International Joint Ventures Hrm And Viable Knowledge Creation

Int. J. of Human Resource Management 13:4 June 2002 624–641

International joint ventures, HRM and viable knowledge migration

Paul Iles and Maurice Yolles Abstract International joint ventures (IJVs) are an increasingly popular form of voluntary co-operation between organizations of different sizes, sectors and geographical locations to satisfy strategic purposes and manage increasingly complex business environments. However, international joint ventures may fail, and HRM plays an important role in their success or failure. From a systems perspective, IJVs offer several kinds of complexity which may contribute to the generation of con ict and failure. The paper proposes that we explore the role of HRM in IJVs through viable systems theory, especially in relation to knowledge migration and organizational learning. The theory presented distinguishes between the cognitive, organizing and behavioural domains of the IJV as a system in the analysis of the relationship between types of worldview and behaviour in IJVs. It proposes a model of viable knowledge development in IJVs and its relationship to HRM, involving knowledge migration, appreciation and action, leading to organizational learning, and identiŽ es directions for future research. Keywords migration.

IJVs;

viable

systems;

HRM;

organizational

learning;

knowledge

Introduction International joint ventures (IJVs) are of a different nature to more formal mergers, acquisitions or intricate partnership agreements, being legally distinct organizations formed by two or more sponsoring partners originating in two or more countries (Geringer, 1991; Muralidharan and Hamilton, 1999). For Glaister and Buckley (1997: 200) ‘alliances’ are the generic form of co-operation, and equity joint venture a special case cemented by ownership sharing through equity holdings. IJVs have become popular because they enable organizations to deal more ably with complex environments. Partners may seek access to geographic or product markets, or to develop new products and share risks, expecting to create more value by pursuing IJVs than they would on their own. IJVs have often been studied from resource-based, transaction cost and technology transfer/knowledge diffusion perspectives, but, increasingly, approaches have focused on organizational learning (e.g. Schuler, 2001a, 2001b). The paper proposes that we focus on the HRM practices involved in organizational learning and knowledge migration in IJVs, especially on those involved in knowledge migration, knowledge appreciation and knowledgeable action. This requires an analysis of the Professor Paul Iles, Professor of Strategic HRM, Teesside Business School, University of Teesside, Borough Road, Middlesbrough TS1 3BA, UK (tel: + 01642 342 800; fax: +01274 774 072; [email protected]). Dr Maurice Yolles, Reader in Systems, Liverpool Business School, Liverpool John Moores University, 98 Mount Pleasant, Liverpool L3 5UZ, UK (tel: +0151 231 3871; fax: 0151 231 3234; [email protected]). t

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

625

cognitive interests, purposes and in uences of the parties involved in different kinds of IJV situations. Though there have been recent reviews of research on HRM in IJVs (e.g. Schuler 2001a, 2001b) and speciŽ c studies of HRM in IJVs in India (e.g. As-Saber et al., 1998, Iles and Wilson, 2002) and China (e.g. Ding and Akhtar, 2000; Gamble, 2000, 2001; Glover and Siu, 2000; Leung et al., 2001; Taylor, 2001; Tung and Worm, 2001; Shenkar and Chow, 1995), theory in this area remains underdeveloped; in particular, theory on HRM, organizational learning and knowledge development. The paper aims to: 1. review the theoretical and empirical literature on IJVs, especially that focusing on HRM in IJVs and its relationship with organizational learning and knowledge development and migration; 2. develop a framework for understanding the role of HRM in IJVs in relation to learning and knowledge migration in order to develop an agenda for further research into HRM and IJVs; 3. develop a viable systems model of HRM, organizational learning and knowledge migration in IJVs that focuses on the cognitive interests, purposes and in uences of the parties involved and their impact on knowledge migration, appreciation and knowledgeable action, and develop an agenda for further research. Theoretical perspectives on IJVs IJVs are often formed to gain knowledge, market entry, raw materials, channel access and to exploit economies of scale, spread risks and improve global competitiveness (Schuler, 2001a, 2001b). Firms lack complete control over strategy and structure in IJVs; these need continual negotiation and re-negotiation. It is claimed that perhaps as many as half IJVs formed fail (e.g. Kelly and Parker, 1997). Cultural differences are often cited as the cause for failure (e.g. Fedor and Werther, 1996); managerial style, one of its manifestations, can also jar alliances (Tsang, 1995). However, despite the importance of culture and management style, most approaches to alliances and IJVs have not been based on HRM theory (except for Schuler, 2001a, 2001b) but on transaction-cost (TC), organizational learning (OL) and resource-based views (RBV) e.g. Glaister and Buckley (1997), as well as knowledge diffusion and technology transfer approaches (Klauss, 2000; Hull, 2000). From TC perspectives, Ž rms seek partners with knowledge of local culture and markets, given the uncertainty surrounding international expansion and the ability of the IJV to economize on information requirements by sharing information at lower costs than would be the case through hierarchical approaches, such as wholly owned foreign subsidiaries. RBV focuses on the motivations for IJV formation, especially the need to exploit excess or idle under-performing resources (including human resources) and to acquire or access new resources for growth (again, including new human resources). IJVs are then seen as bundles or portfolios of resources contributed by partners in accordance with a predetermined legal contract, not as coalitions of business activities. IJVs enable selective access to required resources and phased approaches to resource acquisition and transfer (e.g. IJV termination with acquisition by one partner, e.g. Zhai et al., 1999). OL perspectives in contrast emphasize IJV learning and the need for partners to acquire knowledge, although usually at a rather abstract strategic level rather remote from most HRM theory and research (e.g. Hamel, 1991). Learning is becoming increasingly important to IJVs; as Schuler (2001a) argues, the main source of both instability and potential gains in competitive IJV collaborations is the relatively greater

