CEO background and the adoption of Western-style

human resource practices in China

Katherine A. Frear*, Yang Cao and Wei Zhao
Department of Organizational Science, University of North Carolina at Charlotte, Charlotte, USA
This study develops and tests an institutional explanation of how chief executive ofcer
(CEO) characteristics affect the adoption of Western-style human resource (HR)
practices in Chinas transitional economy. It was predicted that: (1) CEO exposure to HR
ideology would positively relate to rm adoption of Western-style HR practices, and
(2) CEO embeddedness in the Chinese institutional environment would negatively
relate to Western-style HR adoption. Data from 309 foreign-invested enterprises in
China supported these predictions. Further analysis also revealed that the pattern of
relationships between CEO characteristics and Western-style HR adoption differed with
respect to the various functional areas within HR.
Keywords: CEO; China; human resource practices; institutional theory; international
human resources
Chinas reform since 1978 has centered on two prominent themes: marketization and
integration into the global economy. As a result of the reform, the Chinese economy has
sustained rapid growth for three decades. In 2010, China surpassed Japan to become the
worlds second largest economy. Exalted as a miracle by many, Chinas economic success
has attracted a great deal of scholarly attention fromboth the developed and the developing
worlds. One intriguing question pertains to how market transition and global integration
actually transform the way in which Chinese organizations operate. In particular, human
resources (HR) scholars have shown a keen interest in the transfer of Western HR practices
to China because human resource management (HRM) is not only key to organizational
success, but also highly sensitive to culture (see Zheng and Lamond 2009 for a recent
review). For example, researchers have examined the development of Western-style HRM
in China (Warner 1993, 1995, 1996, 2004, 2012; Ding, Goodall and Warner 2000), the
effects of various institutional structures on the transfer of foreign HR practices in Chinese
organizations (Lu and Bjorkman 1997; Gamble 2003; Sumelius, Bjorkman and Smale
2008; Cao and Zhao 2009; Zhu, Warner and Zhao 2011) and the relationship between HR
practices and rm performance in China (Bjorkman and Xiucheng 2002; Law, Tse and
Zhou 2003; Kim and Wright 2010).
While these studies have greatly enriched our understanding of the transfer of
Western-style HRM to China, scholars so far have neglected the role of general managers
or chief executive ofcers (CEOs). Recent studies outside of the HR eld show that CEO
backgrounds often play important roles in the diffusion of organizational practices across
national boundaries (e.g. Fiss and Zajac 2004; Sanders and Tuschke 2007). Compared
with their counterparts in other countries, CEOs in China tend to enjoy greater control over
their company and thus hold stronger inuence in shaping its structures and practices
ISSN 0958-5192 print/ISSN 1466-4399 online
q 2012 Taylor & Francis
http://dx.doi.org/10.1080/09585192.2012.703217
http://www.tandfonline.com
*Corresponding author. Email: kcallas@uncc.edu
The International Journal of Human Resource Management,
Vol. 23, No. 19, November 2012, 40094024
(Guthrie 1999). This rather unique feature of Chinese organizations suggests a need to
examine to what extent the transfer of Western-style HRM may be related to CEO
characteristics; yet to date we know very little about what CEO characteristics facilitate it,
what characteristics impede it, and why.
The current study addresses this deciency by developing an institutional explanation
of how CEO characteristics affect the adoption of Western-style HR practices in Chinas
transitional economy. Drawing on the new institutional theory of organizations (Powell
and DiMaggio 1991), we highlight the gap between Western HR ideology and the
traditional employee management system in China. We then conceptualize CEOs as
potential agents of cross-cultural diffusion and explore the implications of two CEO
attributes CEO exposure to HR ideology through formal education and CEO
embeddedness in the Chinese institutional environment as indicated by age and nationality.
While developed from an institutional perspective, our theoretical arguments also speak to
the upper echelons theory by illuminating the causal processes that give rise to the
relationship between executive characteristics and strategic actions (Hambrick and Mason
1984; Hambrick 2007).
Our empirical analysis uses data collected from 309 foreign-invested enterprises
(FIEs hereafter). In contrast to state rms, most of which were established in the Maoist
era, FIEs rst emerged in China in the late 1970s and are direct products of Chinas reform
campaign aimed at marketization and global integration. In 2009, FIEs employed 17
million workers and accounted for about 28% of Chinas industrial output (State Statistical
