The impact of globalization on HRM: the case of South Korea

The Impact of GlobalizationOn HRM: The Case of

South Korea

Johngseok Bae Chris Rowley

Globalization can have far reaching implications for human resource management (HRM) andmanagement practice in general. For some, globalization creates pressures for a common, often takenas ‘best’, transferable set of HRM practices that can spread around the world. These best practices areconsidered powerful enough to override existing systems. In contrast, others see national based HRMsystems as more resilient, partly because of the systemic underpinnings of particular cultural andinstitutional milieu. Both views contain important implications and lessons. We outline these, aframework for viewing them and the case of HRM in South Korea to demonstrate the issues,contradictions and dilemmas and ways of thinking so that practitioners can make informed choicesconcerning HRM practices to develop competency enhancing HRM systems.

I mportant impacts in the human re-source management (HRM) area stem

from globalization. With its perceivedpower to influence, and even override,nationally specific HRM with the transferof common, sometimes taken as ‘best’,HRM practices, globalization may resultin convergence towards similar systems.Yet, continuing countervailing forces to

such universalistic tendencies may keepHRM more nationally distinctive, notleast those originating in cultural and in-stitutional forces which underpin specificsystems, including HRM. Some trans-ferred practices may even be problematicin their results.

This raises key issues: what causesconvergence; what practices are ‘best’and are they ‘best’ for all firms; and atwhat levels are they actually transfer-able? These form the focus of this paperover the following seven sections. First,the implications of globalization aredealt with, including forces for conver-gence and ‘best practice’ issues - whatthey are, their impacts and ideas ofbenchmarking. Next, contingency ap-

Johngseok Bae, Assistant Professor in Human Re-source Management, School of Business, Han-yang University, Seoul, 133-791, Korea. Tel: �82-2-2290-1069; Fax: �82-2-2296-5893 �[email protected]�.Chris Rowley, Senior Lecturer in HRM & Em-ployee Relations, City University Business School,Frobisher Cresent, Barbican Centre, London EC28HB, U.K. Tel: 44-020-7477-8641; Fax: 44-020-7477-8546 �[email protected]�.

402 Journal of World Business / 36(4) / 402–428

proaches and why universal tendenciesmay be restricted are noted. This is fol-lowed by a section on possible transferof HRM in a more disaggregated fash-ion in terms of level, alignment andacceptance. A framework and the caseof more traditional and newer aspects ofSouth Korean1 HRM are then used toindicate the difficulties, contradictionsand dilemmas. The discussion section isfollowed by some implications andwider relevance and a conclusion. Inshort, globalization’s universal-like ten-dencies in HRM do not wash unhin-dered across economies, but have tonavigate the rocks of contingent vari-ables. While these may not totally im-pede entry, they nevertheless moderatetheir progress and impacts.

IMPLICATIONS OF GLOBALIZATION

Globalization’s impacts on HRM maycome via the opening up and penetra-tion of economies to external forces andinfluences. This may be two-way, withboth indigenous and ‘foreign’ multina-tional enterprise (MNE) operations andinvestment leading to exposure to othercountries’ HRM practices, greater pub-licity and even direct importation. In-dicative of this was the attention fromthe 1980s given to Japan, with attemptsto imitate their practices (as in Ford’s‘After Japan’ and Malaysia’s ‘LookEast’ campaigns) and the so-called‘Japanization’ of industries. Globaliza-tion’s universalizing tendencies and im-plications can be located within work oflong antecedence (e.g., Kerr et al.,1962) and more recent exponents (e.g.,Peters & Waterman, 1982; Womack et

al., 1990). For management an implica-tion is that there were ‘universal truths’,including in HRM, that could be ap-plied everywhere. A central propositionis that because of political, economic,social and technological forces, now in-cluding globalization, there is a world-wide tendency for countries, and withinthem HRM, to become similar as thecopying and transfer of practices, some-times taken as ‘best practices’ andlinked to benchmarking, was encour-aged. In short, HRM systems wouldconverge.

However, there may be reasons otherthan globalization (or earlier political,economic, social, and technologicalchanges) for why and how convergenceoccurs. For instance, institutional theorymay play a role. For Meyer and Rowan(1977) the formal structures of organi-zations reflected institutional environ-ments. Legitimacy can be gainedthrough isomorphism with environmen-tal institutions. DiMaggio and Powell(1983) suggested three mechanisms ofinstitutional isomorphic change: first,coercive isomorphism to gain legitima-cy; second, mimetic isomorphism toavoid uncertainty; third, normative iso-morphism, which stems primarily fromprofessionalization. Thus, practices areadopted not because of ‘effectiveness’,but because of three specific socialforces (McKinley et al., 1995). First,‘constraining’ forces, which shift aspractices once viewed negatively be-come interpreted positively and gain le-gitimacy. This shift in social constraintssubsequently encourages firms to con-form to legitimate structures and man-agement activities. Second, ‘cloning’forces, which pressurize firms to mimic

The Impact of Globalization on HRM 403

the actions of leading companies in theface of uncertainty. A cloning force (as-sociated with mimetic isomorphism), ispromoted by conditions such as ambig-uous performance standards, uncertaincore technologies and frequent interac-tion between firms. Third, ‘learning’forces, which are shaped through pro-cesses in educational institutions andprofessional associations. Togetherthese forces push firms to adopt institu-tional rules, which may then createpressures for convergence.

Irrespective of causation, is it ‘bestpractice’ that is transferred? One viewof ‘best practice’ (in employee rela-tions) is ‘. . . managing by behaving in afair and reasonable manner. . . ’ which‘. . . help to add value to the business’(Gennard & Judge, 1999: 3). Yet, whatdoes this involve? What is considered‘best practice’ is often subjective andvariable between practitioners, authors,locations, sectors, and time. For in-stance, earlier examples of what wewould now call ‘best practice’ weresubsequently repudiated. A classicwould be collective bargaining in theU.K. The broad consensus, encourage-ment and belief it assisted employeerelations and was integral to the ‘goodemployer’ ethos pre-1979 were fol-lowed by an erosion of such views andsupport (Salamon, 2000). Some prac-tices are taken as ‘best’ on the basis of‘fashion’ or presence in what wereviewed as model ‘successful’ compa-nies, some of which subsequentlyfailed. Even within similar periods dif-ferences remain. For instance, severalstudies (Storey, 1992; Wood, 1995;Wood & Albanese, 1995), were dis-tilled by Marchington and Wilkinson

(1996) into ‘clusters’ of ‘best practice’HRM but with only partial agreementover some practices.

