Flexibility in Internationalization

How can HRM contribute

Seminar Paper, 2011

21 Pages, Grade: 1,3


Table of Contents


Table of Abbreviations

1 Introduction
1.1 Problem definition
1.2 Layout of this paper

2 Flexibility in Internationalization
2.1 Theoretical foundation
2.1.1 Operational flexibility
2.1.2 International investments
2.1.3 Human Resource Management
2.2 Contributions to flexibility by HRM
2.2.1 Qualitative dimension
2.2.2 Quantitative dimension
2.2.3 Strategic dimension

3 Conclusion
3.1 Results
3.2 Consequences



Firms going global aim to broaden their range of sales, production or sourcing. Lee and Makhija (2009) confirmed that international investments (export-related investments and foreign-direct investments) could provide flexibility. What the authors didn´t expound on is how Human Resource Management could contribute. The goal of this paper is to show some possibilities concerning qualitative (e.g. broaden the range of employees skills and competencies), quantitative (e.g. use non-standard contract arrangements) and strategic (e.g. linkage of Human Resource Management and top-management concerning strategy development and implementation) contributions of Human Resource Management.

Table of Abbreviations

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1 Introduction

1.1 Problem definition

Internationalization and globalization are phenomena characterizing the past forty years, which face all enterprises around the globe - actively and passively. This means that companies have to cope with difficult global competition, short innovation cycles and changes in global demands.1 Within this dynamic development there are stable times with economic prosperity and growth, and times of economic recessions. The most famous downturn may be the current world economic crises over the last two years. Especially in times of economic downturns, companies have to be flexible in order to ensure their survival as well as during times of stable conditions. One way of providing flexibility is to go global, which means expanding operations in foreign countries, such as sales, production or sourcing. In business it is called international investment.

This paper is based on the article of Lee and Makhija (2009) “Flexibility in internationalization: Is it valuable during an economic crisis?” concerning the two broad ways of internationalization, export-related-investments and foreign-direct- investments and how they can provide flexibility. The authors only confirmed that these two types of international investment support flexibility, but they didn´t demonstrate how single business departments can contribute to this process. Other literature was also reviewed in reference to the issues of human resource, flexibility and internationalization, because human resources are the most decisive factor of production and origin for other resources to contribute to the firms current and future competitiveness.2

Thus, the goal of this paper is to expound on how Human Resource Management (HRM) can contribute to provide flexibility in international enterprises. In doing so, the measures listed below could be implemented not only during an economic crisis but also in times of economic growth.

1.2 Layout of this paper

This paper is divided into three main sections. The introduction deals with the problem definition and the layout of this paper. Section two is divided in two parts. Part one deals with the theoretical foundation and expounds and defines briefly the terms flexibility, international investments and Human Resource Management. Part two presents three possibilities of the HRM to promote flexibility in internationalization by means of qualitative, quantitative and strategic measures of the HRM. The paper ends with the conclusion that encompasses results and consequences.

2 Flexibility in Internationalization

2.1 Theoretical foundation

The following section deals with defining import terms related to the topic. At first, there has to be a definition of the concept of flexibility. Furthermore, a short description will be given about the two broad ways of international investments and a definition of what is meant by HRM in the context of internationalization.

2.1.1 Operational flexibility

There are a lot of definitions concerning flexibility and HRM because it is elusive. Most of the definitions conceive flexibility as adaptability of internal and external factors.3 As mentioned above, the international environment is highly complex and has become increasingly dynamic. Thus, a multinational corporation (MNC) has to cope with this environment by adopting and reacting to diverse and changing contingencies as quickly as possible to ensure their competitive advantages.4

According to Lee and Makhija, this form of capability is called operational flexibility and has to provide economical efficiency. Particularly when a MNC has flexibility, it is able to “respond profitably to country-specific environmental shocks and fluctuations by shifting factors of production across national borders”.5 That is, a MNC can exploit profit opportunities generated by its international investments. But operational flexibility in international contexts has its costs by managing a worldwide network of subsidiaries as well and is associated with a loss of stability.6flexibility is a measure for managing complexity and quick adaptability to dynamic environmental shifts.

2.1.2 International investments

Internationalization is a collective name for a host of activities and processes concerning cross-border operations.7 In this context a company is called an international enterprise or MCN, when operating in one foreign country.8 Further differentiations between transnational, multinational or global enterprise are not relevant in this paper because it extends definitions by detailing special concepts, such as leadership.9

Lee and Makhija distinguish between two modes of operation in international business. Export-related investments and foreign-direct investments. “Exporting involves production in one national market, often the home country of a firm, and sales in other national markets”.10 Motives and goals for this type of investment are, for instance, allocation of resources to retain or gain competitive advantages concerning economies of scale and economies of scope as well as to get in touch with trade-specific networks via relationships with distributors or partners.11 Often, costs associated with the development of new products are too great to be amortized within only one single market, so firms going global to ensure their survival by exporting.

