges from the
research on specifically what and how various environmental factors affect
IHRM and at what stage. The practitioner literature that discusses individual
firms and their obstacles or solutions provide some indication of specific impacts but they tend to be firm-specific.
Finally, as suggested above, from the background of many of the researchers, there appears to be relatively little involvement by scholars within
developing and transitional economies. We recognize, of course, that such observations emerge precisely because business scholars are only just realizing
the importance of studying developing countries generally and have not developed the skills and networks to conduct sophisticated research in the area.
Perhaps now is the time to establish and build closer links with scholars in the
countries we seek to study.
DEVELOPING AND TRANSITIONAL ECONOMY COUNTRY DIFFERENCES
AND WHAT THEY MEAN FOR IHRM
If doing business and conducting I H R M activitieswith developing and transitional economies is "different,"then how is that so? Drawing upon the existing
literature and conceptual models, we describe some of the key contextual differences, as we begin to identify areas for future study. Furthermore, because
the notion of I H R M relating to developing countries is relativelynew, we focus
here on "first steps'--how contextual differences, moderated by variables likely to temper the environmental variables, may influence some IHRM activities
and practices. Our focus, then, is on the broader environment's impact, rather
than on effects of individual firms or situations. The last section will discuss
examples of differences and will provide frameworks for identifying questions
for future discussion and study.
WHAT MAKES DEVELOPING COUNTRIES AND TRANSITIONAL
ECONOMIES "DIFFERENT?"
We discuss selected context or environmental factors that seem to differentiate

developing and transitional economy countries. We offer examples in terms of
how they may influence international human resource practices. Four types of
contextual factors are critical to MNEs regardless of where they do business;
yet in the context of IHRM in developing countries, some aspects may make
them more challenging. Those four factors are economics, politics and legal
issues, technology and infrastructure, and social and cultural issues. We also
propose that there may be "permeator" variables, which may influence the
environmental factors. Those include (1) change (pace and nature), (2) the
INTERNATIONALHUMANRESOURCEMANAGEMENT
51
clash of "old and new values" when changes occur, and (3) the types of IHRM
issues that may come into play at various "interaction points" between MNE
and developing or transitional economy entities during a project's life. We
discuss each below.
Economics
Fundamental to any MNE operation, the economic conditions of a country

can sway decisions from whether to enter to how to set up operations and
succeed. In transitional or emerging economies, economic conditions sometimes take on a sense of eeriness. Growth can be extremely fast, with often
frustrating repercussions. The "simple" task of finding qualified local employees becomes a major challenge, since many organizations are chasing the same
limited number of employees. Legal "requirements" (e.g., withholding a certain
portion of wages for training) become impossible as wage rates ratchet up
quickly; firms find that they may have to pay more than the "official" rate to get
employees, who often jump to another firm when wages are higher there.
Finally, as suggested above, the "literal knowledge" of market economics versus the "gut knowledge" may vary widely among employees, especially since
there are relatively few institutions teaching "market oriented economics" in
many of the transition economics.
Politics and Legal Issues
Understanding politicaland legal issues in developing countries taxes many

foreign experts--business, legal, or academic (e.g.,Johnson 1996; Kalterheuser 1997). In countries where a strong politicalparty is stillthe norm (e.g.,
China or Vietnam), the impact that party decisions and politicscan make is
dramatic. For instance, the 5th National Party Congress in Hanoi, Vietnam,
during June 1996, captivated observers in and out of the country: its outcome
would determine whether Vietnam would continue market oriented policiesor
"slow down," restraining growth and development. In another example, a 1997
decree that each foreign firm must have a "Communist party cell" (i.e., a party
member who looks after personnel and related issues) means that firms must
hire an additional employee, thus increasing their own costs.
Political decisions and actions clearly can have long term implications for
labor force availability. In Myanmar, for example, whose military regime fears
the outcomes that school and university disquiet might bring, has intermittently closed schools and universities over the last decade (The Economist, 14
December 1996). Thus, the "older generations" hold the talent and abilities; the
younger generations have been stunted by lack of a reliable educational system. Many people 40 years old and older, who grew up shortly after the British
colonial period, speak English fluently and have completed university degrees.
Today, many young children finish only primary school; most college age students attend only sporadically and receive no training in English. Thus, for
any foreign firms that may wish to do business in Myanmar, the local talent
52
younger than age 40 will be limited to unskilled and semi-skilled labor; the
employees with greatest talent would be older.
Finally, politicalconditions can influence the transparency of business operations, making foreign firms' decisions more or less dii~cult (Vanhonacker
1997). Because of dii~culties of understanding the implications of changes in
politicalpolicies,hiring competent local staffto assist with that interpretation
is important. A "cultural and political"interpreter becomes as vital as a language interpreter.Again, while such requirements exist in any country outside
a home base, the difficultyof understanding the layer of activities in developing countries may make such people that much more important.
Technology and Infrastructure

