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Converging
Converging HRM practices? A HRM practices
comparison of high performance
work system practices in
MNC subsidiaries and domestic 931

firms in Pakistan Received 21 January 2018

Revised 12 October 2018
21 November 2018
Mansoor Ahmad Accepted 22 November 2018

Department of Management Science,

COMSATS University Islamabad, Islamabad, Pakistan
Matthew M.C. Allen
Business School, The University of Manchester, Manchester, UK
Muhammad Mustafa Raziq
National University of Sciences and Technology, Islamabad, Pakistan, and
Wali ur Rehman
Department of Management Science,
COMSATS University Islamabad, Islamabad, Pakistan

Abstract
Purpose – Existing work on convergence/divergence among HRM practices in MNCs and local firms mainly
focuses on Europe and the USA. Limited research examines these organizations in Pakistan, hindering our
understanding of what policies MNCs are likely to adopt there as well as the extent of any differences between
HRM in MNC subsidiaries and local firms. The purpose of this paper is to examine the similarities and
differences between the HRM practices of MNC subsidiaries and domestic firms to assess if there is evidence
for convergence or divergence.
Design/methodology/approach – The authors targeted MNC subsidiaries and domestically owned firms
working in the banking, information technology and pharmaceutical sectors in Pakistan. These sectors have
enjoyed a steady inflow of foreign direct investment and have a sizeable number of MNC subsidiaries. Out of
1,081 companies, some 392 participated in a face-to-face survey (response rate of 36.4 percent). The authors
ran a series of binary logistic regression models to test the hypothesized relationships between HR practices
and nationality of ownership.
Findings – The authors reveal that a small minority of both types of firm use some practices, such as high
compensation contingent on performance and performance review, appraisal and career development. However,
domestic firms use some practices, such as extensive training, performance appraisals and performance-related pay
significantly less than their multinational counterparts. The authors argue that these differences reflect institutional
influences in Pakistan as well as a potential opportunity for local firms to change their HRM practices. In other
areas, such as recruitment and employee involvement, there are no differences between the two groups.
Originality/value – The authors deepen our understanding of the types of HR practices that local
companies in an emerging economy are likely to adopt as well as those that they are unlikely to adopt.
Existing research has tended to downplay HRM in Pakistan and the different use of individual HRM practices
among MNC subsidiaries and local firms. This research reveals that some companies in Pakistan have
sophisticated HRM practices in place in some areas; however, MNC subsidiaries make greater use of some HR
practices, reflecting different cultural norms between the two groups.
Keywords Training, Human resource management
Paper type Research paper
Employee Relations: The
Introduction International Journal
An important strand in the HRM literature has long questioned whether a global model of HRM, Vol. 41 No. 5, 2019
pp. 931-948
centered on high performance work systems (HPWS), will emerge or whether country-specific © Emerald Publishing Limited
0142-5455
models will prevail (Budhwar et al., 2016; Chen et al., 2005; Pudelko and Harzing, 2007; DOI 10.1108/ER-01-2018-0021
ER Brewster et al., 2016). Empirical studies have presented convincing evidence to support both
41,5 positions; the debate, therefore, is far from over. We compare the HPWS practices and policies of
MNC subsidiaries and domestic firms in Pakistan and assess any convergence/divergence
among these policies.
There is a paucity of literature on HRM in South and South East Asia, especially
Pakistan (Budhwar et al., 2016; Ahmad and Allen, 2015), creating a need to understand how
932 the HRM practices of indigenous firms compare to those of MNCs (Chiang et al., 2017;
Budhwar et al., 2016). We examine how domestic cultural factors influence the adoption
of HPWS practices in Pakistan between MNC subsidiaries and local Pakistani firms.
The lack or inadequate implementation of formal regulations or institutions in Pakistan
provides companies with greater discretion over their HRM practices, potentially
leading to differences in practices between local and foreign companies (Vaiman and
Brewster, 2015).
We hypothesize that cultural differences between the two groups of companies are likely
to be more important for some HPWS, such as performance reviews, learning opportunities
and performance-related pay, than for others, such as recruitment and selection, leading to
variation in the prevalence of some polices, but not others among the two groups. We test
these hypotheses against a unique data set covering the banking, information technology
and pharmaceutical sectors in Pakistan. Our findings confirm our hypotheses: domestic
firms use some practices, such as extensive training, performance appraisal and contingent
pay, significantly less than their multinational counterparts. For other HPWS practices,
such as recruitment and employee involvement, there are no statistically significant
differences between the two groups. We argue that these differences reflect cultural
differences between the two groups with connections (or sifarish values) being more
important in local firms than MNC subsidiaries.
We contribute to the oft-debated issue of HR policy transfer under the theoretical lens of
institutional theory by providing evidence from an important, but under-researched
country. We deepen our understanding of the types of HR practices that local companies in
an emerging economy are likely to adopt as well as those that they are unlikely to adopt.
Existing research has tended to downplay HRM in Pakistan and the different use of
individual HRM practices among MNC subsidiaries and local firms. Our research reveals
that some companies in Pakistan have sophisticated HRM practices in place in some areas;
however, MNC subsidiaries make greater use of other HR practices, reflecting different
cultural norms between the two groups.
The rest of the paper has three sections. The first section reviews the literature and sets
out our hypotheses. The second section discusses the methodology and results. The final
section discusses our results and concludes.

