Managing Employee Relations in Multinational Firms: Challenges and Opportunities

Introduction

The world has become a shopping mall availing simultaneous ideas, products, and services at every place. Globalization explains a phenomenon of the borderless world with the integration of the global value chain, product markets, financial market, and corporate structures (Ohmae, 1990). Internationalization of the firms is one aspect of globalization. Dicken (1992) makes a qualitative difference between globalization and firm internationalization. Globalization is a complex and advanced form of internationalization with the integration of dispersed and multiple economic activities by firms. A multinational enterprise (MNCs) is a firm that owns and controls the activities in different countries (Buckley & Casson, 2016). This chapter is mainly focused on employee relationship management challenges faces by MNCs. The first section of the chapter introduces the concepts of globalization and firm internationalization. The process of Internationalization comes up with several advantages and challenges. The second section of the chapter discusses various employee management challenges faced by MNCs and provide a broad framework based on theoretical literature. The third section of the chapter provides solutions for managing employee relations in MNCs and road ahead for future research. The final section of the paper concludes with findings, implications for practitioners, and theoretical contributions for academicians.

Multinational firms have several advantages by achieving economies of scale and scope, by using their slack resources across boundaries, which increase firm profitability (Franko, 1989; Kobrin, 1991) and also by acquiring a new strategic asset from foreign markets. The establishment of foreign subsidiaries causes reverse spillover of knowledge and innovation to improve firm survival and profitability (Barkema & Vermeulen, 1998; Kogut & Zander, 1992). Firms can reap profit by exploiting low-cost labor and tax benefits in the imperfect markets (S. H. Hymer, 1976; Rugman, 1979) and can spread the fixed cost of R&D and marketing over several firms units (Franko, 1989). Internationalization provides a market power based competitive advantage of serving products and services across borders (Sapienza et al., 2006). The internationalization process comes up with certain unique challenges due to the liability of foreignness (LOF). It is the cost of doing business abroad which resulted from the firm competitive disadvantage of firms in the overseas market in comparison to the local host county firms (Zaheer, 1995). LOF arises from differences in cultural, geographical, political, practices and consumer behavior, labor practices, and laws. This chapter is mainly focused on employee relationship management challenges faced by MNCs. The chapter explores the multinational firm's challenges in strategic decisions of hiring and training new employees, deciding staffing mix of local, home or third-country based employees, retention of the talent and sustaining employee, resolving language barriers, maintaining work-life management, resolving MNCs power games and employee compromises and virtual team management (e.g. managing virtual teams relations during a crisis like present Covid-19 spread).