Technology poses interesting paradoxes in m a n y settings, especially in certain developing and transitional economy countries. Often there is a marked
contrast between the equipment and hardware available versus the technology
infrastructure and mindset of support. Furthermore, there can be a surprising
divergence between the sophistication of the technology and the setting in
which it is used. Two examples illustratethese issues. In the firstsituation, a
foreigner expected an unsophisticated situation and was surprised to find the
opposite. In the second illustration,the physical setting in a university sometimes created obstacles to get things done (Napier, Vu, Ngo, Nguyen, & Vu in
press).
Planning [to deliver] a course on training, I had prepared Powerpoint overhead slides--transparencies and hard copy, in case there was no overhead
projector or power. I used a very simple Powerpoint template, thinking that
anything "too fancy" would depress the participants who would have to
generate their own slides by hand.
I arrived to discover that not only did the [participants in the course have]
access to Powerpoint and Word for Windows, but the computers in Hanoi
had later versions than what I had in the US. Furthermore, the printer...
was a Hewlett Packard Laser jet, made in my home town. From that point
on, I never assumed that people would n o t . . , have access to sophisticated
technology.
The contrastwith the basicteachinginfrastructure,however, was dramatic:

the visitingprofessorsalsoencountered physicallimitsof the teaching
facilities.One learned quicklyto make a decisionabout using the overhead
projectoror air conditioner--usingboth sometimes blew a fuse.The M B A
classroom'sopen windows allowedthe noiseofconstant constructionto penetrate,forcingpeople nearly to yellto be heard.
. .
Supporting this paradox, an American technology expert who recently visited the National Economics University in Hanoi, Vietnam, was astonished at
the extent of sophisticated "toys" (i.e., equipment) in the computer lab and
faculty offices. The hardware, including a newly loaned Digital Equipment NT
server, was as advanced as in many North American universities. The equip-
INTERNATIONALHUMAN RESOURCEMANAGEMENT
53
ment contrasted starkly with the support systems (e.g.,lack of training manuals, limited local training facilities,no local support/answer desk, no "legitimate" software). The local university's director had learned everything he
knew about technology on his own, having no one locallywho was knowledgeable enough to answer his and others' questions. He also lacked a mindset that
his "customers" included not only faculty and staffmembers but students (!).
Thus, while the hardware exist (Kalterheuser 1997), the "software," systems
and mindset may be "virtual" or worse, nonexistent. Such limits constrain
M N E s in the access to data bases, to finding people with knowledge of data
bases or technology's use, and to fully using technology as a way to train
employees.
An additional frustrating technology factor in m a n y countries is limited
access to data bases or information bases through Internet or equivalent services. Restricted access m a y restrict firms' ability to gain information that
competitors have in other settings,may limit abilityto review news periodicals
and professionaljournals, as we found during our initialliterature review.
As suggested, infrastructure and physical conditions are some of the more
obvious differences between operating in developed versus developing countries.The daffy struggle with power outages, equipment failures, leaky offices,
or lack of water, mean that concentration is sometimes not fully on the task at
hand; conditions such as heat or cold that leaves even local inhabitants reeling
from head aches or hypothermia likewise suggest the need for careful selection
of expatriates and their local counterparts.
Social and Cultural Issues
In developing and transitional economies that are seeking a "place" in a

