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Canadian Journal of Administrative Sciences

Revue canadienne des sciences de ladministration


33: 124137 (2016)
Published online 1 April 2016 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1376

eHRM adoption in emerging economies: The case


of subsidiaries of multinational corporations in
Indonesia
Tanya Bondarouk*
University of Twente

Dustin Schilling Huub Rul


University of Twente Windesheim University of Applied Sciences

Abstract Rsum
Electronic HRM (eHRM) is assumed to strengthen the posi- Selon une hypothse bien connue, la gestion lectronique des
tion of HRM as a business partner by promising strategic ressources humaines (GERH) affermit le statut de la GRH en
benefits. Empirical support for this assumption, however, tant que partenaire daffaires, en promettant des avantages
mostly comes from studies conducted in developed econo- stratgiques. Toutefois, cette hypothse trouve son fondement
mies. Yet eHRM adoption in the emerging economy context thorique surtout dans les tudes menes sur les conomies
remains poorly understood as is how eHRM can result in dveloppes. Ladoption de la GERH dans le contexte des
strategic benefits. We argue that the difference between an conomies mergentes et les mcanismes lui permettant de
emerging economy compared to that of a developed produire des avantages stratgiques restent peu ou mal connus.
economy affects the adoption of eHRM in multinational Dans cet article, nous soutenons lide que ladoption de la
corporation (MNC) subsidiaries. In order to investigate GERH dans les succursales des entreprises multinationales ne
which extrinsic factors of a firm in an emerging economy se fait pas de la mme faon selon quon a affaire une
context play a role in the adoption of eHRM, we conducted conomie mergente ou une conomie dveloppe. Pour d-
semistructured interviews in 11 subsidiaries in Indonesia. terminer les facteurs extrinsques qui, au sein dune entreprise
We found that headquarters influence and the available voluant dans une conomie mergente, influencent ladoption
resources have a strong influence on eHRM adoption in In- de la GERH, nous avons men des entrevues semi-structures
donesia. Copyright 2016 ASAC. Published by John Wiley auprs de onze succursales de multinationales bases en
& Sons, Ltd. Indonsie. Les rsultats indiquent que linfluence du sige so-
cial et les ressources disponibles ont un grand impact sur
ladoption de la GERH en Indonsie. Copyright 2016 ASAC.
Published by John Wiley & Sons, Ltd.

Keywords: electronic human resource management, diffu- Mots-cls : gestion lectronique des ressources humaines,
sion of innovations, eHRM adoption, multinational compa- diffusion des innovations, adoption de la GERH, entreprises
nies, Indonesia, qualitative research multinationales, Indonsie, recherche qualitative

The pressure from globalization and the subsequent ori- eHRM is considered an umbrella term covering all possible
entation towards a knowledge economy continues to force integration mechanisms and contents between HRM and
Human Resources (HR) departments to cut costs and be- information technologies aiming at creating value within
come more efficient, flexible, and customer-oriented by and across organizations for targeted employees and
using electronic Human Resource Management Systems management (Bondarouk & Rul, 2009, p. 507). eHRM
(eHRM) (Galanaki & Panayotopoulou, 2009). In this paper, allows companies to generate HR data that supports strategic
decision making, to automate and digitize routine HR tasks,
*Please address correspondence to: Tanya Bondarouk, University of and to make HR staff focus on strategic people-management
Twente, Human Resource Management Department, the Netherlands. activities, all with a view of transforming HR professionals
Email: t.bondarouk@utwente.nl into strategic business partners (Bondarouk & Rul, 2013).

