Analyzing Global Human Resource Management Trade-offs

Business Research Methods: Analyzing Global Human Resource Management Trade-offs in Emerging, Knowledge-Intensive Areas

1.0. Chapter 1: Introduction

1.1. Background Information

The practice of human resource management in small and medium-sized companies operating in emerging knowledge-intensive sectors requires strong balancing skills in order to gain good performance. The management of the human resource of such firms is forced to consider the cultural and social conditions of the environment they operate in order to leverage their work for better performance. In some cases, they need to make use of the tools necessary for employees to do their work or still ensure that they align their policies to that of the country where they want to operate. As a result of ever-advancing technology, a number of jobs are being outsourced to international workers to ensure high-quality job performance. The present research will zoom in on human resource management on a global setup. More specifically, the scope taps into the overlap of the so-called ‘small multinationals’ and their staffing or sourcing activities with reference to superior performance or productivity outcomes. Incidentally, owing to the leverage that digital technology affords, size no longer matters in select industries. It is because their growth and operations are primarily knowledge-intensive as well as knowledge-producing. They exhibit a significant resource similarity and market commonality in terms of the inputs and outputs respectively. However, their value-added is too widely differentiated potentially to posit any major rivalry in this heretofore unfilled, ‘fast cycle’ type, and inherently global marketplace.

Along these lines, an International HRM framework as discussed in Armstrong and Taylor (2014, pp. 465-468) could be seen as a starting point. It addresses many similar issues like expat employment and ‘international ROI’ (return on investments), albeit from a very different standpoint. To begin with, the sector under study is still emerging, and the literature is rather scant and scattered across a variety of strands bordering on many areas. The areas are as diverse as size and scale efficiency, operational complementarities and spill-over, outsourcing and offshoring, trade-in jobs after direct trade-in commodities. Another area is HRM implications for an international and cross-cultural setting. In fact, the work of Varian (2005) could be seen as the early seminal account of the micro-MNEs distinct sector profile, which never emerged as standalone literature beyond the early post-2000 discussions of dotcom controversy. It emerged amid jumbo IPO success stories of online platforms and related network type applications or product concepts such as Apple Computer, Facebook, Twitter, and eBay that are hard to replicate or act upon.

1.2 Justification of the Study

The research scope has little to do with small and medium entrepreneurship (SME) per se. In fact, the domain featuring the so-called micro-multinationals could be thought of as a set of knowledge-intensive and possibly knowledge-generating sectors. It could also be seen as clusters that have been able to afford global expansion without being restricted by either minimum scale efficiency or other size-related entry barriers. With the advent of data processing and communication technologies, the transportation costs of physically relocating resources have become less relevant as more and more industries shift towards information-intensive. This is not to say, however, that their operational profiles have converged to an extent denying any sector-specific core competencies or strategic edge. It is all the more ironic that the micro-MNE host of employers have revealed a strongly characteristic set of operating traits that may point to unique HRM implications.

Unlike most companies, these small or size-invariant players are inherently global in that their dominant online presence does not confine their reach to internal sectors or domestic human capital. Apart from a greater staffing variety, they are free to embark on ad-hoc outsourcing on jobs and input commodities or modules alike. What is more, no matter how small the initial size, expansion or portfolio diversification is largely driven by the nature of their HR but not the short-term resource constraints. More importantly, size appears to have little to do with branding or goodwill constraints, so that unique differentiation is always an option and could inter alia be seen as an HR morale booster.

1.3 Research Aim, Objectives, Questions & Hypotheses

Aim

The attempted research aims at identifying some persistent patterns and trade-offs that can possibly be characteristics of an emerging and turbulent area of global expansion for small and medium-sized companies with inherently flat hierarchies and project teams that are about as replicable as the underlying business models.

Objectives

The latter dimension of replicability pertains to distinguishing between areas in which company size matters beyond the scale of operations (which metrics may not converge) as opposed to domains in which these may prove either less relevant altogether or otherwise show HR trade-offs that are specific to this knowledge-intensive sector.

In addition to the technical narrowing-down of the grand focus, the research is intended to reconcile some of the mainstream frameworks of international HRM to the observed patterns or stylized facts by means of the proposed micro-MNE approach.

Finally, some of the novel methodologies for HRM planning and performance targeting will be critically evaluated with an eye toward how it could contribute to size-sourcing policies on HR or human capital design as discussed below.

Questions

RQ1: Does outsourcing or trade-in-jobs prove more effective as well as efficient for small MNEs?

RQ2: Does size or scale in the area directly affect the ROI as accruing to HR, or can it shape incentives and performance in other ways of importance?

Hypotheses

The first research question could be transformed into a hypothesis looking into whether the particular business unit’s size is correlated with HR performance in terms of ROI and VA contribution. In particular, a dummy variable will be attached as a status indicator in order to check for interactive spill-over or possible differential impacts of sourced HR on performance in ways that may affect size, or be affected by it.