regional and world stage, one of the most disconcerting aspects of economic
and political change is the tension it creates between "new directions" and
long-term social order. When cultural values and traditions seep into surface
changes, the nature and speed of those changes is affected. For example, in
cultures where age and position demand respect, younger employees (who may
be better or more recently trained that their elders) are often reluctant to use
their knowledge for the good of an organization or themselves, if it puts down
older counterparts. Likewise, older, highly positioned managers who may need
training programs on "modern business management" may be reluctant to
participate in such a course with their younger counterparts or subordinates:
it would be "improper" for older more experienced managers to sit in the same
classroom with younger, less experienced employees. Thus, foreign firms may
face discrepancies in "who can be trained in what topics when!"
In some countries, such as China, younger employees will tend to be ones
who speak a second language, such as English, yet they may be less knowledgeable and experienced. Older employees may have more experience and technical knowledge, but lack language skills to interact with foreign businesses.
Thus, the MNEs face the dilemma raised at the paper's begirming--do firms
hire "English speakers and train them to become automobile assemblers?" Or,
54
do they hire people who know how to assemble technical products (e.g.,airplanes, motorbikes or cars) yet lack the language ability to interact with foreign managers?
Finally, the different expectations and acceptance of such practices as
health and safety standards or child labor m a y influence multinational enterprises'willingness and abilityto perform and likewise the nature of the h u m a n
resource practices they are required to implement.
"Permeators"--Vadables That Affect Environmental Factors
One of the other ways that developing and transitional economy countries
may differ from developed ones is through variables that seem to "permeate"
throughout the environmental factors. We discuss three (i.e., change, values
clash, and interaction points) and give examples of how they relate to the
contextual variables (Figure 3).
Embedded in each of the context variables is the sense that change is rampant and sometimes "dangerous." Schuler et al. (1993) refer to the extent of
change in terms of how industries shift over time and how firms take that into
account in learning to compete more successfully. As suggested above, however,
dramatic change may also influence IHRM practice. Developing and transitional economy countries' change in terms of economic growth (e.g., the double
digit rates of places like China), shift in political arrangements (e.g., Russia,
India, the Eastern Bloc), the acceptance of and demand for technology (e.g.,
Malaysia), and the clash of traditional social and cultural values with those
brought about by changes--each suggest a fascinating and complex situation
for any M N E operating in such countries.
For instance, one that emerges often in developing and transitional economies is a confrontation of"old and new values" as the countries'economic and
related systems change. Drawing on but moving beyond the notion of "distant"
or "similar" systems (e.g.,Rosenzweig & Singh 1991; Taylor et al. 1996), this
idea offersa somewhat differentdimension. The "old versus new values" clash
appears to arise (often unexpectedly) out of initiallydesired and "desirable"
changes. With more market oriented economic systems, for example, the standard of living and incomes rise,taxes and government coffersincrease, health
care and other basic services improve. Yet, expectations also rise,emphasis on
money spreads--both on earning and spending. In essence, "competition" confronts "cooperation." Such confrontation challenges leaders (and business
people) in developing countries, particularly when they are somewhat unanticipated.
Although developed countries face clashes as well (e.g.,France's attempt to
prohibit influx of foreign words into the French language!), the tension that
such changes bring in developing and transitional economies seems more dramatic in some developing countries. The response, then, sometimes appears to
foreigners to be overly strong. For instance, a fear of "social evils"infiltrating
society (e.g.,in China, Vietnam, Myanmar) has in some cases taken shape in
terms of restrictions on marketing and advertising, access to education and
55
information, concerns about travel, and interaction with foreigners. Thus, foreign firms face the challenge of trying to understand and operate successfully
in an environment where the reaction to the changes they are helping to create
may also promote more difficulty for them and, in turn, for implementing
IHRM.
Several of the existing models argue that IHRM will change over time (e.g.,
Milliman et al. 1991; Taylor et al. 1996); they tend to refer to the systems and
practices within a MNE and its relation to a subsidiary or affiliate. We suggest
a slight variation--that the point of interaction between MNEs and various
host country entities may influence IHRM issues. These "interaction points,"
which will change over time, may be at the government level, partner/company
level, and employee level (similar to "employee group," Taylor et al. 1996). For
instance, firms will likely need experienced senior managers to initiate early
relationships with senior government officials in developing or transitional
economies. Subsequently, interactions will be between local company and
MNE units and with lower level governmental units. The types of employees,
selection criteria, performance expectations, compensation or training may
thus vary depending upon the nature of the "interaction point." The interaction points may change over time and may be more or less intense during the
interaction. Such interactions occur when MNEs operate in developed countries but, because of the first two proposed moderators (pace and nature of
change and values clash), managing the interactions may be more challenging;
in turn determining how to manage IHRM for each interaction point may also
prove more challenging, as we discuss next.
WHERE DO WE GO? FRAMEWORKS FOR IDENTIFYING RESEARCH
QUESTIONS FOR EXPLORING IHRM IN DEVELOPING COUNTRIES
We offer three basic frameworks to help identify broad areas for future examination. Our review of the literature, experiences in developing countries, and
discussions with foreign managers trying to succeed in such countries, helped
us realize that this field is wide open for research and practical knowledge.
Thus, our suggestions are to spark thought and, we hope, future research even
in situations that seem "impossible."
Here, we present three matrices that suggest generally where we might
begin to put future research attention. One matrix considers "who goes
where?" in terms of where MNEs operate and what implications that might
have for IHRM. The matrix raises the question about what type of literature
exists on types of firms operating outside their home countries in either developed or developing countries. A second matrix builds upon one of the "permeator variables" and raises the question of "interaction points:" what entities
within MNEs interact with which entities in developing countries over time.
The matrix stimulated us to consider implications of those interactions on
IHRM decisions and practices. As suggested above, the interactions might
occur, for example, at the macro or senior governmental level as an MNE
56
initially enters a developing country; its subsequent interactions might be