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

The latter might lead to the impression that the adoption eHRM adoption in MNCs in the context of emerging econ-
of eHRM is a common denominator in companies world- omies, which differs from the (limited) research that has
wide, considering the eHRM value creation possibilities been done in international eHRM adoption with the focus
for various stakeholders within a company. However, there on the Western managerial tradition (Lin, 1997;
are still many unanswered questions in the eHRM literature Olivas-Lujn & Florkowski, 2008; Strohmeier, 2007).
that we have categorized into three major challenges. First, it We address the final challenge of a lack of theoretical
is too easy to assume that the merger of Information rigor in the eHRM literature by examining eHRM adoption
Technologies (IT) and HRM always leads to the benefits through the diffusion of innovation theory (DOI) as intro-
mentioned above. In reality, there is often a discrepancy duced by Rogers (2003). The DOI, stemming from sociol-
between the promised benefits of eHRM and its realized ogy, offers an interesting perspective to explore the
outcomes (Parry & Strohmeier, 2014). It is unclear what adoption of eHRM by considering it an innovation. While
causes this discrepancy and whether research can help antic- some authors in the innovation literature consider innova-
ipate the success of eHRM adoption. Second, although there tions to be a technology that in essence has no precedent
are many studies addressing the importance of eHRM adop- (Abrahamson, 1996; Birkinshaw, Hamel, & Mol, 2008; De
tion in overall eHRM success (Marler & Fisher, 2013; Leede & Looise, 2005; Kimberly & Evanisko, 1981), our
Strohmeier & Kabst, 2009), scholars acknowledge that view aligns with the research stream that considers innova-
eHRM adoption in an international context and in Multina- tions as new to the organization1 (McCabe, 2002; Van
tional Corporations (MNCs) in particular is more compli- de Ven, 1986; West & Anderson, 1996). Therefore, we con-
cated than in a single country national context. Despite the sider eHRM an organizational innovation as long as it is per-
increased usage of eHRM in MNCs, eHRM scholars have ceived as new to the people involved, even though it may
to date paid little attention to this context (Van Geffen, Rul, appear to others as an imitation of a technology applied in
& Bondarouk, 2013). This raises questions as to whether and another organization (West & Anderson, 1996).
how eHRM adoption differs in a company operating in a sin- In the following paragraphs we explain the relevance of
gle country national context compared to MNCs operating in the DOI theory (Rogers, 2003) and explore the adoption of
an international context, and whether the increased complex- eHRM as an innovation in companies in emerging
ity of this context leads to additional factors influencing economies. Next, we introduce our methods and sample
eHRM adoption success. The final challenge that exists in followed by the empirical results of our interviews among
the eHRM literature, in our view, is the lack of theoretical 11 subsidiaries of MNCs in Indonesia. We conclude with
rigor, commented on by all major eHRM literature reviews final remarks, discuss limitations, and suggest practical
(Bondarouk & Furtmueller, 2012; Bondarouk & Rul, implications of our research.
2009; Marler & Fisher, 2013; Rul & Bondarouk, 2014;
Strohmeier, 2007; Van Geffen et al., 2013). The field is
not only in need of additional research (Rul & Bondarouk, Diffusion of Innovation Theory
2014), but also an agreed upon theory.
This paper aims to contribute to the literature by Many scholars have contributed to the understanding of
addressing the three challenges described above. Regarding organizational innovation, with the widely acknowledged
the first challenge, we attempt to explain the discrepancy influence of such great innovation minds as Daft,
between promised and realized outcomes partially due to Damanpour, Rogers, Tidd, & Van de Ven. Many reviews of
processes of how companies and their employees use and the innovation literature are available (Baregheh, Rowley, &
adopt eHRM. By looking at the adoption of eHRM, which Sambrook, 2009; De Leede & Looise, 2005; Marler &
is seen as a process of engaging an organization in its daily Dulebohn, 2005; Olivas-Lujn, & Florkowski, 2008). Rele-
work with selected eHRM systems (Bondarouk, 2011), we vant to this study are some selected notions about innovations.
aim to explain these discrepancies to an extent using the With respect to the types of innovation, several authors
environmental factors influencing eHRM adoption, includ- have offered various classifications. Thus, distinctions have
ing the decision to adopt a certain eHRM system. been made between technological/technical and administra-
Concerning the second challenge, we see that to date, few tive innovations (Daft, 1978; Damanpour & Evan, 1984).
studies (Hannon, Jelf, & Brandes, 1996; Smale & Heikkil, Technical innovations are seen as changes in main work
2009) have examined eHRM adoption from an international activities such as new products, services, and production
perspective, with most focusing on developed economies. activities, while administrative innovations are viewed as
For example, Burbach and Royle (2014) conducted a case changes in the way the firm is managed, and only indirectly
study on the eHRM adoption in the German and Irish viewed as relating to the main work activity (Daft, 1978).
subsidiaries of a US-based MNC, and found specific factors Early classifications have inspired growth in the field and
responsible for a successful adoption process: leadership, renewals of innovation types: distinctions have been made
planning, change management, communication, training, between product, service, and process innovations
and stakeholder involvement. We chose to investigate (Tidd, Bessant, & Pavitt, 1997) and product and process

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

innovations (Damanpour & Gopalakrishnan, 2001). Boer knowledge and skills, cultural influences, managerial
and During (2001) specified three types of innovation as support, availability of resources, and external influences.
product innovations (the development of new products According to Rogers (2003), the communication of new
and/or services), process innovations (the introduction of ideas through interpersonal networks and other communica-
new production or service technologies), and organizational tion channels is the essence of the innovation diffusion
innovations (the creation of new organizational forms and/or process (p. 18). Also, he described the innovation-decision
management practices). process as an information-seeking and information process-
Having acknowledged different types of organizational ing activity (p. 14), which is a clear indicator for the influ-
innovations, it is not difficult to argue that conceptualizing ence of knowledge and skills on the decision to adopt an
eHRM as an innovation does not fit the above classifications innovation. Rogers conceptualized knowledge utilization as
directly. In this contribution, we study IT packages (includ- the first step in the innovation-decision process.
ing ERP) used for HRM that assumingly fall under both Rogers (2003) also makes clear statements about the
administrative innovations (supporting administrative influence of management support on the decision to adopt
processes), and technical innovations (capitalizing on equip- an innovation and availability of resources as important
ment like computers, intranet, employee self-services, HRM factors influencing the decision to adopt an innovation.
shared services). We would not exclude organizational Rogers stated that change agents are more likely to contact
developments that accompany an introduction of eHRM clients that have the economic means to adopt an innovation
that is, changes in organizational and HR processes such and that late adopters of an innovation, in some cases, might
as devolution of HRM tasks to line management or transfer- not be resistant but merely limited in their resources to per-
ring HRM practices to shared services. form a change.
We view eHRM innovation as something new to the We saw several reasons to apply the DOI theory in the
adopting organization, but not as something radically novel context of our research. The use of IT to transform the tradi-
without known precedent, whether eHRM is an administra- tional paper-based HRM into eHRM goes hand in hand with
tive, technical, or process-oriented innovation. This last the innovation of HRM services and processes (Rul,
notion turns our study towards the technology adoption Bondarouk, & Looise, 2004). The eHRM research field
question, andin the context of innovationtowards the has been exploring the potential of the DOI theory to explain
Diffusion of innovation theory of Rogers (2003). We eHRM adoption, with major contributions from Marler and
borrow the definition of innovation from Rogers (p. 12) as Dulebohn (2005) and Olivas-Lujn and Florkowski (2008).
an idea, practice, or object that is perceived as new by an Considering that Rogers (2003) supported his theory with
individual or other unit of adoption. Diffusion of innova- many examples from developing economies such as Egypt
tion is traditionally seen as an organization-level construct and India, we were inspired to work with the DOI theory
and is defined as the process by which (1) an innovation further to examine the role of attributes of innovation and
(2) is communicated through certain channels (3) over time the environment in the decision to adopt eHRM and its fur-
(4) among the members of a social system (Rogers, p. ther adoption in an emerging economy context (Indonesia).
11), while its adoption is traditionally seen as an
individual-level construct and is defined as the innovation- The Role of Attributes of the Environment in eHRM
decision process of an individual. The DOI theory explicitly Adoption
distinguishes between five perceived attributes of innova-
tions that influence the decision to adopt an innovation and The empirical support for communication as a factor
its further implementation (Rogers pp. 229 258). The influencing the decision to adopt eHRM is strong, but
degree to which an innovation is perceived as (a) being bet- mostly limited to developed economies. Numerous scholars
ter than the idea it supersedes, is called relative advantage; found that the interpersonal communication with other
(b) consistent with the existing values, past experiences, adopters about eHRM increases the chances for a better
and need of potential adopters, is called compatibility; understanding of the technology, and a higher chance of
(c) relatively difficult to understand and to use, is called successful adoption (Galanaki & Panayotopoulou, 2009;
complexity; (d) being experimented on a limited basis, is Panayotopoulou, Vakola, & Galanaki, 2007).
called trialability; and (e) being visible to others, is called Support for skills and knowledge as the attributes of the
observability. environment is shown mostly from developed economies,
Although Rogers (2003) predominantly focused on the too. Hall (2004) found that when knowledge about technol-
above mentioned attributes of innovation to explain the ogies is available in close proximity, it positively influences
decision to adopt an innovation and its further adoption, a its adoption. Also, the existing IT skills of employees and
close reading of the authors original work allowed us to expertise with human resource information systems
distill additional factors that are attributed to the environ- (Teo, Lim, & Fedric, 2007) lead to a higher adoption rate
ment of innovation, and appear to also have an influence of eHRM. The availability of technical skills is shown to
on the decision to adopt an innovation: communication, be a prerequisite for the adoption of eHRM self-services,