The second research question will map into a model building on the CHI-squared test of proportions. More specifically, a differential or residual HR performance impact will be tested, when it comes to the relative or marginal contribution of outsourced HR as compared to regular, in-house, or locally staffed HR. The facets of implied or revealed human capital will come in forms as diverse as, ROI (return on investment) and VA (value-added). Whereas the former dimension is concerned with profitability, as directly followed by analysts in financial markets, the latter pertains to the stages or levels of contribution throughout the value chain. It is also concerned with any material social cost savings that may otherwise tend to be overlooked by the myopic markets. In other words, the latter domain boasts a significant overlap with agency and sustainability, which agendas are crucially important in their own right. Ehnert, Harry & Zink (2014) have provided a broader and inter-disciplinary perspective on sustainable HRM, notably in SMEs (pp. 128-150). Broad and disparate as these areas are, however, the attempted formalization should be able to capture their pertinent facets for all operational purposes.

1.4 Structure of the Project

The first chapter presents background information on globalized human resource practices, the objectives of the study, research questions, and the hypothesis of the study. Chapter two is a review of the literature on global human resource management. The chapter explores different models of managing human resource, the dynamics in the practice of global human resource, theoretical foundation, the expansion of small and medium-sized firms in knowledge-intensive areas, and the impact of international employee attitude on the global expansion of a firm. The final part of this chapter is a summary of the whole chapter. Chapter three presents the methods used in collecting the data. It discusses study design, research strategy, and sampling and sample size. Other elements discussed include ethical considerations and the validity of the research design. Chapter four presents the findings and analysis, providing a comparison of the theories in literature and the results of the study. Chapter five is a discussion of recommendations and also provides the concluding remarks.

2.0 Chapter 2: Literature Review

2.1 Introduction

Global dynamics have impacted the way people interact in their places of work and especially the practice of human resource management. With the emergence of international marketing and the transfer of management skills from one cultural background to another, studies have shown that human resource management efforts in small international companies is largely defined by the staffing approach and sourcing activities which have a great impact on the quality and productivity outcomes of these companies (Kotler, Berger, & Bickhoff 2010, p. 59). In order to continue to compete in a dynamic environment, driven by technology dynamics and cultural differences, institutions and companies operating in a global environment must adapt human resource management practices that support their work. They can also gain a competitive advantage by taking into consideration the prevailing conditions in the environment where they are operating and hence adopt measures that are suited for the improvement of their service delivery (Manasa & Reddy 2009, p. 90). The management approach of these small internationals varies widely among the businesses in a global context and influences what the human resource practice can and should do. In order to be efficient and enhance productivity, companies may adopt a bureaucratic approach to human resource management whereby the human resource office establishes a hierarchical structure with a tight job description and a top-down decision-making model.

2.2 Models used in Managing Human Resources

Global businesses may also use the low-cost operator model for managing human resources. This model is characterized by low wages, minimum benefits, and a focus on cost reduction and control. Still, some global businesses adapt the high involvement structure for its human resource by encouraging a flat structure to allow for inclusive participation in decision-making and demonstrating a commitment to employee development and career growth (Konrad 2006, p. 77). The other model that businesses commonly use is the sustainability model whereby human resource management features an agile design and places a focus on financial performance and sustainability (Michae 2008, p. 86). Finally, the global operator model is characterized by complex, interesting work, and best-talent approach with low commitment to employee development and career.

The present proposal zooms in on an altogether different operational profile that has very little if anything to do with either network size per se or IT applications beyond inputs or prerequisites which are increasingly commonplace. The small, knowledge-intensive players to be addressed are for the most part regular producers of tangible value-added, many of whom are manufacturers still in a position to outsource on their engineering and assembly. Moreover, they need not end up operating in overseas setups by deploying global expansion or penetration strategies. It should not be done even though they may well confront cross-cultural issues while sourcing their jobs and projects or summoning ad-hoc teams (Konrad 2006, p. 72). The “dust” in the industry literature has not settled in the emerging sector yet to be defined, nor has its HRM layer. It will be shown how the conventional IHRM frameworks may not suffice, in how they fail to seize the global, or culture-invariant domains while focusing on comparative studies aimed at either marketing standardization or diversity laden adaptation.

Research by Brainard (1997) could be seen as a very early attempt in applying a ‘mixed strategy’ in-between direct exports versus MNC expansion in sectors involving multi-stage processes. The study showed that the latter option dominates even across technologically similar or equally endowed environments, as long as there are significant economies-of-scale that is more pronounced at the business unit level than corporate level. Micro-MNEs may not face that critical entry barrier in terms of high operating leverage or a lump-sum initial outlay. However, incremental R&D expenditures may well drive the excess profits out early on unless the quantitative dimension or level of the outlay is backed or informed by human capital in ways that draw upon their natural complementarity.

Carr, Markusen, and Mascus (2001) shed more light on the knowledge side of intangible capital accumulation within MNEs. As a starting point, knowledge-generating activities could be the ultimate layer of operations that are either sourced or otherwise disjointed with respect to regular processes. Regardless of how high the initial R&D cost is, along with human capital investments, the resultant spillovers can be replicated at little to no extra cost, which could be the ultimate source of increasing returns. While the cost dimension could further be aligned to staffing costs or compensation as one underpinning of HR based sourcing, project-specific synergies or unique match is far more time consuming unless the employer is willing to forgo a part of the savings sought. In any event, the meta-feature of HRM or human capital allocation suggests a facet of HR function that targets proper matches along process or value structure lines.

