36  International Human Resource Management

36.1 What is IHRM?

International HRM (IHRM) is the set of HR activities — planning, staffing, training, performance, compensation and relations — undertaken in cross-border firms to manage employees from multiple countries. Peter Dowling, Marion Festing and Allen Engle, in International Human Resource Management (1990 → 2017, 7th ed.), set the modern textbook.

TipWorking definitions
Author Definition
Dowling, Festing & Engle “The interplay among HR activities, the type of employees and the countries in which an MNE operates.”
Morgan (1986) “An interplay of three dimensions: HR activities (procure-allocate-utilise) × Categories of countries (Home/Host/Other) × Categories of employees (PCN/HCN/TCN).”
Schuler, Dowling & De Cieri (1993) “HR issues, functions, policies and practices that result from the strategic activities of multinational enterprises.”
Brewster, Sparrow & Vernon “Comparative and cross-national HRM in MNCs.”

36.2 IHRM vs Domestic HRM

TipIHRM differs from domestic HRM in six ways (Dowling)
Dimension Difference
More HR functions Taxation, relocation, expat compensation, language training
Broader perspective Multiple national cultures + legal systems
More involvement in personal lives Spouse jobs, schooling, housing abroad
Risk exposure Political, kidnapping, exchange rate, expat failure
External influences Government regulation, cultural norms, multiple unions
Wider mix of employees PCN, HCN, TCN

36.3 Morgan’s Three-Dimensional Model

Patrick Morgan (1986) conceptualised IHRM along three dimensions:

flowchart TB
  X[HR Activities<br/>procure-allocate-utilise]
  Y[Country Categories<br/>Home/Host/Other]
  Z[Employee Categories<br/>PCN/HCN/TCN]
  X --> M[IHRM]
  Y --> M
  Z --> M
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

TipMorgan’s three-dimensional model
  • HR activities — procurement · allocation · utilisation.
  • Country categories — Home country (parent) · Host country (subsidiary) · Other countries.
  • Employee categories — PCNs · HCNs · TCNs.

36.4 PCN, HCN, TCN

TipThree employee categories in MNCs
Category Meaning Example
PCN — Parent-Country National From the MNC’s home country American at GE-USA, posted to GE-India
HCN — Host-Country National Local resident at subsidiary Indian at GE-India
TCN — Third-Country National Citizen of a third country Australian working for GE in India
Inpatriate HCN sent to parent country for development Indian sent to GE-USA
Expatriate PCN/TCN posted abroad American sent to India

36.5 Perlmutter’s EPRG Framework

Howard V. Perlmutter (1969) — “The Tortuous Evolution of the Multinational Corporation” — proposed a typology of management orientations:

TipPerlmutter EPRG model
Code Orientation Staffing implication
E Ethnocentric — home-country culture is best Key positions everywhere held by PCNs
P Polycentric — host country knows best HCNs run subsidiaries; PCNs at HQ
R Regiocentric — manage within regions HCN + TCN moved across the region
G Geocentric — global talent regardless of nationality Best person for the job — PCN + HCN + TCN
NotePerlmutter — the EPG roots, R added later

Perlmutter’s 1969 paper originally proposed only E, P, G. Regiocentric was added by Perlmutter and Heenan in Multinational Organization Development (1979).

36.6 Adler & Ghadar’s IHRM Strategy Model

Nancy Adler and Fariborz Ghadar linked HR strategy to the firm’s stage of international growth:

TipAdler-Ghadar four phases
Phase Strategy HR orientation
Phase 1 — Domestic Home market focus Ethnocentric
Phase 2 — International Export, transfer Ethnocentric/Polycentric
Phase 3 — Multinational Multi-domestic, local responsiveness Polycentric
Phase 4 — Global / Transnational Integration + responsiveness Geocentric

36.7 Bartlett-Ghoshal Typology — MNC Strategy

Christopher Bartlett and Sumantra Ghoshal, Managing Across Borders (1989), identified four strategic stances for the MNC:

TipBartlett-Ghoshal four strategies
Strategy Global integration Local responsiveness
Multinational Low High
Global High Low
International Low Low
Transnational High High

The Transnational firm is the modern ideal — globally efficient and locally responsive and innovation-sharing across units.