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

as skilled employees are more likely to autonomously customers and the industry influence the decisions of com-
handle IT-related tasks based on their previous experiences panies to implement eHRM (Galanaki & Panayotopoulou,
(Lau & Hooper, 2009). 2009; Hall, 2004; Olivas-Lujn & Florkowski, 2008; Teo
Evidence of cultural factors influencing the decision to et al., 2007).
adopt eHRM is widespread throughout the literature for
developed economies, and is based on the assumption that The Emerging and Developed Economies Context in
homogenous social systems appear to adopt innovations eHRM Adoption
faster than their heterogeneous counterparts because the
shared interests do not lead to decision-making gridlock As we have argued, many attributes of the environment
(Dekimpe, Parker, & Sarvary, 2000). The national culture empirically support eHRM adoption. However, we observed
in which a company operates appears to have a major impact that the empirical support originates predominantly from
on an organizations culture (Dasgupta, Agarwal, Ioannidis, research conducted in developed economies.
& Gopalakrishnan, 1999; Hofstede, Hofstede, & Minkov, Emerging economies have several distinct features from
2011; Rao, 2009; Thatcher, Foster, & Zhu, 2006). Business developed or high-income countries: lower Gross Domestic
cultures that rely on face-to-face relationships appear to find Product (GDP) per capita with a stronger weight of agrarian
it difficult to adopt what they regard as rather clinical activities over industrial/commercial activities, a faster GDP
electronic eHRM practices (Olivas-Lujn, Ramirez, & growth rate (pace of economic development), and weaker
Zapata-Cantu, 2007). market governance with a relatively unstable free-market
Management support is found to have a great impact on system (Arnold & Quelch, 1998).
eHRM adoption in developed economies. Management Hoskisson, Eden, Lau, and Wright (2000) summarized
makes strategic decisions, approves budgets, and makes this into two aspects: emerging economies are those that
decisions about company realignment, whereas top execu- show a rapid pace of economic development, and govern-
tives need to be convinced of an innovations benefits in ment policies that support economic liberalization and
order to agree to its adoption (Lin, 1997; Teo et al., 2007). expansion of a free-market system. The most commonly
Since the adoption of an innovation such as eHRM requires known economies fitting these criteria are China, India,
significant restructuring within a company, managements Brazil, Russia, Indonesia, and Turkey.2 The research into
willingness to initiate restructuring has been shown to be differences between developed and emerging economies is
crucial (Lau & Hooper, 2009; Marler, Fisher, & Ke, 2009; mainly built on areas such as strategy and institutional devel-
Marler, Liang, & Dulebohn, 2006; Olivas-Lujn & opments, but no studies exist in the area of eHRM. For
Florkowski, 2008; Panayotopoulou et al., 2007). example, Hoskisson et al. (2000) suggested that strategy im-
Available resources also found support through the plementation may differ in emerging economies due to miss-
literature with evidence from both developed and develop- ing institutional features such as poorly functioning labour
ing countries. The higher the amount and quality of available markets, capital markets, infrastructure problems, lack of
resources, the more likely it is for a new technology to be property rights registration, and lack of legal frameworks.
successfully implemented (Dekimpe et al., 2000). Adequate Roztocki and Weistroffer (2011), for example,
funding is also a decisive factor in the successful adoption of explained that the business reality in many emerging econo-
eHRM (Lau & Hooper, 2009). mies is rather unpredictable, and that long-term strategic
Some IT studies within the tradition of the Technology planning is more complicated as well as less desirable. New
Acceptance Model (TAM), based on the Theory of Planned opportunities may arise more often than in developed econo-
Behavior, acknowledged the role of facilitating conditions in mies and hurdles may block plans more often (Table 1).
the technology adoption process. Significant support has
been found for so-called facilitating conditions to secure
technology adoption success. Among those, management Method
support, seen as the degree of support from managers to
ensure sufficient allocation of resources and act as a change Research Setting
agent to create a more conductive environment for technol-
ogy success was found to play a significant role in technol- The questions inspired us to opt for an explorative study
ogy adoption (Igbaria, Zinatelli, Cragg, & Cavaye, 1997). with the qualitative research design to understand the adop-
Availability and quality of resources such as time, budget, tion of eHRM in the context of an emerging economy. We
and IT compatibility were empirically found to impact the chose the Indonesian context as our research setting for
usage and adoption of technology (Karahanna & Straub, various reasons. First, Indonesia is the fourth most populous
1999; Taylor & Todd, 1995; Venkatesh, 2000). country in the world. Indonesias capital and most important
Finally, we also found support for external influences as business hub is Jakarta, with 9.1 million inhabitants
a factor in the eHRM adoption decision-making process in (CIA, 2013). But while business hubs such as Jakarta exist
developed economies. A number of authors found that and keep growing, the vast majority of Indonesias