more at the local company level. Those interactions would likely require different types of employees, suggesting different IHRM practices and approaches.
A third framework presents examples of the types of environmental influences (e.g., economic, political) discussed briefly above and ways those factors
may affect IHRM. We assume, for this discussion, that environment may influence the IHRM practices, rather than the reverse (topic for another article!).
Our goal was to view from several possible angles ways to consider what
may influence IHRM practices of MNEs operating in developing countries and
transitional economies. It is important to recognize that these frameworks
represent very unrefined "starting points." While we expect to continue to
explore and refine them in our own "research futures," we posit the ideas here
solely as a way to spawn interest and discussion.
"Who Goes Where"
One benefit of our two person (developed/developing country) team was the
perspectives we each brought to this project. During our early discussions, we
decided to focus on IHRM in multinational enterprises. Our unspoken definitions of MNE were quite different, as it turned out! One of us took the more
traditional "western" view and assumed we were talking about "developed
country MNEs." The other questioned why there was so little emphasis on
multinational firms from developing or transitional economies. Realizing our
differing views made the literature review results that much more striking.
As mentioned, our initial literature review revealed that much of the scholarly literature has focused on MNEs from developed countries. The lack of
scholarly work on firms in developing countries, such as Thailand or India, was
then startling. Our general reading (e.g., in the Far East Economic Review)
confirmed that there is information about developing country firms, both ones
that move abroad (e.g., Beijing's Citic Pacific's move into Hong Kong) and ones
that are successful in their home countries, such as India (e.g., Karp 1997) and
Thailand (Valikiotis 1997). Yet, such popular press reports, however, provide
little systematic investigation that will contribute to academic research.
These realizations led to a simple 2 2 matrix (Figure 1) that posited where
MNEs "come from" (developed or developing countries) and where they "go to"
(developed or developing countries) to raise basic questions about information
gaps. The result confirmed our early discussion: much of the published academic literature looks at developed country MNEs (e.g., North American, European and Japanese) going mainly to developed or newly industrialized countries, such as Taiwan or South Korea. This contrasts, however, with the
burgeoning popular press that also reports on the movement, practices, and
challenges of developing country MNEs, in such publications as, for example,
Far East Economic Review, the international edition of Business Week, The
Economist, China Morning Post, and The Straits Times.
Thus, while the popular press provides some indication that developing
country ]VINEs may use different HRM practices in their home countries (e.g.,
57
Developed
cognacs
Developed
country
Lots of literature
Developing
countries
Somelitemt~e
:r
Developing
country
Linlc/No literature
Ngligible
Figure 1. Literature on "Who Goes Where?"
Karp 1997), even that information source provides little about those firms'
approaches to managing globally, especially in terms of their IHRM practices.
The lack of research information in this area become increasingly obvious.
As a starting point, then, the matrix helped us identify a broad deficiency in
research. While our initialassumption (and eventual focus) for this articlewas
on developed country MNEs and their approaches for HRM and IHRM in
developing countries, we realized another avenue--similar issues and topics
for developing country MNEs--needs attention as well. Scholars could, for
example, examine whether models and studies based upon firms from developed countries apply for developing country MNEs and, even more appropriate
perhaps, create new theories and models for how developing country MNEs
operate.
How and Where Do MNEs and Developing Countries "Interact?"
In the course of our regular work, we had been informally tapping MNE
managers to learn where and how they conduct business in developing countries and transitional economies. Coupled with this was an attempt to learn
how they view IHRM issues during their business start up and implementation operations. This led to a second matrix that raised the question of where
MNE units and various entities in developing and transitional economy countries interact (Figure 2) and what implications those interactions might have
for IHRM. With more refining, this idea could perhaps complement existing
IHRM and international business literature that examines how MNEs interact
with subsidiaries, joint ventures (e.g., Barkema, Shenkar, Vermuellen, & Bell
1997; Meschi 1997), and, more recently, alliance partners (e.g., Management
Review, May 1997; Pant & Rajadyaksha 1996).
Although we have conceptual research addressing the issues (e.g., Schuler
et al. 1991; Taylor et al. 1996), we remain in the early stage of understanding
empirically how ]VINEs and their various entities relate to one another; even
more limited is our knowledge about whether and how those interactions affect
IHRM practices. If MNE headquarters and local units interact at different
stages with different entities within a given country, is it likely that the types
~8
]viNE unit
Developing
country
"'unit"
Gov'!
Partner
Firm
Headquarters
Subsidia~'
Much int=ac~on
initially
Sotne
involvement,
later at lower
Much interaction
initially
Most
involvement
Figure 2. Interactions
of employees needed for those various interactions could vary, as would the
resulting IHRM practices?
For example, in initial stages of entering a country, the emphasis is on
establishing relationships between headquarters (i.e., senior managers) and
top government officials, mostly likely in ministries. Subsequent interactions,
once a representative office or equivalent is established, will be more between
the local office and its partner and perhaps some of the units within ministries
(e.g., Smith & Reney 1997). Interactions at the "macro" level, when documented, often appear in the popular press (e.g., Katz 1994). Discussions about
interactions at the unit to unit level are reported more infrequently, perhaps
because they can be more confidential or controversial or because access is
more difficult.
Managers could perhaps more clearly identify the qualifications and skills
that employees need for various types of situations and interactions (Milliman
et al. 1991). Given the more radical shifts in developing countries--in economics or politics or social conditions--selection and training of employees could
become even more critical. In the initial stages, senior people with broad experiences in making initial contacts, creating the formal and informal relationships necessary to do business would likely be key expatriate players. Rather
than being long term employees, perhaps they would be "suitcase employees"
who go for shorter terms (less than one year) and for specific projects (Napier &
Taylor 1995). The criteria for selecting them (e.g., former senior level governmental experience, negotiation expertise, status in the firm) could be very
different from the criteria for employees who subsequently manage and work
in the local office (e.g., some language skill, cultural sensitivity, technical
knowledge, sensitivity to management of local employees). If firms can identify
stages of ventures and criteria needed for employees, they may also broaden
their outlook for sources of employees. For example, rather than assuming an
expatriate is "always" the solution, some firms may hire "independents" (i.e.,
on site parent country national employees) who moved to the country independently, without being part of a firm. Thus, selection criteria and training may
differ from the types of employees who bring the entity into fruition in its first
few years.
The matrix seeks to urge researchers and managers to identify stages of
59
development of a given project and to consider the types of employees (and