As far as the bidding effect of global exposure and offshoring is concerned, the compensation tends to increase for highly skilled HR (as well as the related employment sectors such as the one being considered). It does this while also simultaneously absorbing away some of the blue-collar earnings (Hummels et al. 2013). What this suggests is that the knowledge-intensive sector understudy could be unique as well as most promising in that it appears on the upper-bound of asymptotic divergence within the economy. Although other sectors also could benefit from further augmenting its human capital, the complementarity match of HR and knowledge-based technologies is all the more unique bearing in mind the knowledge type value-added it boasts.

By contrast, Grossmann & Rossi-Hansberg (2008) focused on productivity spillovers as opposed to distributional losses. The former category of impacts, stemming from progressively lower costs of expanding globally or engaging in ‘task trades’, maps into shared value enough to offset the initial losses without provoking factor price convergence of a distorting type. One result could be that HR no longer needs to worry about the sterilized incentives on the part of the CEOs to invest in human capital, in particular by considering lower compensations should more candidates be available—if only because the would-be employees may consider offshoring opportunities to keep their human capital more adequately employed or allocated, while landing heftier pays.

2.3 Outsourcing of Services

While Grossmann and Rossi-Hansberg (2012) proceeded to posit direct costs of outsourcing as a criterion for marginal decision making in between two otherwise similar milieus, Baldwin and Venables (2013) considered an endogenized version of opportunity costs arising from inter-stage complementarity relationships. Some of the stages are more inherently related and can only proceed in sequential steps that are harder to spin off, whereas other tasks are more tradable in just how readily reshuffled they can be under any ‘critical path’ showing reasonable slack on project delivery. In the meantime, it remains to be seen whether inter-stage flexibility should be considered one other meta-trait of HRM or a facet of human capital, in light of the moral hazard involved. It could be highlighted by envisaging high-skilled employees ending up reluctant to signal material slacks or interchangeable tasks in just how wary they are of sourcing rivalry. However, the true state should soon be revealed in a fast-cycle area such as the one invoked, with fortes and core competencies wearing out too soon to be hoarded or fared on for a long time. Put differently, it is this sector that fosters explosive accumulation of human capital while rendering learning inertia a luxury.

In fact, impacts could be even more manifest in non-manufacturing, service-type industries, whose demand could be residual and most contingent on the real business cycle while offering the highest value-added along with superior profitability. Amiti and Wei (2009) found that productivity gains as accruing to trade in tasks have outmatched cost savings coming from materials outsourcing. One important implication that could be drawn is that the global economy can become integrated to an extent that factor endowments and earning capital is no longer confined to formal jurisdictions and could instead be shared beyond competitive outcomes. The flipside of this is that human resources will increasingly come to face cross-cultural tension despite platform and media-driven institutional convergence, such that diversity management aptitude could count as one other meta-pillar of human capital or HRM in its own right.

When it comes to international ROI, as defined in Doherty and Dickmann (2012), the non-financial portion of costs and benefits will, for analytical purposes, involve social costs or negative externalities while integrating the learning curve as part and parcel. At that rate, many conflicting areas could be reconciled, as some of the costs or lags involved could best be referred to as inputs or investment into human capital, or future performance. Long-standing methods of exercising motivation and internal controls (or ‘tone at the top,’ according to a particular organization’s model of governance) may have to be updated to cutting-edge data processing or computer-aided technologies. However, state of the art could, in turn, be deployed in line with general methodological approaches to be seen as benchmarks or controlling devices. For instance, HR planning analytics, notably the TDRP (talent development reporting principles) as noted in Fitz-Enz and Mattox (2014, pp. 71-73) could be qualified against conventional BEP (break-even point) type analysis of minimum scale efficiency, when it comes to each extra hiree’s expected or lower-bound contribution.

In a business environment that is largely dependent on the knowledge-intensiveness of the employee, human management is likely to be complex and based on the skills and talents of the employee. The need for sustainable development has seen the increase in the use of the global competitor model which allows even small and medium-sized companies to compete on the same scale as well established businesses in the global market (Letto-Gillies 2012, p. 54). The main focus in this literature review is to explore some of the patterns and trade-offs in the practice of human resource management in small companies that act in a global context (Casson 2012, p. 39). Specifically, the literature review uses scholarly works published on global human resource management with the focus on how small and medium-sized companies are using the global competitor model in the management of their human resource to increase the productivity and performance of their employees.

2.4 The Dynamics in the Practice of Global Human Resource Management

The current change in social expectations caused by globalization has placed new challenges before human resource managers and has shifted the nature of the organizational relationships between human resource managers and the employees (Briscoe, Schuler & Tarique 2011, p. 90). As a result, there is greater potential for employees working in small and medium-sized companies to influence the competitiveness of their businesses on a global scale versus the past few years. Part of the reason for this change has been the transformative nature of work from the traditional mechanical-based works to knowledge-intensive activities driven by enhanced technology and skills of employees. Furthermore, the ease of accessibility to information and the rapid flow of this information have increased the ability of the employees to work within different market contexts.

According to Schunk (2008, p. 32), the resultant effect is an emergence of a new vitalized generation of employees who are able to shape the demands facing contemporary human resource management. Small and medium-sized businesses are thus forced to emphasize global competition and sustainability of work which allow for focusing on social, economic, and environmental performance. As indicated by Schraeder, Becton & Portis (2007, p. 65), up to 68% of large international firms, amounting to 250 global companies that are listed on Fortune 500, are now using the triple bottom line to report through corporate responsibility and sustainability initiatives. However, these activities are not focused on building a strong human resource, an area that is instead left to small and medium-sized companies. Most of the large international businesses that use the triple bottom line approach to doing business in a global business environment are focused on international honors in terms of their contribution to the sustainability of businesses.