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

Table 1
Business Environment Differences between Developing, Emerging, and Developed Economies (adapted from Roztocki
& Weistroffer, 2011)

Business environment Emerging economies Developed economies

Laws and regulations Changing fast and Relatively slow with likely changes due
unpredictably to regulated environments
Government control Mostly strong and Mostly strong and stable authorities
determined authorities
Workforce Low, but rising salaries; High salaries; at demand for highly
characteristics high demand for highly qualied employees; mostly low
qualied employees; high employee turnover
turnover
Management style Accommodating to fast Keeping to the status quo; focusing on
growth and to developing improving existing products and services
new products and services
Economic conditions Continuous and fast Stable but modest economic growth
economic growth

inhabitants (70%) live in rural areas (Bennington & Habir, Although mentioned alphabetically in Table 2 it is not
2003). Today, Indonesia has a GDP of $1.212 trillion and difficult to notice that our final sample consisting of 11
is a member of the G20. It has a labour force of 119.5 companies includes subsidiaries with different eHRM
million, which is distributed between agriculture (38.3%), adoption stages: 3 at the basic adoption stage, 4 at the
industry (12.8%), and services (48.9%) (CIA, 2013). sophisticated eHRM adoption stage, and 4 at the advanced
Secondly, Indonesia shows strong potential for the eHRM adoption stage. Such an almost equal representation
usage of IT innovations, including eHRM, according to the of three different adoption stages allowed for a balanced
Global Information Technology Report (Dutta & Mia, comparison and analysis later in our study. We built three
2011). Thirdly, the same potential that is present for the descriptors for the level of eHRM adoption based on the
adoption of IT innovations appears to be present for HRM findings of Rul et al. (2004), where the differences in
in general. While HRM did not enjoy a particularly positive eHRM adoption in companies have been operationalized
image in Indonesia before the Asian financial crisis based on a relative (a) number of active users of eHRM;
(Bennington & Habir, 2003), the recognition of HR roles (b) ratio between managerial and nonmanagerial active users
in companies is steadily rising (Habir & Rajendran, 2007). of eHRM; and (c) dominant purpose of the adopted eHRM.
Traditionally, HR roles in Indonesian companies have been Companies with eHRM systems that were predominantly
considered administrative in nature (Habir & Larasati, used by fewer active users and nonmanagerial employees,
1999), and the educational background of HR managers and had the main purpose of administrating data were
has not been HR-related in most companies (Bennington & categorized as being in a basic stage of eHRM adoption.
Habir, 2003). However, since 1997, personnel departments Companies where managerial employees used eHRM
and managers have mostly been rebranded as HR depart- systems to create valuable information for managers were
ments, and managers are keen to stress the newly gained categorized as being in an advanced stage of eHRM
importance of HRM (Habir & Rajendran, 2007). adoption. Companies where the majority of managerial
and nonmanagerial employees used eHRM systems with
Sample the purpose of making strategic HRM and business
decisions based on the information created from the system
The companies that formed our sample are subsidiaries were categorized as being in a sophisticated stage of eHRM
of MNCs located in the Greater Jakarta Area in Java. All adoption.
companies that participated had either already implemented Each company we contacted was part of our academic
a form of eHRM or were in the process of doing so. From network and had to be approached individually. A local
an initial sample of 150 companies that we contacted on a senior scholar assisted us in the process of establishing
cold-call basis through our academic network, 11 companies contacts with companies and accessing the local network.
agreed to participate in our study. These 11 companies each His help was crucial during the forming of the sample
operate in different sectors and vary in size both globally as because the local culture is heavily dependent on personal
well as locally (Table 2). relationships.

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Table 2
Sampled MNC Indonesian Subsidiaries, their Characteristics, eHRM Adoption, and Interviews Conducted

Number of
employees: eHRM Time for
Location Indonesian Level of introduction HRM practices Interview transcribing
Subsidiary of a subsidiary / eHRM in the supported time an interview
of an MNC Sector headquarter globally adoption subsidiary Type of eHRM by eHRM Interviewees (hours) (hours)

Aggreko Power supply, UK 150 / 5000 Basic stage 2012 Off-the-shelf SAP- Data HR 1 3
rental services based Adrenaline administration manager
system
ANZ Bank Banking sector Australia 1200 / Basic stage 2012 Off-the-shelf Leave, HR 2.83 5
48000 PeopleSoft recruitment, data manager
(customized) administration
E-HRM ADOPTION IN EMERGING ECONOMIES

AXA Insurance France 240 / Sophisticated 2001 Off-the-shelf Payroll, HR 2.83 7.5
160000 stage PeopleSoft recruitment, leave, manager
(customized) promotion,

Copyright 2016 ASAC. Published by John Wiley & Sons, Ltd.


training, HRM
information
Formulatrix High-tech USA 90 / 360 Sophisticated 2010 In-house developed, Payroll, HR 2 5
(protein stage called Employee recruitment, leave, manager
crystallization Information System promotion,

129
solutions) training, HR
information
Indocement Cement Germany 5000 / Sophisticated 1980 In-house developed, Payroll, HR and IT 3.42 7.5
manufacturer 53000 stage called HRIS recruitment, leave, managers
promotion,
training, HR
information
Kievit Food The Netherlands 240 / Advanced 2009 Off-the-shelf Sunsh Training, HR and IT 2.5 5
22000 stage and in-house payroll, managers
developed e-HRM leave and
reimbursement,
management, data
administration
Nufc Higher The Netherlands 12 / 300 Basic stage 2007 Intranet HRM information Director 1.5 3
education sharing
Nutreco Animal The Netherlands 160 / Advanced 2009 In-house developed Performance HR 2.92 5
nutrition 10000 stage many separate management, data manager
systems, e.g.: administration
PACT, e-Leave
system, e-Learning
Oxfam NGO UK 80 / 6000 Advanced 2005 Data HR 2.67 5
stage administration, manager

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BONDAROUK ET AL.

