Influence of MNC strategy on commitment to employee development- the Malaysian context

Abstract

In an increasingly global world, multinational corporations (MNCs) seek to leverage their resources and capabilities to achieve global competitive advantage. Human resources are a significant capability and hence employee development initiatives play a major role in securing competitive advantage. Using the Barlett and Ghoshal (1989) model of MNC organizational strategy, this study aimed to examine the influence of organizational strategy on commitment to employee development in subsidiaries. The study also examined the influence of commitment to employee development on employee turnover in subsidiaries. The manufacturing industry in Malaysia was chosen as the context of the investigation. Applying a multi-stage research method, a questionnaire survey and semi-structured interviews were conducted. The results from cluster analysis revealed two prevalent strategies: multidomestic and global strategies. Further analyses revealed that organizational strategy does influence commitment to employee development. In particular, MNCs that adopt the multidomestic strategy have higher commitment to employee development in their subsidiaries than global MNCs. The research revealed that multidomestic subsidiaries have fewer linkages with their parents and other subsidiaries. Thus, they need to develop their own employee development policies and practices. On the other hand, global subsidiaries have strong linkages to their parent company, promoting the transfer of practices from the parent to the subsidiary. Hence, global subsidiaries commit less to employee development. In terms of the relationship between commitment to employee development and employee turnover, the relationship was found to be statistically non-significant. That is, it was found that commitment to employee development does not lead to employees reciprocating with loyalty and staying with the organisation, which is contrary to social exchange theory. One possible reason could be due to employees viewing development programs as additional work which requires more effort, resulting in job dissatisfaction and turnover. Also, organisations may simply be reacting to legal obligations and other government initiatives when initiating employee development. In such cases, employee development is less likely to have an impact on employee turnover. It is hoped that, through this study, researchers and managers will be better equipped to address this important area of management. Although this study has its limitations, it makes an important contribution to understanding the relationship between MNC organisational strategies, commitment to employee development and employee turnover in subsidiaries.