practices) needed at each stage. One of the challenges of many of the existing
models on IHRM (e.g., Welch 1994a) is that they are relatively static, not
taking into account the change in staffing, training, and other needs over the
course of a global venture (Milliman et al. 1991). Particularly for a developing
country, where finding employees from the home office willing to transfer, such
an approach could be very useful in finding employees, especially if it means
that the firm could hire some locally based employees.
Environmental Impacts on IHRM
Using ideas from the existing models, the literature review, manager reactions, and observations from working in a developing country, we provide one
last matrix. This one suggests issues for possiblestudy about how environmental factors may influence how M N E s operate in developing countries. The
framework takes as a given, as existing conceptual models suggest, that environmental context can have an impact on I H R M practices and issues. Second,
those environmental factors m a y be more striking in developing countries
because of the pace and nature of change, the potentiallywrenching clash of
old and new values that come from such changes, and that the "interaction
points" between M N E s and entities in the country demand different approaches for IHRM. Thus, we provide examples of how selected environmental
factorsmight influencethe types of questions,issues and topicsthat are important to understand for M N E s operating in developing countries.
Table 1 provides examples of four contextual factors (i.e.,political/legal,
economic, technology/infrastructureand social/cultural)and example issues
they may raise for M N E s operating in developing and transitionaleconomies.
In each "cell,"we raise questions--some more "researchable" than others-that are likely to be of concern to MNEs. We also sought to provide sample
issues as they would relate to both foreign (e.g.,transferee, third country
national or independent) employees as well as local employees. In some cases,
the factors seem to affectone group more than another; in some cases, factors
m a y have littleor no apparent effecton I H R M practicesfor one of the employee
groups. Thus, we offerthis table as a starting point for future discussion and
Economic
practices/
impacts
Figure 3. IHRM Influencers
On foreign employees:
What measures of
performance will employees have if their
time in countries is
limited? If it takes 5 8 years to build a
successful operation,
how will MNEs know
if an employee based
in country (e.g., for
three years) was
"successful?"
On local employees:
How does a "work
ethic" from MNE to
local partner transfer
quickly?
To what extent will
limits on number and
time periods that foreigners can work in
country may affect
who to select?
To what extent will
"foreigner friendly" (or
lack of) environment
affect recruiting and
selection?
To what extent can
MNEs draw upon local foreign community versus
transferees?
On local employees:
How "willing and
able" will local employees be to join foreign firms? what
constraints may they
face? how can MNEs
overcome them?
Legal regulations regarding business practices, e.g., hiring

practices, visa and
work permit constraints, training requirements
Performance Appraisal
Recruiting~Selecting
Sample Factors
If time in country is
more limited and constrained, will employees
need different "crash"
course training to be
able to succeed faster?
If transferee time spent
in country is more limited, to what extent will
MNEs train employees
to be "generic" developing or transitional
economy experts versus doing training on
specific countries?
How will foreigners
"transfer knowledge" to
each other on transition?
On local employees:
If foreigner time is more
limited, how will "technology transfer" occur?
how can local employees "learn faster" or
"better" from foreigners?
Training and Development
TABLE 1
Example Contextual Factors and Their Possible Impact on IHRM Practices
On local employees:
Compensation
~D
z
c
.oo
5
E
m
z
.-I
o
c"11
Z
-n
rn
"1"
C
Requirement for a
'(communist) party
cell" within each organization
Reporting requirements, such as the use

of specific systems intemally (eg, local versus company or
international accounting
system)
On local employees:
What types of qualifica
tion and training can
employees demand?
What expectations can
MNEs have of what employees bring to the
firm, need upon hiring,
need on continuous basis?
To what degree must
MNes prepareVtrain employees to understand
the political implications
decisions that affect
management of local
employees?
On local employees:
To what extent can
MNEs require that local employees follow
and perform to company standards versus local report
standards?
On local employees:
To what extent will l a
bor markets be able
to meet demands,
given changes in reporting requirements?
Is buy versus build an
option if all firms are
scrambling for expertise in same area?
In conditions where
party cell review exists, how does a firm
choose and prepare
expatriates to adjust?
What obligations will
employees have to
follow requests of
"cell leader" in hiring,
managing versus
MNE expectations
and requirements?
How much and what
type of training must
firms provide as regulations and requirements
change regularly? What
are the cost implications of employees being "experts" in a
country, when they will
not be there forever?
What types of employees will be
needed to "translate'
local reporting into
"international" or
company reporting?
continued
Given existing differentials between expatriates and locals,

how does this change
if the locals are the
ones with key skills
and the expatriates
have little knowledge? how do such
changes affect the
"value added" of the
expatriates?
On local employees:
How will firms compete for certain
skilled local employees in tighter mar
kets? how will firms
determine appropriate
compensation levels?
m
z
-4
rn
C
-n
r'"1"
C
Rapid growth rate and

changes in country or
region
Sample Factors
TABLE 1

On local employees:
What obligations for
training do such requirements bring?
How can employees in
developed country be
prepared for different
"pace" of change in developing country?
What can employees
use about managing in
rapid change environments in their home ofrices?
On local employees:
What expectations for
performance will
come from "external/
party" sources versus
performance requirements set by a firm?
To what extent will
expectations for performance be greater
(because of a faster
pace) or less (because of unpredictability of change) for
transferees?
On local employees:
If certain employees
are "appointed" or
hired by legal requirement, how does a
firm mesh its organizational selection
procedures with external requirements?
How will criteria for
transferee selection
differ?, how to choose
people who can deal
with rapid, unpredictable change? How to
prepare them?
Will TCNs (especially
from settings like
South Africa,
Lebanon, or Ireland)
become more attractive, given own experiences?
continued
On local employees:
To what extent will
such requirement
mean "extra costs"
for MNEs? How will
smaller/medium sized
firms absorb?
Do employees hired
for different legal reasons end up# with different pay
expectations?
How do firms adjust
for hyperinflation versus "normal inflation"
in rapidly changing
settings?
Compensation
m
tz-
Z
-.I
"n
C)
Ill
oc
~o
m
(I)
~>
Z
T
C
t~
Shift to market oriented