33(2), 124137 (2016)


(Continues)
E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

an interview
Interview transcribing
Interview Procedure

Time for

(hours)

6
Keeping the explorative nature of our research in mind,
we collected the data through semistructured interviews that
lasted from 1 to 3 hours, totalling more than 26 hours of
Interviewees (hours)

1.67
time conversations and requiring double the amount of time for

3
interview transcribing. All interviewees ensured us that they
were the most knowledgeable persons regarding the

HR and IT
adoption of eHRM in their companies.

managers
manager
Each interview began with general questions about the
HR companys adoption of eHRM. We asked what kind of
systems they were using both in the past and currently,

recruitment, leave,
who used the systems, for what purpose these systems have
reimbursements,
payroll, medical
HRM practices

management been adopted, and for how long the companies have been

training, HR
performance
HRM report

information
making use of eHRM. These questions allowed us to assess
recruitment

generating,

promotion,
by eHRM
supported

both the companys current level of adoption and their


Payroll,

involvement with the adoption of eHRM over time. We also


asked about the five traditional attributes of the innovation,
and explored the attributes of the environment.
iGrasp (customized)

Microsoft Access
Type of eHRM

PeopleSoft and

PeopleSoft and

Exploring the Constructs Guiding the Interviews


(customized)
Off-the-shelf

Off-the-shelf

Off-the-shelf
PeopleSoft

During our interviews we addressed both decisions to


adopt an eHRM system and the adoption process itself. To
assess the traditional attributes of the innovation, we asked
introduction

the interviewees whether they believed these factors influ-


subsidiary

2009

1994

enced the subsidiarys decision to adopt eHRM. The environ-


eHRM

in the

mental factors were operationalized according to the


information we gathered during the literature review. We
Sophisticated

asked whether communication amongst potential adopters


Advanced

had taken place and whether the eHRM systems in place as


adoption
Indonesian Level of
subsidiary / eHRM

well as its benefits had been communicated clearly through-


stage

stage

out the organization. We asked questions about the experi-


ence of the company regarding eHRM and what skills were
employees:
Number of

needed to implement the system. Cultural influences were


globally

assessed by asking about the company culture and decision-


4500 /
36000

78000
140 /

making process and how the companies deal with the adop-
tion of innovations in general. The influence of management
support on the decision to adopt eHRM was evaluated by
asking the interviewee questions about the HRM managers
headquarter

attitude towards eHRM and change as well as the managers


Location

willingness to facilitate HR services in the organization.


USA
of a

UK

Questions about the availability of recourses focused on


whether or not the company has sufficient resources to adopt
eHRM and what resources were needed to adopt eHRM.
Reckitt Benckiser Hygiene and
healthcare

Last, we asked the interviewees whether there were any ex-


products

Tabaco

ternal influences in their decision to adopt eHRM.


Sector

Results
(Continued)

of an MNC

Sampoerna
Subsidiary
Table 2

We present our findings along with the three main


constructs of interest in this study: eHRM adoption level, at-
tributes of the innovation, and attributes of the environment.

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Copyright 2016 ASAC. Published by John Wiley & Sons, Ltd. 130 33(2), 124137 (2016)
E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

Level of eHRM Adoption their current eHRM system is more efficient or increases the
performance in HRM processes. Overall, the interviewees
As Table 2 shows, Sampoerna, Indocement, AXA, and described their systems as lowering the bureaucratic burden
Formulatrix have very sophisticated levels of eHRM adop- within HRM and reducing paperwork. The interviewees from
tion. Both Sampoerna and AXA make use of a customized Indocement and Sampoerna stated that their current eHRM
version of PeopleSoft that integrates many HR processes systems have increased control over employees and created
and significantly reduces the bureaucratic burden, but also additional transparency. Overall, our observations allowed us
allows the companies to make strategic decisions based on to conclude that, based on the respondents perceptions,
the information created through the system. Indocement Indonesian subsidiaries gained the relative advantage through
and Formulatrix, on the other hand, designed their own standardizing and simplifying HRM processes, known as
systems that they simply call HRIS or Employee Informa- transitional eHRM (Rul et al., 2004).
tion System. Although the systems were designed according Compatibility. The degree to which eHRM systems
to the needs of the companies, they only differed in design have been perceived as consistent with existing values, past
while offering the same content applications. experiences, and needs of individual users was dependent
Oxfam, Nutreco, Reckitt Benckiser, and Kievit are in an on whether a system was developed in-house or taken off-
advanced stage of eHRM. Oxfam makes use of two the-shelf. Subsidiaries that developed their eHRM systems
off-the-shelf eHRM systems, which are not integrated with in-house (e.g., Indocement and Formulatrix) reported a very
each other and are predominantly used to lower the bureau- high compatibility. The same was observed for companies
cratic burden and to create simple reports. The subsidiary that implemented highly customized systems of external ven-
does not use the information from the system to make strate- dors as in the case of AXA and Sampoerna. Oxfam, Nutreco,
gic decisions. Nutreco makes use a number of systems, most Reckitt Benckiser, and Aggreko demonstrated problems with
of which have been developed in-house. Despite the capability. The HR manager at Oxfam described an issue
company using a number of systems, its level of eHRM is with the hiring procedure, which made it impossible to limit
not necessarily advanced, because the systems are not inte- job advertisements to Indonesia only. The interviewee at
grated with each other, and strategic decisions are not based Nutreco described that some of their employees had prob-
on the information generated from the systems. Reckitt lems with the English language in their system.
Benckiser makes use of off-the-shelf eHRM systems, mainly Complexity. The overall complexity of the eHRM
for reporting, managing data, and generating reports on systems can be described as rather low. The interviews that
employees performance. However, the systems are not we conducted revealed that eHRM was perceived as rela-
sophisticated. Many HR services such as applications relat- tively easy to understand, learn, and use. Even companies
ing to leaves (sick leave, maternity leave, etc.) are still done such as Indocement, Sampoerna, AXA, and Formulatrix,
on paper, and the lack of integration between the systems which have adopted a sophisticated level of eHRM, found
increases the risk of having duplicate datasets. Kievit makes the eHRM interfaces easy to use. Most companies described
use of an eHRM system by a local vendor called Sunfish and their systems as easy to use, citing the ability to use a com-
a self-made training application. Sunfish is used for payroll puter and access the internet as the only skills needed. To
processes, leave, and reimbursement management as well familiarize users with the systems at the subsidiary sites,
as administering employee data. Both systems work inde- all MNCs offered either training or the answers to their ques-
pendently from each other and are predominantly used by tions as they arose. Aggreko, ANZ, and Nuffic, in particular,
managers to create simple reports. who are in the basic stages of eHRM, described their
Last, Nuffic, Aggreko, and ANZ can be described as systems as straightforward, easy to understand, and use.
being in a basic stage of eHRM adoption. Nuffic uses its Trialability. The trialability of the eHRM systems
intranet to share important information among its staff. The implemented in our case companies varied between very
same picture emerges at Aggreko. Although the company low and high: interviewees reported different degrees of
makes use of the SAP-based Adrenaline system, the systems experimentation with the eHRM in their subsidiary. In cases
main purpose is to administer employee data. Other HR where companies used off-the-shelf systems from
processes are managed manually by HR staff. Last, ANZ uses PeopleSoft or Sunfish, the system became very difficult to
PeopleSoft to manage employee leave processes, recruitment, change after it was implemented and customized, which
and data administration. However, the system was only was the case in Sampoerna, AXA, and Kievit. These and
recently introduced and is limited to simple data input. other companies committed themselves to a particular sys-
tem vendor without the possibility of testing it. We under-
Attributes of the eHRM Innovation stood that, although particular modules within the eHRM
Relative advantage. When we asked companies systems could be added or removed after system implemen-
whether they perceived an improvement in the HRM system tation, the overall trialability was low due to the strict agree-
over what they used prior to its adoption, a similar picture ments with the vendor. On the other hand, subsidiaries that
emerged for every company. Every interviewee stated that developed their own systems (e.g., Indocement or