In a fast-changing global business environment, a focus on the triple bottom line can have many implications on the practice of human resource management by small and medium-sized companies. The human resource management of such companies has organized human resource management processes that are coherent and mutually support the principles and goals of their businesses (Jiminez-Jiminez & Sanz-Valle 2005, p. 17). Thus, they have built a unique resource-based advantage in global marketing by linking human resource principles to their globally competitive strategies and knowledge-intensive services. A lasting industry advantage is created through capacity-building that focuses on building and developing social, economic, and environmental conditions conducive for use skills and talents (Schaufeli & Bakker 2004, p. 19).

At a more advanced level, the global competitor model of small and medium-sized companies is value-laden and built on the relationships and aspirations of the company. This concept explicitly acknowledges the role that the relationships between human resource management and employees of small and medium-sized global firms can play. That is their relationships with regard to their economic and financial performance as well as social and environmental performance (Schaufeli et al 2002, p. 43). For many years, business managers and activists have wrestled with the idea of role performance when it comes to ensuring that the emerging knowledge-intensive services such as offshoring and outsourcing play a role in the execution of effective human resource management in small and medium-sized companies.

At a time when knowledge is changing almost daily and innovation is paramount to business success, the organization of human resource is becoming increasingly of greater importance to a company’s eventual performance in a global market (Saks 2006, p. 601). The human resource management approach in many of the international small and medium-sized companies is closely linked with the organizational strategy that a company adapts to drive innovation. The four main dimensions of staffing, strategy, system support, and structure are central to successful delivery of knowledge-intensive services. They can help the human resource officers to determine the right skills of employees and best match them to the most appropriate work responsibilities. Regardless, the transformation in the technology world and the globalization effects have meant that the practice of human resource management still faces some challenges in view of the innovation in a non-manufacturing context, especially to knowledge-intensive organizations (Sandeep et al. 2008, p. 27). Even though all types of firms involve themselves in the work processes touching on the use of knowledge to deliver services, they are diametrically opposed to the conventional approach to service delivery.

Knowledge, as opposed to financial or physical capital, is the key asset that these companies need to thrive in a competitive global market (Robinson, Perryman & Hayday 2004, p. 12). The output of service organization is more tangible than the ones of knowledge-intensive which on many occasions rely on the knowledge they possess to deliver services. The knowledge-intensive organizations are characterized by intellectual capital, which is subsequently exhibited through information; experience, knowledge, and the intellectual property deliver by a highly experienced and highly educated workforce. As noted by Rich, Lepine, and Crawford (2010, p. 15), the quality of employees is a strong determinant of the strategic and innovative renewal that such small and medium-sized companies have in the global business context.

The essence of innovation is central to the success of small and medium-sized firms when it comes to the management of the human resource in the context of global practice. As suggested by Fitz-Enz and Mattox (2014, p. 13), the need for restriction of firms creating value through the exploitation of tacit knowledge can be accomplished through effective human resource management and identifying highly qualified employees. The focus on human and social capital is commensurate to the knowledge-intensive sectors which face unique challenges when it comes to the management of the human resource. This is specifically applied in terms of acquiring and sustaining a highly skilled workforce that can support the exploitation of knowledge as an asset. The extension of knowledge about the relationship between human resource practices of small and medium-sized firms and innovation in knowledge utilization can inform the decision-making process when it comes to firms operating in a global context (Grossman & Rossi-Hansberg 2012, p. 29). There is, therefore, a need to identify and explore the globalized human resource practices, which support the knowledge-intensive approach to global operations.

2.5 The Theoretical Foundations of Global Human Resource Management

Even though the value of effective management of human resource to eventual success in innovation is highly recognized in literature, a number of empirical studies investigating the relational approach to human resource have emerged in the recent past (Ehnert, Harry & Zink 2014, p. 46). The view that human resource management encompasses all activities involving organization and employee has served to explore the operational functions of human resource management. Through these practices, the officers judged with the responsibility of managing the personnel are involved in job design, selection, staffing, and training of the hired employees. They are also responsible for performance appraisal and compensation in line with employee work responsibilities. Moreover, there is an increasing tendency to consider a higher level of strategic functions including forecasting and human resource planning. A considerable discussion with regard to the relative importance of particular human resource management practices and the way through which they are configured, a need for alignment of human resource practices and organizational strategy still exists.

In the recent past, the link between the management of personnel and innovation has been evaluated from different angles. An emergent concession is that knowledge-intensive firms operating in a global context should be adapted to meet the unique challenges and needs facing these firms (Doherty & Dickmann 2012, p. 67). The human resource systems put in place by a small firm working in a global context can influence the capacity to innovate and make use of the available knowledge. An empirical study by Carr, Markusen, and Maskus (2001, p. 13), provide support to the argument that human resource management can influence the mechanisms of small firms such as development and exploitation of intellectual capital, new product development, and knowledge generation. Organizational learning, on the hand, can facilitate the uptake of innovation including the trade-offs such as offshoring and outsourcing of services for quality performance.