The convergence–divergence debate in HRM

Globalization has increased interest in the convergence or divergence of firms’ HRM
practices in different national and cultural settings. Some research finds that, due to a
common logic of industrialism, similarities in the organization of work throughout the world
are increasing, leading to a convergence of HRM practices around those associated with
US MNCs, as such firms are often seen as “technological leaders” despite the differences
in national cultures, politics and ideology (Kerr et al., 1960; Hall and Soskice, 2001;
Esping-Andersen, 1990). Other research finds that cultural and institutional differences
between countries and regions prevail, resulting in persistent differences in management
systems and practices (Hofstede et al., 2010; House et al., 2004).
In this convergence–divergence debate, HRM scholars have analyzed several factors, most
notably country-of-origin effects (Almond and Ferner, 2006; Ferner and Quintanilla, 1998) as well
as host- and home-country effects (Edwards and Kuruvilla, 2005; Edwards and Zhang, 2008).
This research has highlighted the influence of host-country factors, such as local isomorphism, Converging
internal consistency, institutional forces, informal controls, social networks, headquarter HRM practices
influence and the host-country’s general environment (Björkman et al., 2007; Fey et al., 2009), on
HRM practices. Another stream of research has explored the similarities and differences in
employment practices in Europe, revealing a general directional similarity in employment
practices; however, there is no evidence of complete convergence (Mayrhofer et al., 2011; Poutsma
et al., 2006; Sahadev and Demirbag, 2011). 933
MNCs may not organize the HRM function of their subsidiaries according to country-of-
origin or host-country environment rather they can standardize their HRM policies and
practices according to the country that sets the standards for what is perceived as global best
practices, often the US model of management (Pudelko and Harzing, 2007). HPWS
have attained the status of best practices in HRM that many MNCs adopt in their
international operations (Björkman et al., 2007; Mellahi et al., 2013). Smith and Meiksins’ (1995)
system–society–dominance model proposed the idea of a dominance effect: the USA, Japan
and Germany are the countries that provide the best practices for others to follow. Due to
globalization and the prominence of the USA in the world economy, the USA is the
technological leader and role model in management. HPWS as a system of best practices for
managing human resources has its roots in American history and culture, meaning that they
may not be applicable in other countries. However, American-style HPWS influence MNCs, in
general, and HPWS, in particular, have become the dominant global HR system (Chen et al.,
2005; Pudelko and Harzing, 2007; Tüselmann et al., 2008).
Many scholars have taken HPWS policies and practices as the basis for comparing
similarities and differences between MNCs and domestically owned firms within a country or
across countries. For instance, Lawler et al. (2011) examined the HPWS practices of US
multinationals in 14 countries and found that subsidiaries in affluent, low-growth Western
European countries are less likely to implement HPWS than those in emerging East Asian
economies. Chen et al. (2005) analyzed the similarities and differences between MNC
subsidiaries and local firms in relation to HPWS in Taiwan, concluding that the use of HPWS
in Taiwan was on the rise. Mellahi et al. (2013) compared the HPWS practices of MNC
subsidiaries and local firms in Turkey and argued that specific sociocultural contingencies
play an important role in explaining statistically significant differences between the two types
of firm. Ma et al. (2016) investigated the HRM practices of multinational and local firms in
China, finding that the Chinese institutional context shapes the degree of homogeneity and
hybridity of control and commitment HRM system across firms in China. Although there are
still differences between countries, the existing evidence suggests that, in general, HPWS
practices are gaining acceptance in diverse cultures and institutional set-ups. However, we are
not aware of any large-scale studies that examine the HPWS practices of MNC subsidiaries
and local firms in Pakistan with its distinctive sociocultural characteristics.