Bureau of China 2010). Being subject to the inuence of both international and Chinese
institutional environments, FIEs have played a pivotal role in introducing Western
managerial practices to China and in triggering organizational changes among Chinese
domestic companies (Guthrie 1999; Gallagher 2007). While certainly not representative of
all rms in China, FIEs allow us to observe the effects of CEO characteristics in
trendsetting organizations. It is also advantageous from a methodological point of view to
focus on FIEs because CEOs of these organizations have more diverse backgrounds with
regard to education, age, and nationality.
From traditional employee management to modern HRM in China
Before 1978, China had a socialist economy (Child 1994). Under this structure, economic
activity was planned and managed by the state while the fruits of individual labor were
redistributed, also by the state. One dening feature of the planned economy in China was
the government structure of employment. In particular, employment was highly regulated
and employees were assigned to organizations by the state (Lewis 2003). Workers enjoyed
guaranteed, permanent employment, a phenomenon that was referred to as the iron rice
bowl. As a result, workers were committed to a single employer (or work unit) with little
exibility or mobility to change jobs. Under this system, employee management was
simple and essentially focused on personnel management.
Under the socialist ideology and political culture (characterized by the rhetoric like
workers are the masters of the house), the term and concept of human resource
management was alien to Chinese organizations. With the government controlling stafng
positions and enforcing lifetime employment, there was no need to invest in a commitment-
inducing HR system, as commitment was required by law. Along the same lines,
performance management was largelynonexistent. Because the state prohibitedorganizations
fromdismissingworkers, it was difcult for managers toenforce meaningful sanctions for low
performance. Managers could not re or lay off employees even if they were negligent,
K.A. Frear et al. 4010
absent, indolent, or not needed (Child 1994). Such a system contributed to widespread
overstafng, low motivation, and declining organizational performance (Warner 1995).
While reformpolicies during the 1980s largely focused on restructuring the relationship
between state-owned enterprises and the state, the 1990s witnessed major changes in the
labor domain. The Labor Law effective in 1995 symbolized the demise of the socialist
employment regime and provided the legal foundation for market-oriented labor
management. According to the Labor Law, all workers must now have a written labor
contract. The Labor Law granted employers the authority to terminate the labor contract if
an employee failed to fulll his or her responsibilities or when the enterprise faced grave
economic difculties. Consequently, workers iron-rice bowl was snatched away, and
lifetime employment and job security were terminated. In subsequent years, the state had
not only continued to reduce its role in job assignment, but also presided over a massive
wave of layoffs where state-owned enterprises slashed tens of millions of jobs. As
employment is increasingly governed by labor markets, howto attract, use, and retain talent
becomes a new challenge for Chinese companies.
Western-style HRM provides one potential answer to this challenge. Consisting of a
bundle of managerial practices in four major functional areas stafng, compensation,
traininganddevelopment, andemployee involvement Western-style HRMstands insharp
contrast with the traditional employee management in China. First, under Chinas socialist
employment system, job assignments were carried out by the state with little exibility or
mobility, whereas in the emerging labor market stafng practices are designed to attract and
identify talent. Second, under the socialist system, an employees salary was strictly
controlled by the state and was largely tied to occupational rank and seniority, yet in
Western-style HRM compensation is tied to performance and is used as a competitive
strategy to attract and retain talent as well as to provide incentives to stimulate performance.
Third, training and development were largely ignored under the socialist employee system.
However, in the labor market environment, investing in employee training helps to retain
talent and to realize the potential of HR. Finally, while the socialist management system
encouraged workers contributions and initiative, workers were subordinate in the
hierarchical, authoritarian structure. Western-style involvement practices, in contrast,
encourage employee participation and empowerment with the objective of improving
decision-making, coordination, and communication in the rm (Lawler 1986, 1992;
Thomas and Velthouse 1990; Ciavarella 2003).
Thus, Chinas emerging economy presents both opportunities and challenges for the