With the current practices of human resource around the world, the understanding of knowledge-intensive organizations can be conceptualized from three angles. The first is the knowledge-intensive work where the employees are expected to have the necessary knowledge in order to do certain tasks (Baldwin & Venables 2013, p. 248). The second is the knowledgeable workers who constitute a body of employees that use existing knowledge to do their work. Lastly, there are knowledge-intensive firms that integrate work and workers relating to knowledge in the same context (Brainard 1997, p. 79). The distinction between less knowledge-intensive and knowledge-intensive firms is not self-evident but must be developed through human resource practices adapted by a particular firm.

For small and medium-sized firms, this has become a source of strength and an advantage in a global competition for customers. As such, these firms are developing a globalized approach to the practice of human resource management to leverage on the benefits that accrue from conscientious use of knowledge as a resource by employees (Amiti & Wei 2009, p. 214). Most of the responsibilities and duties are now characterized by the ability of the employees to make use of acquired knowledge to make decisions and solve business problems. This is also becoming a source of sustainable competitive advantage for most of the firms that are operating in a global environment (Armstrong & Taylor 2014, p. 74). The classification of emerging knowledge-intensive areas requires that small and medium-sized companies hire highly intelligent employees with high qualifications as part of the workforce.

Moreover, the firms can claim to produce qualified products or services depending on the knowledge that its employees have in a particular area. This has become a major concern for many of the firms operating in a global market environment, where the consumers know exactly what they want and there are many options available to them (Grossman & Rossi-Hansberg 2008, p. 60). Among the emerging knowledge-intensive firms operating in a global environment include the accounting firms, management, engineering, law firms, and consultancy companies as well as research and development units and technology companies (Hummels et al. 2013, p. 78). These firms have common characteristics denoted but the capital input, the industry aspects, and the type of work that they are involved in.

The majority of organizations around the world are investing heavily in developing their workforces through training. The emerging knowledge-intensive needs mean that such firms must identify areas of compromise where the management can spur growth. The intellectual capital contained through a qualified workforce is being harnessed through intellectual property rights and experience owned by employees of such firms. This is being used to create wealth for the firms. As noted by Fitz-Enz & Mattox (2014, p. 33), knowledge-intensive can be applied to globally operating firms where knowledge is more important than any other input and where human capital dominates physical or financial power. In view of the current competition for customers and the need to reduce the cost of doing business, knowledge-intensive managers are choosing to move their production activities overseas. They prefer facilitating the sensitivity of their businesses to local and regional human resource practices (Grossman & Rossi-Hansberg 2012, p. 43). They are also contradicting or outsourcing some of their highly specialized jobs to employees who have relevant skills.

By outsourcing, the human resource departments can focus more on the core competencies while also making the services more productive. This practice is especially favored in developed countries such as the United States where the outsourcing of services that require heavy intellectual capacity is a preferred model for small and medium-sized companies. The result is increased productivity and better management approach in human resource. Such models also allow the firm to be able to operate in any market conditions around the world. As argued by Brown and Duguid (2001, p. 22), “Outsourcing is needed not just because of the economics involved. It is required equally because it gives opportunities, income, and dignity to service work and service workers.” Another strategy popular in the current practice of globalized human resource management is the issuance of more temporary and part-time work, especially for locals workers and students. Firms can also use emerging and technology as a means of enhancing the management of human personnel. Some of these technology innovations have the capacity to increase the productivity and performance of employees in a certain field.

2.6 Attitude of International Employees

According to Ehnert, Harry, and Zink (2014, p. 19), there has been a recent global development of organizations because of advancements in technology. The resulting growth has come with challenges for the utilization of the expatriates on intercontinental assignments to complete strategically significant tasks. Basically, MNCs or multinational corporations require expatriates not only for the motive of managing the corporate organization within the critical global markets but also for the effortless entry into the new markets. It helps in managing and extending international management abilities. Ian, Len, and Tim (2004) defined the expatriate as an individual who has settled outside their native country for a long-term period. In the case of the business world, the increase in the globalization of the world involves new measurements for the business to be successful within the international market.

In contrast, Adler and Nancy (2008) explained that the term expatriate refers to an employee who has been sent by his or her organization in another country for the purpose of managing and administrating the business operations and functions there. In such cases, organizations usually send their own workers from the parent country or even from a third country to the host country in order to carry out the business operations there. According to Varian (2005, p. 2), a number of opportunities and challenges are associated with the global business processes which originate the need for expatriates. For instance, in China, organizations rely on the skilled workers of other countries in order to compensate for the lack of competent domestic employees. In contrast, Wood (2009, p. 25) argued that organizations belonging to emerging countries like India and China are now emphasizing on providing managers with the training and knowledge of international experiences so as to cater the need of global expansion of a firm. Furthermore, numerous previous studies have critically argued that the adjustment of expatriates is essential for the management of organizations international assignments and tasks.

2.7 Global Expansion of Small and Medium-sized Firms in Knowledge-intensive Sectors

The work of Wilton (2010, p. 33) specified that organizations tend to globalize when the domestic market no longer offers growth opportunities. Growth and sustainability are the two variables that determine the effectiveness and success of an organization. In fact, globalization has become one of the most significant business strategies that leads to the development of a firm on an international scale. Wilkinson et al. (2009, p. 17) observe that extensive research has been conducted on studying the globalization processes. It was found in the prime interest of numerous past authors and analysts because of its significance for the development of the world economy. On the contrary, Wheelwright (1985, p. 90) declared that internationalization and global expansion have a significant impact on a firm’s performance. It depicts the effectiveness of an organization within the market.