Convergence–divergence and institutional theory

Institutional theory is a key theoretical approach to explaining convergence–divergence
(Vanhala et al., 2006), suggesting that firms become similar in the same organizational field
(Kostova et al., 2008). Firms conform to contextual expectations to gain legitimacy and to
survive. Thus, a process of homogenization or “isomorphism” forces one unit in a population
to resemble others (Paauwe, 2009). Firms may face coercive, mimetic and normative
pressures to look similar (Scott, 1995, 2013). Coercive isomorphism happens due to
regulatory pressures. Mimetic isomorphism results from firms emulating more successful
ones and leads to companies in the same organizational field resembling one another.
Normative isomorphism stems from socialization and unquestioned assumptions about how
to organize work (DiMaggio and Powell, 1983; Paauwe, 2009). In our context, the arguments
of institutional duality may help to explain the similarities and differences between the
ER two types of firms. While MNC subsidiaries may feel pressure to conform to local norms to
41,5 establish legitimacy in the new context, domestic firms at the same time may feel pressure to
adopt to international practices (Mellahi et al., 2013).
Those who argue that HR policies continue to diverge emphasize that contrasting country-
specific institutions exert an influence over firms’ HRM values and practices (Rowley and
Benson, 2002). Thus, the US “best practice” model of HRM cannot be characterized as “the
934 best” in countries with different cultural and institutional environments (Aycan, 2005).
Although Asian companies have intensified their search for advanced western HRM practices,
Asian traditions, values, history and institutions are very different from those in Western
countries, making Asian management and HRM quite different (Poon and Rowley, 2010).
Thus, it is important to examine the unique contextual factors prevailing in Pakistan in
order to understand the HRM practices in MNC subsidiaries and local firms. Rosenzweig
and Nohria (1994) argued that MNCs will not be able to implement policies that diverge
significantly from local norms easily and that HR practices are likely to resemble local
practices; however, this tendency varies from practice to practice. Moreover, Edwards and
Kuruvilla (2005) argued that, in order to understand the global-local question better, we need
to understand how MNCs operate. The crux of the argument is that MNCs only standardize
their HRM policies and practices if it contributes to their global strategy. However, if the
host-country context, the MNC’s division of labor and global commodity chain
considerations do not favor such standardization, the MNC will not standardize its HRM
policies and practices (Tüselmann et al., 2008).
The only research that we are aware of that examines the convergence/divergence
debate in MNC subsidiaries in Pakistan argues that MNC regional headquarters officers
sought to transform HRM in Pakistan in an effort to lead the market in a process of
convergence with the intention of introducing successful strategic HRM policies from the
West (Khilji, 2002). However, the study focused solely on multinational banks in Pakistan,
providing evidence that organizations and the people they manage are well aware of HRM
practices in the West. Following Boon et al. (2009), we argue that, despite the institutional
pressures in an economy, firms enjoy some leeway for HRM and have some freedom to
decide the degree of adaptation; however, they often cannot afford to diverge substantively
from their competitors’ HRM practices.

Pakistani context
Pakistan is the world’s sixth most populous country (190m inhabitants); two-thirds of
Pakistanis are under the age of 30 (Statistics-PK, 2016). The institutional environment of a
country, including its cultural norms, potentially has important implications for firms’ HR
policies. The unemployment rate is 5.6 percent and female participation in the workforce is
low. The literacy rate is 58 percent (Ministry-of-Finance, 2015). In year 2013–2014, 0.31m
students were enrolled in 3,300 technical and vocational institutes in the country. In the
higher education sector, 1.60m students were enrolled in 161 universities. Thus, firms in
Pakistan have access to skilled as well as unskilled workers to recruit from, potentially
influencing the types of HR practices that local firms and MNC adopt.
In the past few decades, governments of Pakistan have encouraged foreign direct
investment (FDI), liberalization, de-regulation and privatization. The Government has, for
example, granted tax holidays for foreign investors, helping total inward FDI reach $750.9m
in 2015 and $2,979m in total. These characteristics and the FDI figures illustrate the
importance of FDI to Pakistan and highlight the potential opportunities for local firms to
emulate MNCs’ HPWS practices.
Trade unions play almost no role in the economy: only 6.3 percent of the workforce is
unionized and a mere 2.2 percent are covered by a collective bargain. The Industrial
Relations Act 2010 does not allow unions any role in retention, suspension, the dismissal of
employees ( Jhatial et al., 2014), enabling companies to implement the HR practices that they Converging
deem to be most appropriate. Moreover, Paik et al. (2011) argue that the institutional HRM practices
environment provides flexibility and options to MNCs to select whichever management
practices are most appropriate for their operations. The regulatory institutional
environment in Pakistan provides no strong requirements in terms of HRM policies that
foreign firms must implement; foreign firms are unlikely to copy local firms’ HR practices in
a process of mimetic isomorphism as MNCs will not perceive local firms’ practices to be 935
superior to their own.
National culture, including religion, plays an important role in the type of HRM policies
and practices being utilized in Asian economies (Al-Hamadi et al., 2007; Mellahi, 2007).
Pakistan’s culture has been classified as collectivist, high on power distance, hierarchical
authority, and there is a preference for uncertainty avoidance and a restrained society (Iqbal
et al., 2018). Factors such as connection, cronyism, corruption, deference to seniors are
strong national characteristics. Family and social relationships take preference over rules
and regulations and organizational life (Hofstede et al., 2010; Jhatial et al., 2014). In general,
such factors are likely to influence firms’ HRM practices. In particular, MNCs may be more
likely than domestic companies to implement specific HPWS practices.

Hypothesis development
This section develops hypotheses to examine the differences, if any, between key HPWS
practices in subsidiaries of MNCs and domestic firms in Pakistan, a country with a
distinctive institutional and cultural context. There is no consensus on which practices
constitute HPWS; we, therefore, draw on the HPWS literature and select the following
practices: selective hiring and sophisticated selection, extensive training and development,
employee involvement and participation, high compensation contingent on performance,
performance review, appraisal and career development (Marchington and Wilkinson, 2008;
Guest et al., 2003; Guthrie et al., 2009).