There is also debate on the ways thatHRM may affect organizations. For theuniversal approach there is a set of ‘bestpractices’ that have additive and gener-alizable effects on performance (seeAppelbaum & Batt, 1994; Huselid,1995). More cautiously, for Pfeffer(1994), other things being equal, utili-zation of ‘best practice’ can lead tocompetitive advantage, although withcaveats - not all organizations with/without such practices will inevitablybe more/less successful. Critically,some emphasize ‘fit’ - synergy amongsystems and holistic approaches (Delery& Doty, 1996; Dyer & Reeves, 1995).Thus, horizontal integration, theachievement of a high degree of internal‘fit’, is needed to gain from ‘best prac-tice’ (Marchington & Wilkinson, 1996:396). In other words, ‘. . . individualpractices must be aligned with one an-other and be consistent with the HRarchitecture if they are ultimately tohave an effect on firm performance’(Becker & Gerhart, 1996: 786). The im-plication is that gains from HRM need amore comprehensive and integratedtake-up, rather than a ‘pick and mix’ ofa few, isolated practices.

Furthermore, can ‘best practice’ betransferred globally? Here benchmark-ing is seen as useful with its implicitassumption that ‘best practice’ effectsare not firm specific, but rather univer-sal and transferable. Without bench-marking, firms may be at a competitivedisadvantage (Barney & Wright, 1998).However, benchmarking may be seenas only ‘imitation’ (copying), rather


than ‘innovation’. Additionally, bench-marking is a start rather than a result.Benchmarking ‘best practices’ becomesa competitive advantage through insti-tutionalization (Kostova, 1999). Ac-cording to resource-based theorists(Barney & Wright, 1998; Lado & Wil-son, 1994), ‘unique’ (i.e., rare, difficultto imitate, and supported by the organi-zation) HRM practices cannot be copiedeasily, hence they result in sustainedcompetitive advantage. In sum, the par-adox is that imitating ‘best practices’may lead to competitive advantage, yetit is hard for these to be imitated whenembedded implicitly in the organiza-tion. Such skepticism has echoes of ear-lier contingency-type arguments, whichwe deal with next.

CONTINGENCY APPROACHES

In contrast to ideas of universal ‘bestpractices’ transferred around the worldresulting in converging systems, arecontingency approaches. These seek toexplain continuing HRM diversity be-tween (and even within) countries, eventhose grouped together as ‘regions’,such as Asia (see Turner & Auer, 1996;Katz, 1997; Rowley, 1997). This maybe because there is no such thing as‘best practice’ in management, witheven some practitioner commentatorsadmitting the context ‘. . . is the decid-ing factor’ (Armstrong, 1999: 75).Rather, the impact of practices is depen-dent upon the congruence betweenHRM and not just an organization’sstrategic posture, but also contingentvariables and national context (such asinstitutions and culture). These limit the

pressures towards convergence. Imped-iments to, or factors that inhibit, fullconvergence revolve around particularand specific packages stemming fromthe political, economic, and social mi-lieu.

Therefore, HRM differences couldresult from not just the more obviousvariations, such as a country’s stage ofindustrial and economic development ororganizational size, but also in opera-tional environments and the spread, im-pact, and way technology is configuredand used. There are alternative solu-tions to common pressures and prob-lems with no single response to marketcompetitiveness. ‘Equifinality’, that dif-ferent collections of practices producethe same outcomes (Gresor & Drazin,1997), is important. Indeed, manage-ment authority and autonomy to intro-duce practices varies and is not unilat-eral and unfettered globally. Critically,countries remain distinctive in culturalterms. The term ‘country institutionalprofile’ (CIP) reflects this ‘distance’(Kostova, 1999). A three-dimensionalconstruct, the CIP is a country’s set of:‘regulatory’ (i.e., existing laws andrules), ‘cognitive’ (i.e., schemas,frames, inferential sets, etc.), and ‘nor-mative’ (i.e., values and norms) institu-tions. Therefore, CIP and other factors,such as organizational and relationalcontexts, are important in successfulcross-cultural transfer of practices(Schneider, 1988; Schuler et al., 1993).

This sort of perspective is empiricallysupported. After reviewing employmentpractices in various countries, Lockeand Kochan (1995) concluded that al-though new practices emerged becauseof the growing interdependence of na-


tional economies, the particular formsand the extent of diffusion varied con-siderably because of differences in localhistory and institutions and the strategicchoices of actors. Similar observationsalso can be found in studies of industrialrelations system transformation (Erick-son & Kuruvilla, 1998; Golden et al.,1997; Freeman & Katz, 1995). Thus,the manner in which HRM changes are‘. . . introduced, mediated and handledcan lead to different outcomes’, so evenconvergence at the global level in termsof economic forces and technologies‘. . . may result in divergence at thenational and intranational level, as theseforces are mediated by different institu-tions with their own traditions and cul-tures’ (Bamber & Lansbury, 1998: 32).In short, despite globalization, variednational HRM systems remain as dis-tinctive political, economic, institu-tional, and cultural frameworks and fea-tures restrict transference and soconvergence in HRM.

A further issue is that convergenceand contingency approaches may oper-ate at different levels of HRM systems(Becker & Gerhart, 1996; Youndt et al.,1996). Evidence for both growing sim-ilarity and distinctiveness may then re-sult from different research foci. Earlierfindings indicated tendencies for con-vergence studies to concentrate onmacro level variables, such as structureand technology, while divergence stud-ies targeted micro level variables, suchas the behavior of people in organiza-tions (Child, 1981). This still seems tohave some explanatory usefulness.Therefore, a key issue is to move be-yond broad-brush portrayals, to disag-gregate and distinguish aspects of HRM

that may be transferred and so converg-ing, from those that may remain resis-tant and so distinctive. Thus, we need tobegin to distinguish possible dimen-sions of HRM that globalization im-pacts on. This involves the level, align-ment and acceptance of HRM practices.