Downloaded By: [informa internal users] At: 09:08 25 March 2008

626

The International Journal of Human Resource Management

learning capacity of one partner. The approach developed here recognizes the importance of TC and seeks to build on RBV and OL perspectives by regarding knowledge as a critical resource and identifying knowledge creation and migration as key IJV processes leading to organizational learning. It thus seeks to overcome some of the limitations of other approaches to ‘knowledge management’, ‘transfer’ and ‘diffusion’ in IJVs, such as ‘technology transfer’ (Klauss, 2000), often dominated by a ‘hardware orientation’ involving the application and transfer of ‘hard’ technologies in relatively unproblematic ways (e.g. Hull, 2000). Such studies fail to question the purpose or nature of the processes involved, often viewing them as involving one-way transfer of modern management practices, including HRM practices, and technology. ‘Knowledge diffusion’ concepts Ž rst emerged in the 1950s as a way of understanding how multinational enterprises conceived of IJV formation as driven by knowledge assets, especially technologies, management and HR systems. Unidirectional  ows of knowledge are often assumed – from the corporation’s home base (e.g. R&D function) to its subsidiaries and alliances. As in technology transfer, there is a separation between knowledge generation and application. Recent ‘knowledge leveraging’ perspectives (e.g. Grant et al., 2000) focus more on the links between generation and application, forms of productive knowledge other than technology, and on the need to acquire and access knowledge from outside the Ž rm’s boundaries. Knowledge is here seen as created in many sites and functions and accessed in many locations, and its creation and exploitation are seen as linked or complementary processes. New knowledge is seen as needing to be aligned with existing knowledge, dependent on the recipient’s ‘absorptive capacity’ (Cohen and Levinthal, 1990) or organizational learning capacity, linking this perspective with organizational learning perspectives (e.g. Hamel, 1991; Pucik, 1988). Grant et al. argue that ‘the movement of knowledge between different geographical locations is central’ (2000: 115–16) to the process of adding value in knowledge development. Here we conceive of this ‘movement’ of knowledge in IJVs not as ‘diffusion’ or ‘transfer’ but as knowledge ‘migration’, emphasizing the multidirectional, unplanned and emergent nature of knowledge  ows. Our approach therefore seeks to build on earlier perspectives by regarding knowledge as a critical resource; knowledge development and migration rather than knowledge transfer or diffusion are then seen as key processes in IJVs, making HRM key to IJV success. Empirical research on IJVs A major issue for research in IJVs has been partner selection, as outcomes will be in uenced by the nature of the chosen partner, in uencing the mixture of skills and resources available to the IJV (including knowledge, HR practices and people) and its ability to achieve strategic objectives (Geringer, 1991). Partners are likely to have different strategic objectives, and, when partners possess complementary missions, resource and managerial capabilities and other attributes that create a strategic Ž t, success may be more likely (Harrigan, 1985, 1990). Geringer (1991) distinguishes between task-related and partner-related criteria in selecting IJV partners and argues that partner-selection criteria have often been neglected (Glaister and Buckley, 1997). The HRM characteristics of partners have been a particularly under-researched area. Another focus of research has been strategic choice, especially the strategic interests of foreign MNCs; the interests of local partners have often been overlooked, a surprising omission, since Li and Shenkar (1997) argue that local partners’ strategic objectives also impact on choice of both IJV partner and structure (Gray and Yan, 1997).

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

627

Various changes alter partners’ incentives to continue IJV strategy and structure, perhaps necessitating IJV restructuring (e.g. Harrigan, 1985); otherwise, the IJV may fail to achieve its objectives (Muralidharan and Hamilton, 1999). The need for restructuring may arise from misperceived initial Ž t, perhaps because of hidden, competitive objectives (Hamel, 1991), inter-partner learning and environmental changes (Harbison and Pekar, 1998). Non-contractual inputs (including HR inputs) are becoming increasingly important to IJV success through raising contributors’ levels of in uence and building expertise, authority, goodwill and trust (e.g. Child et al., 1997). Trust has been an important issue in IJV research; Butler and Gill (1997), distinguishing personal, procedural and institutional trust, found it enhanced by low parent expectations at formation; ambiguous parent goals for the IJV, but enough agreement to proceed; low reliance on procedural trust; lack of competition or dependence between parents; and the relative unimportance of the IJV to both parties. Parent trust, based on IJV performance, was developed over time through multiple-level, ongoing interactions, and enhanced by high and increasing levels of autonomy granted to the IJV, its physical separation from its parents, its distinct geographical and organizational identity and its parents’ consistent support (Gill and Butler, 1996). The relationship of trust to organizational learning and the role of HRM in in uencing trust and learning have been less explored in research speciŽ cally focusing on HRM and IJVs. HRM issues in IJVs IJVs are entities with particularly complex sets of HR practices due to the high levels of interaction between employees from collaborating partners of different corporate and national backgrounds (who may be nationals of the parent-country (PCNs), hostcountry (HCNs) or a third-country (TCNs)), which presents many HR challenges (e.g. Dowling et al., 1994; Schuler et al., 1993; As-Saber et al., 1998). Two sets or more of HR practices interact, with potential clashes between the need to comply with local HR practices (over stafŽ ng or labour relations, for instance) and the desire of the partners to retain parent-country practices for reasons of familiarity and/or control. Establishing a shared vision, developing negotiation, communication and con ict management skills, harmonizing management styles and HR practices, acculturating managers to work with foreign partners, developing a teamwork culture and using stafŽ ng and careermanagement practices to reduce psychic distance and encourage identiŽ cation with the IJV have often been cited as key challenges for HRM in IJVs (e.g. Pucik, 1988). The decision to adopt an IJV mode of entry and select a particular partner also seems in uenced by HRM (e.g. As-Saber et al., 1998). The local regulatory environment may impact on stafŽ ng and employee relations practices in particular, and local culture may affect management style. Investing Ž rms may be more likely to adopt IJV modes of entry in relatively unfamiliar, culturally distant locations, seeing local partners as useful for identifying a suitable workforce, dealing with employee relations issues and minimizing the need for high-cost expatriate managers. HR issues in uenced selection of the IJV as an entry mode, and cultural differences, unfamiliarity and low labour productivity were seen as important HRM issues in Australian–Indian IJVs, but not labour-force quality or militancy (As-Saber et al., 1998). Organization-speciŽ c HR issues such as jointly managing labour unrest, wage disputes, working hours and facilitating inter-partner learning were seen as more in uential HR factors, but less important than such factors as resource sharing, distribution channel access, transaction cost minimization and compliance with government regulations. HRM did however