36.8 Cultural Distance — Hofstede Recap

Geert Hofstede’s Culture’s Consequences (1980) gave the dimensions used in cross-cultural HRM. Recap of the six dimensions:

TipHofstede’s six dimensions
  • Power Distance Index (PDI).
  • Individualism vs Collectivism (IDV).
  • Masculinity vs Femininity (MAS).
  • Uncertainty Avoidance Index (UAI).
  • Long-term vs Short-term Orientation (LTO) — added with Bond.
  • Indulgence vs Restraint (IVR) — added with Minkov.

(Detailed in Topic 19.)

36.8.1 Other Cross-Cultural Frameworks

TipOther cross-cultural frameworks for IHRM
Framework Author Key idea
Trompenaars 7 dimensions Fons Trompenaars (1993) Universalism vs Particularism, Individualism vs Communitarianism, etc.
GLOBE Study Robert House et al. (2004) 9 cultural dimensions, 62 societies, 6 leadership profiles
Hall’s Context Edward Hall (1976) High-context vs Low-context cultures
Kluckhohn-Strodtbeck Kluckhohn & Strodtbeck (1961) Value orientations: relation to nature, time, activity, etc.
Schwartz Value Survey Shalom Schwartz (1992) 10 universal values; 7 cultural orientations

36.9 Expatriate Management

36.9.1 Reasons for Expatriation

TipWhy send expatriates
  • Position-filling — when local talent unavailable.
  • Management development — building global leaders.
  • Organisation development — transferring culture, technology.
  • Coordination and control — aligning subsidiary to HQ.
  • Knowledge transfer — best practices, IP.

36.9.2 Expatriate Selection — Mendenhall-Oddou (1985)

TipMendenhall-Oddou four dimensions
  • Self-orientation — stress tolerance, self-efficacy.
  • Others-orientation — relationship building.
  • Perceptual orientation — non-judgemental, cognitive complexity.
  • Cultural toughness — fit with host culture.

36.9.3 Cross-Cultural Adjustment — Black, Mendenhall, Oddou (1991)

Three facets of adjustment:

TipThree facets of cross-cultural adjustment
  • Work adjustment — to job, role.
  • Interaction adjustment — to host-country nationals.
  • General adjustment — to climate, food, infrastructure, culture.

36.9.4 U-Curve Theory of Adjustment — Lysgaard (1955)

The expat’s psychological journey across an assignment is shaped like a U:

flowchart LR
  H[1. Honeymoon<br/>fascination] --> C[2. Culture Shock<br/>frustration]
  C --> A[3. Adjustment<br/>coping]
  A --> M[4. Mastery<br/>integration]
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

Lysgaard (1955) proposed the U-curve of expatriate satisfaction. Gullahorn & Gullahorn (1963) extended to the W-curve to include repatriation re-adjustment.

36.9.5 Expatriate Failure

Expatriate failure = premature return or failure to perform on assignment. Tung (1981) and Black-Gregersen identified causes:

TipCommon causes of expatriate failure
  • Spouse / family inability to adjust.
  • Manager’s inability to adjust to culture.
  • Other family-related problems.
  • Job-related issues — bigger role, more autonomy, ambiguity.
  • Selection error — technical-only selection.
  • Inadequate cross-cultural training.
  • Lack of motivation.
  • Personal or emotional difficulty.

Failure rates from US firms (Tung’s classic studies) — historically 20-40 %; modern figures around 5-10 % with better selection and training.

36.9.6 Cross-Cultural Training (CCT)

Tung’s CCT framework has four levels by rigor:

TipTung’s CCT levels by rigor
  • Level 1 — Information-giving (briefings, books).
  • Level 2 — Cultural-orientation (lectures, culture assimilator).
  • Level 3 — Cultural-immersion (role plays, simulations).
  • Level 4 — Interaction approach (field experience, language immersion).

Black & Mendenhall matched training rigor to cultural toughness and job toughness.

36.10 Repatriation

Repatriation = return of expatriate to home country. Often called the “forgotten phase”. Repatriation problems — career: no clear role on return; reverse culture shock; loss of expat allowances; “out of sight, out of mind”. Repatriation programmes include reorientation, career counselling, and tying assignment to long-term plan.