TRANSFER OF HRM: LEVEL,ALIGNMENT, AND ACCEPTANCE

Level

Transfer may occur at different levelsof HRM systems. Levels can be distin-guished (Becker & Gerhart, 1996: 786)as: one, ‘System Architecture’ (guidingprinciples and basic assumptions); two,‘Policy Alternatives’ (mix consistentwith one and internal/external fit); andthree, ‘Practice Process’ (techniquesgiven appropriate decisions at one). Im-plementation of ‘best practices’ may oc-cur at level three, but its effects arecontingent upon levels two and one.However, the universal effects on firmperformance may be expected at levelone (Becker & Gerhart, 1996). If thereare ‘best practices’, it seems that those‘best’ are for those firms that have asuccessful alignment process. Hence wenow turn to this issue.

Alignment

Here we use three different types of‘alignment’ or ‘fit’ (c.f., Bae, 1997), asin Table 1. These are: one, ‘Architec-tural’ fit between HRM system architec-ture and policies/practices; two, ‘Struc-tural’ fit among HRM policies/practices(internal) and HRM systems with otherorganizational components, such as


business strategy and structure (exter-nal); three, ‘Cultural’ fit, at both orga-nizational and national levels.

This framework provides usefulguidelines for issues of convergence,transfer, and ‘best practice’ effects. Ta-ble 1 shows generalizabilty and conver-gence, effects, and critical fit at eachlevel of an HRM system. We may findsome HRM convergence at some levels,such as one, while divergent phenom-ena may remain at other levels, such astwo or three. The underlying assump-tion is that a single HRM architecturemay have several HRM policy alterna-tives and practices. Indeed, systems the-ory’s concept of ‘equifinality’ indicatesmultiple means can be used to reach thesame end. For instance, several differ-ent sets of policies and practices (inindustrial relations) existed to achievethe same goals of cost reduction andflexibility in U.S. steel minimills(Arthur, 1990). Although the effects ofsystem architecture may be universal(Becker & Gerhart, 1996), those of theother two levels are dependent upon

appropriate alignments. Policy alterna-tives first need to be aligned with sys-tem architecture (‘architectural fit’),then with organizational culture andother organizational structural factors.Practices need to have ‘internal struc-tural fit’ among themselves and policyalternatives, and ‘external structural fit’with other organizational factors.

In the case of between-country trans-fer, either between the affiliates ofMNEs or between unrelated firms, na-tional cultural fit needs to be consideredbeyond other fits. In the case of cross-country transfer among unrelated firms,many benchmark practices rather thansystem architecture. This leaves recipi-ent units to make architectural, struc-tural, and cultural fits. In the case ofMNEs, Taylor et al. (1996: 966) sug-gested three different internationalHRM (IHRM) orientations and types:‘Adaptive’ (‘low internal consistencywith the rest of the firm and high exter-nal consistency with the local environ-ment’); ‘Exportive’ (‘high internal con-sistency and low external consistency’);

Table 1Levels and Effects of Alignment

Level, Effect, Fit

SystemArchitecture:

Guiding Principles Policy Alternatives Practice Process

Generalizability:Convergence

● High ● Moderate ● Low

Effects ● Universal ● Contingent on appropriatefirm-specific alignments

● Contingent on particular policyalternatives

Critical Fit:Within-Country

● (not relevant) ● Architectural fit ● Structural (internal & external)fit● Structural (external) fit

● Cultural (organizational) fit

Critical Fit:Between-Country

● Cultural (national) fit needs to be additionally considered

Source: Adapted from Becker and Gerhart (1996).


‘Integrative’ (‘high internal consistencyand moderate external consistency’).They also provided such determinantsof IHRM orientation as the parent’s in-ternational strategy and top manage-ment’s beliefs concerning the existenceand context generalizability of its HRMcompetence. The Adaptive type meanslittle transfer of all three levels of HRMsystems; the Exportive type wouldtransfer all three levels; and the Integra-tive type would transfer system archi-tecture, but may try to make HRM prac-tices adapt to local environments.

Globalization implies an Exportive orIntegrative orientation for IHRM. Yet,the Exportive type cannot resolve the‘think global, act local’ paradox. Thenthe Integrative orientation seems a moreviable alternative. For instance, whenasked about worldwide culture changeefforts, the chairman of Novartis,Krauer, said ‘the basic values are thesame. Only the practices are different’(in Tushman & O’Reilly, 1997). Hencethe HRM of MNEs may need to adaptto local environments because of cul-tural or institutional constraints, butthere is still some room for managers tomake strategic choices in keeping withtheir basic values globally. Therefore,the issue of transferability of HRM be-comes more a matter of degree, not ofkind, and less about ‘all-or-nothing’,but ‘what-aspects and how-much’choice (Taira, 1990). The first thing tochoose is whether a firm wants to trans-fer its system architecture or not. If‘no’, then a localization approachwould be an appropriate choice, while if‘yes’, then IHRM practitioners need tocheck architectural fit. If it is satisfied,the next choice is which practices

should be transferred and which local-ized. In making this strategic choice,practitioners may use two criteria in se-lecting HRM practices to transfer: ‘easeof implementation’ (easiness of makingthe three types of fit) and ‘strategic im-portance’ (the extent of achieving stra-tegic goals by adopting practices). Ofcourse, the first priority should be givento practices that satisfy both criteria.

An example using the criterion ofstrategic importance was Philip’s stan-dardized job evaluation with a singleformat to ensure they could comparepeople internationally as cross-nationalmovement increases. In the case of Ko-rean firms in general, the authors oftenfound they often too easily experimentwith new practices regardless of theirstrategic impact or ease of implementa-tion. When one of the authors inter-viewed human resource managers insubsidiaries of Korean firms operatingin Thailand, they mentioned that head-quarters of Korean MNEs did not exer-cise strong influences on HRM issues,nor were there consistent HRM poli-cies. For instance, Samsung ElectronicCo. (SEC) emphasizes some codes ofconduct (e.g., regarding labor unions,financial status and quality issues), al-though the headquarters do not havestandardized HRM practices. Similarly,managers in Korean companies operat-ing domestically did not sufficientlyevaluate ‘downside’ problems of trans-ferring HRM practices.