Downloaded By: [informa internal users] At: 09:08 25 March 2008

628

The International Journal of Human Resource Management

play a signiŽ cant role in affecting IJV success, indicating its importance. Particularly important HR issues included the appropriate selection of personnel, the use of experienced PCNs, cross-cultural training, joint training of HCNs and PCNs, providing special compensation to expatriates, using HCNs in key positions and building a unique IJV culture. Other important HRM issues included using experienced HCNs familiar with local markets and cultures (minimizing the costs of expatriation), using highquality experienced PCNs at the beginning of IJV operations (promoting inter-partner learning and bridging cultural differences), using local partners to deal with corruption and bureaucracy, coping with the high demand for experienced local managers, exercising strategic control of IJVs through in uencing stafŽ ng, and overcoming HRrelated problems by utilizing the local partners’ experience and familiarity with local HR practices (As-Saber et al., 1998). Increasingly important issues for IJVs, and of particular relevance to HRM, are issues of organizational learning and knowledge creation in IJVs. These are taken up in more detail by Schuler (2001a, 2001b), whose analysis we seek to develop further in this paper. IJVs, HRM and organizational learning For Schuler (2001a, 2001b), learning is critical to IJVs, from the very foundation of the IJV and as the parents learn more about each other, from each other, and from the IJV itself, with such learning being useful for other units and IJVs. Some partners may emphasize learning, others may not make it a priority; ‘the behaviours and styles of managers in organizations have a signiŽ cant impact on the ability and willingness of a Ž rm to learn’ (Schuler, 2001b: 317). HRM is important here, as a lack of openness, a need for control, low cultural awareness and ethnocentricity may reduce the ability of organizations and managers to learn, while  exibility and a willingness to take risks may promote it. HRM policies and practices may support or inhibit knowledge  ows, sharing and development. Asymmetry in learning capability may lead to alliance instability and dissolution, despite short-term gains for one partner. Inkpen and Currall (1997) suggest that, if partners learn at equal rates or engage in forbearance, the need for control diminishes and trust increases. Learning about an alliance partner provides the basis for increased trust, as trust is the vehicle for knowledge migration. Learning from a partner provides the basis for increased bargaining power and reduced dependence. Opportunistic behaviour may, however, lead to instability and greater efforts at control by the other partner. Trust, control and learning seem interrelated, as IJVs provide many opportunities for organizational learning, especially the transfer of culturally embedded knowledge if trust is developed and substantial non-contractual inputs, including HR inputs, are invested (Fitzgerald, 2000). BeneŽ ts are, however, likely to be appropriated asymmetrically according to the organizational learning capacity (Pucik, 1988) or absorptive capacity (Cohen and Levinthal, 1990; Grant et al., 2000) of the partners. From an HR perspective, a vital part of a learning infrastructure includes HRM policies supporting the protection of competitive advantage, in uencing the direction of the IJV, especially the development of knowledge. HR planning may inhibit learning by failing to communicate strategic intent, adopting short-term and static planning horizons, and giving learning activities low priority. Employee resourcing may also inhibit learning, allowing insufŽ cient lead time for stafŽ ng decisions, adopting a resource-poor stafŽ ng strategy, assigning lowquality staff to the IJV and depending on the partner for IJV stafŽ ng. HRD may also inhibit learning, especially a lack of cross-cultural competence, a career structure not

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

629

conducive to learning and a poor climate for transferring learning. Reward management may inhibit learning by focusing on short-term goal achievement, not encouraging learning, providing limited incentives for knowledge transfer, and not aligning rewards with the global strategy of the Ž rm. Organization design and control may also inhibit learning by failing to make responsibility for learning clear and by fragmenting learning processes (e.g. Pucik, 1988; Schuler, 2001a, 2001b). Developing a framework for understanding HRM, knowledge migration and organizational learning in IJVs As Schuler (2001b) says, ‘learning is critical to today’s IJVs, and this begins with the very nature of the design of joint ventures. Learning also continues as the parents learn more from each other . . . consequently human resource issues and activities permeate several stages of the IJV process’. Schuler (2001a, 2001b) identiŽ es a number of HR issues of relevance to alliance performance at the organizational level (parent-to-parent relationships, including seeking, selecting and trust building; parent–alliance relationships, including rationale, structure and integration; alliance–context relationships; and parent characteristics such as culture, vision and values). At the individual/group level, staff learning, stakeholder management, gaining and sharing knowledge, staff competencies, staff attitudes and behaviours, staff motivation and commitment, and recruitment to the alliance are important HR issues. Schuler (2001a, 2001b) presents a multi-stage model for understanding HR issues in IJVs. At the alliance formation stage, the reasons for the alliance, how its beneŽ ts will be utilized (e.g. how knowledge is managed), the selection of managers, the selection of partners, the building of trust and negotiating the alliance are important HR issues. At the development stage, locating the alliance, establishing the right structure and getting the right senior managers are crucial HR processes. At the implementation stage, establishing alliance vision, mission, values, strategy and structure, developing HR policies and practices, and stafŽ ng and managing employees are critical, especially in supporting and rewarding learning and knowledge sharing. Finally, learning from the partner, the migration of the new knowledge to the parents and the migration of the new knowledge to other locations are critical processes in IJV advancement. We here also consider restructuring to be an important further stage in considering HR issues in IJVs, not speciŽ cally addressed by Schuler (2001a, 2001b). Three key issues of relevance to HR that need to be addressed throughout are control, trust and con ict. Learning and trust are positively related, while trust and the use of informal and formal controls are negatively related, so establishing mechanisms to enhance trust may beneŽ t the relationship between alliance partners (Schuler, 2001b). IJV failure may therefore occur at the formation, development, implementation, advancement and restructuring stages, affecting trust, learning and con ict, and HR issues therefore affect performance at all stages. A framework summarizing empirical research into and theorizing of IJV performance and HRM, especially in terms of knowledge migration and organizational learning, is presented in Figure 1 (building on Schuler 2001a, 2001b). IJV formation is seen as in uenced by partner recruitment and selection criteria. Partners’ motives, objectives, resource contributions (including knowledge and HR contributions), prior relationships, organizational and national cultures, management styles, especially over issues of trust, control and con ict, transaction costs and HRM practices (both organization-speciŽ c and environmental) are also seen as important factors. In particular, formation is seen as in uenced by partners’ cognitive interests and purposes, concepts we discuss further

