Chapter 4

IHRM in
cross-border M&As,
international alliances,
and SMEs

Chapter 4
For use with International Human Resource Management 7e ISBN-10: 1473719026
By Peter J. Dowling, Marion Festing, and Allen D. Engle, Sr. © Cengage Learning
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 Chapter 4
IHRM in
cross-border M&As,
C O N T E N T S

international alliances,
and SMEs START

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TA B L E

of contents.

 Cross-border alliances
 Cross-border mergers and c acquisitions
 International equity joint ventures
 International SMEs

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Vocabulary
 non-equity cross-border alliance, equity modes
 TNCs, EEA
 greenfield investments, acquisitions, mergers, M&As
 pre-M&A, due diligence, integration planning, and implementation phases
 resources, processes, values
 HR functions: strategic partner, administrative expert, employee
champion, change agent
 knowledge transfer, embedded knowledge
 performance-related pay, IJVs
 recruitment, training, and development
 partnership role, change facilitator and strategy implementer, innovator,
collaborator
 multicultural teams
 International SMEs
 internationalization process theory


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Objectives
You want to understand how these relate to IHRM:
1. Cross-border alliances
2. Equity-based alliances (M&As, IJVs)
3. Globalizing SMEs

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For use with International Human Resource Management 7e ISBN-10: 1473719026
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Cross-border alliances

Chapter 4
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By Peter J. Dowling, Marion Festing, and Allen D. Engle, Sr. © Cengage Learning
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Figure 4.1
Equity and non-equity modes of foreign operation

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Cross-border mergers & acquisitions

Chapter 4
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By Peter J. Dowling, Marion Festing, and Allen D. Engle, Sr. © Cengage Learning
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Figure 4.2
The formation processes of M&As and HR challenges

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Figure 4.3
Mergers and acquisitions, 2005-2015 (billions of US$)

Source: ©UNCTAD, cross-border M&A database (www.unctad.org/fdistatistics)

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Typical cross-border M&A problems
 Within the first year of a merger,
up to 20% of executives may be lost
 The percentage lost gets worse over a longer
time frame
 Personnel issues are often neglected,
delayed, or not made a priority
 A high number of M&As fail or do not
produce the intended long-term
results

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Figure 4.4
HR activities in the phases of a cross-border M&A

Based on information in the article ‘The correct spelling of M&A begins with HR by
Jeffery A. Schmidt, HR Magazine, June 2001. © 2001, Society for Human Resource
Management, Alexandria, VA. Used with permission. All right reserved.’

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Strategic HRM in M&As
Firms should rely on three conceptual tools:
1. Resources
money, people, brands, relationships
2. Processes
activities used to convert resources into
valuable goods and services
3. Values
the way employees think about
what they do and why they do it

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Comparing HRM in M&As
 Convergence across nationalities in HRM policies; move towards
performance-related pay, training, and team-based product
development
 Most acquirers also adjust to suit the local culture
 American HRM reflects a short-term individualistic national
business culture
 Recruitment in US is more short-term than in Germany, France,
and UK
 Japanese still has longest-term, consensual, team-based,
collectivist national philosophies
 French still favor French managers
 Germans are the most anxious to adopt
international practices for their M&As

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International equity joint ventures

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IJV challenges include
 HR must manage relations at the interfaces
between IJV and parent companies

Different rules can create critical dualities

 HR must develop appropriate HRM

practices and strategies for the IJV itself.

HR must recruit, develop, motivate,

retain human resources at IJV level

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Figure 4.5
Formation of an international equity joint venture

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The main reasons for an IJV
 Gain knowledge and transfer that knowledge
 Host government insistence
 Increase economies of scale
 Gain local knowledge
 Obtain vital raw materials
 Spread the risks (e.g., share financial risks)
 Improve global competitive advantage
 Provide an efficient and cost-effective response
required by the globalization of markets

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IJV development stages
 Partnership role
 Change facilitator and strategy implementer
 Innovator
 Collaborator

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International SMEs

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Table 4.1
SME definition

Source: European Commission (ed.) The New SME Definition. User Guide and Model Declaration
(Brussels: European Commission, 2005), p. 14. Reproduced with permission.

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SMEs play an important role
In EEA and Sweden:
 99+% of 16 million enterprises in EEA & Sweden
are SMEs
 Two thirds of all jobs are in SMEs
In Asia Pacific region:
 90% of all enterprises are SMEs
 32-48% of employment is by SMEs
In US:
 80+% of employment is by SMEs
with less than 20 employees

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Barriers to international markets by SMEs
1. Shortage of working capital to finance exports TOP

2. Inability to identify foreign business opportunities 10

3. Limited information to locate/analyze markets
4. Inability to contact potential overseas customers
5. Inability to obtain reliable foreign representation
6. Lack of managerial time to handle internationalization
7. Untrained or not enough personnel for internationalization
8. Difficulty in managing competitors’ prices
9. Lack of home government assistance/incentives
10. Excessive transportation and insurance costs

Chapter 4
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IHRM features in SMEs
 The founder or owner has large impact
 Recruitment, selection, and retention:
SMEs struggle because of perceptions
 Yet SME requirements are similar to those of
large organizations
 Human resource development:
the challenge of learning
 Expatriate management
 Limited resources of the HR department
and outsourcing

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For use with International Human Resource Management 7e ISBN-10: 1473719026
By Peter J. Dowling, Marion Festing, and Allen D. Engle, Sr. © Cengage Learning
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