35  International Human Resource Management

35.1 What is IHRM?

International Human Resource Management (IHRM) is the management of people in multinational enterprises (MNEs) — the worldwide management of human resources, dealing with the unique HR challenges of operating in multiple countries with diverse workforces. The standard reference text is Peter Dowling, Marion Festing and Allen Engle’s International Human Resource Management (dowlingfestingengle2017?).

Dowling et al.’s working definition: IHRM is “the set of activities aimed at managing organisational human resources at international level to achieve organisational objectives and competitive advantage over local and international competitors”.

TipThree Working Definitions
Author Definition What it foregrounds
Dowling, Festing & Engle “The set of activities aimed at managing organisational human resources at international level.” International scope
Morgan “Influence on three areas — types of HR activity, types of employees, and country of operation — and their interaction.” Three dimensions
Schuler, Dowling & De Cieri “An integrative framework of strategic-level HR functions inside the multinational enterprise.” Strategic

35.1.1 IHRM vs domestic HRM

TipIHRM vs Domestic HRM
Feature Domestic HRM IHRM
Number of HR activities Standard Wider — taxation, relocation, expatriate management
Type of employees Generally one nationality Three types (PCN, HCN, TCN)
Geographical span One country Multiple countries
External influences National environment National + international + cultural
Risk Routine Higher — political, currency, terrorism, family adjustment
Personal life Limited HR involvement Significant — relocation, schooling, dual-career

The shorthand for the three employee categories — used widely in the IHRM literature:

TipPCN, HCN, TCN
Acronym Meaning Example
PCN Parent-Country National A US national posted by a US firm to its India subsidiary
HCN Host-Country National An Indian working in the India subsidiary of a US firm
TCN Third-Country National A British national posted by a US firm to its India subsidiary

35.2 Perlmutter’s EPRG Model

Howard Perlmutter (1969) classified the attitudes of MNE headquarters toward foreign operations and people. Later expanded to add Regiocentric — making EPRG (perlmutter1969?).

TipPerlmutter’s EPRG Orientations
Orientation View Staffing pattern
Ethnocentric Home country knows best Key positions filled by PCNs
Polycentric Each country is unique; let locals manage Key positions in subsidiary by HCNs
Regiocentric Manage by regions Key positions filled by managers from the region
Geocentric Best person regardless of nationality Truly global mobility 

flowchart LR
  E[Ethnocentric<br/>HQ knows best] --> P[Polycentric<br/>Each country unique]
  P --> R[Regiocentric<br/>Region-based]
  R --> G[Geocentric<br/>Best person, anywhere]
  style E fill:#FFEBEE,stroke:#C62828
  style P fill:#FFF3E0,stroke:#EF6C00
  style R fill:#FFF8E1,stroke:#F9A825
  style G fill:#E8F5E9,stroke:#1B5E20

The geocentric orientation is the textbook ideal — though it requires the firm to invest in standardised HR systems, cross-cultural training and global mobility infrastructure.

35.3 Schuler-Dowling-De Cieri Integrative Framework

Schuler, Dowling and De Cieri (1993) offered the most-cited integrative model of Strategic IHRM (schulerdowling1993?). The framework links four sets of factors:

TipThe Schuler-Dowling-De Cieri Framework
Element What it covers
Exogenous factors Industry characteristics, country, regional factors
Endogenous factors Structure of MNE, life-cycle stage, country of origin, headquarters orientation
Strategic MNE components Inter-unit linkages, internal operations
SIHRM issues, functions and policies HR functions, policies and practices

35.4 Expatriate Management

An expatriate is an employee posted to work in another country, typically for an extended period. The expatriate cycle is the central operational concern of IHRM.

TipSix-Stage Expatriate Cycle
Stage Activity
1 Strategy and selection — define purpose; pick candidate based on technical and adjustment competence
2 Pre-departure preparation — cross-cultural training, language, family briefing
3 Compensation — design package (base, allowances, hardship, COLA, tax equalisation)
4 Performance management — bi-cultural appraisal, multiple raters
5 Repatriation — re-integration into home country and home organisation
6 Career planning — long-term mobility planning

35.4.1 Why expatriates fail

Empirical research consistently identifies a small number of recurrent reasons for expatriate failure (typically defined as early return or under-performance):

TipCommon Causes of Expatriate Failure
Cause Comment
Family / spouse adjustment The single most-cited cause
Inability to adapt to host culture Cultural shock, isolation
Manager’s personality issues Lack of openness, rigidity
Inability to cope with greater responsibilities Job mismatch
Lack of motivation for the assignment Poor selection
Technical incompetence Surprisingly less common

35.4.2 Compensation approaches

TipThree Approaches to Expatriate Compensation
Approach What it does Use
Going-rate (Market) Pay based on host-country market Long-term local hires; HCN-style
Balance-sheet (Build-up) Maintain home-country standard of living + premiums Short-to-medium-term expatriates
Lump-sum / Cafeteria Single allowance; expatriate manages Modern, flexible, often combined

The balance-sheet approach is the most common for traditional expatriate assignments — base salary in home-country terms, plus allowances for housing, COLA, hardship, education, and tax equalisation so the expatriate is not worse off.

35.4.3 Cross-cultural training

Mendenhall and Oddou’s classic four-level training-rigour scheme:

TipFour Levels of Cross-Cultural Training Rigour
Level Methods Use
Information-giving Lectures, books, videos Short trips
Affective Role-plays, case studies, sensitisation Medium-length stays
Immersion Field experience, in-country language Long-term assignments
Field training Live-in pre-assignment Most demanding postings

35.4.4 Repatriation

Repatriation is often the least planned part of the cycle — and the part where the most expatriates leave the firm. Issues: career plateau on return, loss of host-country autonomy, social re-integration, financial drop. Effective repatriation programmes plan the next role before the expatriate leaves.