Downloaded By: [informa internal users] At: 09:08 25 March 2008

630

The International Journal of Human Resource Management

later in relation to knowledge migration and IJV cognitive purposes and interests. Crucial HRM issues are HRM support in terms of knowledge, learning, stafŽ ng, communication, negotiation and con ict management. IJV development and implementation are then seen in terms of strategy, structure, mission, vision, value, policies and practices, including HR practices and policies, in uenced by ongoing partner interaction, support, forbearance, expectations and ongoing contractual and noncontractual inputs, including HR inputs, with performance dependent on the development of mutual trust, resource complementarity, inter-partner learning and, particularly, knowledge development and migration. HR practices supporting learning and the development of trust and a positive learning climate and knowledge migration are critical factors, and a particularly important issue concerns the cognitive in uences the partners bring to the IJV, also to be discussed later. Monitoring and evaluation of IJV performance may then lead to advancement, especially in terms of learning and knowledge migration (both back to the parents and to other locations, again requiring HR support). Restructuring, seen here as dependent on knowledge tracking (assessing the organizational environment and change from a knowledge perspective), linemanagement involvement, management team diversity and experience and the presence

Source: adapted from Schuler (2001a, 2001b), Iles and Yolles (2002b)

Figure 1 HRM, development and performance in IJVs

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

631

of IJV champions in the management team may also then occur if perceived as necessary and/or urgent. Figure 1 presents a simpliŽ ed model of an IJV formed between two partners from two countries; in reality, of course, there may be multiple partners from different countries on each side, as well as several phases of restructuring. It is not intended to offer a prescriptive model, but points to the need to develop a comprehensive model of HRM, knowledge development and migration and organizational learning in IJVs. The intention is for Figure 1 to act as a research framework identifying factors that may be studied in future HRM research (including assessment of their relative in uence and priority). The paper now seeks to develop further a model of HRM, knowledge and learning in IJVs, building on viable systems perspectives on knowledge creation and migration (e.g. Iles and Yolles 2002a, 2001b). As Schuler (2001a) says, since organizational capability to learn from the IJV and the other parent appears crucial to IJV success, especially in competitive IJVs, this process requires further analysis. We propose that viable systems theory (VST) will help develop this analysis. The purpose of IJVs and viable systems theory IJVs are children of complexity, and various types of complexity can be identiŽ ed. Complex situations are particularly susceptible to examination by methodologies from management systems, such as viable systems theory (VST), as they represent structured approaches to inquiry capable of reducing complexity (Yolles, 1999). A particularly important issue is the interaction of worldviews in IJVs and their role in facilitating or inhibiting knowledge migration and learning. According to Yolles (1999) there are two types of worldview: Weltanschauung and paradigm. Weltanschauunge n (Churchman, 1979) become paradigms (Kuhn, 1970) when formalized (Yolles, 1999). This requires a formalized or semi-formalized shared Weltanschauung to be created, called a virtual paradigm, that may or may not become a paradigm. Individuals and groups such as IJV partners may behave in ways that are determined by their Weltanschauung, but paradigms emerge when these become coherent through a degree of formalization. Partners in an IJV from different countries may well manifest radically different organizational worldviews and, in particular, hold different HRM paradigms, making commonality difŽ cult to achieve and presenting difŽ culties in the establishment of effective IJV HR systems. For example, Iles and Wilson (2002), in a study of an Anglo-Indian engineering joint venture, showed that the two companies held very different models for what constituted successful and effective managers, what the core competences of the companies were, the gendered nature of jobs and what constituted the effective management of diversity. Many studies of joint ventures in China (e.g. Gamble, 2000, 2001; Glover and Sui, 2000; Ding and Akhtar, 2000) have pointed out that the dominant model of HRM in many Chinese enterprises, often persisting despite many economic, social and organizational changes, makes radically different assumptions about such issues as organizational autonomy in HR planning, recruitment and selection, pay policies and individualized appraisal and reward from Western partners in an IJV. Both forms of worldview operate through culture, established within ‘rational’ organized structures called propositions and norms (ibid.). They have a relationship with each other, and with the behavioural world, that is coupled to the physical or social forms that we see around us. This relationship applied to IJVs is shown in Figure 2 (Yolles, 1999), where types of worldview in IJVs are collected into a cognitive domain, differentiated from the behavioural domain of IJVs within which it is deŽ ned by the

Downloaded By: [informa internal users] At: 09:08 25 March 2008

632

The International Journal of Human Resource Management

Figure 2 Relationship between types of worldview and behaviour in an IJV

‘real’ or perceived behavioural world. In order to distinguish between these two domains and the transformations that occur between them, we have also introduced an organizing domain in IJVs. According to VST (Yolles, 1999), all entities, including IJVs, that are purposeful and adaptive have cognitive, organizing and behavioural domains, and so can be seen as systems that have structure and behaviour and cognitive domain-determined metasystems, from which come decisions (Iles and Yolles, 2002a, 2002b). Our interest here lies with purposeful adaptable organizations in interaction with others in an IJV, modelled as actors in a supra-system of actors, themselves in an environment. Each actor has a behavioural system that exists within a behavioural domain, and a meta-system deŽ ned in terms of the cognitive domain, within which occur decision-making processes (Figure 3). The meta-system is the system’s

Figure 3 A supra-system of actors and a decision-making meta-system of one actor in an IJV