Luo (200, p. 21) believed that managing the global expansion of a firm is crucial for the management because apart from opportunities, the process brings in several challenges as well. These challenges include data scarcity, difference in the culture and lack of resource capability. As growth in overseas markets is clearly found in the main agenda of the firms operating across the globe, it has been found that the new and latest techniques applied for the management of challenges have turned out to be a barrier for this process. Luo and Tung (2007, p. 22) explained that growth and expansion of the organization are derived for capable people, clear management thinking and flexible structures. The three are represented as all essential components necessary for the management of global business operations.

2.8 Impact of International Employees Attitude on Global Expansion of a Firm

Tayeb (2004, p. 7) explained that the ability of an expatriate to be flexible according to the conditions and circumstances of an international environment is more than just a matter of psychosomatic well-being within a foreign country. In fact, it is described as a major factor that facilitates the successful accomplishment of international assignments. Luo and Tung (2007) also noted that with the increase in multinational enterprises (MNE’s), the role of expatriates for the management of those of MNEs has also gained significant importance in the current ages (Tempel 2001, p. 22). Additionally, numerous authors have concluded that the ability of an expatriate to manage and adjust within the cross-culture of the host county has an influence over the success of the global assignment of an organization.

Tarran, Bain, and Verrinder (2011, p. 55) stated that cross-culture management is optimistically associated with the performance of an assignment which is directly linked to its success or failure in the international market. As a result, the management of expatriate’s attitude has received much attention from researchers and analysts in recent times. The work of Tarran, Bain, and Verrinder specified that it is important for the management of a firm to provide the expatriate with the knowledge and information related to foreign experiences in order to maintain their attitude towards global assignments. With this scenario, organizations are able to manage the performance of expatriate which later results in organizations development and expansion.

According to Storey (1995, p. 13), global expansion for any organization belonging to the contemporary world, has become a significant strategy through which firms grow and capture new markets. When expatriates are provided with appropriate training initiatives to better handle the business situation in the host country, it develops their understanding and importance about the opportunity that is being provided to them as employees of the firm. The attitude of expatriates is largely affected by the constant counseling and consultancy that is provided by the headquarters of the company in order to achieve the required goals with regard to the expansion of the firm. The negative attitude of an expatriate might result in decreasing the possibility of success of the move overseas. The attitude of an expatriate can be influenced by the facilities provided to the employee as a member of the parent company. Global expansion requires commitment and support from employees of the organization which include the employees who are working at the parent firm and also the employees who are being sent to foreign countries with the purpose of expanding the business.

3.0 Research Methodology

3.1 Introduction

A research methodology serves the purpose of presenting a theoretical underpinning that defines the rules and procedures for collecting and analyzing the data. The procedure chosen by the researcher must conform to the objectives to be achieved through the study. It is also essential that issues of reliability of the research process, the ethical and confidentiality considerations, and the validity of the research methods are addressed. The aim of carrying out a thorough and reliable data collection and analysis is to ensure that the data being used is answering the questions set out by the researcher (Saunders, Lewis & Thornhill 2007, p. 19). This ensures that optimal research findings are received for the purposes of fulfilling the objectives of the dissertation. A number of approaches are available for researchers to use in their research process. However, a careful selection must be done to ensure that whichever approaches are used, they are reliable and dependable in terms of collecting and analyzing the data. Among the common approaches used in collecting and analyzing data are the qualitative and quantitative methods. The two approaches have distinctions that can be beneficial to the process of collecting and analyzing data.

Quantitative research may be defined as the systematic and scientific investigation of quantitative properties and phenomena and their relationships. The major purpose of quantitative research is to explain, examine, control and predict phenomena of interest (Ader, Mellenbergh & Hand 2008, p. 83). On the other hand, qualitative research looks at the richness of an occurrence or experience and strives to document it effusively by concentrating on any and all possible facets of an event or experience (Shapiro & Varian 2013, p. 67). The research agenda has a major influence on the research approach being used. From the surface level, both methods appear to offer many benefits to this dissertation’s research. However, the crucial objective of this dissertation is to conduct an analysis on globalized human resource management in the knowledge-intensive sectors. This analysis will involve comparisons of past and present human resource practices in the knowledge-intensive segments. The exploratory nature of qualitative research makes it useful in scenarios that lack predictability and where there is a need to develop an approach or define the problem.

Quantitative approaches, as opposed to qualitative designs, are decisive in their resolution. They attempt to quantify problems and interpret how predominant the problem is by seeking for projectable results. By contrast, the purpose of qualitative research is to better understand the nature of a specific phenomenon and to describe its scope and impact. The analysis of globalized human resource management practices cannot be effectively performed using a quantitative approach since it is more analytical rather than interpretive (Cooper & Schindler 2011, p. 43). Given the subjectivity of the academic scholarly articles, a qualitative approach will provide room for more flexibility for extraction of data, narrative analysis and the utilization of case studies.

The first hypothesis can be put in the regression form as follows:

The dummy variable D takes values of 1 and 0 for an outsourcing match versus otherwise, respectively. The null hypothesis maintains insignificance of any or all of the explanatory variables involved:

The intercept need not be zero even in an otherwise insignificant model, if only because the size or scale can never be zero anyway, while trivially depending on factors other than those investigated.