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

Formulatrix), reported no problems with trialability since hiring skilled and experienced experts can positively influ-
they were able to test the eHRM and make incremental ence the eHRM adoption. As both HR and IT managers
changes when necessary. expressed during the interview, despite not having any
Observability. The internal observability of the eHRM experts on eHRM in-house, Sampoerna managed to imple-
systems used by our sample companies is high as the results ment a sophisticated eHRM system with the help of outside
of an eHRM innovation are clearly evident to others. The experts.
majority of managers we interviewed believed that system Cultural inuences. It is difficult to draw conclusions
benefits, such as an increased efficiency, simplified HRM about whether cultural influences affected the decision to
processes, and time savings in HRM administration, were adopt eHRM and whether they affected the actual process
apparent. These benefits were communicated clearly of adoption in our sample. An explanation for this ambiguity
towards the entire staff through emails, meetings, banners, is that our entire sample consisted of subsidiaries that were
and personal communication. ANZ, for example, made supportive towards the adoption of new technologies such
considerable efforts to make the benefits of their system as eHRM. Formulatrix, for example, welcomed the idea of
visible to the entire subsidiary by using all of the above- eHRM, because the company was trying to improve no
mentioned channels. At the same time, we characterized matter what (HR manager, Formulatrix). For Sampoerna,
the external observability of eHRM as low. Although many innovating with IT was the everyday meal (HR manager)
of the eHRM systems that have been used by our sample with eHRM being a part of that. The company embraces
companies are based on software packages from profes- uncertain situations by constantly innovating (IT manager,
sional vendors, the systems alterations to the particular Sampoerna) and eHRM offered the possibility to innovate
needs of a company are hard to comprehend by others. its HRM processes. It appeared that Sampoernas budget
Every system we observed during the interviews had a dif- did not affect whether it embraced change and continuous
ferent appearance, functionality, and interconnectedness. improvement.
Availability of resources. The availability of
Attributes of the eHRM Environment resources appeared to play a major role in the decision-
Communication. Communication as influential on the making process and further adoption of eHRM.
decision to adopt eHRM is mixed. Our interviews suggested Implementing systems like PeopleSoft or SAP required large
that communication facilitated the adoption of eHRM more amounts of resources. As the interviewee at Reckitt
than it influenced the decision to adopt it in the first place. Benckiser reported, their headquarter management team
While companies such as Sampoerna, Formulatrix, decided against the adoption of SAP, because the cost for
Indocement, AXA, and ANZ broadly communicated the implementing SAP in Indonesia was too huge (HR man-
adoption of their eHRM systems, this was only the case after ager, Reckitt Benckiser). The interviewee at ANZ stated that
the decision to implement the system had been made. The it would be good to have one single platform of eHRM, but
HR manager at AXA stated that open communication with it would be really hard because of the money. Interviewees
employees is key to make the eHRM system work after its at the smaller subsidiaries in particular, such as Nuffic or
introduction. However, he acknowledged that the urge to Aggreko, described the availability of resources as having
communicate appeared to be lower when the implemented a major influence on the adoption of eHRM. Large subsidi-
eHRM system did not result in major changes, which was aries, such as Indocement or Sampoerna, had no issues
the case in Nuffic and Aggreko, where communication with adjusting a budget for very sophisticated eHRM systems.
other adopters was not observed in either of the companies. External inuences. Within our sample, external
Knowledge and skills. Our findings produced mixed influences appeared to have limited-to-no impact on the
evidence that knowledge and skills have an influence on decision to adopt eHRM. Although interviewees at many
the decision to adopt eHRM. Statements like the systems companies indicated that they were implementing eHRM
are easy to use and it is easy to understand (HR manager, to increase efficiency, their motivation to reach higher levels
Nutreco) or there are no special skills needed to work with of efficiency did not stem from, for example, pressure from
our [eHRM] (IT manager, Kievit) were as frequent as It is competitors. Exceptionally, the HR manager at Reckitt
very difficult for them. Most of them dont have computer Benckiser stated that they cannot survive two minutes in
literacy (IT manager, Indocement). Almost all companies the year 2013 with the old processes. We make strategic
offered training or feedback after the introduction of a new decisions based on that [the performance management
system. Some companies (Indocement and Reckitt data]. According to the Reckitt Benckisers HR manager,
Benckiser) described computer literacy and Lingua Franca they needed high levels of internal effectiveness to be com-
English skills as necessary for system use. According to petitive. The interviewee at AXA referred to a talent short-
the HR manager at Reckitt Benckiser, their PeopleSoft plat- age in the Indonesian insurance market that forced the
form was not adopted across the whole Indonesian subsidi- company to improve its talent acquisition, training, and
ary due to a lack of translation of the texts into the Bahasa talent retention by means of eHRM. In the case of ANZ,
Indonesia language. The case of Sampoerna showed that governmental regulations forced companies in the