transfer of Western-style HRM. On the one hand, reform policies aimed at promoting
marketization and global integration have, indeed, signicantly reoriented Chinese
organizations toward competition, efciency, and exibility. On the other hand, the
institutional legacy of Chinas old employee management system still looms large, and the
culturally sensitive nature of HRMfurther suggests that there might be considerable cultural
barriers for the international transfer process. Under these circumstances, we argue that
the rms leaders can playa particularly important role in shaping the companys orientation
and structure. In the next section, we draw on the new institutional theory of organizations
to explore how CEO characteristics may be related to the adoption of Western-style
HR practices.
The role of CEOs in the adoption of HR in China
The new institutional theory (DiMaggio and Powell 1983; Powell and DiMaggio 1991;
Scott 2008) posits that organizations tend to adopt structures and practices that are deemed
The International Journal of Human Resource Management 4011
natural and appropriate in their institutional environment. One process through which this
occurs is normative isomorphism. Citing the works of Larson (1977) and Collins (1979),
DiMaggio and Powell (1983, p. 152) underscore the importance of professionalization in
standardizing organizational decision-makers, yet the underlying logic of the authors
argument leads to a broader focus on all formative experiences. For instance, the
socialization through upbringing, education, and career experiences of professionals
or executive leaders shapes their cognitive bias and, in turn, inuences the structures of the
organizations that they lead. Thus, norms and practices that executive leaders are familiar
with will be diffused throughout their respective rms. In fact, Guthrie (1999) observed
this in China. He noted that (1) CEOs enjoy a great deal of control in the rms they
oversee, (2) such control is often exerted in relation to the CEOs background and training,
and (3) this, in turn, affects the practices used within the rm.
Given that the ideology of Western-style HR is generally incompatible with the
traditional employment structures in China (Warner 1993, 1995, 2004; Zhao and Cao
2009), we argue that the institutional experiences of the CEO will affect the rms use of
Western-style HR practices in China. In particular, we examine how the educational and
personal characteristics of the CEO, including educational background, nationality, and
age, serve as important predictors of CEO favorability of Western-style HR, which, in
turn, can affect the rm adoption-level HR practices. We rst examine this with regard to
the degree to which the CEO is educated in and exposed to the ideology of Western-style
HRM. Second, we examine it in relation to the extent that the CEO is embedded in the
Chinese institutional environment.
CEO educational background and exposure to Western HRM ideology
According to DiMaggio and Powell, universities and professional training institutions are
important centers for the development of organizational norms among professional
managers and their staff (1983, p. 152). During the past three decades, Chinese
universities have become increasingly open to Western culture, and formal college
education is one of the most common venues where individuals are rst exposed to
Western managerial models and techniques, such as the ideology of HRM. By contrast,
elementary and secondary education in both China and other countries tends to focus
heavily on basic knowledge and preparing students for the next higher level. Thus, people
without a college education are less likely to have been exposed to Western HR ideology
in any systematic manner. These considerations lead us to predict that, all else being equal,
H1(a): Firms with CEOs who have a college education are more likely to adopt Western-
style HR practices than those with CEOs without a college education.
There can be further uneven exposure and normative pressure across various majors
among college graduates. More specically, of all possible areas of specialization in
college, individuals who study business management should have the most systematic
exposure to HRM and be the most likely to internalize the norms and values of the HR
profession. Similarly, since HR represents the application of social and behavioral science
to the management of people, we expect CEOs with educational backgrounds in social
science to be more receptive to HR ideology. In contrast, CEOs who studied science,
engineering, and other majors would be least familiar with the social, behavioral, and
management aspects of HR. This leads to the following hypothesis:
H1(b): Among college graduates, CEOs with degrees in business management and social
science are most likely to adopt Western-style HR practices.
K.A. Frear et al. 4012
CEO embeddedness in the Chinese institutional environment
Another important dimension of CEOs professional experience is their level of