Selective hiring and sophisticated selection

Attracting high-quality candidates and using sophisticated techniques to select them are
central to the high performance paradigm (Marchington and Wilkinson, 2008). The
literature on MNCs highlights that in an effort to recruit and select the best talent to fulfill
their competency requirements, MNCs often employ global best practice in their hiring and
selection process (Garavan et al., 2012). A sophisticated recruitment system is needed to
differentiate their employment offering from the domestic firms and to identify a person-
organization fit (McDonnell et al., 2010; Vaiman and Brewster, 2015). However either to
incorporate a sophisticated approach to recruitment or selection in the subsidiary depends
upon the corporate strategy of the MNC (Mahmood, 2015).
In local firms, a person’s social circle either based on close family relationships or a wider
social network can play an important role in selection and hiring decisions (Saher and
Mayrhofer, 2014). In Pakistan, a social elite has emerged as corporate entities rely on
specific educational institutions that cater to the needs of the elite, creating a barrier for
other candidates to apply to MNC subsidiaries and well-known domestic firms (Khilji and
Wang, 2006). The political, military, civil and social elite in Pakistan have been shown
to use employment opportunities to oblige their social network, supporters and punish
opponents. Some evidence suggests that such a mind-set is true for private businesses
( Jhatial et al., 2014). Thus, some evidence suggests that hiring and selection may be linked to
sifarish (i.e. personal connections or contacts that are used to benefit each other) (Mangi
et al., 2012). As a result, recruitment and selection decisions may often not be based on merit,
but on connections.
ER However, other evidence indicates that Pakistani companies are adopting more merit-
41,5 based recruitment and selection practices (Ali and Brandl, 2017). Recently, almost all the
subsidiaries of MNC and major domestic firms have started advertising vacancies online
and applicants can apply online, suggesting that firms appoint the most suitable rather than
the most well-connected applicant to the job. Thus, we hypothesize:
H1. There will be no differences between MNC subsidiaries and domestic firms in
936 Pakistan in their recruitment and selection practices.

Extensive training, learning and development

The provision of training opportunities to employees to improve their knowledge and
problem-solving abilities is an important part of HPWS (Pfeffer, 1998). MNCs depend on the
development of global workers; thus they often focus on soft HRM policies and practices
that lead to the overall development of employees’ human and social capital as well as their
cultural intelligence so that they can operate, potentially, across the globe (Bozkurt and
Mohr, 2011; Tatoglu et al., 2016).
Although several governments in Pakistan have prioritized skill development, these
priorities may not have influenced firm activities. The existing evidence indicates that MNC
subsidiaries provide better training and career opportunities to workers in Pakistan (Khilji
and Wang, 2006). This may reflect a sifarish culture to offer training, learning and
development opportunities to those managers who are well connected rather than to those
who merit them or to a wide group of employees. We, therefore, hypothesize that:
H2. MNC subsidiaries in Pakistan are more likely than domestic firms to provide
training, learning and development opportunities to their employees.

Employee involvement and participation

Employee involvement and participation is one of the most important HPWS practices
(Marchington and Wilkinson, 2008). The practice differentiates traditional mechanistic jobs
from more skilled work (Beltrán-Martín et al., 2008). Mellahi et al. (2013) provided evidence that
MNC subsidiaries are more likely to encourage employee involvement and participation as
compared to domestic firms. Williams and Lee (2016) provided evidence that MNC
subsidiaries in South Korea provide a formal and extensive platform of employee involvement
and participation as it facilitates knowledge sharing. Lavelle et al.’s (2010) study of MNCs in
Ireland concluded that MNCs extensively use direct and indirect voice mechanisms. Indeed,
employee involvement and participation has been considered as a critical element in MNCs’
foreign operations in different cultural contexts (Pudelko and Harzing, 2007).
The evidence on the extent of employee involvement and participation in Pakistani firms
is mixed. Some evidence suggests that, in general, Pakistani firms provide limited
information to employees, do not delegate authority to them and do not enable them to
participate in decision making (Khilji, 2002; Khilji and Wang, 2006). In this view, a typical
Pakistani firm, reflecting high power distances, has a hierarchical structure and is highly
formalized and centralized (Mangi et al., 2012). However, other evidence suggests that
Pakistani firms are increasingly adopting HRM practices that promote participation (Miah
and Bird, 2007). Based on the latter evidence, we hypothesize that:
H3. There will be no differences between MNC subsidiaries and domestic firms in
Pakistan in their employee involvement and participation HRM practices.