Acceptance

A further element concerns the de-gree of acceptance of transferred HRM.This involves possible gaps between


new HRM practices and the sharedmindset of firms. The notion of ‘culturaldistance’ (Horng, 1993; Kogut & Singh,1986) explains these gaps, and the rela-tionships between national and organi-zational culture and HRM practices(Lawler & Bae, 1998; Schneider, 1988).To develop this we can see transfer suc-cess as the degree of the practice’s ‘in-stitutionalization’ at twin levels at re-cipient units (Kostova, 1999: 311).First, ‘implementation’, where formalrules are followed with objective behav-iors and actions. Second; ‘internaliza-tion’, attained when employees havecommitment to, satisfaction with, andpsychological ownership of, practices.The internalization process is associatedwith institutional and organizationalcontexts. Gaps reflect a lack of internal-ization, representing failure to infusepractices with values (Selznick, 1957).

It may be easier to implement, but muchmore difficult to internalize, certainHRM practices. Therefore, even if thereare ‘best practices’, they may not bringpositive effects until people fully acceptand approve them. Thus, ‘It is easier tochange the HR policies than it is tochange the behavior of employees’(Shadur & Tung, 1997: 293).

A Framework: Transferenceof HRM

The framework in Figure 1 shows theimpacts of, and constraints on, thetransference of HRM. The frameworkhas two dimensions: unit of analysis(organizational vs. national) and focalpoint (systems/practices vs. people/culture). HRM can be affected by envi-ronmental changes. For instance, in Ko-rea after the 1997 financial crisis, neo-liberalism prevailed in public policy,

Figure 1Transference of HRM: Impacts and Constraints


corporate management and HRM. Thisbrought tremendous changes in manyarenas, including HRM. Yet, at thesame time, there can be countervailingpressures with impediments at bothcountry (national culture) and organiza-tion (mindsets) levels. For instance, inKorea, at the national level, while someefforts (e.g., transparency) were reason-able and acceptable, other changes en-countered strong resistance. At firmlevel, with other organizational factors,HRM systems also experienced dra-matic changes towards enhanced flex-ibilities, as discussed below. However,during the institutionalization process,internalization did not occur withouttrouble. The ‘gaps’ identified between,on the one hand, universalism and na-tional culture, and on the other, HRMchanges and the shared mindset of peo-ple in organizations, will be exploredusing examples of Korean HRM.Through this case, we can observe someinteresting paradoxes and dilemmas re-garding the impact of globalization,convergence, and the transfer of HRM.

THE CASE OF KOREA

Many economies, as in Asia andEastern Europe, have felt the force ofchanges, but Korea merits particular at-tention for a combination of reasons.There is the sheer speed of both Korea’seconomic growth and transformationfrom a rural backwater into an industrialpowerhouse and world-class produceracross a range of traditional and morehi-tech sectors, and more recent seem-ingly total collapse. Within this, Ko-rea’s culture and institutions, including

HRM, were important (Lee, 1998).There has also been some rethinking bycommentators concerning Korea’s tra-ditional tight labor control and low la-bor cost competitiveness (Kim et al.,2000). Moves towards a more value-added and upgrading route, with its im-plications for an increased importancefor HRM, is one option.

Additionally, talk of globalization, orsegyehwa, is commonplace. Tradition-ally globalization may have had impactsvia Korean MNEs operating around theworld being exposed to practices. Thereis now also the operation of MNEs andforeign direct investment (FDI) in Ko-rea itself with the opening up of domes-tic markets. These are exposing KoreanHRM to other practices. Korean societyhas also increasingly been opened-up toglobal influences. Sudden environmen-tal pressure from the 1997 Asian crisisand IMF bailout was also critical toreappraising traditional Korean HRM.Previously beneficial cultural and insti-tutional underpinnings, including HRMpractices (e.g., strong internal labormarkets and seniority systems) wererapidly reviewed and relabeled as prob-lematic. Clarion calls by commentatorsand policy-makers, both internal andexternal to the country, to recast HRMwith Westernized practices (e.g., moreflexible labor markets and remunera-tion) were often heard. These changes,with a move from a dirigiste economyto a more market-driven one withgreater MNE and FDI penetration andunemployment, gave a culture shock tomany Koreans and potentially fertileground for the import of HRM prac-tices. Therefore, Korea provides us witha strong example as it faced pressures to


change its HRM and so could be takenas receptive to transfer. If transfer itconstrained in such circumstances, thenits chances in less conducive environ-ments may be bleaker.

Thus, the Korean example allows in-sights into how HRM transfer washesover and crashes on the rocks of aneconomy that was formerly mostlyclosed and based on its own particularstrong culture and institutions, includ-ing HRM. We can see the interactionsof the import of what might be seen assomewhat ‘alien’ HRM practices onmore traditional ones.

Characteristics of Korean HRM

Confucian values and heritage, de-spite Japanese and American influencein the 20th century, remained importantand strong in Korean culture and werereflected in its HRM practices (Lee,

1998; Rowley, 2001). The ‘old’ and‘new’ characteristics appear in Table 2.Within these, lifetime employment and‘seniorityism’ (with some similarities toJapanese versions) are commonly iden-tified as key underpinnings to KoreanHRM. They are also integral to otherHRM areas, including performanceevaluation, remuneration, promotion(Bae, 1997; Lee, 1998; Rowley, 2001),and reflect, and are related to, the heri-tage of Confucianism, which empha-sizes family and clan, education, moraldisciplines in human relations, and soon (Moore & Ishak, 1989; Lee, 1998).Furthermore, such practices can be re-lated to lists of ‘best’ HRM practices.For example, Marchington and Wilkn-son’s (1996) ‘clusters’ include on theone hand flexibility, internal promotionand employee security (relating to life-time employment), and on the other per-

Table 2Characteristics of Korean HRM

HRM Areas Old Characteristics New Characteristics

(1) Core Ideology ● Organization first ● Individual respected

● Collective equality ● Individual equity

● Community oriented ● Market principle adopted

(2) Human Resource Flow ● Mass recruitment from new graduates ● Recruitment on demand