embeddedness in the Chinese institutional environment. Recall that the traditional employee
management structure during the planned economy in China encouraged practices that are
incompatible with the Western view of HRM. For example, institutions in China endorsed
control and conformity at work, in contrast to the system of rewards and motivation
encouraged by Western-style HRM (Child 1994). In FIEs, CEOs who were socialized in the
Chinese environment will likely perpetuate the previous employee structure, while CEOs
from outside China will be more receptive to the Western view relatively speaking.
Having a Chinese CEO may also indicate the stronger bargaining power of the Chinese
business partner or the entrenched inuence of Chinese business practice, which leads to a
stronger tendency to inherit the traditional employment practices. In contrast, top managers
recruited fromoutside the institutional environment are more likely to initiate organizational
changes and adopt new practices (Schuler and Jackson 1987).
H2: Firms with Chinese CEOs will be less likely to adopt Western-style HR practices
than those with foreign i.e. non-Chinese CEOs.
Nationality alone may not be an adequate indicator of CEO embeddedness in a given
institutional environment. In terms of the relationship between CEO nationality and
adoption of Western-style HRM, we expect age to have a moderating effect. More
specically, older Chinese CEOs were socialized under the planned economy and tend to
be more deeply embedded in the institutional environment that is incompatible with
Western-style HRM. Furthermore, because HRM has gained popularity only recently in
China, old Chinese CEOs are unlikely to fully understand or embrace Western-style HRM.
By contrast, younger Chinese executives have worked primarily during Chinas transition
to a market economy and might be more inclined to consider foreign practices that have
been positively linked to rm performance. Indeed, the younger generations of employees
in China have been characterized by their receptiveness to foreign values and willingness
to learn from Western management practices (Child 1994; Gamble 2000; Lewis 2003).
Thus, when HRM becomes popular in business discourse, they should be eager to learn
and adopt Western-style HR practices.
In comparison, age has different implications for CEOs abroad. Generally speaking, older
foreign CEOs tend to be more committed to modern HRM practices under the social and
normative inuence of the business world than younger CEOs. They also have a better
understanding of the nuances in modern HRM practices and better skills in their
implementation. All these should facilitate the higher adoption of Western-style HRM in the
Chinese context among FIEs headed by older foreign CEOs. Thus, as mentioned previously,
we expect that rms with Chinese CEOs will be less likely to adopt Western-style HR
practices thanthose withforeignCEOs, and that this difference will be greater whenCEOs are
older because older Chinese CEOs will be cognitively embedded in the traditional Chinese
institutional environment.
H3: CEO age will moderate the relationship between CEO nationality and adoption of
Western-style HRpractices, such that rms with Chinese CEOs will be less likely to
adopt Western-style HRpractices than foreign CEOs, but this effect will be stronger
for rms with older CEOs.
The International Journal of Human Resource Management 4013
Method
Data and sample
Our empirical analysis focuses specically on FIEs in China because we expected that this
approach would help to maximize variation on both the dependent variable (adoption of
Western-style HR) and at least one of the independent variables (CEOnationality). The data
were collected in 2007 from a number of Chinese cities, including Beijing, Tianjin, Dalian,
Xuzhou, and Lianyungang. Access to rms was obtained based on the connections of our
research partners in China. Past experience suggests that making connections before
collecting data is necessary for ensuring cooperation (see e.g. Farh, Tsui, Xin and Cheng
1998; Akhtar, Ding and Ge 2008; Zhao and Cao 2009).
Graduate students from local universities were hired to collect survey data by
conducting face-to-face standardized interviews with managers. The interview ques-
tionnaires consisted of questions about key organizational characteristics (e.g. industry or
number of employees), HR practices, CEO characteristics, and respondent characteristics.
All interviews were conducted in Chinese, and responses were subsequently translated into
English. Respondents were most often the director of HR or a mid- to senior-level manager
in HR. Other respondents included CEOs, vice presidents, and other members of senior
management (20%of the sample). CEOdata were provided by the respondent, but when the
respondent was not the CEO, he or she was encouraged to seek or verify this information
with higher management. This was also encouraged for information on rm-level data.
The survey collected data from a total of 442 FIEs. We excluded rms where the CEO