Performance review, appraisal and career development

Performance appraisal is a systematic process in which firms assess an employee’s performance
and productivity against pre-set standards and organizational goals. Performance appraisal and
career development are key aspects of HPWS and are used to enhance employees’ skills and Converging
motivation (Macky and Boxall, 2007; Jiang et al., 2012). Increasingly evidence is emerging that HRM practices
indicates that performance appraisal is becoming standardized across MNCs (Edwards et al.,
2016; Mellahi et al., 2016).
In Pakistan, the evidence suggests that MNC subsidiaries emphasize the development of
employees more than domestic firms do (Khilji and Wang, 2006). Moreover, domestic firms
may find it difficult to implement performance reviews as they are likely to run counter to 937
agrarian norms of mutual expectations, exchange of favors and social network ties as well
as other cultural values, such as the acceptance of differences in status (Ali and Brandl,
2017). Consequently, we hypothesize that:
H4. MNC subsidiaries will be more likely to implement performance reviews, appraisals
and career development reviews than domestic firms.

Performance-related compensation
Performance-related pay is a key HPWS practice (Marchington and Wilkinson, 2008). It can
be designed both for individuals and the team depending upon task interdependence and it
can take several forms, such as profit sharing and stock options, etc. (Shaw et al., 2002).
Performance-based pay is becoming increasingly popular in the USA and Europe and is
becoming popular in Asia (Chang, 2006). However, Farndale et al. (2008) note that MNCs as
compared to domestic firms are more likely to offer contingent pay schemes, such as profit
sharing and stock options, to employees based on their performance. Findings from Mellahi
et al. (2013) suggest that, in Turkey, MNC subsidiaries are more likely than domestic firms to
offer performance-related pay. Other research suggests that performance-related pay, in the
shape of profit sharing and stock options, has become an international practice in MNCs
(Ahrens et al., 2018).
Evidence on the prevalence of performance-related pay in Pakistan is mixed. Some
indicates that pay in Pakistani firms is typically seniority based (Khilji, 2002), while other
evidence indicates that some local firms are adopting variable pay that is dependent on
employees’ contributions (Khilji and Wang, 2006). Drawing on the evidence overall, we
hypothesize that:
H5. MNC subsidiaries are more likely to offer performance-related pay than
domestic firms.
Figure 1 sets out all of our hypothesized relationships.

Sample, research design and data collection

We targeted MNC subsidiaries and domestically owned workplaces in the banking,
information technology and pharmaceutical sectors. All these sectors have enjoyed a steady
inflow of FDI and a sizeable number of MNC subsidiaries operate in these sectors. The
population for our sampling frame was identified by visiting the websites of the relevant
industry trade associations. The respective trade associations from where the details of their
members were identified are: Pakistan Bankers Association, The Software Export Board,
Pakistan and Pharmaceutical Manufacturers Association. The lists were comprehensive
and provided the details of addresses and contact person in the relevant establishment.
All private sector establishments with 20 or more employees located in and around four
major metropolitan cities of Islamabad, Rawalpindi, Lahore and Karachi were invited to
participate in the research. In Pakistan, the majority of economic activity is centered on
these cities. Some 251 MNC subsidiaries and 830 establishments of domestic firms operate in
these cities. The majority of the MNC subsidiaries were headquartered in the UK or the
USA. We contacted all of the 1,081 workplaces in our population; some 392 agreed to
ER High Performance Work
41,5 System Practices

Selective hiring and MNC

sophisticated selection Subsidiary

Extensive training, learning Domestic Firm

938 and development

Employee involvement and

participation

Performance review,
appraisal and career
development Control
Variables
Performance-related Firm Size
Figure 1.
compensation Firm Age
Research framework

participate in a face-to-face survey, leading to an overall response rate of 36.4 percent. We

received 131 responses from the participants working for MNC subsidiaries (response rate
52 percent) and 261 responses from domestic firms (31 percent). The respondents typically
held titles such as factory general manager, plant manager and branch manager. All of the
respondents were senior executives and have served their respective firms for number of
years, making them familiar with HR practices.
Unfortunately, we do not have any information other than the address of workplaces. We
cannot, therefore, check for a non-response bias in our sample by comparing some of the
characteristics of our sample to those of the population. In addition, as we collected our data
using a face-to-face survey, we do not have any “late responders” to use as proxies for “non-
responders.” Our relatively high response rates underpin the validity of our research.
Although the sample sizes for both groups of firms are relatively small, they both exceed the
minimum number of 100 cases for logistic regressions (Long, 1997). Even though we have a
high percentage of the total populations in our sample, our unequal sample sizes mean that
our coefficient values and odds ratio estimates should be treated with some caution (King and
Zeng, 2001; Nemes et al., 2009). In particular, our odds ratios may bigger/smaller than the true
value for positive/negative ratios. Building on previous studies (Batt, 2002; Wright et al., 2005),
we investigated the applicability of HPWS practices for the firms’ non-managerial employees
and the impact of these practices on performance. Relevant theory drives this choice, as
HPWS practices are only likely to influence performance if they apply to non-managerial
employees (Lawler, 1986; Pfeffer, 2012). One of the paper’s authors collected the data
using structured face-to-face interviews with respondents at their premises. The respondents
were highly educated professionals; the questionnaire was carefully designed and kept to
the shortest possible length to ensure a good response rate and valid answers. On average, the
structured interviews lasted 20–30 min per respondent. Respondents were encouraged to take
their time to complete the answers to ensure accuracy.