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

633

metaphorical ‘cognitive consciousness’. The propositional logic of a meta-system associated with one actor (e.g. IJV partner) is distinct from that of another, and the paradigmatic language (e.g. meta-language) of each actor may represent meanings that are not expressible in that of another. Finally, the culture associated with a given meta-system will not allow particular perspectives to develop that may be part of the meta-system of another actor. Actors that are purposeful (such as IJVs and partners) manifest behaviour that is ultimately worldview-determined, with social structures that both facilitate and bound behaviour. The structure itself is a manifestation of the worldviews that actors maintain, not only generating informal and formal perspectives, but also responsible for the decision-making processes that occur. We assign these aspects of actors to metasystems that house the worldviews that give behaviour meaning. Actors such as partners and the IJV itself manifest behaviour when viewed from the perspective of the supra-system, but internally they display social, cultural and political processes. They also possess an economy that facilitates organized behaviour. In this way economic aspects can also be seen as part of the organizing process, and related to the political aspect of actors. The decision-making process for an actor is assigned to its meta-system, and the aspects that we are interested in in terms of IJVs relate to HRM policy making and the HRM paradigms and Weltanschauung of policy makers. Actors in a supra-system such as an IJV interact with considerable frequency, according to regularized processes that deŽ ne coherent situations. In their mutual interactions, actors (e.g. IJV partners) display characteristics represented by the types or classes of administrations that actors develop; the role of entities in the actor system’s external relations; and the methods by which actor resources are mobilized to achieve external objectives. Traditionally, the interactive behaviour of actors (e.g. IJV partners) in a supra-system is explained in terms of actor attributes and needs, including HRM attributes, and the individual characteristics of policy makers (e.g. Schuler 2001a, 2001b). The external environment, and particularly the structure of power and in uence in a supra-system, may also have profound effects on the general orientations of one actor towards another. Thus, the major characteristics of any supra-system can help explain the typical actions of an actor. While a supra-system may be a collection of actors in interaction, it can also have purposefulness associated with it, and be seen as an actor in its own right. In such cases, it is essential that a new supra-meta-system is formed that can act as its ‘cognitive consciousness’ and make decisions for the supra-system. In many cases, such as may occur with IJVs, the supra-meta-system does not successfully form, and attempts are made to drive the supra-system from one of the actor meta-systems, such as one IJV partner, often causing problems. The assembly of worldviews associated with each actor of the supra-system will be incommensurable to some degree, which will be greater if the actors derive from very different host cultures, as is often the case in IJVs (e.g. Gamble, 2000, 2001; Iles and Wilson, 2002; Glover and Siu, 2000). The nature of this incommensurability is important for the development of a supra-meta-system. When two or more worldviews come together during attempts by a group of viewholders to share meaning, as in an IJV, some cognitive strands become coincident, providing for commonalities of understanding (Yolles, 1999). With worldview incommensurability, a cognitive pattern emerges that entails ‘cognitive turbulence’, becoming a source of con ict manifestation from the interference of incommensurable differences in cognitive organization and knowledge. The patterns are responsible for arbitrary stable processes of understanding and misunderstandings, and communication

Downloaded By: [informa internal users] At: 09:08 25 March 2008

634

The International Journal of Human Resource Management

and miscommunication; these can become institutionalized in IJVs. Con ict is therefore the manifestation of cognitive turbulence in the behavioural world, and may be enhanced by complexity in an IJV. If actors in a supra-system such as an IJV Ž nd themselves with a problem situation due to cognitive turbulence, change can occur through their realigning their worldviews to enable a new cognitive pattern to emerge. Application of the viable systems model to HRM, organizational learning and knowledge migration in IJVs IJVs often begin life as intended purposeful supra-systems, and fail for a number of reasons cited in the literature, including HR-related factors (e.g. Schuler 2001a, 2001b). An important factor identiŽ ed in Figure 1 is that actor cognitive purposes may be different, or expressed differently because of problems of language; actor cognitive interests may also be divergent or misinterpreted; and, perhaps most importantly, cognitive turbulence may not be dealt with, with no stable supra-meta-system able to form. Cognitive turbulence impacts on the organizing and behavioural domains. The organizing domain is the place where worldview differences are contested, deŽ ning a cognitive purpose that will be directly responsible for the manifestation of con ict. Intention is then realized through the creation and strategic pursuit of goals and aims that may change over time, enabling actors through control and communications processes to redirect their futures. The strategic process derives from a relational logic that derives from actor rationality, different for each of the actors in a supra-system involved in contesting differences. Each actor may pursue its own missions, goals and aims, generating organization of thought and action that ultimately determines behavioural possibilities. Ideology may deŽ ne the manner of thinking, enabling policy makers to interpret reality politically, involving ethical and moral orientations, providing images of the future that enable action through ‘correct’ strategic policy and giving a ‘correct’ view of the stages of historical development in respect of interaction with the external environment (e.g. the view that economies in central and eastern Europe are ‘in transition’ to a market economy (e.g. Iles and Yolles, 2002b)). New paradigms are seen here as arising through knowledge recognition, creation or knowledge migration, occurring through the cognitive in uences of other paradigms. Cognitive interest relates to the structural/behavioural domain and can be differentiated from the knowledge domain. Cognitive purpose (Yolles, 1999) relates to rational and cybernetic processes that can also be differentiated from the knowledge domain. Two basic cognitive interests in acquiring knowledge are proposed by Habermas (1970): a technical interest relating to work and a practical interest for interaction. Another cognitive interest proposed here is critical deconstraining, which results in emancipation. Habermas’s classiŽ cation is a cognitive property of the behavioural domain; with reference to Figure 2, Yolles (1999) argues that cognitive purpose is a cognitive property of the organizing domain, because it is through the organizing process that cognitive purposes are made apparent. There are three types of cognitive purposes that correspond to the three types of cognitive interest: cybernetic, rational and ideological. There is also a cognitive property associated with the cognitive domain: cognitive in uences. The typological dimensions in this are cultural, political and social, and contribute to knowledge migration from one worldview to another, such as from one partner to another in an IJV.