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

Indonesian banking sector to store certain data locally. This cases of Oxfam, Nutreco, Reckitt Benckiser, and Aggreko,
created a barrier for the company to integrate their eHRM the promised benefits of eHRM (e.g., increased efficiency)
globally. The HR manager at Nutreco stated: We are not appeared to be undermined by the inability of the system
really pressured by the competition; it is more like we get to be fully compatible to the subsidiaries needs and pro-
inspired by what (systems) they have. cesses. A possible explanation for the compatibility issues
Management support. Management support appeared could be the low amount of trialability and observability in
to be a major influence on the decision to adopt eHRM these companies. A majority of the case companies
within our sample. Contrary to our expectations, we explained that the adoption of eHRM required a high
observed that the decision to select and adopt a certain amount of commitment towards a certain vendor to compen-
eHRM system was made by higher level managers from sate for the lack of trial periods for eHRM. The findings
headquarters rather than the local subsidiary managers. All show that the trialability is limited to adding or removing
interviewees explained that the decision to adopt particular particular modules within the systems. Interestingly, compa-
eHRM systems was made by headquarters and communi- nies that developed their own systems reported no compati-
cated through the global hierarchy. Thus, although local bility issues and were able to make incremental changes to
subsidiary managers appeared to be very supportive towards their systems at any given time. The low external observabil-
eHRM in general, their opinion or expertise did not appear ity in the companies in our study might also be an indicator
to influence the decision to adopt eHRM. The local manager of a discrepancy between promised benefits and realized
at ANZ described that he really fought hard for its adop- outcomes of eHRM. We observed that almost every eHRM
tion, referring to the struggle of convincing the companys system in our sample companies was customized to some
top managers to adopt PeopleSoft in Indonesia. Despite the extent. A version of PeopleSoft in one company could have
managers efforts, headquarters proceeded with their own a completely different functionality compared to a version of
decision. At Reckitt Benckiser, whenever new features for PeopleSoft in another company. The low amount of observ-
the established eHRM systems were needed, the support ability might leave companies under the impression that they
by headquarters was crucial for their adoption. In the case could reap certain benefits using eHRM with the actual out-
of Sampoerna, the influence of headquarters on the decision comes varying considerably.
to adopt eHRM became very clear during the interview. The Our evidence for the attributes of the environment sug-
interviewee described that after five years of implementing gests that the availability of resources and management sup-
PeopleSoft, the local management team received informa- port affects the decision to adopt eHRM, while evidence for
tion from headquarters that all existing systems would be communication, knowledge and skills, cultural influences,
changed to SAP. and external influences yield inconclusive results. The find-
ings suggest that communication facilitates the adoption pro-
cess of eHRM more than it affects the decision to adopt
Discussion eHRM. Companies communicated their decision to adopt
eHRM very well, but only once the decision to implement
Our discussion is structured along the three research had been made. In our sample, we found no evidence that
challenges we aimed to address: a discrepancy between communication minimized the discrepancy between prom-
promised benefits of eHRM and its realized outcomes, ised benefits of eHRM and its realized outcomes. Despite
emerging economy context, and a lack of a theoretical rigor this, we do assume that communication can minimize this
in the current eHRM research. potential discrepancy and steer perceptions about eHRM
adoption through well-defined, consistent, and consensual
Discrepancy between Promised Benets of eHRM and its messages about eHRM project developments such as
Realized Outcomes unforeseen delays and/or changes in planning. Regarding
knowledge and skills, our findings show that if the relevant
First, we asked whether the discrepancy between prom- IT skills are already in place, companies might be more
ised benefits of eHRM and its realized outcomes can be inclined to develop an eHRM system in-house. Companies
explained by the environmental factors influencing eHRM in our sample that lacked the necessary skills for the eHRM
adoption. Our findings show that there are certain factors adoption hired outside experts. The role of cultural factors is
that appear to have an influence on the decision to adopt found to be mixed: all companies in our study had an
eHRM, which may lead to the aforementioned discrepancy. organizational culture that was very supportive towards
Concerning the traditional attributes of innovation, we new ideas, technologies, and change. Apart from the exter-
found that the majority of the companies in our study had nal influences observed at AXA and ANZ, these factors
problems regarding the compatibility, trialability, and did not appear to seriously affect the decision to adopt
observability of their eHRM systems. Although our findings eHRM. On the contrary, both management support and
show that all eHRM systems had clear overall relative resources available appear to have a strong influence on
advantages and featured low amounts of complexity, in the the decision to adopt eHRM. Contrary to what we expected,