● Job security (lifetime job) ● Job mobility (lifetime career)

● Generalist oriented ● Development of professional

(3) Work Systems ● Tall structure ● Flat structure

● Line and staff; function based ● Team systems

● Position-based ● Qualification-based

(4) Evaluation and Reward ● Seniority (age, tenure) ● Ability and performance (annual pay)

● Pay equality pursued ● Merit pay systems

● Evaluation to advance in job & grade ● Evaluation for pay increases

● No appraisal feedback ● Appraisal feedback

● Single-rater appraisal ● 360° appraisal

(5) Employee Influence ● Relatively less involvement ● Involvement of knowledge workers

● Relatively less information sharing ● More information sharing


formance related rewards (relating to se-niorityism). Additionally, it is argued thatincreasing flexibilities in these areas im-proves competitiveness and systemsneed to change, developments pre-sented as widespread and ‘best prac-tice’. In addition, we also use the exam-ple of high performance work systems(HPWS). These show the ambivalence,with both supports and constraints, inHRM transference.

Changes in Korean HRM

Employment Adjustment

A system of lifetime employment andjob security existed, and albeit re-stricted in coverage and comprehen-siveness, it acted as a model for otherKorean companies. Thus, the adjust-ment of employment levels was rela-tively difficult with numerical laborflexibility classified as ‘low’ (Bae et al.,1997). Post-1997 economic problems,prompting legal change allowing dis-missals, would seem to be a ‘condu-cive’ environment for greater employ-ment adjustment and the transference offlexible labor markets. Has this been thecase?

Flexibility can be increased via arange of options. One, employment ad-justment from reduced hiring, presentsdifficulties for organizations operatingsystems of lifetime employment. Afterall, this ‘inflow’ labor is young andtherefore relatively cheap and maybring fresh ideas, compared to existinglong-tenured employees who are in-creasingly expensive because ofseniority-based pay, but perhaps lessproductive. Therefore, so-called ‘honor-

ary retirement plans’ were used for re-dundancies. To enable adjustments, theclause on ‘lay-offs upon business disso-lution’ was introduced to the LaborStandard Law in 1996. A general strikefollowed, resulting in a more lenientand postponed version of the law. How-ever, a condition of the postcrisis IMFbailout was the immediate ending oflegal support (but as we shall see, notnecessarily practice) for lifetime em-ployment, requiring further legislativerevisions, which followed in 1998.

According to a recent survey,2 over-all labor flexibility swiftly increased forthe two-year period between 1996 and1998, that is, before and after IMF bail-out of 1997. Numerical flexibility dra-matically increased via boosting recruit-ment postponement (6 firms in 1996 to29 firms in 1998) and retirements (22 to72 firms, respectively), while reducingworking hours (5 to 61 firms, respec-tively), overtime (11 to 104 firms, re-spectively) and recruitment (33 to148firms, respectively). Workers employedon less than the formerly ‘typical’ fulltime, permanent basis, were increas-ingly used, with temporary and part-time workers now even outnumberingfull timers (Burton, 2000). Functionalflexibility also increased through dis-patch to affiliated companies (11 firmsin 1996 to 21 firms in 1998) or rede-ployment to other departments (19 to 95firms, respectively) and to sales (12 to53 firms, respectively). The most dra-matic increases occurred in financialflexibility, as via wage freezes (only 1firm in 1996 to 78 firms in 1998) orreduction of base pay (0 to 41 firms,respectively), bonus (0 to 116 firms,


respectively) or fringe benefits (4 to 141firms, respectively).

Numerous company cases also high-light employment adjustments. One ex-ample is SEC, an important case as itwas something of a trendsetter in HRM,even the object of study by other Koreafirms. Under postcrisis restructuring,SEC’s employment was massively re-duced by 20,000, about one third of itsworkforce, to 40,000.

However, there were limits to theseadjustments. Even though the economicand legal contexts changed, neither thegovernment nor chaebols were keen torush to put the new legislation to use(The Economist, 1999: 7). This inertiacan be seen in the earlier survey (Park& Ahn, 1999) and cases of constrainedadjustments. Alternatives to simple lay-offs spread, such as reductions in work-ing hours (5 firms in 1996 to 61 firms in1998) and overtime (11 and 104 firms,respectively), while boosting temporaryleave, both unpaid (5 to 24 firms, re-spectively) and paid (2 to 26 firms, re-spectively). Similarly, A Samsung sub-sidiary asked for both men and womento take unpaid ‘paternity leave’, Kia hadremained ‘proud’ of its ‘no-lay-offs’agreement (although now part of Hyun-dai, which may produce a differentethos) while Seoul District Court pro-tected jobs by refusing to close Jinro(The Economist, 1999). Recently, Sam-sung Electro-Mechanical categoricallystated that no lay-offs were planned de-spite its closures and spins-offs (Burton,2001b). One high profile example con-cerns Hyundai Motor (Maeil BusinessNewspaper, 1999; The Economist,1999), whose initial plan to dismiss4,830 of its 45,000 workers was diluted

to 2,678 and then 1,538. Followingstrikes and conflicts with managementin 1998, a negotiated compromise wasreached. The final agreement providedfor just 277 dismissals (with 167 ofthese from the staff canteen), along withlump-sum severance pay. As a result,while Hyundai’s workforce shrank toabout 35,000, this was due mainly to7,226 voluntary retirements plus about2,000 who will return after 18 monthsunpaid leave. Another high profile caseis Daewoo Motor and its Pupyong, In-chon plant, which employs 50% of its15,700 workers. Here both large, vio-lent worker protests and government of-ficials insisting the plant be included inany rescue deal (Burton, 2001a), indi-cate attempts to restrict employment ad-justment.

These cases highlight several points.They contain conflicting messages onemployment adjustment. That actualdismissals were practiced, especially inhigh profile leading lights of the econ-omy could give strong signals that oth-ers might follow this route. However,the counterexamples of challenges, withreductions and prevention of some em-ployment adjustments, combined withseeming government and company sup-port, also provide salutary warnings.Similarly, the level of acceptance ofsuch adjustments can be questioned,as Kia’s ‘proudness’ of its secure em-ployment and Samsung Electro-Mechanical’s categorically reiterated nolay-off policy indicate.