had less than two years tenure from the analysis because in these cases the CEO might not
have had the opportunity to substantially reshape company practices. The only exceptions
were cases where the CEO was the founding CEO of the company; such cases were
retained even if CEO tenure was less than two years. After data cleaning, 309 FIEs were
retained for the nal analysis.
Dependent variable
A 20-item scale was used to measure the adoption of Western-style HR practices. Three
items assessed adoption of stafng practices; example items include: we try our best to
select and recruit the best employees and selection is based on the overall t with the
company, not just specialized skills (M 4.88, SD 1.03). Four items assessed adoption
of compensation practices; example items include: compensation is tied to individual
performance and the company offers long-term incentive plans (e.g. prot-sharing)
(M 4.20, SD 1.16). Six items assessed adoption of training and development
practices; example items include: we invest a great deal of manpower and resources in
employee training and we use job rotation to develop employee skills and to develop
their career paths (M 4.33, SD 1.12). Seven items measured adoption of employee
involvement practices; example items include: the company creates conditions that allow
the employees to take initiative and employees are routinely involved in solving
production-related problems (M 4.17, SD 1.01).
An unweighted grand mean of the four HR functions was calculated for each
organization to represent overall adoption of Western-style HR practices. We used an
unweighted mean so that all four functions would be given equal weight, even if a
particular function was measured by more or fewer items than another function. Responses
were measured on a seven-point Likert scale ranging from 1 not at all adopted to
7 fully adopted (M 4.39, SD 0.83, a 0.78).
K.A. Frear et al. 4014
Independent variables
Two categorical items were used to measure CEO educational background: (1) CEO level
of education and (2) CEO college major. Using these two items, we dummy coded the
response options into three groups. The CEOs who had less than an associates degree
comprised the reference group (n 21). The CEOs who had at least an associates degree
were divided into the remaining two groups based on their area of specialization: business
management and social science comprised one group (n 135), while all other college
majors comprised the other group (n 153).
A single categorical item was used to measure CEO nationality. Response options
included Chinese, Hong Kong, Macao, Taiwanese, and foreign. For the purpose of the
current study, foreign represents CEOs who are foreign to China thus, CEOs with any
nationality other than Chinese, Hong Kong, Macao, or Taiwanese fall into the foreign
category. Also, because of theoretical similarity, we combined Hong Kong, Macao, and
Taiwanese into a single category (HMT), and as a result, dummy coded the resultant three
categories Chinese (n 176), HMT (n 53), and foreign or non-Chinese (n 80).
To test the interaction hypothesis that CEO age would moderate the effect of CEO
nationality, we mean-centered the continuous variable CEO age (see Aiken, West and
Reno 1991; Cohen, Cohen, West and Aiken 2003). We then multiplied the centered
variable and the CEO nationality dummy codes to create the interaction terms.
Control variables
Several organizational-level and CEO characteristics are worthy of statistical control.
The rst is rm age. While some researchers believe older rms are unlikely to innovate
(Srensen and Toby 2000) i.e. adopt new, foreign practices others anticipate that the
organizations life cycle can have a direct effect on HR practices (Ciavarella 2003).
In terms of the latter, rms may emphasize stafng at the beginning, but invest greater
effort in an internal labor market later on. For these reasons, we chose to control for the age
of the organization. We measured rm age using a single item that asked the respondent to
indicate the year the rm was founded. We then subtracted the founding date from the year
of data collection (2007), calculated the natural log, and included it as a continuous
variable in the analysis.
We controlled for rm size to obviate the potential inuence it could have on the effect
of CEO background. For example, CEOs in large rms might have less of an inuence
than CEOs in smaller rms, which could affect the results and interpretation of our
ndings. Firm size was measured with a single, open-ended item that asked the respondent
to indicate the number of ordinary (non-management) employees working for the rm.
Before including this continuous variable in the analysis, the natural log was calculated.
We also controlled for industry. Industry was measured by a single item that asked the
respondent to choose the industry from a list of 18 possible options, including mining,
construction, real estate, nance, insurance, and so on. We reduced the categories by
