Subsidiary responses to the institutional characteristics of the host country

Abstract

PurposeThe purpose of this paper is to examine the strategic responses of multinational enterprise (MNE) subsidiaries in China toward a unique institutional characteristic – the structural discrimination against rural migrant workers.Design/methodology/approachBased on surveys of 181 firms and 669 rural migrant workers, as well as a case study of eight firms in Jiangsu and Shanghai, the authors examined and compared the human resource management (HRM) policies of MNE subsidiaries and domestic Chinese firms toward rural Chinese migrant workers.FindingsThis study found that MNE subsidiaries are more likely to accept local discriminatory HRM practices when managing migrant workers. In response to the institutional environments of host countries, MNE subsidiaries tend to share similar behavioral characteristics with local firms and are reluctant to show leadership in initiating institutional change in host countries.Originality/valueThis study is important since it enables investigation of some prevailing assumptions in the literature. Contrary to common wisdom that MNEs are change agents that proactively engage in institutional entrepreneurship in host countries, this study found that MNEs’ responses to the institutional environment of host countries are shaped by their entry modes and the institutional environment in their home countries. MNEs are as diverse as their home countries and far from forming a unified organizational field with similar behavioral characteristics.