Measures
The independent variables. All independent variables of the study were measured
by using items adopted from earlier work (Guest et al., 2003; Guthrie et al., 2009;
Wright et al., 2003; Macky and Boxall, 2007). All items were measured on a five-point
Likert scale.
 Selective hiring and sophisticated selection (recruitment) was operationalized using three Converging
items: How often does your recruitment process generate as many good/qualified applicants HRM practices
as you need? Are one or more employment tests (e.g. skills tests, aptitude tests, mental/
cognitive ability tests) used prior to hiring? Is there a deliberate attempt to provide a
preview of what work in the organization will be like, including more negative aspects as
part of recruitment and selection process?
Extensive training, learning and development (training) was operationalized by a four- 939
item construct: Have non-managerial employees been trained in variety of jobs or skills (are
cross trained) and/or routinely perform more than one job (are cross utilized); received
intensive/extensive training in company-specific skills (e.g. task or firm-specific training);
received intensive/extensive training in generic skills (e.g. problem solving, communication
skills, etc.). Your company places a great deal of importance on training.
Employee involvement and participation (employee involvement) – the practice was
operationalized using four items: are employees involved in programs designed to elicit
participation and employee input (e.g. quality circles, problem solving or similar groups);
provided with relevant operating performance information (e.g. quality, productivity, etc.);
provided with relevant strategic information (e.g. strategic mission, goals, tactics,
competitor information, etc.); organized in self-directed teams.
Performance review, appraisal and career development (performance appraisal) was
operationalized using four items: employees receive formal performance appraisal or
evaluation on a routine basis; employees receive formal performance feedback from more
than one source (i.e. feedback from several individuals such as supervisors, peers, etc.). A
proportion of non-managerial employees pay is determined by performance appraisal. The
performance feedback provides information on how they do their job.
High compensation contingent on performance (compensation) was measured using
three items: employees can participate in profit sharing or share ownership schemes based
on their job performance or team performance; are they offered additional pay or have they
been offered a pay rise in the past year as a result of job performance or work in team; are
employees offered some sort of cash incentive?
Drawing on previous studies, we controlled for the number of employees and age of the
firm in our analysis.
The dependent variable. Following Mellahi et al. (2013), we assigned a value of 0 to
multinational subsidiaries and a value of 1 to domestic companies for our categorical
dependent variable. In other words, our dependent variable is the dichotomous variable of
ownership, that is, MNC subsidiary or local establishment.

Analysis
We ran a series of binary logistic regression models to test the hypothesized relationships.
The regression coefficient estimates the impact of an independent variable on the
probability of an event occurring. There is no suggestion of multicollinearity between
predictor variables. The descriptive statistics with pairwise correlations, values for
convergent and discriminant reliability are provided in Table I.
The convergent validity of all the constructs is established as AVEW0.50 and the
discriminant validity of all the constructs is established, as the square root (AVE) Winter-
correlations. We ran a confirmatory factor analysis on the five factor solution. The five
factor confirmatory factor analysis yielded the best fit for the data ( χ2 ¼ 280.30, df ¼ 20,
CMIN/df ¼ 1.67, GFI ¼ 0.96, RMSEA ¼ 0.05). The CFA confirmed our five HPWS policies
(selective hiring and sophisticated selection; extensive training, learning and development;
employee involvement and participation; performance review, appraisal and career
development; and high compensation contingent on performance). Table II provides further
 ER
41,5

940

Table I.

reliability)
discriminant
and correlation

(convergent and
Descriptive statistics

coefficients and AVEs

Mean SD 1 2 3 4 5 6 7 8

1 Company type – –
2 Age of the company 3.42 1.123 0.060
3 Ln of the size 4.00 0.940 −0.014 0.266**
4 Recruitment 3.22 0.745 0.031 0.333** 0.110* 0.780
5 Employee involvement 3.94 0.886 −0.116* 0.157** 0.242** 0.000 0.750
6 Compensation 1.95 0.992 −0.196** 0.204** 0.240** 0.153** 0.362** 0.822
7 Performance appraisal 2.96 0.706 −0.023 0.063 −0.110* 0.097 0.343** 0.185** 0.756
8 Training 2.61 0.903 −0.184** 0.222** −0.029 0.146** 0.299** 0.235** 0.325** 0.817
Notes: The diagonal values are the square root of AVEs of the relevant construct. These values should be greater than the inter-correlation to establish discriminant
validity of the construct. The table shows that discriminant validity of all the constructs is established as the diagonal values, i.e., square root (AVE)Winter-correlations.
The convergent validity of all the constructs is established through AVEW0.50. Please further note that variable company type is a binary variable coded as 0 for MNC
and 1 for domestic firm. As it is binary in nature so mean and SD values are not provided. *,**Statistical significance at the 10 and 5 percent levels respectively
 Cronbach’s
Converging
α (CR HRM practices
Factor composite
Construct (items) loading reliability) AVE Convergent validity Discriminant validity

