Global alignment or localization? An empirical examination of global reward management in MNEs from a subsidiary perspective

Abstract

The degree to which multinational enterprises (MNEs) standardize their global management practices results from the interplay between pressures on local adaptation and global alignment. Based on data from reward managers of foreign subsidiaries operating mainly in Europe, the present study examines MNEs’ global reward management and influencing factors. Our results show that the impact of localization pressures varies between reward practices, remains stable between the different host countries, and is strongest for benefits. Alignment pressures are strong for all reward practices, remain stable between different home countries, and are strongest for performance-related pay. The degree of alignment and localization pressures is reflected in the extent to which subsidiary practices resemble those of HQs and local competitors. This study suggests to researchers as well as practitioners that global reward management is not a simple choice between standardization and localization; instead, it asks to make a distinction between different reward practices and employee groups such as senior and middle management, as well as operational employees, thereby contributing to a more differentiated understanding of global reward management.