35.5 Adjustment, Culture Shock and the U-Curve

Sverre Lysgaard’s U-curve hypothesis (1955), refined by Black, Mendenhall and Oddou, describes the typical adjustment of an expatriate over time:

TipThe U-Curve of Cross-Cultural Adjustment
Stage Mood
Honeymoon Excitement; differences seem charming
Culture shock Frustration; differences seem irritating
Adjustment Functional adaptation; routines stabilise
Mastery Comfort; effective performance

The W-curve extends the model to include the repatriation curve — the same drop-and-recovery on return.

35.6 IHRM and the Indian MNE

Indian MNEs — TCS, Infosys, Wipro, Tata Motors, Mahindra, Reliance, Bharti Airtel — have built distinctive cost-leader IHRM systems based on a few practices:

  • Geocentric leadership at very senior levels; localisation at execution.
  • Heavy investment in technical and onboarding training (Infosys’s Mysuru campus is the textbook example).
  • Use of short-term assignments and frequent flyers in place of long expatriate postings.
  • Significant reverse expatriation — sending HCNs to corporate HQ for cross-pollination.

35.7 Practice Questions

Q 01 Definition Easy

IHRM is best defined as:

  • AHRM in a single country
  • BWorldwide management of HR in multinational enterprises
  • CTrade-union management
  • DRecruitment for international airlines only
View solution
Correct Option: B
IHRM = HR management in multinational enterprises. Standard text: Dowling, Festing & Engle.
Q 02 PCN/HCN/TCN Medium

A British national posted by a US-headquartered firm to its India subsidiary is, in IHRM parlance, a:

  • AParent-Country National (PCN)
  • BHost-Country National (HCN)
  • CThird-Country National (TCN)
  • DLocal hire
View solution
Correct Option: C
A national from a country other than the parent and the host country = TCN.
Q 03 EPRG Medium

Match Perlmutter's orientation with its hallmark:

(i) Ethnocentric (a) Best person regardless of nationality
(ii) Polycentric (b) Region-based management
(iii) Regiocentric (c) HQ knows best; PCNs in key roles
(iv) Geocentric (d) HCNs run their own subsidiaries
  • A(i)-(c), (ii)-(d), (iii)-(b), (iv)-(a)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(d), (ii)-(c), (iii)-(a), (iv)-(b)
  • D(i)-(b), (ii)-(a), (iii)-(d), (iv)-(c)
View solution
Correct Option: A
Ethnocentric → HQ-led PCN; Polycentric → HCNs lead local; Regiocentric → region-based; Geocentric → best person globally.
Q 04 Expatriate Failure Medium

The most-cited single cause of expatriate failure in empirical research is:

  • ATechnical incompetence
  • BFamily / spouse adjustment difficulties
  • CLocal language failure
  • DClimate
View solution
Correct Option: B
Family / spouse adjustment is consistently the single largest cause of expatriate failure (Tung; later replicated). Selection should consider the family, not only the candidate.
Q 05 Compensation Medium

The "balance-sheet" approach to expatriate compensation aims to:

  • AMatch the host-country market exactly
  • BMaintain the expatriate's home-country standard of living plus premiums and tax equalisation
  • CPay a single fixed allowance
  • DPay only in the host-country currency
View solution
Correct Option: B
The balance-sheet approach maintains parity with the home-country standard of living and adds allowances + tax equalisation so the expatriate is no worse off.
Q 06 U-Curve Medium

In Lysgaard's U-curve of cross-cultural adjustment, the second stage is:

  • AHoneymoon
  • BCulture shock
  • CAdjustment
  • DMastery
View solution
Correct Option: B
The U-curve: Honeymoon → Culture shock → Adjustment → Mastery. The W-curve extends it to repatriation.
Q 07 Repatriation Medium

Repatriation in IHRM refers to:

  • ASelecting expatriates
  • BReturning expatriates to their home country and integrating them back
  • CPromoting expatriates locally
  • DSending home-country expatriates abroad
View solution
Correct Option: B
Repatriation = the return and re-integration of an expatriate. It is the most under-managed part of the cycle and the stage at which many expatriates leave the firm.
Q 08 Geocentric Easy

A truly *geocentric* MNE staffs its key roles by:

  • AAlways using PCNs
  • BAlways using HCNs
  • CThe best person available regardless of nationality
  • DOutsourcing all roles
View solution
Correct Option: C
Geocentric = best person, anywhere. The textbook ideal — though it requires global mobility infrastructure.
ImportantQuick recall
  • IHRM = HR management in MNEs. Standard text: Dowling, Festing & Engle. Wider scope, three employee types, higher risk, more personal-life involvement.
  • Three employee types: PCN (parent-country), HCN (host-country), TCN (third-country).
  • Perlmutter’s EPRG: Ethnocentric → Polycentric → Regiocentric → Geocentric. Geocentric = best person regardless of nationality.
  • Schuler-Dowling-De Cieri integrative SIHRM framework — exogenous + endogenous + strategic MNE components → SIHRM issues, functions, policies.
  • Six-stage expatriate cycle: strategy/selection → preparation → compensation → performance management → repatriation → career planning.
  • Most-cited cause of expatriate failure: family / spouse adjustment. Mendenhall & Oddou — four levels of cross-cultural training.
  • Compensation: going-rate, balance-sheet (most common), lump-sum. Balance-sheet maintains home standard of living + allowances + tax equalisation.
  • U-curve of adjustment: Honeymoon → Culture shock → Adjustment → Mastery. W-curve adds repatriation.