NoteReverse Culture Shock

Reverse culture shock (Adler 1981) is the difficulty of re-adjusting to one’s own culture after long stay abroad. Often more disorienting than the original move, because expectations don’t include shock.

36.11 International Compensation

36.11.1 Two Main Approaches

TipTwo approaches to expat compensation
Approach Method Pros Cons
Balance Sheet (Build-up) Home-base salary + adjustments for cost-of-living, housing, taxation, hardship Equitable for expat; protects living standard Complex; expensive
Going Rate (Market) Compensation matches host country rates Simple; integrates with locals Inequity between expats from different countries

36.11.2 Components of Expat Pay

TipComponents of expat compensation
  • Base salary (home-based or host-based).
  • Foreign-service / hardship premium.
  • Cost-of-living allowance (COLA).
  • Housing allowance or company-provided housing.
  • Education allowance for children.
  • Home-leave allowance.
  • Tax equalisation / protection.
  • Relocation allowance.
  • Spousal support / dual-career assistance.
  • Medical coverage worldwide.

36.11.3 Approaches by Country Mix

TipCompensation approaches by employee type
  • Headquarters approach — pay tied to home country (typical for PCNs).
  • Host-country approach — pay tied to local market (typical for HCNs).
  • Lump-sum approach — total cash for the assignment.
  • Cafeteria approach — choose from a menu.
  • Regional system — pay tied to a regional benchmark.
  • Global system — single global pay structure for top executives.

36.12 International Labour Standards and ILO

TipILO — key facts
  • Founded 1919 under the Treaty of Versailles — Part XIII.
  • HQ at Geneva.
  • Tripartite — governments + employers + workers.
  • Nobel Peace Prize 1969 on its 50th anniversary.
  • 189 conventions; 8 Fundamental Conventions (4 categories — freedom of association, forced labour, child labour, discrimination).
  • Declaration on Fundamental Principles and Rights at Work (1998).
  • Decent Work Agenda (1999, Juan Somavía).

36.13 International Industrial Relations

TipIssues in International IR
  • National vs corporate locus of bargaining.
  • MNC bargaining power vs local union power.
  • Cross-border solidarity — Global Framework Agreements with UNI Global, IndustriALL.
  • Coordinated bargaining through international union federations.
  • Codes of conduct — voluntary corporate codes (UN Global Compact, OECD Guidelines).
  • OECD Guidelines for Multinational Enterprises (1976) — voluntary standards.

36.15 Practice Questions

Q 01 PCN/HCN/TCN Easy

An Australian working for a US-based MNC at its Indian subsidiary is a:

  • APCN
  • BHCN
  • CTCN
  • DInpatriate
View solution
Correct Option: C
TCN — Third-Country National. Parent = USA; Host = India; Australian = Third country.
Q 02 Perlmutter Medium

Perlmutter's EPRG framework was proposed in:

  • A1959
  • B1969
  • C1979
  • D1989
View solution
Correct Option: B
1969 — Perlmutter (EPG); R added in 1979 with Heenan.
Q 03 Geocentric Medium

A "Geocentric" staffing orientation means:

  • AAll key positions held by home-country nationals
  • BAll key positions held by host-country nationals
  • CBest person for the job, regardless of nationality
  • DBest person within a region
View solution
Correct Option: C
Geocentric — best person globally, regardless of nationality.
Q 04 Morgan Medium

Morgan's three-dimensional IHRM model includes HR activities, country categories and:

  • ACompensation systems
  • BEmployee categories
  • CCultural dimensions
  • DSubsidiary structures
View solution
Correct Option: B
Three: HR activities · country categories · employee categories (PCN/HCN/TCN).
Q 05 Bartlett-Ghoshal Medium

Bartlett & Ghoshal's "Transnational" firm has:

  • AHigh global integration + High local responsiveness
  • BLow global integration + Low local responsiveness
  • CHigh global integration + Low local responsiveness
  • DLow global integration + High local responsiveness
View solution
Correct Option: A
Transnational = High + High; Global = High + Low; Multinational = Low + High; International = Low + Low.
Q 06 U-curve Medium

The U-curve of cross-cultural adjustment (1955) was proposed by:

  • ALysgaard
  • BBlack & Mendenhall
  • CHofstede
  • DAdler
View solution
Correct Option: A
Sverre Lysgaard (1955). Honeymoon → Culture Shock → Adjustment → Mastery.
Q 07 W-curve Hard

The W-curve, which extends the U-curve to include repatriation, was proposed by:

  • AMendenhall & Oddou
  • BGullahorn & Gullahorn
  • CTung & Black
  • DAdler & Ghadar
View solution
Correct Option: B
Gullahorn & Gullahorn (1963).
Q 08 Balance Sheet Medium

The "Balance Sheet" approach to expatriate compensation:

  • AMatches local market rates
  • BBuilds up from home-country base plus adjustments
  • CPays a flat lump sum
  • DUses a regional benchmark
View solution
Correct Option: B
Balance Sheet (build-up) — home base + COLA + housing + hardship + taxation.
Q 09 ILO Easy

The International Labour Organisation (ILO) was founded in:

  • A1919
  • B1945
  • C1948
  • D1969
View solution
Correct Option: A
ILO — 1919, Treaty of Versailles. HQ Geneva. Nobel Peace Prize 1969.
Q 10 OECD Guidelines Hard

The OECD Guidelines for Multinational Enterprises were first issued in:

  • A1948
  • B1976
  • C1990
  • D2000
View solution
Correct Option: B
1976. Voluntary standards on labour, environment, anti-corruption.
Q 11 Expat failure Medium

The most-cited reason for expatriate failure is:

  • AInadequate technical skills
  • BSpouse / family inability to adjust
  • CLow pay
  • DLong working hours
View solution
Correct Option: B
Spouse / family inability to adjust — Tung's classic finding.
Q 12 GLOBE Hard

The GLOBE Study of culture and leadership (2004) was led by:

  • AGeert Hofstede
  • BFons Trompenaars
  • CRobert House
  • DEdward Hall
View solution
Correct Option: C
Robert House et al. — 9 cultural dimensions, 62 societies, 6 leadership profiles.
Q 13 Trompenaars Hard

"Universalism vs Particularism" is one of seven cultural dimensions by:

  • ATrompenaars
  • BHofstede
  • CHall
  • DSchwartz
View solution
Correct Option: A
Fons Trompenaars (1993). 7 dimensions.
Q 14 Hall context Medium

"High-context" vs "Low-context" cultures was the contribution of:

  • AEdward Hall
  • BGeert Hofstede
  • CRobert House
  • DKluckhohn & Strodtbeck
View solution
Correct Option: A
Edward T. Hall, *Beyond Culture* (1976). Japan high-context; USA low-context.
Q 15 Reverse culture shock Hard

"Reverse culture shock" — difficulty re-adjusting after a long stay abroad — was discussed by:

  • ANancy Adler
  • BLysgaard
  • CMendenhall
  • DBlack
View solution
Correct Option: A
Nancy Adler (1981).
Q 16 Ethnocentric Easy

In an Ethnocentric MNC, key positions in subsidiaries are held by:

  • AHCNs
  • BPCNs
  • CTCNs
  • DBest person globally
View solution
Correct Option: B
Ethnocentric = key positions filled by PCNs.
Q 17 Inpatriate Medium

An "Inpatriate" is:

  • AA PCN posted abroad
  • BAn HCN sent to the parent country
  • CA TCN at the subsidiary
  • DA retiree returning to work
View solution
Correct Option: B
Inpatriate — HCN sent to parent country for development.
Q 18 Tax equalisation Hard

"Tax equalisation" in expat compensation means:

  • AExpat pays only home-country tax rate equivalent; company covers any excess
  • BExpat is exempt from all taxes
  • CExpat pays double tax
  • DTax is split 50-50
View solution
Correct Option: A
Tax equalisation — neutralises tax differences so expat is no better/worse off.
Q 19 ILO Conventions Hard

How many ILO "Fundamental Conventions" are there?