dummy coding all of the response options into four groups light manufacturing, heavy
manufacturing, services, and high-tech industries.
To ensure that the effect of CEO national background is not due merely to the country
of the foreign investor, we control for foreign investor nation of origin. This was measured
using a single item asking, which country/region is the foreign investor from? If the
organization had multiple foreign investors, respondents were instructed to indicate
the country of the primary investor. We dummy coded the variable into ve groups the
USA, Europe, Japan, newly industrialized economies (NIEs), and all others.
The International Journal of Human Resource Management 4015
Next, a low-cost strategy might limit the efforts invested in HRM. To control for low-
cost strategy, we used a single item which asked respondents to indicate the three most
important reasons why the foreign investor chose to do business in China, with one of the
response options being abundance of labor supply. We coded this as an ordinal variable,
with higher values representing higher adoption of low-cost strategy. In particular, the
response is coded as 3 if abundant labor supply is listed as the most important motivation
for entering China, 2 if mentioned as second most important, 1 if mentioned as the least
important, and 0 if not mentioned at all as a motivation for entering China.
Finally, we controlled for CEO sex and CEO tenure. CEO sex is indicated with a
dummy variable (1 female). Tenure was assessed as the number of years the CEO has
occupied his or her current position (M 4.83, SD 3.46). Descriptive statistics and a
correlation matrix are presented in Table 1.
Results
We used ordinary least squares regression analysis to test our hypotheses. The results of this
regression analysis are shown in Table 2. Model 1 of our analysis includes only the control
variables, which explain a signicant amount of variance in the adoption of Western-style
HR practices (R
2
0.13). In particular, FIEs with Japanese investors were less likely to
adopt Western-style HR practices (b 20.36, p , 0.05) than those with US investors.
In addition, the extent that FIEs mentioned having a low-cost strategy as a motivation for
entering China was negatively related to the adoption of Western-style HR practices
(b 20.11, p , 0.01). Lastly, FIEs that were run by a female CEO were more likely to
adopt Western-style HR practices than those run by a male CEO (b 0.36, p , 0.05).
Model 2 illustrates the results for the test of the rst set of hypotheses. In support of
Hypotheses 1(a) and 1(b), FIEs run by CEOs with business management and social science
degrees were more likely to adopt Western-style HR practices than those run by CEOs
without a college education (b 0.42, p , 0.05). The regression coefcient for rms with
CEOs who had other college majors was positive (b 0.25), but not statistically
signicant. These results support the expectation that CEO exposure to Western HR
ideology through college education and a social-behavioral or management specialization
is related to the adoption of Western-style HR practices in FIEs in China.
Next, Hypothesis 2 was not supported by the data as there were no main effect
differences in the adoption of Western-style HR between the two focal CEO nationality
groups. However, there was a signicant interactive effect of CEO age and foreign
nationality on the adoption of Western-style HR practices (b 0.03, p , 0.05), in support
of Hypothesis 3. An examination of Figure 1 shows that the expected difference in HR
adoption between rms with Chinese CEOs and those with foreign CEOs with HR
adoption predicted to be lower among those with Chinese CEOs is, indeed, observed at
the higher end of the CEO age distribution. In fact, the crossover effect visible in Figure 1
illustrates why there is no signicant main effect of nationality; the inverse slopes of the
separate effects of Chinese and foreign CEOs with CEO age make it impossible to observe
a main effect of nationality alone. Moreover, the signicant interaction effect supports the
prediction that CEO embeddedness in the Chinese institutional environment is associated
with lower rates of adoption of Western-style HR practices. An interesting nding,
however, is that FIEs with young Chinese CEOs were most likely to adopt Western-style
HR practices, even more so than those with foreign CEOs of any age.
After testing the hypotheses in relation to the overall adoption of Western-style HR
practices, we rened our analysis to examine the robustness and potential nuances in the
K.A. Frear et al. 4016
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The International Journal of Human Resource Management 4017
Figure 1. Regression lines for adoption of Western-style HR practices.
Table 2. Unstandardized beta coefcients for regression of CEO background on adoption of
Western-style HR practices.
Model 1 Model 2 Model 3 Model 4
Intercept 4.34
**
4.10
**
4.09
**
4.06
**
Firm age (natural log) 20.14 20.01 0.00 0.00
Firm size (natural log) 0.06

