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Chapter 4

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

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
1 of 23
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cross-border M&As,
C O N T E N T S

international alliances,
and SMEs
 Vocabulary
O F

 Objectives
TA B L E

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

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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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, & implementation phases
 resources, processes, values
 knowledge transfer, embedded knowledge
 performance-related pay
 IJVs
 recruitment, training, & development
 partnership role, change facilitator, strategy implementer, innovator,
collaborator
 multicultural teams
 SMEs
 internationalization process theory

Chapter 4
 experiential market knowledge
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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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

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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Cross-border alliances

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
5 of 23
Figure 4.1
Equity & non-equity modes of foreign operation

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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Cross-Border mergers & acquisitions

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
7 of 23
Figure 4.2
The formation processes of M&As and HR challenges

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
8 of 23
Figure 4.3
Mergers and acquisitions in US$ billions

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
9 of 23
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 more
than one year after a merger
 Personnel issues are often neglected
 A large number of M&As fail or do not
produce the intended results

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
10 of 23
Figure 4.4
HR activities in the phases of a cross-border M&A

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
11 of 23
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
goods & services
3. Values
the way employees think about
what they do & why they do it

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
12 of 23
Comparing HRM in M&As
 Performance-related pay is more popular in US
than in Japan or Germany
 Recruitment in US is more short-term than in
Germany, France, & UK
 Japan still has longest-term focus
 US training & career planning is the most extensive
 French still favor French managers
 Germans are the most anxious to adopt
international practices for their M&As

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
13 of 23
International equity joint ventures

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
14 of 23
IJV challenges include
 HR must manage relations at the interfaces
between IJV & parent companies

Different rules can create critical dualities

 HR must develop appropriate HRM


practices & strategies for the IJV itself.

HR must recruit, develop, motivate,


retain human resources at IJV level

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
15 of 23
Figure 4.5
Formation of an international equity joint venture

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
16 of 23
The main reasons for an IJV
 To gain knowledge & transfer that knowledge
 The host government insists
 Increased economies of scale
 To gain local knowledge
 To obtain vital raw materials
 To share risks (e.g., financial)
 To improve global competitive advantage
 Provide an efficient & cost effective response
required by market globalization

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
17 of 23
IJV development stages
 Partnership role
 Change facilitator & strategy implementer
 Innovator
 Collaborator

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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International SMEs

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
19 of 23
Table 4.1
SME definition

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
20 of 23
SMEs are very important
In EEA & Sweden:
 99+% of 16 million enterprises in EEA & Sweden
are SMEs
 Two thirds of jobs are in SMEs
In Asia Pacific region:
 SMEs are 90% of all enterprises
 32-48% employment is by SMEs
In US:
 80+% employment is by SMEs
with less than 20 employees

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
21 of 23
Barriers to international markets by SMEs
TOP1. 1. Not enough working capital to finance exports
102. 2. Inability to identify foreign business opportunities
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 to go international
8. Difficulty in managing competitors’ prices
9. Lack of home government assistance & incentives
10. Excessive transportation & insurance costs

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
22 of 23
IHRM features in SMEs
 The founder or owner has large impact
 Recruitment, selection, & retention:
SMEs struggle because of perceptions
 Yet SME requirements are similar to those
of large organizations
 Human resource development – learning
 Expatriate management
 Limited HR dept resources
& outsourcing

Chapter 4
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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