In contrast, “foreign-direct investments involves the establishment of subsidiaries and affiliates in foreign locations”.12 This means that this type of investment contains private capital investments owned by the firm, either by a foundation, by acquisition, by fusion or joint venture with a foreign company.13 There are many reasons/motives concerning this type of international business involvement, such as differences in disposability of factors of production (e.g. acquiring raw materials), controlling foreign subsidiaries, following the leader firm in that trade to retain a competitive advantage, acquiring local technical know-how and as well, the motives of exporting.14

Lee and Makhija measured the benefits of flexibility for each type of investment. Flexibility for export-related investments is reflected by the proportion of export sales to new and non-regular customers (this means the shifting of sales across multinational markets); flexibility for foreign-direct investments is reflected by shifting production among subsidiaries.15 Additionally, foreign-direct investments also provide the possibility of postponing or deferring procurements and sales across borders. Both types of investments have overlapping and differing benefits related to operational flexibility. Overlapping benefits are the reduced expenditures of any initial investments and the opportunity to shift sales across multiple markets. Other benefits include differentiated production capability, exploitation of differences in costs of factors of production and the possibility to reduce exchange rate risks due to foreign production.16

2.1.3 Human Resource Management

Until the late 1960s all work concerning personnel matters (e.g. motivation, controlling or improving labor productivity) was named Personnel management. In the 1970’s the academic and practical field of HRM was coming into its own by focusing, for instance, on safety, health and worker satisfaction.17 Even now, HRM is a vital function in organizations. The HRM literature is broad and diverse, especially its definition. But they all have common features. HRM could be defined as focusing on human resources by making management decisions and activities that are intended to influence and affect efficiency, effectiveness and the relationship of and between the employees and the organization, keeping in mind different aspects of safety, health, satisfaction, performance, business ethics and so on.18 Thus it regards employees as the most decisive asset for increasing organizational performance.19

Due to the fact that HRM practices are derived from the firms strategy, a new HRM concept rose up which not only focused on operational activities. It is called Strategic human resource management (SHRM), which encompasses full integration and adaption with strategies, needs and policies across all levels of an organization.20 A further development of HRM was originated due to the increasing complexity of managing human resources within global context by firms internalization. International human resource management (IHRM) has to cope with the global complexity and dynamic and operates in different countries with employees from different nations.21

Consolidating the concepts and strategies in SHRM and IHRM resulted in the Strategic international human resource management (SIHRM).


1 Cp. Pawlowsky, Peter et al. (2006): p. 1.

2 Cp. Krenn, Manfred (1999): p. 72; cp. Freiling, Jörg; Fichtner, Hanno (2010): p. 156.

3 See Scholz, Christian (1997): p. 38; Staehle, Wolfgang H. (1999): p. 836.

4 Cp. Wright, Patrick M; Snell, Scott A. (1998): pp. 756-758.

5 Tang, Charles Y; Tikoo, Surinder (1999): p. 749; Gächter, August (1993): p. 227.

6 Cp. Lee, Seung-Huyn; Makhija, Mona (2009): p. 539.

7 Cp. Rothlauf, Jürgen (2009): pp. 2-3.

8 Brinkhaus, Frank (1995): p.16.

9 Cp. Perlitz, Manfred (2004): pp. 9-10.

10 Lee, Seung-Huyn; Makhija, Mona (2009): p. 541.

11 Cp. Huber, Andreas (2007): pp. 21-22.

12 Lee, Seung-Huyn; Makhija, Mona (2009): p. 539.

13 Cp. Brinkhaus, Frank (1995): p. 17; see also Kutschker, Michael; Schmid, Stefan (2006).

14 Cp. Heinrich, Michael; Richter, Bernd (2002): pp. 249-250.

15 Cp. Lee, Seung-Huyn; Makhija, Mona (2009): pp. 538.

16 Cp. Lee, Seung-Huyn; Makhija, Mona (2009): pp. 541-543.

17 Cp. Schuler, Randell(2000):242.

18 Cp. Milkovitch/Glueck/Wohlgemuth qouted in Brinkhaus, Frank (1995): pp. 52-53; cp. Schuler, Randell(2000):242.

19 Cp. Czerny, Elfriede; Steinkellner, Peter (2008): p. 48.

20 Cp. Schuler, Randell(2000):249.

21 Cp. Schuler, Randell(2000):251.

Excerpt out of 21 pages


Flexibility in Internationalization
How can HRM contribute
Technical University of Chemnitz  (Fakultät für Wirtschaftswissenschaften - Professur für Personalführung)
Human Resource Management Research
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ISBN (eBook)
ISBN (Book)
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445 KB
HRM;, Internationalization;, Flexibility;
Quote paper
Dipl.-Betriebswirt (FH) Felix Merz (Author), 2011, Flexibility in Internationalization, Munich, GRIN Verlag, https://www.grin.com/document/167547


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