Recruitment – 4 items Established AVEW0.50 Established

(Sqrt (AVE)W
inter-correlation) 941
Rec1 0.858 0.723 (0.817) 0.608
Rec2 0.884
Rec3 0.554
Employee involvement – 4 items Established AVEW0.50 As above
EI1 0.891 0.760 (0.743) 0.562
EI2 0.439
EI3 0.817
EI4 0.771
Compensation – 3 items Established AVEW0.50 As above
Comp1 0.838 0.707 (0.809) 0.676
Comp2 0.868
Comp3 0.757
Performance appraisal – 4 Established AVEW0.50 As above
items
PA1 0.849 0.705 (0.753) 0.572
PA2 0.898
PA3 0.418
PA4 0.765
Training – 4 items Established AVEW0.50 As above
Train1 0.930 0.848 (0.843) 0.668
Train2 0.878
Train3 0.529
Train4 0.870
Notes: In this table; Rec1, Rec2, Rec3 are the items of recruitment; EI1, EI2, EI3 are the items of employee
involvement; Comp1, Comp2 and Comp3 are the items of compensation; PA1, PA2, PA3 and PA4 are the Table II.
items of performance appraisal, Train1, Train2, Train3, Train4 are the items of training. The second column Reliability
shows their loadings on their main construct. The dependent variable (company type) is dichotomous and and validity
single-item construct, therefore, no measurement model for this construct (measurement model)

details regarding Cronbach’s α values, the items loadings for their relevant constructs,
the AVEs and their composite reliabilities of the practices (the independent variables)
and establishment of reliability and validity of constructs. The dependent variable is a
single-item dichotomous variable; we did not, therefore, assess its reliability and validity.
Table III shows the results of the logistic regressions. Multinational subsidiaries
are the reference category. The binomial logistic model explains the variation in HRM
practices between MNC subsidiaries and domestic Pakistani firms. A negative sign
on the independent variable coefficient indicates that MNC subsidiaries use the relevant
practice more than domestic firms; a positive sign indicates their relative greater use by
domestic firms.
We tested the individual effects of high performance HRM practices along with control
variables in Models 1–6. All of the high performance HRM practices as independent
variables along with control variables were tested in Model 6. All seven models have
significant χ2 values ( p o0.001). All the models have good fit with correct ratios ranging
from 0.68 to 0.72. The Hosmer and Lemeshow value for all the models was non-significant,
ER Variable name Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
41,5
Recruitment 0.02 0.12
Training −1.14*** −0.95**
Employee involvement −0.32** −0.14
Performance appraisal −0.05 −0.42**
Compensation −0.72*** −0.71***
942 Log size −0.81*** −0.81*** −0.75*** −0.81*** −0.84*** −0.81***
Age 0.11 0.19* 0.12 0.10 0.20* 0.22*
Model χ 2
49.04*** 59.08*** 54.60*** 49.02*** 79.33*** 89.00***
Pseudo R2 0.16 0.19 0.18 0.16 0.25 0.28
Correct ratio 0.68 0.70 0.69 0.68 0.72 0.71
Hosmer and Lemeshow 0.71 0.95 0.69 0.71 0.20 0.35
Notes: n ¼ 392. The dependent variable is the type of company, i.e., MNC subsidiary or local workplace. MNC
subsidiary were assigned a value of “0”; local establishments, “1.” MNC subsidiaries ¼ 131; local
Table III. workplaces ¼ 261. Negative signs indicate MNC subsidiaries’ greater use relative use of the HRM practices,
Results of while positive signs indicate local establishments’ greater use of the HRM policy. *p o0.1; **p o0.05;
logistic regressions ***p o0.001

confirming the models’ goodness of fit. Pseudo R2 values ranged from 0.16 to 0.25 in Models
1–5 that include the individual high performance HRM practices, and 0.28 in Model 6 that
incorporates all the high performance HRM practices.

Results
As hypothesized by H1, the coefficient of selective hiring and sophisticated selection
(recruitment) is positive, but not statistically significant in Models 2 and 6, thus failing to
support the hypothesis and suggesting that multinational subsidiaries and domestic firms
do not differ with respect to their use of the practice. The coefficient of extensive training,
learning and development (training) is negative and statistically significant the 0.1 percent
level in Model 2 and at the 5 percent level in Model 6. Thus, MNC subsidiaries are more
likely to provide extensive training, learning and development opportunities to their
employees compared to domestic Pakistani firms.
With respect to employee involvement and participation (employee involvement) (H3), the
individual practice model (Model 3) indicates a negative and statistically significant coefficient;
however, this variable is not statistically significant in Model 6. Keeping in view the improved
explanatory power of the latter model, we consider its result to be more important. Hence, we
conclude that there are no statistically significant differences with respect to employee
involvement and participation between MNC subsidiaries and domestic firms. In the case for
the performance review, appraisal and career development the coefficient is negative and
insignificant in case of individual practice in Model 4; however, the practice becomes significant
in Model 6. Thus, the overall model that contains all of the independent variables supports H4
(MNC subsidiaries are more likely than domestic firms to use performance appraisals).
As hypothesized by H5 the coefficient of high compensation contingent on performance
(compensation) is negative and statistically significant at the 0.1 percent level in Models 5 and 6.
Thus, the results suggest that MNC subsidiaries are more likely to provide performance-related
compensation to their employees than domestic firms. However, overall, the mean values for this
practice indicates that the surveyed companies use this practice infrequently in Pakistan.