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

we observed that higher level managers from the companys management knowledge and skills to local employees
headquarters made the decisions about eHRM adoption through on-the-job training. We also observed that along
process in all sample companies and provided the necessary with these explicit skills, Western expats brought a stronger
resources for its adoption. trust in management and loose control in eHRM projects that
In general, we observed that traditional attributes of otherwise would be under strict organizatinal regulations.
eHRM innovation influenced the adoption of eHRM in We assumed that in general, foreign direct investment is
Indonesian companies, which is in line with the DOI theory. welcomed by governments in emerging economies
However, an analysis of interviews allows us to assume that (Bennington & Habir, 2003) and serves to relax some organi-
in the emerging economy context, it is the complex interplay zational rigidity and change the workforce mindset.
between traditional attributes of innovation and diverse envi-
ronmental attributes that possibly diverge eHRM outcomes
from its anticipated benefits. Contributions to Scholarship

Emerging Economy Context on eHRM Adoption Following Rogers (2003) adopter categorization, we
found that our sample consisted of innovators, early
Building on the above arguments, we contend that the adopters, and early majority. However, these findings have
business environment in emerging economies is significantly to be handled with care. Due to the high variety of compa-
different from that in developed economies (Arnold & nies in our sample and the fact that Rogers (2003) adopter
Quelch, 1998; Hoskisson et al., 2000; Roztocki & categorization does not consider the level of adoption, it is
Weistroffer, 2011). The fast-moving and partially unpredict- hard to make valid conclusions. What we did find was that
able business developments in Indonesia appeared to addi- companies that began experimenting with eHRM very early,
tionally support innovation adoptions in an emerging including those in Indonesia, have sophisticated eHRM sys-
economy context. Interestingly, although the majority of tems today.
our sampled companies described that they were Apart from that, Rogers (2003) DOI theory appears to
implementing eHRM to increase efficiency, their motivation be quite appropriate for exploring eHRM adoption in an
to reach higher levels of efficiency did not stem from pres- emerging economy context. Its attributes of innovation and
sure from competitors. Interesting exceptions were Reckitt environment cover both the influences of eHRM systems,
Benckiser, AXA, and ANZ. Talent shortages pushed AXA and factors influencing adoption of eHRM at a company
to innovate their eHRM, and government regulations forced level.
ANZ (banking sector) to store certain data locally. This in Our findings indicate that two of the selected six attri-
turn made integration with the companys global system butes of the environment are apparent: management support
more difficult. and availability of resources. While management support is
Regarding other external factors, we observed that in a known factor in the IT implementation literature, in the
terms of the perception of the HRM function, little has specific context of an emerging economy and MNCs, we
changed since Habir and Larasatis (1999) findings that saw that the headquarter influence has become a special
HRM in Indonesia has historically not had an important role subdimension within traditional management support. Al-
in management. It has traditionally been regarded as a sup- though with some acknowledged limitations in our study,
portive function and almost totally administrative in orienta- we see the link between a strong directive leadership from
tion. In our sample of companies, we observed that even in headquarters and advanced and/or sophisticated level of
todays capacity, HRM competence continues to be poorly eHRM adoption. To further argue this point, availability of
regarded. Interviewees also referred to the many regulations resources, particularly IT competences and communication
that started off after the financial crisis in East Asia in 1997- (as attributes of the environment), appear to be rooted in
98, which on the one hand, complicated existing HRM pro- headquarters commitment to adopt eHRM.
cesses, but on the other, increased opportunities to align We believe that in the emerging context, attributes of
Indonesian businesses with international best (HRM) prac- innovation have a great effect on its adoption only in com-
tices and HRM innovations, including eHRM. bination with environmental factors. From the point of
An earlier study from Heikkil (2013) on eHRM in view of a subsidiary, this assumption is particularly
MNC sudsidiaries showed that the local institutional envi- applicable.
ronment such as mindset, language, and cultural values influ- This study contributes to scholarship by addressing
ence eHRM adoption. We observed that in all companies three major challenges in the eHRM literature and by pro-
with an advanced and sophisticated level of eHRM adoption, viding a new perspective on the adoption of eHRM. Our
eHRM experts or project managers were brought in to assist results indicate that the adoption of eHRM in subsidiaries
in eHRM implementation. Their involvement in eHRM of MNCs in international, emerging economy contexts such
implementations served the primary purpose of managing as Indonesia is highly affected by the decision making pro-
eHRM implementations and transferring project cess at the MNCs headquarters.

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E-HRM ADOPTION IN EMERGING ECONOMIES BONDAROUK ET AL.

Applied Implications support and availability of the resources played a critical role
in eHRM adoption in our sampled companies. Headquarter
There are several lessons for practice that are apparent. influence as the subdimension of traditional management
In particular, subsidiary HR managers who work in a support strongly contributed to the level of advancement of
developing/emerging economy context might find our obser- eHRM adoption by MNCs subsidiaries in an emerging econ-
vations intriguing. Our findings indicate that managers tend omy context. Overall challenges of eHRM adoption in our
to have a weak influence in the decision-making process of sample of companies were related to the complexity of the
eHRM adoption. Subsidiary managers must find a way to economic, legal, and political systems in the emerging econ-
make their voices heard in the decision-making process of omy context and in the still rather traditional image of the
eHRM in order to overcome redundancy and inefficiency. HRM function as being predominantly administrative.

Limitations and Future Research Directions

Our sample is restricted to subsidiaries of MNCs in Notes


Indonesia that are located around the business hub Jakarta.
Jakarta is just a small part of Indonesia and subsidiaries 1 The authors are very grateful to the anonymous reviewers for
located in this area might be different from subsidiaries in this idea.
other areas of Indonesia. Moreover, all companies that 2 We acknowledge an open door to argue whether countries such
agreed to host interview sessions appeared to be very as Brazil or Russia still t in as they have shown negative eco-
nomic growth over the past few years.
supportive of eHRM innovations. It would be interesting to
know what factors would influence Indonesian companies
JEL Classication: M1
to adopt eHRM and what factors influence companies that
are opposed to eHRM innovations and thus reluctant to
adopt eHRM. The study is subject to the pro innovation
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