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

635

Figure 4 The knowledge cycle

The cultural dimension has a cognitive organization that is part of a worldview, and, when people perform social roles, they do so through their beliefs, values and attitudes. Cultural elements affect how we interact (practically) and deŽ ne our logico-relational (rational) understandings . The political dimension is concerned with polity (condition of order), and, as such, has an interest in attributes that condition the social domain and its situations. It involves the creation of power placed at the disposal of some social roles, the use of which is also worldview determined. When conditions (of order) affect the social domain and become issues, political processes are used to address them (e.g. con ict resolution). Political in uences affect our manner of thinking (ideology) and our degree of emancipation (critical deconstraining). The social, cultural and political in uences that arise during the development of IJVs are implicit in the processes of knowledge migration and organizational learning that occur between the partners involved. We therefore argue here that knowledge creation and organizational learning in IJVs may occur through a process of knowledge migration from one partner’s worldview to another, involving knowledge identiŽ cation. The basic knowledge cycle model (Figure 4) depicts the three fundamental phases of the knowledge creation process: knowledge migration, knowledge appreciation and knowledgeable action. Migration is associated with the cognitive domain, appreciation with the organizing domain and action with the behavioural domain. Each process has an input and an output. A control process is also able to condition each process through actions on the inputs or on the processes themselves. Knowledge migration in IJVs is therefore conditioned through cognitive in uence, knowledge appreciation though cognitive purpose and knowledgeable action through cognitive intention. Towards a research agenda for studying knowledge migration, organizational learning and HRM in IJVs We argue that the control process involved with knowledge migration occurs through the development of interconnections between the worldviews of the actors (e.g. IJV partners) in a given supra-system, and is the result of semantic communication. As part of the process of knowledge migration, new knowledge is locally generated within the

Downloaded By: [informa internal users] At: 09:08 25 March 2008

636

The International Journal of Human Resource Management

Figure 5 Basic form of the control model

actor (e.g. one partner) and can be seen as actor local spontaneous, when the process of knowledge migration operates as a knowledge-creation trigger. Knowledge that enables the nature of a control process to be understood is seen here as local and worldview dependent. Empirical and reference control criteria are also seen as worldview dependent, value laden and susceptible to ideological and ethical in uences. Conditioning control processes are seen as implemented in a local inquirer-relative way. These propositions have implications for the way in which an actor, such as one of the IJV partners, responds to control situations and appreciates the need for semantic communications that make it broadly meaningful. In Figures 5 and 6, we consider the control process involved with knowledge migration and the development of interconnections between the worldviews of the actors in a given supra-system (e.g. the IJV) as a result of semantic communication. As part of the process of knowledge migration, new knowledge may be locally generated for an actor (e.g. one IJV partner). For example, Ding and Akhtar (2001) discuss the way many Chinese enterprises show ‘organizational inertia’, which constrains the success of foreign investors in implanting new HRM systems and practices. Barriers to successful transfer include the cultural and institutional heritage of Chinese organizations, re ected in their size, age, location (e.g. interior vs coast) and ownership (e.g. foreign invested vs state owned). IJVs were more likely to choose human capitaloriented HRM practices than state-owned enterprises, being freer to hire employees from the open labour market and formulate their own. Policies the Japanese–Chinese IJVs studied by Taylor (2001) did not generally transfer Japanese HR practices, while

Figure 6 Control model for knowledge migration within IJV

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

637

Gamble (2001), in discussing the operation of a UK–Chinese joint retail venture, argues that the HR system developed in the Shanghai operation shared many, but not all, characteristics of the London operation (e.g. more extensive communication, training and performance-related pay than most state-owned enterprises, open plan ofŽ ces and Ž rst name terms for managers). Interestingly, given the older nature of the workforce as compared to those in many Chinese IJVs, many workers regarded the climate positively, as reminiscent of 1950s egalitarian China, which, along with the personalized relationships and ‘team spirit’ feeling, may have enabled more effective semantic communication, and therefore knowledge migration, between the expatriate management and workforce. Though there are many arguments for ‘localizing’ IJVs and other foreign-invested enterprises, Gamble (2000) makes the case that rapid localization in China is hindered by the lack of suitably qualiŽ ed local managers, that expatriates can perform control and surveillance functions, and that they can also act as trainers, coaches, role models, co-ordinators and relatively neutral ‘outsiders’. Hence they can play an important role, if ‘culturally literate’ as knowledge identiŽ ers and migrators in organizational learning. Local employees can also act as potential customers, identifying knowledge that can help such expatriates learn about actual and potential markets. However, Tung and Worm (2001) argue that the high use of expatriates in senior staff positions in European–Chinese IJVs may affect their ability to build appropriate guanxi (connections) with local authorities, hindering their effectiveness as knowledge identiŽ ers and migrators. It should not necessarily be assumed that expatriate cultural similarity develops more effective job attitudes in local employees; Leung et al. (2001) showed that Western expatriate hotel managers were more effective in enhancing Chinese workers’ job attitudes than were Japanese or overseas Chinese managers, who, despite apparent greater cultural similarity, may be less effective knowledge migrators. Professional and organizational culture may play an important role alongside national culture in the development of worldviews (e.g. Iles and Wilson, 2002; Gamble 2000, 2001). Newly migrated knowledge may be shared and re-shared within the supra-system between the IJV partners and other units, because the new knowledge created by one actor will have a local deŽ nition that will be different for others. As a result, the original migrated knowledge will have to be re-migrated in a feedback loop. This does not stop the knowledge from being ‘contagious’ to relevant others (e.g. other partner units) within a given supra-system, through the continuous semantic communication process by which they participate in recursive migration (that is re-migration and rere-migration) of knowledge. Each recursive knowledge migration has the potential for new knowledge creation for each actor in the IJV supra-system. As knowledge migrates, it is likely to pass through a morphogenic process, and sometimes a metamorphic one that makes it new to the IJV or partners (Figure 6). The process of knowledge appreciation in an IJV can follow knowledge migration; an appreciation of how migrated knowledge can be of use to a relevant other, such as other IJV partners, is essential if they are to be able to harness it within a behavioural world (Figure 7). Knowledge appreciation by relevant others is dependent upon knowledge contagion to these others. However, this is Ž ltered through knowledge that activates weltanschauung-derived ideology and ethics. In addition, the evaluation reference criteria derive from knowledge about intention and logico-relational cognitive purposes. A consequence of the process of knowledge appreciation may be its intelligent application within the IJV or within its partners, resulting in knowledgeable action (Figure 8) such