or more "open" economies
Increasing wage rates

for local employees
On local employees:
How will performance
relate to wages?
How will MNEs gain
accurate wage
information?
How will "old values"
of seniority and status relate to "new values" of market rates?
How do you measure
employee performance when the environment is shifting
so rapidly?
On local employees:
To what extent and
what types of raiding
and job hopping will
develop?
What types of "sign
on incentives" will
MNEs need to use?
To what extent does
it matter for transferees to understand
the mentality of
"planned" economies
On local employees:
How will employees
balance desire for
growth or development with maintaining
other conditions (e.g.,
slower work pace).
On local employees:
How can MNEs entice local employees,
when the labor market may be tight?
To what extent can
MNEs influence universities and schools
to provide needed
talent?
On local employees:
How will MNEs balance
labor codes that stipulate "withholding" a
portion of wages to
cover training in initial
stage of employment
versus that market
wages that push wages
to above those levels.
What training do transferees need to learn
how to train locals in
"market oriented economic" concepts?
On local employees:
How can MNEs "hold
onto" employees who
see foreign firms as
"training grounds?"
In countries where employees must pay back
training costs if they
leave before a stipulated time period, how
can MNEs realistically
recoup that money?
continued
Will transferees demand extra incentives?
On local employees:
How can firms balance wage expectations with realistic
pay schemes?
How can firms get
accurate salary/wage
information?
On local employees:
How do firms know
what employees are
"worth?"
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Sample Factors
On local employees:
How will firms know
that people "understand" versus just
know the vocabulary
for a market oriented
economy?
To what extent and
how will the shift affect recruiting--using
"career days" ("new")
versus "relationships"
(=old") in hiring?
Who will be willing to
work for different
types of firms--will
MNEs be able to attract only younger,
and implications of
the shift?
Are there different
preparation approeches that MNEs
should use for employees going to transitional versus other
developing countries
What does "success"

in a market economy
mean? How is it measured for different
types of employees?
How do firms balance
"old" models of operating with their own
cultures and approaches?
On local employees:
(many are same)
How do you measure
employee performance in a market
oriented economy?
How is it measured
for different types of
employees?
How do firms balance
"old" models of operating with thier own
cultures end approaches?
Recruiting/Selecting PerformanceAppraisal
TABLE 1
continued
On local employees:
What training do employees need?
What training will
"work"? What can be
trained? What must be
"grown?"
How long does it take
to create a "market oriented economy
mindset?"
How do employees
learn to take initiative,
make decisions?
What training do transferees need (e.g., differences between

"capitalism" and "market oriented economics?"
Trainingand Development
On local employees:
How will MNEs instill
a mindset of getting
market wages for
market performance?
Compensation
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;ess
~.vailable Internet ac-
"xtent of computer
mowledge and experJse
. To what extent and
what type of preparation can MNEs expect among new
employees?
3n foreign employees:
, How will information
access affect ability
to perform a job?
How can firms insure
access to critical information?
3n local employees:
, Will access and information about what
exists in other settings be a "motivating" influence? will
employees "want"
more of the products
and services they
see? will they view
the information as
)n foreign employees:
To what extent will
access limit willingness to transfer?
)n local employees:
. To what degree will
increasing knowledge
of other parts of the
world affect employee
interest in working for
foreign firms? If they
can "learn" via Internet, what incentives
will they demand to
join foreign firms?
~)n local employees:
3n local employees:
. What type of training
will employees need
and expect? To what
extent will MNEs train, if
local facilities are poor
or non-existent?
. How can Intemet and
information access be
used more extensively
in training employees in
developing and transitional economies?
3n local employees:
, How can Intemet and
information access be
used more extensively
in training employees in
developing and transitional economies?
, Impact on what employees will accept and not
3n local employees:
)n local employees:
"ontinued
3n local employees:
, Will "comparison
wage shopping" become more common?
Will employees' pay
spread further?.
~)n foreign employees:
less experience, less

connected employees?
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73
l"
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Physical
infrastructure-existance and stability
Sample Factors
beneficial or "evil?"
What impact will that
have on work performance?
Will such information

access increase the
schism between older
and younger employees?
What incentives and
preparation will transferees to developing
and transitional economies need?
To what extent can
and must MNEs take
physical condition
into account in selection (e.g., age, physical condition, family
situation)?
How do MNEs balance home country
legal requirements
with host country cultural requirements
(e.g., age and perception of ability to
deal with physical demands?)
How can firms balance accountabilty
with obstacles beyond employee control?
PerformanceAppraisal
Recruiting/Se/ecting
TABLE 1
continued
How will the notion of
"hardship post"
change over time?
How will that affect
compensation?
Compensation
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Decision making process
What criteria will employees need for different "interaction
points" with country
entities?
How will firms choose
employees who can
deal with the "frustrations" of seemingly irrational decisions?
On local employees:
To what degree will
"cultural interpreter"
employees be
On local employees:
On local employees:
What will be the role
of "cultural imterpreter" for MNEs?
On local employees:
How do employees
learn what performace standards to
reach when conditions often prevent
highest level of performance (e.g., power
outages, equipment
lack)?
How can firms help
employees see that
ability to be "creative" and fix equipment could be used
in other performance
areas?
If decision making is
nontransparent, slow,
to what extent can
MNEs make employees accountable?
On local employees:
To what extent can
firms help transferees
learn to adjust decision
making and management styles to developing country settings?
On local employees:
How long and what
type of training do employees need before
continued
On local employees:
To what extent will
firms be expected to
provide full welfare
for employees (e.g.,
housing, food, uniforms, transportation)
versus employees
providing own?
What conditions will
spark the differences?
On local employees:
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Perceptions about education and training
Sample Factors
On local employees:
To what degree will
employees see MNEs
as "training
grounds?" can MNEs
protect against employee exploitation
during the selection
process?
needed? how will