The generic CHI-squared proxy test of the Pearson type, as accommodative of the second layer of hypothesis testing, could be represented as follows:

The observed values are juxtaposed against their prior expectations or otherwise benchmarking hurdles such as the control-group performance. In proportionate terms, the relative shares or weights of each alternate HR layer’s contribution, outsourced versus incumbents, will be tested for any residual or excess performance. For ROI metrics, the test is straightforward across all the lines of business or strategic business units:

By contrast, VA contributions will be gaged with respect to the stages and layers involved:

Apart from the inter-group assessment, an inner test can be run based on a comparison of the group’s share in the payroll versus its share of VA contribution:

Finally, for ROI and VA alike, a weighted average type metric could be constructed akin to the interactive coefficients of econometric regressions drawing upon ‘dummy variables’ or qualitative indicators. The product comparisons will check into whether a particular business line is associated with a comparative advantage as exhibited by HR of the respective group at a specific stage. In a sense, that might point to how well the core competencies are aligned against the resources and the allocations or business objectives at stake.

In this setup, beta could be defined as the share of each dummy variable or status, with D taking on a value of 1 if the person has been outsourced or 0 if he or she has not:

In all of the above tests, the null hypothesis pertains to conjectured insignificance, meaning that the two sub-groups or populations do not reveal any major gaps in the measurable performance, which is what low values of CHI-squared would suggest. The present thesis maintains, however, that the spreads are significant irrespective of whether they are positive for outsourced HR.

All of the CHI-squared based methodology pertaining to the second hypothesis could loosely be referred to as a version of ANOVA or ANCOVA, with the analysis of variances and covariances having yet to be augmented or rationalized by invoking Granger causality. Since this does not constitute the immediate scope of the present research, it will be left as an option for prospective studies.

Other than the causality issues, the validity and reliability of research will be ensured via prior random sampling of companies as well as posterior sets of standardized tests for heteroscedasticity in the data as well as multi-collinearity across the explanatory variables. Validity could, among other things, be inferred by t-tests of significance applying to standalone coefficients, while the F-test will be the counterpart pertaining to the model on the whole. That said, reliability concerns could arise in that collinearity and heterogeneous variance might occur even under an F-value and an R-squared high enough.

In addition, there is a trade-off involving the choice of the number of observations. For one thing, a large sample secures the degrees of freedom rendering the OLS (ordinary least squares) regression estimates efficient or unbiased. On the other hand, a handful of companies should suffice for in-depth case studies or direct interview questionnaires. While bordering on the qualitative dimensions of inference, by and large, the results could well allow for rigorous quantification as proposed while still capturing the scope and explanatory power denied in large-scale, correlation-laden regression type tests. Bearing this in mind, a reasonably small random sample of knowledge-intensive companies that come in a variety of sizes will be chosen so as to enable meaningful case-study, qualitative-style research while still securing enough detail with respect to multiple business lines or stages of value-added to inform Chi-square or regression-based testing. It appears for now that for the larger companies, primary data could be tapped into by referring to their 10K reports in the SEC/EDGAR database. The smaller ones will be addressed via direct interviews over the phone involving CEO and CFO responses for the purpose of controlling.

Although quantitative methods are prone to accommodating phenomenological or instrumental approaches, this fact provides little assurance that qualitative research ever ushers in ultimate, ontology-driven findings. In fact, the very design of the study appears to be striking an optimum balance as defined on this matrix of cognitive or inferential tradeoffs. In particular, the qualitative part could be seen as the add-on or residual explaining away any incentives structure or underlying mechanisms of HRM in a global or micro-MNE context that may have accounted for superior HR performance or catalyzed the core competencies.

Bearing in mind the aforementioned provisions on how the alternate methods could suggest similar findings while qualifying the omitted dimensions, triangulation is embedded most naturally while simultaneously building on benchmarks and otherwise controlling tools that are intertwined. For instance, the two sets of hypothesis-testing could be seen as largely the same thing albeit embarking on distant premises. Not least, the very use of the CHI-squared acts to hedge against potential excesses of heteroscedasticity, in that the expectation hurdles vary along with the observation rather than being set in stone as a sample mean.

3.2 Research Design

The current study uses a combination of primary and secondary design. At the primary level, interviews are done with select groups of respondents. In secondary design, published material and reports about the practice of human resource in a global context with regard to knowledge-intensive sectors. It involves an exploration of reports, scholarly publications, and the company documents that involve the practice of globalized human resource management and the elements that influence how firms practice their human personnel management. There are also some interviews with human resource managers from select small and medium-sized firms that working in a global context and in the knowledge-intensive sectors (Cooper & Schindler 2011, p. 22). The interview involves a face-to-face with the management of a firm that has branches across the globe and seeks to determine how their practice of human resource has influenced the formation of unique and special approaches to the practice of human resource management.

The purpose of the interview questions for the management team was to identify how the practice of outsourcing or trade-in-jobs has proved more effective as well as efficient for small MNEs. Furthermore, the questions will also involve the size and scale in their area of operation and the impact that this has on the return on investment and the impact on the overall practice of human resource management. The questions as presented are structured in a way to keep the respondents on the topic in order avoid drifting into other forms of management practice which are not directly related to globalized human resource practice (Cameron, Dutton & Quinn 2003). The preceding formed the guidelines of designing questionnaires for online survey and the face-to-face interviews.