0.05 0.06

0.05

Industry (ref light manufacturing)

Heavy manufacturing 0.11 0.11 0.11 0.11
Services 0.20 0.17 0.18 0.16
High-tech 0.32

0.29 0.26 0.24

Investor origin (ref the USA)
Europe 20.04 20.06 20.05 20.02
Japan 20.36
*
20.37
*
20.36
*
20.33
*
Newly industrialized economies 20.13 20.15 20.17 20.16
All others 20.08 20.09 20.08 20.07
Low-cost strategy 20.11
**
20.12
**
20.12
**
20.11
**
CEO characteristics
CEO tenure 0.00 0.00 0.00 0.00
CEO sex (1 female) 0.36
*
0.38
*
0.38
*
0.35
*
CEO age 20.01 0.00 0.00 20.02

CEO education (ref no College)

Management and social science 0.42
*
0.47
*
0.45
*
Other college majors 0.25 0.29 0.28
CEO nationality (ref Chinese)
Foreign 20.15 20.20
Hong Kong, Macao, and Taiwan 20.25

20.22

Interaction: CEO nationality age

Foreign CEO age 0.03
*
HMT CEO age 0.02
DR
2
0.13
**
0.02
*
0.01 0.02

R
2
0.13 0.15 0.16 0.18
Notes: N 309.