MNEs identify "good"
versus "ineffective"
ones?
To what extent will
firms be ablt to hire
=prepared" employees versus expect
them to receive training in country?
On local employees:
To what extent can
firms tie performance
expectations to training opportunities?
TABLE 1
continued
How do MNEs decide
which transferees to offer the opportunity for
further study (e.g., MBA
programs), while they
are in developing countries? For example, who
should pursue a
$80,000 vs. a $15,000
distance leaming degree?
On local employees:
How much is training
"worth"into firms, to
employees?
How will firms balance
of employee demand
for "degrees and certificate" with fears of loslog highly trained
employees immediately
after training?
they can make "good"

decisions?
On local employees:
What should firms expect as match between qualifications
and pay?
Compensation
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OO
Questioning about doing things "the western

way:" both older generation (with some xenophobia?) and younger
generation local employees (with some
knowledge about "international methods")
may question approaches presented by
MNE employees. What
Balancing "old and

new" methods of operating
On local employees:
To what extent can or
should MNEs "balance" the types of
employees hired ("old
versus young," traditionally versus "modem" trained; "less
versus more" experienced in technical
areas?
How to select transferees who understand and can mentor
changes and adjust
to "local conditions?"
How can employees
and MNEs know
whether employees
are successful at balancing desire to
transfer knowledge
with adjustment to local situation? What
performance measures are appropriate?
How can firms balance expectation

about "who should
do what type of job"
with expectations of
"what has to be
done?"
How do foreign employees learn which
"rules" are dominating actions?
To what extent can
employees rely on local employees for
guidance?
On local employees:
Can transferees learn
where the "balance is?"
can it be trained? how
will they learn?
How will parent company managers understand the balance and
conditions?
continued
On local employees:
How much impact
will skills versus tradtional factors (e.g.,
age) play in pay decisions?
On local employees:
Traditional employees
may resist doing training
programs or doing them
with subordinates
t.D
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C)
m
8C
rn
i =-
impact will such "culture clashes" have?
Sample Factors
On local employees:
How will firms select
employees who are
open to new ideas
yet can work toward
adjusting them to local conditions
On local employees:
How can local employees know areas
to question? how will
they know if they are
successful at balancing transfer of knowledge with adjustment
to local situation
What performance
measures are appropriate?
TABLE 1
continued
On local employees:
How accepting will employees be to training-older ones may resist
change because they
"lose" (e.g., status,
perks, positions);
younger ones may resist models of "big
MNEs" in favor of "local
examples."
On local employees:
To what extent will
employees embrace
"market concepts"
when it "suits them"
(e.g., when it means
more wages but not
when it means accountability for performance?)
Compensation
P
z
c
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z
-t
Z
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GO
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71
idea generation to help us learn more about HRM issues in developing and
transitional economies.
The full set of questions, then, appears in Table 1. Below, we offer some
examples of how factors may influence IHRM practices.
Legal and Political Factors. Regulations (which may change frequently) about
employment of foreigners in developing and transitional economies may influence the nature and type of employees an MNE can draw upon. In Vietnam, for
example, recent legal initiatives requiring work permits for certain groups of
foreigners sought to limit the number of typically young, foreign =backpacker"
labor that came as tourists and stayed on to work. In the process, it also
restricted the opportunities for young college graduates who come seeking
more professional jobs. In turn, then, it curbed the ability for MNEs to hire
"independent" foreign workers who might have good language or cultural sensitivity and be willing to work for less than expatriate pay.
Such regulations also place greater limits on the length of time foreigners
may be allowed to work in country, which may cause difficulties with knowledge and technology transfer. That raises interesting training questions: how
and what type of training is "best" to be sure that knowledge is transferred to
local employees within a set timeframe? How can MNEs be certain that the
employees can fully manage or take over tasks that foreigners would have done
longer? Thus, such regulations can generate far reaching IHRM repercussions.
Economic Factors. One of the environmental issues most frequently cited in