Downloaded By: [informa internal users] At: 09:08 25 March 2008

638

The International Journal of Human Resource Management

Figure 7 Control model for knowledge appreciation within IJV

as the implementation of HR systems that are new to the partners (e.g. Gamble, 2001) or new quality management systems requiring changes to training, pay and appraisal policies (Glover and Siu, 2000). Measurement of this control process may require researchers to search the local environment for ways in which knowledge has been applied (directly or indirectly) to varieties of situations by one of the actors within an IJV. For example, local Chinese employees in hotel joint ventures seem to have become more sensitive in the 1990s to issues of organizational justice and fairness, increasingly using expatriate managers as a reference group for social comparison (Leung et al., 2000). A consequence of the process of knowledgeable action that derives from knowledge migration is the creation of a new deŽ nition of relationships between identiŽ able actors, such as partners in the IJV, giving meaning to work-related activities. In terms of a future research agenda, measures within this control loop with respect to knowledgeable action may require the examination of the environment in which that action has occurred. Work and interaction knowledge that conditions knowledgeable action can be explored by examining how work and interaction processes change with the introduction of new knowledge (e.g. Gamble, 2001). Knowledge about emancipation may also be determined through in-depth questioning of relevant others involved in the IJV (e.g. Iles and Wilson, 2002).

Figure 8 Control model for knowledge action within IJV

Iles and Yolles: IJVs, HRM and viable knowledge migration

639

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Conclusions It is appropriate to differentiate between traditional concepts associated with HRM and IJVs and those derived from the VST constructs discussed here. IJV theory and research are seen here as requiring exploration of how IJVs satisfy cognitive in uences, purposes or interests, developed through establishing a virtual paradigm that may initially be ill formed and unstable. Because of this, they can be volatile, with many dissolving prematurely. IJVs may thus have limited cognitive in uence, purpose or interest and an intended limited life span and domain of action. Alternatively, there may be enduring general agreements intended for the long term. If this occurs, it is usually the case that a paradigm, including an HRM paradigm, will have developed that will have associated with it recognizable patterns of behaviour. Our interest here is to formulate what may become the base of a systemic theory of HRM in IJVs. We start by proposing that IJVs may occur between purposeful adaptive organizations, and that complementariness involves creating a virtual paradigm that enables the formulation of the nature of the co-operative behaviour. The argument is that, when a cognitive domain is established, it results in the formation of a metasystem that directs the system. It is essential, according to the theory outlined above, that a cognitive interest or purpose exists to facilitate an IJV. However, this cannot work without the formation of a local frame of reference, from which derives a local meta-system. This will be formed through the cognitive in uences of all the worldviews involved, and will be a formation of the whole rather than any one part of the actors of the supra-system. It is through the locally deŽ ned meta-system that the actors can deal with paradigm incommensurability, and thus the formation of cognitive turbulence and manifest con ict. With it local purposefulness and direction can develop. Without it, IJV behaviour will be prone to chaos. IJVs can therefore be considered to be purposeful adaptive activity systems, enabling them to be considered in terms of three domains: cognitive, transformational and behavioural, each with the cognitive properties of in uence, purpose and interest. The importance of this is its potential for further developing the theory associated with HRM, organizational learning and knowledge migration in IJVs, which may enable research to be more focused on processes of learning and knowledge migration in IJV. Future research may involve exploring the worldviews of the actors involved, their cognitive interests, purposes and in uences, and the processes of knowledge  ows and migrations between the parents and the IJV and from the IJV to the parents. Cyr (1995) suggests that the lack of involvement in HR issues in IJVs is not due to lack of recognition of their importance, but because information on the development and implementation of HRM practice in IJVs is limited. We have sought to build on the multi-stage model of HRM in IJVs proposed by Schuler (2001a, 2001b) by emphasizing the importance of learning and knowledge migration in IJVs within a viable systems framework as one step towards building this understanding. References As-Saber, S.N., Dowling, P.J. and Liesch, P.W. (1998) ‘The Role of Human Resource Management in International Joint Ventures: A Study of Australian–Indian Joint Ventures’, International Journal of Human Resource Management, 9(5): 751–66. Butler, R. and Gill, J. (1997) ‘Knowledge and Trust in Partnership Formation’, paper presented at the Fourth International Conference on Multi-Organisational Partnerships and Cooperative Strategies, Oxford University.