Discussion and conclusion

We examined the HPWS practices of MNC subsidiaries and domestic firms to understand
similarities and differences between these two types of firm, revealing that host-country
institutions influence the adoption of some of these practices in MNC subsidiaries. Converging
Isomorphism seems to affect some HRM practices in MNC subsidiaries in Pakistan. Thus, HRM practices
no statistically significant differences were observed between the two types of firms with
respect to selective hiring and selection and employee involvement and participation. Our
finding of no statistically significant differences between MNC subsidiaries and local firm in
terms of employee involvement and participation are in line with the previous research
that indicates that the practice is increasingly gaining popularity in Asian countries 943
(Torrington and Hall, 1998; Miah and Bird, 2007), despite the marginal role that unions play
in Pakistan.
Performance reviews are more likely to be used, in a statistically significant way, by
MNC subsidiaries than by domestic firms. We argued that Pakistani culture reflects
agrarian values with society expecting mutual favors and the maintenance of one’s social
network at the expense, potentially, of praising those outside it (Ali and Brandl, 2017).
Conforming to these social norms, domestic firms seem less interested in the strict
implementation of performance review practices.
Our findings also indicate that institutions play a role in domestic firms’ implementation
of extensive training and development policies: MNC subsidiaries are more likely to offer
training opportunities to employees. These findings support the view that a sifarish
culture affects many Pakistani firms, limiting the training and development opportunities
for many employees.
In the case of compensation contingent on performance, the evidence reveals that MNC
subsidiaries are more likely to implement the practice. Once again, this suggests that
sifarish cultural norms lead managers to prioritize existing seniority and contacts at work
rather than to open up compensation to more transparent policies that are likely to reward
employees to a greater extent on merit ( Jhatial et al., 2014).
An important argument of our study was that the high performance HRM model has
gained an institutional status as a best practice US model. This has prompted some firms
worldwide to organize their HRM practices on HPWS patterns. However, does a model
that has its roots in US institutions have universalistic appeal? Do firms in other
institutional settings accept the HPWS model as best practice? We found no evidence of
complete convergence to the US model of HPWS in MNCs subsidiaries or domestic firms
in Pakistan. An examination of individual practices in our case helped us to segregate the
practices which were more localized by MNC subsidiaries and the ones which were
integrated to the best practice US model. Though our basis of comparison was the HPWS
model, we found support for the duality perspective in convergence/divergence debate.
In line with the wider findings in the literature (Brewster et al., 2008, 2016; Mellahi et al.,
2013), our results support the argument that there are various forces at play and HRM
practice is subject to various institutional, especially normative, pressures both from host
and home country context.
Our findings have some practical implications for firms in Pakistan. They can help MNC
subsidiary managers to better understand the situation of local context and their standing
vis-à-vis HPWS in Pakistan and in a similar way the local managers to establish their
benchmarks for assessing the HRM status and change in Pakistan as compared to a decade ago.
Our research has some limitations: our respondents were single managers in each firm; our
approach reflected, however, the difficulties of obtaining multiple respondents across several
firms and conforms to practices in many studies by focusing on key informants who have the
relevant knowledge to answer our questions (De Cieri and Dowling, 2012). In addition, the
number of domestic establishments is almost double that of MNC subsidiaries. The difference
in sample sizes may result in “false positives” in logistic regressions; in other words, our results
may suggest a statistically significant difference between the two types of establishment (MNC
and local), when none exists (Herrera and Gómez, 2008). However, we were able to gain high
ER response rates for both samples and we conducted face-to-face surveys, helping to improve the
41,5 validity and representativeness of our data. Therefore, our cross-sectoral study of foreign and
domestic workplaces has been able to shed light on HR practices across important firms and
has highlighted the areas of convergence and divergence in HRM practices across the two
groups of workplace.

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Further reading
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university teachers in Pakistan”, International Review of Business Research Papers, Vol. 4,
pp. 302-315.
Zhu, Y., Warner, M. and Rowley, C. (2007), “Human resource management with ‘Asian’ characteristics:
a hybrid people-management system in East Asia”, The International Journal of Human
Resource Management, Vol. 18, pp. 745-768.

Corresponding author
Matthew M.C. Allen can be contacted at: [email protected]

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