developing and transitional economies is the nature of change and fast rate of
growth. In such an environment, selecting and training transferred employees
can be quite challenging. We think of the pace of change in the developed world
as being fast and demanding; in developing countries the pace may be rapid
but it typically comes with frustrations. For example, the simple act of producing and sending a fax, which takes minutes in North America, can take a
morning in a country where power outages are common, where computers are
regularly infected,where the phone lines go out, or where finding fax paper is a
major task. Identifying, preparing and supporting foreign employees in such
an environment becomes a challenge of a new order. H o w can employees be
"prepared" to deal with uncontrollable change? H o w can performance expectations be set in environments where predicting economic growth is so difficult?
In such fast changing settings, how will firms know what the "market wage
rate" for local employees will be? In Vietnam, where firms vie for a limited
talent pool, the salary and wage rate changes dramatically in short time
frames; how can firms be sure what an appropriate and competitive rate is?
Regarding technology, to what extent and how will access to worldwide
information (e.g.,through Internet) affectforeign firms' abilityto attract local
employees? For instance, if one of the incentives of joining foreign firms is to
learn modern management techniques or skills(e.g.,accounting, marketing),
local employees could feasibly use access to universities and other information
to learn on their own. Instead ofjoining a foreign firm for a long period of time,
they may join for "an internship" and return to their former firms. Another
79.
issue may be how firms can more effectively use Internet and technology to
provide training to transferred employees who may not otherwise have access
to quality training programs in developing or transitional economies?
If physical conditions are rugged, can finns "use" that in selecting employees
for hire? In some developing and transitional economies, for example, local
managers have no misgivings about using age in promoting managers or
choosing employees for various posts. The issue of MNEs following home country laws regarding selection and resolving conflicts with local country practice,
then, could become an issue.
Finally, cultural and social issues may come into play in different ways in
developing and transitional economies. Although in many countries, "western
management" is viewed positively, in some parts of the world managers are
beginning to question its application. If xenophobia or concern about values
clash penetrates local employees' thinking, will they be "open" to foreign firm
technologies, techniques or approaches? Under such conditions, how can firms
enhance employee receptiveness to training? What behaviors and skills must
foreign managers have to deal with local employees who may challenge them?
If such situations emerge, how do MNEs assess foreign managers' performance?
In closing, we offer two other thoughts. First, as researchers entering a
newly developing and transitional part of the field, we should not be overly
concerned with designing the "perfect ~ study. In 1986, Rick Steers (University
of Oregon), as President of the National Academy of Management, spoke at an
international conference in Singapore. He had a long and distinguished career
as a renowned researcher, with many carefully designed and executed quantitative studies behind him. Yet, in that talk and subsequent comments, he
changed his perspective somewhat. He noted that in international management research, which can be "messy," it is not always possible (or desirable) to
use traditional research designs. Instead, we need to be willing to be descripfive, to explore what exists, to develop theories and ask questions, long before
we can begin to test them. In fields that are relatively unexplored, the opportunities for learning and investigating are wide open.
Thus, we should be adventurous and curious, researching all range of issues. Many of the issues will clearly be more "practical ~ than "theoretical" in
nature. Yet, given the overall lack of any significant amount of information
about IHRM in developing and transitional economies, studies that begin to
address any of these issues would be worthwhile.
A second thought relates to the importance of bringing into the research and
exploration colleagues from the developing countries and transitional economies that we need to learn about. The two of us on this project have worked
together for three years, as co-teachers, as partners in building a business
school, and as co-authors. In each of these endeavors, we learned about our
different perspectives and, we think, built a stronger product (e.g., classroom
experience for students, committee output, journal article) as a result. Although we knew one another well, working jointly on this project gave us even
more insight into our biases, our perceptions, and our views on what to study
INTERNATIONAl HUMAN RESOURCE MANAGEMENT
73
and how to do it. Such learning comes easiest from working on a daily and
regular basis. Most international research teams, however, may not have the
luxury of being together for more than short times, at a conference or trip to
visit one site or another. Even so, it is crucial for future investigations that
scholars from developing and transitional economies play as integral a role as
any from "developed countries" might. They are the scholars and leaders of
their countries; they will "live with ~ the results of research and practice; they
will teach the upcoming generations using that knowledge. Thus, they should
drive and participate in creating it.
In conclusion, we learned much from this project and hope we conveyed part
of it. We are optimistic--and a bit overwhelmed--by the potential for learning
that awaits scholars and managers in how IHRM will be carried out in developing and transitional economies. There is room for many questions and many
questioners.
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INTERNATIONAL HUMAN RESOURCE

MANAGEMENT IN DEVELOPING AND

What kind of challenges do developing countries offer for foreign firms as

Direct all correspondence to: NancyI~ Napier, Departmentof Management,BoiseState University,1910

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBERI, 1998

INTERNATIONAL HUMAN RESOURCE MANAGEMENT

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

INTERNATIONALHUMAN RESOURCE MANAGEMENT

I H R M as a topic has garnered increasing attention in recent years (Bania

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

try, a challenge in itselfl.),mainly since 1990. By luck, in March 1997, the

General Findings from the Literature

Given the significantenvironmental change in developing and transitional

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

understanding transitional economies generally. Yet, given changes in India

Existing Models and Their Application for Developing Countries

INTERNATIONALHUMAN RESOURCE MANAGEMENT

sometimes become almost surreal--gaining licenses and approvals to begin

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

The general literature review and examination of selected models generated

INTERNATIONAL HUMAN RESOURCE MANAGEMENT

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

country settings. Longitudinal examination of changes and their impacts is

We discuss selected context or environmental factors that seem to differentiate

Fundamental to any MNE operation, the economic conditions of a country

Understanding politicaland legal issues in developing countries taxes many

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

Technology and Infrastructure

The contrastwith the basicteachinginfrastructure,however, was dramatic:

In developing and transitional economies that are seeking a "place" in a

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

initially enters a developing country; its subsequent interactions might be

INTERNATIONAL HUMAN RESOURCE MANAGEMENT

Figure 1. Literature on "Who Goes Where?"

HUMAN RESOURCE MANAGEMENT REVIEW

VOLUME8, NUMBER1, 1998

development of a given project and to consider the types of employees (and

Figure 3. IHRM Influencers

Legal regulations regarding business practices, e.g., hiring

Training and Development

Reporting requirements, such as the use

Given existing differentials between expatriates and locals,

Rapid growth rate and

Training and Development

Shift to market oriented

Increasing wage rates

What does "success"

What training do transferees need (e.g., differences between

~.vailable Internet ac-

~)n local employees:

~)n foreign employees:

less experience, less

Will such information