‘Seniorityism’

The efficacy of seniority pay systemshas been questioned in Korea for per-


ceived systemic rigidities and weakindividual-level motivational effects(Kim & Park, 1997). There has beenincreasing interest in more flexibilityand ‘performance’ in rewards. Flexibil-ity in financial areas rose, as aforemen-tioned, with wage freezes and reducingbonuses and benefits. Further data(Choi & Lee, 1998) indicates remuner-ation flexibility spreading, almost qua-drupling from 10.7% (32 firms) in 1997to 38.7% (116 firms) by 1998.

However, it is not just a question of‘either or’, of simply either seniority orperformance to reward employees, asthe basis of remuneration systems.There are a range of options betweenthis dichotomy: first, traditional ‘se-niorityism’; second, seniority-basedplus some performance factor; third,performance-based plus some seniorityfactor; and fourth, ability/performance-based (Bae, 1997). A survey (Park &Ahn, 1999) of both manufacturing (210firms) and nonmanufacturing (68firms), and small-sized (144 firms) andlarger (134 firms) firms, highlights this.Thus, 42.4% used the first (traditional‘seniorityism’), 24.5% the second(seniority-based plus some performancefactor), 29.1% the third (performance-based plus some seniority factor), andabout 4% the fourth (pure ability/performance-based) options. This indi-cates that some element of performancein rewards—second through to fourthoptions—have spread, covering wellover half (almost 58%) of firms. Onethird (33%) of firms had performance-based—third and fourth—systems.There seem to be common trends acrosssectors, although with some greaterchange in use of fourth option in non-

manufacturing vis-a-vis manufacturing(5.9% vs. 3.4%). Slightly more varia-tion by organizational size may be ex-pected given this is a powerful variableacross many HRM areas. Somewhatcounterintuitively, the first option, tra-ditional ‘seniorityism’, was used byslightly more ‘smaller’ (although de-fined relatively highly at up to 300 em-ployees) firms (43.8% vs. 41.3%), whilemore than twice the percentage (al-though still a small total percentage)compared to ‘larger’ firms, used thefourth option, performance-based sys-tems (5.6% vs. 2.2%).

One example is the spread of annualpay, with salary determined in advancebased on individual ability or perfor-mance. A recent survey3 found 15.1%(649 firms) had already adopted annualpay; 11.2% (481) were preparing for it;and 25% (1,077) were planning to adoptit (Korea Ministry of Labor, 1999).Hence, just over one quarter (26.3%) offirms had either made, or were prepar-ing to make, changes to increase perfor-mance elements in remuneration. In-deed, just over half (51.3%) of firmswere in some stage of changing paysystems. Again, there seem commontrends across organizational size. Fur-ther examples are that in January 2000,13% (more than doubling the 6% in1998) of companies listed on the Ko-rean Stock Exchange gave employeesshare options, while 18% (more thanquadrupling the 4% in 1998) of 5,116large companies shared profits and an-other 23% planned to do so by year end(Ministry of Labor survey in The Econ-omist, 2000).

Individual cases of performance ele-ments in remuneration systems also oc-


curred. LG Chemical developed a newsystem of performance-related pay at itsYochon plant (The Economist, 1999).Hyundai Electronics introduced shareoptions in late 1999, while SamsungElectronics introduced performance pay(Kim & Briscoe, 1997) and even profitsharing (The Economist, 2000).

Again the extent of, and constraintson, the transference of performancebased remuneration systems need to beconsidered. These practices are rela-tively limited in coverage and spread.For instance, Park and Ahn’s (1999)survey simultaneously indicates tradi-tional ‘seniorityism’ remains in largenumbers of firms (nearly 43%), with littlevariation in usage by size or sector, andthat some performance based systems arenot that widespread. Indeed, some formof seniority basis to remuneration—firstand second options—accounted for thepay systems of over two thirds (67%) offirms, again with little size or sectorvariation in usage. Critically, seniorityhad an input in the pay systems in vir-tually all (a huge 96%) firms, with veryfew (just 4%) using only performanceto set pay. Other data also indicatesrestrictive applications. Annual paypractices were limited to managers orthe higher educated (Yang, 1999), whilesome firms used a ‘base-up’ remunera-tion system, with its uniform increase ofbasic pay regardless of performance.

Company cases also show the re-stricted nature of changes. For instance,the aforementioned examples of Hyun-dai’s stock option covered just 7% ofthe workforce, while Samsung’s profitsharing was limited to ‘researchers’(The Economist, 2000). Critically,many managers argue that while ‘se-

niorityism’ should change, its meritsshould be kept with remedies to its per-ceived defects.

In short, it seems that while therehave been some transference of perfor-mance based remuneration systems,coverage and application have beensomewhat restricted, while seniority el-ements continue. Again, the level ofacceptance can be questioned. The caseof Samsung’s 1995 HRM reforms, in-cluding pay, indicates this as a problemof whether employees accept changes‘. . . internally’ (Kim & Briscoe, 1997:307).4 This reflects our earlier pointsconcerning the components of HRM’sinstitutionalization, requiring not just‘implementation’, but also its ‘internal-ization’ (Kostova, 1999).

The Transferability of HPWS to Korea

HPWS indicates why this ambiva-lence may be so, with both encourage-ments and restrictions to its operation.HPWS is ‘a specific combination of HRpractices, work structures, and pro-cesses that maximizes employee knowl-edge, skill, commitment, and flexibility’(Sherman et al., 1998: 670). The jointoptimization of HPWS’ two primarysubsystems (social and technical) needsto be pursued (Sherman et al., 1998;Neal & Tromley, 1995).

Simultaneously and paradoxically,some specific Korean factors can bothfacilitate and impede HPWS adoption(Bae & Lawler, 2000), as outlined inFigure 2. This shows facilitators andinhibitors at twin levels: values and rou-tine practices.5 A set of values is a com-ponent of culture, and a basis of systemarchitecture. Routine practices cover


both policy alternatives and practices.Therefore, the relationship between val-ues and routine practices is closely re-lated to architectural fit. Positive/negative relationships between valuesand HPWS mean they have good/badarchitectural and cultural (national) fits.Positive/negative relationships betweenroutine practices and HPWS mean theyhave good/bad structural/cultural (orga-nizational) fits.

