Human resource management in domestic vs. multinational enterprises: an investigation in the country of Brunei

Very little past work has focused on the comparative analysis of human resource management (HRM) practices between domestic (DEs) and multinational enterprises (MNEs). The majority of the work in this area has instead concentrated on comparing the HRM practices employed by the subsidiaries of MNEs, and has mostly been conducted in the context of developed countries. This research studies the behavioural differences in the HR practices--recruitment, training, internal career opportunities, appraisals, rewards and incentives, as practiced in DEs and MNEs in the emerging country context of Brunei Darussalam. A survey of literature yielded nine major testable hypotheses. These included MNEs being more stringent with regard to their recruitment and training and rigorous with their promotion practices. Performance appraisal (PA) processes were hypothesised to be more advanced and better structured in MNEs when compared to DEs. Incentives and reward systems were also observed and following from literature, these were predicted to be more advanced and better structured in MNEs. In addition, we also hypothesised that the role of HR directors has become more strategic in the two genres of enterprises. We also tested the impact of several control variables on HR practices. In order to put our hypotheses to test, we collected primary data from a cross-section of firms. A count revealed a total of 465 firms in operation; of these, 214 were drawn for study. A total of 151 firms (70%) responded; 88 of these (58%) were DEs and 63 (42%) were MNEs. We applied a mix of parametric and non-parametric tests to analyse the data. On balance, we found support for most hypotheses. In terms of recruitment and selection practices, MNEs are found to be more rigorous in their recruitment, placing more emphasis on such traits as candidates’ willingness to travel, devotion to task, self-motivation, and independent judgment. We also found that MNEs place more emphasis on training; they also emphasise a stronger work culture by relying on ‘induction by socialisation’, and ‘buddy system / mentoring’. Moreover, while the statistical differences on its importance are seen to be higher in MNEs, the mean score emphasising the importance of training for DEs comes out to be high as well. This shows that both sets of enterprises rank the issue of training of their employees high. In terms of internal career opportunities, the results show that MNEs prefer to avoid competition between internal candidates by preparing one person well in advance. Compared to DEs, MNEs rely on sound individual technical skills for promotion purposes, also displaying their preference for technically sound employees in senior positions. Our analysis also shows that MNEs conduct PAs more frequently than DEs, and their feedback system is also rapid. The HR directors and employees of MNEs are more receptive to PAs than those in DEs whilst; in contrast, HR directors in DEs face less opposition to feedback when compared with those in MNEs. It emerges that PAs are an important part of the HR function in both types of organisations. In terms of incentives and rewards systems, MNEs follow market ethos and principles. They also show that DEs tend to look at the industry standards when setting rewards such as ‘basic pay’. There is also higher appeal for social and psychological benefits to employees of MNEs when compared to DEs. When analysing the role of the HR director, HR directors of MNEs show a tighter fit between HR policy and business strategy compared with DEs. With regard to the subject of HR devolvement, HR directors from both DEs and MNEs indicated that rather than having sole responsibility, routine HR responsibilities were shared with line management. The area in which there is less inclination to devolve to line managers is in strategic HR work. Moreever, these traits were more pronounced in MNEs than in DEs. Further, HR directors of MNEs clearly regarded their tasks as more important than the HR directors of DEs. Our analysis also showed that MNEs had higher perceived financial performances when compared to DEs. When analyzed by age, older firms were found to place more importance on language and commitment. With regard to size, larger firms place emphasis on employees’ willingness to travel and work experience in other countries as the main recruitment criteria. Younger firms are more likely to be following market principles in terms of explaining incentives and reward system to their employees, whilst older firms claim that working for them carries social and psychological benefits for employees.