3.3 Quantitative Research

The quantitative approach to research involves the process of collecting observable and factual information through a scientifically proven method. Through this process, it is possible for the researcher to make deductions in terms of laws and the relationship concerning the observed facts and observed phenomena (White 2003, p. 17). Quantitative research involves the approach where numerical data is collected about a phenomenon and analyzed using methods of calculations especially the use of statistics. The importance of using a quantitative research approach is that it provides the researcher with a subjective approach to wider phenomenon and the ability to collect the data that might be required to understand a wider topic. Also, the approach is suited to the understanding of concepts like attitudes, motivation, commitment, values, and beliefs that generally do not have assigned numerical values. The quantitative approach to research allows the researcher to numerically codify abstract concepts that would otherwise be difficult to measure scientifically.

This approach to research makes it possible to make inferential statistical interpretations of the descriptive statistical interpretation approach. In the descriptive statistical approach, the researcher can use diagrams, charts, tables, among many other illustrations to analyze the collected data. This is advantageous because it enhances the visual representation of the findings of the study. The advantage is that the researcher has a whole range of tools to use when conducting analysis, including software like SPSS. In the interest of the present study, the researcher has chosen the descriptive statistical approach and specifically, the use of tables to present the findings from the survey and interviews.

3.4 Methods of Collecting Data

The purpose of survey questions in self-administration questionnaire is to develop queries that respondents can interpret without contradicting the intention of the researcher (Dillman 2000, p. 32). Respondents should also find no challenges in responding to questions accurately. The selection of methods of data collection on this study was guided by three factors: the aim of the study, the available resources in terms of time and money, and design and testing tools. The researcher also considered other constraints applicable. Creswell (2007, p. 74) observed that researchers who conduct a survey can employ a variety of techniques to collect data. These techniques include modes such as face-to-face interviews, the use of telephones, using the Internet, or simply having questionnaires in paper form and delivered to the respondent through mail or in-person (Hill 2007). Whatever the mode of data collection chosen, it ultimately impacts on the person who is interviewed, the ability of the researcher to conduct the survey and the possibility of having an effective method of sampling out the participants from a particular population. It also impacts on the methods of contacting and selecting people as participants and the kind of people who can respond.

Moreover, mode factors, including the presence of interviewer and the mode of communication, also influence the answers given by the respondents. To this end, Dillman (2000), argues that it is essential for contemporary surveyors to apply various methods of collecting data in order to counteract the limits presented in each of the above modes. Mixed-mode surveys are becoming more popular in surveys where a variety of modes is used to reach out to respond in different categories. However, the writer points out that such an approach can be expensive and time-consuming, especially when the survey is on a nation-wide scale. In addition, Scheuren (2004) noted that the survey response rates also vary between different modes. This is due to the effects related to the various aspects of the survey design including the time available to respond and the incentives given to the respondents. It can also be due to a variety of other factors including the length of the survey or the number of respondents. Recent years have seen a decline in response rates due to the changes in the tastes of the respondents.

In order to address the challenges identified in carrying out surveys, this study used Survey Monkey to develop a web-based questionnaire (Appendix 1). The website provides tools to design and email questionnaires to selected participants. Its flexibility in terms of ease of use and simplicity made it the most appropriate choice to reach out to the participants located across the country. The selection of the email addresses found in the directory of contacts was based on a random sampling technique that gave each staff member an equal chance of participating in the survey (Ponterotto 2005, p. 40). However, they were required to have worked for their respective companies for a minimum of 3 years. The link to the website was emailed to the participants with a window of three weeks to respond. In describing the basic features of the data, the researcher chose the descriptive statistical approach as the form of analysis to describe what was implied in the data from respondents (Trochin 2006).

3.5 Data Used in this Research

The current study uses qualitative and quantitative data. Qualitative data was captured using the Likert Scale where the respondents were asked to rate the items from Strongly Agree to Strongly Disagree. The respondents were arranged from numbers 1-5 (Appendix 1). To obtain quantitative data, selected respondents were asked to fill up a questionnaire with their views. The data collected through the method was mainly quantitative since it captured only the views of the respondents. These were analyzed to align them to the objectives of the research project.

3.6 Data Collection Method

Research findings rely upon the assessment and evaluation of gathered data; therefore, the selection of data is observed as a crucial part of the research. Data can be collected through two sources. namely primary and secondary (Kumar 2011, p. 73). Primary sources provided quantitative data for which a questionnaire will be developed that address the research problem completely. However, secondary data was compiled through the review of journals, past studies, articles, publications, and annual reports. Furthermore, the developed questionnaire included a series of questions established according to the research topic.

3.7 Research Strategy

The strategy of the research employs a plan of action that facilitates the investigator in completing the study within an organized way. Research strategies can come in the form of an observation strategy, experimentation strategy and survey strategy (Johnson and Christensen, 2010). For this particular study, the researcher will use the survey strategy because it will help in reviewing the most recent data in the form of view of selected participants. In line with this strategy, the researcher will use determinants of data that are the qualitative, quantitative and mixed-method approach. For the proposed research, a mixed-method approach will be used in which quantitative data will be collected through questionnaire surveys, while, qualitative data will be collected through reviewing past studied and publications.

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