First, the values of Korean society(e.g., loyalty, cooperation, and harmo-ny), which have been closely related toConfucian traditions, underlie most Ko-rean corporations’ labor policy (Lee &Johnson, 1998). These values mesh wellwith high involvement HPWS. There-fore, Korea’s collectivism can actuallybe well aligned with HPWS ap-proaches. Second, contemporary Ko-

rean culture is complex—a compositeof Asian and Western values, such asin-group harmony and intergroup com-petition, hierarchical principles, opti-mistic progressivism, and personalachievement based on individualism(Bae, 1997; Cho & Park, 1998). WhileHPWS implementation requires someindividualistic features, for example, forempowerment, Korean emphasis on ed-ucation and employee self-developmenthelps firms to adopt cross training, alsoa necessary condition for empower-ment.

However, although Korea’s collec-tivist culture facilitates workers to ac-cept work teams, a linchpin of HPWS,its bounded collectivism (i.e., the lim-ited scope of collective solidarity), canrestrict their functioning. Korean col-lectivist culture addresses in-group har-

Figure 2The Paradox of HPWS in Korea


mony to which individuals willinglysubordinate their own goals to collec-tive goals (Cho & Park, 1998). Thisharmony, however, is exclusively lim-ited to within the group boundary. Forout-group members, different rules areusually employed. Furthermore, whenthe team leader is more ‘junior’, thisproduces large difficulties in demon-strating ‘leadership’ as seniority rulesstill remain.

In hierarchical cultures the empower-ment aspects of HPWS are generallynot so readily accepted by either man-agers or their subordinates (Kirkman &Shapiro, 1997). If collectivist countriesshow large ‘power distances’ (Hof-stede, 1991), the efficacy of participa-tion is questionable because of employ-ees’ fear and distrust (Newman &Nollen, 1996). Thus, workers are lesslikely to have the requisite sense ofself-efficacy to act independently. Tra-ditional features of Korean organiza-tional culture, such as authoritarian andpaternalistic leadership, hierarchicalstructures, and bureaucratic managerialstyles (Cho & Park, 1998; Steers et al.,1989), are thus inimical to HPWS.

This example links back to the debatein the following way. HPWS consists ofmany ingredients classified into threegeneric factors: competence enhance-ment; commitment and motivation; andopportunity to participation. Appel-baum et al. (2000: 39) also observedthat ‘effective HPWS requires three ba-sic components: opportunity for sub-stantive participation in decisions, ap-propriate incentives, and training andselection policies that guarantee an ap-propriately skilled workforce’. Multi-plication of these factors may bring the

effectiveness of HPWS, but lack of oneof them may result in failure (see Kan-del & Lazear, 1992; Milgrom & Rob-erts, 1995 for theoretical rationales forthis view). These factors are commonlyfound in many different HPWS-typesystems established in diverse coun-tries. These include American ‘lean andteam’ systems, Japanese lean produc-tion, Italian flexible specialization, Ger-man diversified quality production, andSwedish socio-technical systems (Ap-pelbaum & Batt, 1994). These compo-nents can be considered as system ar-chitecture, may have universal effects,and accordingly can be converged.

However, there may be multiple setsof practices that can achieve the threegeneric components of HPWS. This is,we assume, one reason that HPWS var-ies significantly as to the practices in-cluded. Therefore, one task of manage-ment is making the strategic choice ofappropriate practices with contingencyperspectives. Management may takethose practices that can enhance thethree generic components of HPWS,and at the same time, that can easily beimplemented. Here again, the equifinal-ity argument can be applied. Their nexttask is making good alignments of allthree types for a synergistic effect ofbundling these practices into a coherentsystem. Their final task is, because bothvalues and routine practices have adouble-edged nature, managing se-lected practices ambidextrously by en-couraging facilitators and discouraginginhibitors.

This is a change management issue.At the value level, encouraging facilita-tors means reinforcing desirable valuesand norms (i.e., culture) through re-


wards and recognition and symbolic ac-tions; discouraging inhibitors can beachieved through the unlearning (or un-freezing) process. At the routine prac-tices level, encouraging facilitators anddiscouraging inhibitors can be achievedthrough the continuing efforts of therealignment process among practices.For example, when performance-basedannual pay systems were first intro-duced at Samsung and Doosan, strongresistance arose from employees whohad been accustomed to the traditionalvalues of harmony and uncertaintyavoidance. Their management proac-tively created internal crisis so as toencourage employees to accept thechange. At the same time, they alsochanged traditional performance evalu-ation systems towards more reliable andvalid ones to align with pay systems.

DISCUSSION

While flexibility and performance mayhave come to be a more valued ele-ments in Korean HRM, this shift inHRM system architecture demands con-sistent policy mixes and practices. Forexample, to move towards performancebased systems may require attempts toreduce the well-known tendencies to-wards subjective behavior and increaseobjective measurement of employeeperformance (i.e., state-of-the-art 360°appraisal systems). Yet, a steady streamof well-known research notes contex-tual limitations to such practices inAsian contexts because of both struc-tural and cultural incongruence. There-fore, the transfer of practice is onething, and making it effective another.

The relationships among globaliza-tion, ‘best practice’ and competitive ad-vantage are much more complicatedthan as one thinks. In terms of ‘bestpractice’ effects, according to resource-based theory, competitive advantagecomes through building-up imitationbarriers (Barney, 1991). Without valu-able resources6 (such as ‘best practices’),firms suffer competitive disadvantageresulting in poorer performance. How-ever, benchmarking ‘best practices’would bring just competitive parity pro-ducing normal performance as otherfirms would also adopt them. Only afterfirms build imitation barriers would‘best practice’ bring competitive advan-tage (Barney & Wright, 1998). This im-plies ‘best practices’ do not generatecompetitive advantage by themselves.