p , 0.10;
*
p , 0.05;
**
p , 0.01. NIE, newly industrialized economies; HMT, Hong Kong,
Macao and Taiwan. All dependent variables are on a seven-point scale, where 1 not at all adopted, 7 fully
adopted, and SD 0.83.
K.A. Frear et al. 4018
adoption pattern across the four functions of HR. In particular, we retested the hypotheses
using the separate means for stafng, compensation, training and development, and
employee involvement. When HR practices are broken up into multiple categories, the
data suggest that the pattern of results does in fact change across the different types of HR
practices. The results of these analyses are provided in Table 3.
The full model explains a signicant amount of variance in the adoption of
Western-style stafng practices (R
2
0.16, p , 0.01). Having a low-cost strategy was
negatively associated with the adoption of stafng practices (b 20.16, p , 0.01). CEO
exposure to Western HR ideology through education was positively associated with the
adoption of stafng practices: FIEs with CEOs educated in management and social science
as well as those with other college degrees were more likely to adopt stafng practices
than those with CEOs who did not have a college degree (b 0.63, p , 0.01; b 0.54,
p , 0.05). CEO embeddedness in the Chinese institutional environment was also related
to the adoption of Western-style HR practices through the combined effect of CEO age
and foreign nationality (b 0.04, p , 0.05; see Figure 2).
The full model alsoexplained a signicant amount of variance inthe adoption of Western-
style compensation practices (R
2
0.16, p , 0.01). FIEs run by female CEOs were more
likely to adopt such compensation practices (b 0.49, p , 0.05). The interactive effect of
CEO age and foreign nationality was also signicant, suggesting that CEO embeddedness in
the Chinese institutional environment is related to the adoption of compensation practices
(b 0.06, p , 0.01; see Figure 3). CEO exposure to Western HR ideology through college
education was not related to the adoption of compensation practices.
In addition, the full model explained a signicant amount of variance in the adoption of
Western-style training and development practices (R
2
0.14, p , 0.01). Having a low-cost
strategy was negatively associated with the adoption of training and development practices
(b 20.17, p , 0.01). However, none of the hypothesized variables CEOage, nationality
or education was related to the adoption of Western-style training and development
practices.
Lastly, the full model did not explain a signicant amount of variance in the adoption of
Western-style employee involvement practices (R
2
0.09, n.s.). Two variables were
associated with the adoption of training and development at the p , 0.10 level: having a
Japanese foreign investor (b 20.37) and CEO management and social science education
(b 0.45). None of the hypothesized variables or control variables were signicantly
associated with the adoption of Western-style employee involvement practices at the
p , 0.05 threshold.
Conclusion
The purpose of this study was to examine the relationship between CEO background and
the adoption of Western-style HR practices in FIEs in China. We predicted that CEO
exposure to HR ideology and CEO embeddedness in the Chinese institutional environment
would be related to FIE adoption of Western-style HR practices. First, CEO educational
background was used as an indicator of exposure to HR knowledge and ideology. Second,
CEO nationality and age were both used as indicators of CEO embeddedness in the
Chinese institutional environment.
We rst found that CEO exposure to HR ideology through management or social
science education was related to FIE adoption of Western-style HR practices. Further
exploratory analysis revealed that this nding is largely driven by the relationship between
CEO education and the adoption of Western-style stafng practices. Next, we found that
The International Journal of Human Resource Management 4019
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K.A. Frear et al. 4020
CEO embeddedness in the Chinese institutional environment was related to the adoption
of Western-style HR practices. In particular, FIEs with older Chinese CEOs were less
likely to adopt Western-style HR practices than those with young Chinese or old foreign
CEOs. Further analysis revealed that this nding is largely driven by the relationships that
CEO age and nationality have with the adoption of stafng and compensation practices.
Interestingly, we found that there were no signicant relationships between CEO
background and the adoption of training and development practices. We suspect that this
might be due the characteristics of foreign-invested rms in China. In particular, many
foreign rms mention the abundance of cheap labor as a motivation for investing in China
(e.g. M 1.58, SD 1.22 in the current sample). By contrast, training and developing
employees is a costly investment and the return on investment will only be realized
when employees are maintained as long-term rm resources that accumulate knowledge
Figure 3. Regression lines for adoption of Western-style compensation practices.
Figure 2. Regression lines for adoption of Western-style stafng practices.
The International Journal of Human Resource Management 4021
and skills over time. If labor is considered cheap, abundant, or dispensable, employee
training and development may not be a worthwhile HR practice to invest in. Moreover, the
insignicant effects of CEO background after controlling for low-cost strategy suggest
that CEO background does not predict any variance in rm adoption of Western-style
training and development practices above and beyond that explained by low-cost strategy.
Another notable nding is that our model did not explain signicant variance in the
adoption of Western-style employee involvement practices. One plausible explanation for
this nding is that employee involvement practices in the West are not yet sufciently
institutionalized to be diffused in ways that are similar to other Western-style HR
practices. Indeed, even in Western contexts, there are mixed views about the effectiveness
of high-involvement practices (Edwards and Wright 2001). Thus, if the use of employee
involvement practices is not consistent in Western contexts, then Western-relevant CEO
background characteristics should not be strong predictors of the adoption of these
practices in China.
It is important to note that interpretations of our ndings are limited by the
cross-sectional design of the research. We took care, however, to minimize this limitation
by controlling for several organizational and CEO characteristics, in addition to dropping
CEOs with less than two years tenure from our analyses. While our theoretical framework
suggests that CEO characteristics precede the rms likeliness to adopt Western-style HR
practices, it is possible that a rms predisposition to adopt Western HR practices might
precede the selection of a CEO with a similar propensity. Thus, to rule out this alternative
hypothesis, the next step in the current line of research is to carry out a cross-lagged design
or, preferably, a longitudinal analysis which includes the succession of at least two CEOs
per rm.
In spite of the cross-sectional design, our ndings provide correlational support for the
general proposition that CEO institutional experiences play a role in the global diffusion of
management practices, particularly HRM practices, in the context of Chinese FIEs.
Moreover, these ndings contribute to the extant research on the adoption of Western-style
HR practices in China. In particular, one goal of the research stream related to HR in China
is to examine the effective transfer of HR practices to China (Zheng and Lamond 2009);
yet, while CEOs often enjoy a great deal of power and inuence in the rms that they
manage, CEOs have thus far been overlooked in this line of research. Thus, the current
ndings advance the literature by bringing to light the role of high-level managers in the
transfer of Western-style HR practices to China.
Finally, although not the primary emphasis of the research, this study also contributes
to the extant literature on upper echelons theory. Upper echelons theory asserts that
characteristics of top management members, including CEOs, are related to strategic
choices and the performance of the rm (Hambrick and Mason 1984). The current research
supports the expectation that CEO education and age are related to rm practices, and
further extends this theoretical prediction by drawing on institutional theory to explain the
intervening processes.
In sum, the data suggest that CEO background is an important predictor of rm
adoption of some Western-style HR practices in China, but not others. For this reason, it is
important to examine the adoption of HR practices with regard to separate functional areas
rather than as a single construct. This research contributes to the body of literature on new
institutional theory by looking at how CEO institutional experiences relate to the diffusion
of organizational practices. More specically, the focus on CEOs also adds to the existing
research on the adoption of Western-style HRM in China. Furthermore, HR managers in
K.A. Frear et al. 4022
Chinese foreign-invested rms can use the ndings of this research to anticipate potential
executive predispositions to Western-style HR practices.
Acknowledgments
The data collection for this study was funded by an SHRM Foundation research grant. The authors
are grateful for the SHRM Foundations generous support.
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