  • A4
  • B8
  • C10
  • D12
View solution
Correct Option: B
8 Fundamental Conventions across 4 categories: freedom of association · forced labour · child labour · discrimination.
Q 20 Match concepts Hard

Match the framework with its author:

(i) EPRG framework (a) Bartlett & Ghoshal
(ii) Transnational firm (b) Lysgaard
(iii) U-curve (c) Robert House
(iv) GLOBE Study (d) Perlmutter
  • A(i)-(d), (ii)-(a), (iii)-(b), (iv)-(c)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(c), (ii)-(d), (iii)-(a), (iv)-(b)
  • D(i)-(b), (ii)-(c), (iii)-(d), (iv)-(a)
View solution
Correct Option: A
EPRG — Perlmutter; Transnational — Bartlett & Ghoshal; U-curve — Lysgaard; GLOBE — House.

36.15.1 Advanced Format Questions

AR 1Assertion-ReasonHard

A: Perlmutter's EPRG framework classifies MNC orientations.
R: Ethnocentric is home-country dominated.

  • ABoth true; R explains A
  • BBoth true; R does not explain A
  • CA true, R false
  • DA false, R true
View solution
Correct Option: A
S 1Statement-basedMedium

Expatriate categories: (i) PCN. (ii) HCN. (iii) TCN. (iv) Inpatriate.

  • AAll four
  • B(i) and (ii) only
  • C(iii) and (iv) only
  • D(i), (ii), (iii) only
View solution
Correct Option: A
S 2Statement-basedHard

EPRG (Perlmutter 1969): (i) Ethnocentric. (ii) Polycentric. (iii) Regiocentric. (iv) Geocentric.

  • AAll four
  • B(i) and (iv) only
  • C(ii) and (iii) only
  • D(i), (ii), (iv) only
View solution
Correct Option: A

36.16 Quick Recall

ImportantQuick recall
  • IHRM textbook: Dowling, Festing & Engle.
  • Definitions: Dowling et al. · Morgan (1986) · Schuler-Dowling-De Cieri (1993) · Brewster.
  • IHRM vs Domestic HRM — 6 differences (Dowling): more functions, broader perspective, more personal involvement, more risk, external influences, wider mix of employees.
  • Morgan’s 3D model: HR activities × Country categories × Employee categories.
  • Employee categories: PCN (parent), HCN (host), TCN (third); Inpatriate (HCN → parent); Expatriate (PCN/TCN → abroad).
  • Perlmutter EPRG (1969 EPG; R added 1979 Heenan): Ethnocentric (PCNs) · Polycentric (HCNs) · Regiocentric · Geocentric (best person).
  • Adler-Ghadar four phases — Domestic · International · Multinational · Global/Transnational.
  • Bartlett-Ghoshal (1989) — 4 strategies on 2 × 2 (Integration × Responsiveness): Multinational · Global · International · Transnational (H+H).
  • Cross-cultural frameworks: Hofstede 6 dimensions · Trompenaars 7 · GLOBE (House 2004) · Hall context · Kluckhohn-Strodtbeck · Schwartz.
  • Expat selection — Mendenhall-Oddou (1985): Self · Others · Perceptual · Cultural toughness.
  • Adjustment — Black-Mendenhall-Oddou (1991): Work · Interaction · General.
  • U-curve — Lysgaard (1955): Honeymoon → Culture Shock → Adjustment → Mastery.
  • W-curve — Gullahorn & Gullahorn (1963) — adds repatriation.
  • Expat failure: spouse/family adjustment #1 (Tung); historic 20-40 % US firms.
  • Tung CCT 4 levels: Information · Cultural orientation · Cultural immersion · Interaction.
  • Repatriation — forgotten phase; reverse culture shock (Adler 1981).
  • Compensation: Balance Sheet (build-up) vs Going Rate (market); Lump-sum · Cafeteria · Regional · Global.
  • Components: Base · Foreign-service premium · COLA · Housing · Education · Home leave · Tax equalisation · Relocation · Dual-career.
  • ILO (1919, Geneva, Nobel 1969) — tripartite; 8 Fundamental Conventions in 4 categories.
  • OECD Guidelines for MNEs (1976); UN Global Compact (2000); ILO Decent Work (1999, Somavía).
  • Modern trends: Virtual / Short-term / Commuter assignments · Inpatriation · SIEs · Gig global · Global EOR (Deel) · AI location-pay · Modern Slavery Act 2015 · German Supply Chain Act 2023.