Downloaded By: [informa internal users] At: 09:08 25 March 2008

640

The International Journal of Human Resource Management

Child, J., Yan, Y. and Lu, Y. (1997) ‘Ownership and Control in Sino-Foreign Joint Ventures’. In Beamish, P.W. and Killing, J.P. (eds) Cooperative Strategies: Asian PaciŽ c Perspective s. San Francisco: The New Lexington Press, pp. 181–225. Churchman, C.W. (1979) The Systems Approach, 2nd edn. New York: Dell. Cohen, W.M. and Levinthal, D.A. (1990) ‘Absorptive Capacity: A New Perspective on Learning and Innovations ’, Administrative Science Quarterly, 35, 128-52. Cyr, P.J. (1995) The Human Resource Challenge of International Joint Ventures. Westport, CT: Quorum Books. Ding, D. and Akhtar, S. (2000) ‘The Organizational Choice of Human Resource Management Practices: A Study of Chinese Enterprises in the PRC’, International Journal of Human Resource Management, 12(6): 946–64. Dowling, P.J., Schuler, R.S. and Welch, D.E. (1994) International Dimensions of Human Resource Management, 2nd edn. Belmont, CA: Wadsworth. Fedor, K.J. and Werther Jr, W.B. (1996) ‘The Fourth Dimension: Creating Cultural Responsive International Alliances’, Organisational Dynamics, Autumn: 39–52. Fitzgerald, S. P. (2000) ‘Building Personal and Procedural Trust through Sino-American Joint Ventures: The Transfer of Culturally Embedded Knowledge’, paper presented to the 7th International Conference on Advances in Management, Colorado Springs, July. Gamble, J. (2000) ‘Localising Management in Foreign-Invested Enterprises in China: Practical, Cultural and Strategic Perspectives’, International Journal of Human Resource Management, 11(5): 883–903. Gamble, J. (2001) ‘Retail Store Management in London and China: The Transferability of Human Resource Practices’, presented at Global HRM Conference, Barcelona, Spain. Geringer, J.M (1991) ‘Strategic Determinants of Partner Selection Criteria in International Joint Ventures’, Journal of International Business, 22(1): 41–62. Gill, J. and Butler, R. (1996) ‘Cycles of Trust and Distrust in Joint-Ventures ’, European Management Journal, 14(1): 81–9. Glaister, K.W. and Buckley, P. (1997) ‘Task Related and Partner-Related Selection Criteria in UK International Joint Ventures’, British Journal of Management, 8(3): 199–222. Glover, L. and Siu, N. (2000) ‘The Human Resource Barriers to Managing Quality in China’, International Journal of Human Resource Management, 11(5): 567–82. Grant, R.M., Almeida, P. and Song, J. (2000) ‘Knowledge and the Multi-national Enterprise’. In Millar, C.J.M., Grant, R.M. and Choi, C.J. (eds) International Business: Emerging Issues and Emerging Markets. Basingstoke: Macmillan, pp. 102–14. Gray, B. and Yan, A. (1997) ‘Formation and Evolution of International Joint Ventures: Examples from U.S.-Chinese Partnerships ’. In Beamish, P.W. and Killing, J.P. (eds) Cooperative Strategies: Asian PaciŽ c Perspectives. San Francisco: The New Lexington Press, pp. 57–88. Habermas, J. (1970) ‘Knowledge and Interest’. In Emmet, D. and MacIntyre, A. (eds) Sociological Theory and Philosophical Analysis. London: Macmillan, pp. 36–54. Hamel, G. (1991) ‘Competition for Competence and Inter-Partner Learning within Internationa l Strategic Alliances’, Strategic Management Journal, 12: 83–103. Harbison, J.R. and Pekar, P. (1998) Smart Alliances: A Practical Guide to Repeatable Success. San Francisco: Jossey-Bass . Harrigan, K.R (1985) Strategies for Joint Ventures. Lexington, MA: Lexington Books. Harrigan, K.R (1990) ‘Bases of Interorganizational Co-operation: Propensity, Power, and Persistence ’, Journal of Management Studies, 27: 417–34. Hull, G.S. (2000) ‘US MBA and Management Training Programs in Central and Eastern Europe’, Journal of Technology Transfer, 25: 319–27. Iles, P.A. and Yolles, M. (2002a) ‘Across the Great Divide: HRD, Technology Translation and Knowledge Migration in Bridging the Knowledge Gap between SMEs and Universities ’, Human Resource Development Internationa l, 4(1): 1–35. Iles, P.A. and Yolles, M. (2002b) ‘The Czech Academic Link Project: Developing Resource Based Learning’, Human Resource Development Internationa l.

Downloaded By: [informa internal users] At: 09:08 25 March 2008

Iles and Yolles: IJVs, HRM and viable knowledge migration

641

Iles, P.A. and Wilson, E (2002) ‘International Joint Ventures, HRD, and Viable Systems Theory: A Tale of Multiple Cultures in an Anglo-Indian International Joint Venture’, submitted to Human Resource Development Internationa l. Inkpen, A. and Currall, J. (1997) ‘International Joint Venture Trust: An Empirical Examination’. In Beamish, P.W. and Killing, J.P. (eds) Cooperative Strategies: Asian PaciŽ c Perspectives. San Francisco: The New Lexington Press, pp. 308–34. Kelly, A. and Parker, N. (1997) Management Directions: Joint Alliances. Institute of Management Foundation, Corby, Northants, UK. Klauss, R. (2000) ‘Technology Transfer In Education: Application to Developing Countries’, Journal of Technology Transfer, 25: 277–87. Kuhn, S.T (1970) The Structure of ScientiŽ c Revolution s. Chicago: University of Chicago Press. Leung, K., Wang, Z. and Smith, P.B. (2001) ‘Job Attitudes and Organizational Justice in Joint Venture Hotels in China: The Role of Expatriate Managers’, International Journal of Human Resource Management, 12(5): 926–45. Li, J. and Shenkar, O. (1997) ‘The Perspectives of Local Partners: Strategic Objectives and Structure Preferences of International Cooperative Ventures in China’. In Beamish, P.W. and Killing, J.P. (eds) Cooperative Strategies: Asian PaciŽ c Perspectives. San Francisco: The New Lexington Press, pp. 22–56. Muralidharan, R. and Hamilton, R.D. (1999) ‘Restructuring International Joint Ventures’, International Journal of Organizational Analysis, 7(4): 307–32. Pucik, V. (1988) ‘Strategic Alliances, Organizational Learning, And Competitive Advantage: The HRM Agenda’, Human Resource Management, 27(1): 77–93. Schuler, R. (2001a) ‘HR Issues and Activities in IJVs’, International Journal of Human Resource Management, 12(1): 1–52. Schuler, R.S. (2001b) ‘HR Issues in International Joint Ventures and Alliances’. In Storey, J. (ed.) Human Resource Management: A Critical Text, 2nd edn. London: Thomson Learning, pp. 314– 36. Schuler, R.S., Dowling, P.J. and De Cieri, H. (1993) ‘An Integrative Framework of Strategic International Human Resource Management’, Journal of Management, 19(2): 419–59. Shenkar, O. and Chow, M.K. (1995) ‘Yin and Yang: The Interplay of Human Resources in Chinese-Foreign Ventures’. In Shenkar, O. (ed.) Global Perspectives of Human Resource Management. Englewood Cliffs, NJ: Prentice Hall, pp. 273–92. Taylor, B. (2001) ‘Management of Labour in Japanese Plants in China’, International Journal of Human Resource Management, 12(4): 601–18. Tsang, J. (1995) ‘Joint Venturing in China: Choosing the Right Partner. Beware of Anyone Who Claims Nothing but Guanxi’, East Asian Executive Reports, 15 April: 8–15. Tung, R.L. and Worm, V. (2001) ‘Network Capitalism: The Role of Human Resources in Penetrating the China Market’, International Journal of Human Resource Management, 12(4): 517–34. Yolles, M.I. (1999) Management Systems: A Viable Systems Approach. London: Financial Times Management. Zhai, P., Shi, Y.J. and Gregory, M. (1999) ‘A Resource-Based View on the Motivation of Joint Venture Formation’, Proceedings of the Third International Symposium on Multinational Business Management, 11: 196–205, Nanjing, PRC, December 1999.