How can management create thoseimitation barriers? One way is to de-velop ‘high fit’ (i.e., as aforementioned,architectural, structural and cultural).Before the 1997 crisis, there was a goodalignment among Korean culture, cor-porate philosophy and managementpractices. Confucian culture addressedin-group harmony and paternalisticleadership. With this cultural milieu,‘owner managers’ had an ‘employee-first philosophy’ and took care of em-ployees and their families. To achievethis kind of orientation firms had life-time employment, seniority-based payand many allowances for family mem-bers (e.g., for education). Then employ-ees displayed loyalty and commitment,even sometimes sacrificing personal lei-sure time. All these had been a drivingforce for rapid economic development.This configuration had been a source of


competitive advantage of Korean firmsthat defied imitation.

In contrast, transferred HRM maybring problems. Flexibilities andperformance-based elements in remu-neration are not necessarily panaceas,especially in Asian cultures. Interest-ingly, ‘lightly’ regulated or high flexi-bility economies (e.g., the U.K.) do notnecessarily out-perform (e.g., by GDP,productivity, worker conditions andbenefits) more regulated or ‘rigid’ ones(e.g., Germany, France). A recent Ko-rean report (Samsung Economic Re-search Institute, 1999) raised seriousquestions about labor flexibilities andnoted countervailing trends elsewhere,with support for lifetime employment.It concluded that Korean firms wouldbenefit from ‘mutual investment’,rather than ‘unbalanced’, employee-organization relationship approaches(c.f., Tsui et al., 1997), with some returnto longer term employment relation-ships. Other examples include firmsdeclaring they would try to pursue life-time employment even in bastions ofneo-liberal free markets. For instance,some U.K. companies experimentedwith ‘guaranteed employment’, andsuch ideas may receive a boost withthe vogue for ‘workplace partnership’schemes.

IMPLICATIONS AND WIDER RELEVANCE

The above has implications and widerrelevance for Korean organizations andmanagement interested in Korea, IHRMand business more generally and forpractitioners in other contexts. First, im-prudent discarding of so-called ‘Asian

values’ may produce future liabilities.Second, HRM systems should becomecompetency enhancing, rather thancompetency destroying. Third, the ex-tent, speed and impacts of change areimportant. Fourth, restrictions to trans-fers need to be considered.

Simultaneous Realization ofMultiple Values

There is a paradox here. Originally,Confucian heritage, ‘Asian values’ andcollectivism were considered impedi-ments to economic progress. Then,many attributed rapid industrializationand growth to such traditions (Sinha &Kao, 1988; Hofstede & Bond, 1988).Following the 1997 crisis, once againthis legacy came to be seen as a weak-ness. Earlier models of economic devel-opment focused on dichotomizing theattitudinal characteristics of ‘tradition-al’ and ‘modern’ societies (Triandis,1973). This implies that some change ofattitudes and value systems is necessaryfor economic development. This para-digm of development has been chal-lenged. Sinha and Kao (1988: 12) ar-gued that Asian productivity andgrowth is ‘. . . widely attributed to bothmanagement styles and work attitudesthat are rooted in Confucian social val-ues, familism, and institutional structurethat are not necessarily Euro Ameri-can’. Triandis (1988), dealing with therelationship between collectivism anddevelopment, argued that both individ-ualism and collectivism provided one-sided influence on organizational effec-tiveness.

The relationship between values anddevelopment is not uni-directional,rather it is interactive, or even circular


in causation, in a way that developmentaffects cultural change and this changeimpacts on development (Sinha & Kao,1988; Triandis, 1994). Therefore, wemay expect some cultural change alongwith development. Thus, less developedcountries could lower their ‘culturalthreshold’ to become more ready to ac-cept other values for development.However, in so doing, the values thatare more peripheral, more task/technology-related, and more universal,are probably changed first (c.f., Trian-dis, 1994; Lincoln et al., 1986; Lincoln& McBride, 1987).

It can be argued that Korean HRMhas changed direction from acommunity-based, towards a morecompetition-based, system. TraditionalHRM was characterized by a ‘commu-nity’ orientation and paternalistic rela-tionships. Basic norms for this systemwere harmony, care and equality. It wasnot uncommon for managers to takeresponsibility not only for subordinates’work, but also personal and family life.After firms adopt more flexible andperformance-based practices, the char-acteristics of HRM shift towards agreater ‘transaction’ orientation, marketprinciples and contract. The basicnorms for this are, in contrast, compe-tition. One problem for firms is not sim-ply absorbing this second set of norms,but rather totally discarding the first setfor the wholesale and uncritical adop-tion of the second. Evidence of this isthe recent outflow to venture firms oflarge company core employees disap-pointed with HRM changes.7 Withoutthe ‘high care’ climate and family-likeorganizational community, employeesbecome more restrictive and skeptical

about giving their loyalty. Such reducedcommitment and work ethic has beennoted generally and specifically, as withthe lack of loyalty and problems follow-ing dismissals at Samsung Life Insur-ance (Lee, 1998).

Ironically, some Western firms haverecently emphasized greater ‘relation-ship’ over ‘transaction’, orientations(Keltner & Finegold, 1996), with trustand commitment for knowledge cre-ation and sharing and high care climates(Leonard & Sensiper, 1998; Nonaka,1991; Von Krogh, 1998). This can beseen in ‘partnership’ agreements signedbetween management and unions insome companies in the U.K. Therefore,one task for firms is not to simply to-tally discard ‘community’ for ‘transac-tion’ orientations, but to achieve thesimultaneous realization of multiplevalues (c.f., Goudzwaard, 1979), that ispursuing both Korean values and othervalues from foreign countries.

Towards Competency-EnhancingHRM Systems

Management theories (e.g., resource-based, knowledge management) arguethat people are a critical source of com-petitive advantage. Appelbaum and Batt(1994) concluded that across countries acommon thread was that firms gain astrategic advantage from training front-line workers and utilizing their full par-ticipation and that of their representa-tives at various levels of theorganization. Locke and Kochan (1995)also observed that skill developmentand flexibility in work organization arebecoming critical sources of competi-tive advantage. Similarly, Rowley


(1997: 207) concluded there was someconvergence around greater recognitionof the importance of employees to suc-cess across Asian economies.

Yet, there are competing forces here.On the one hand, while knowledgemanagement has been emphasized, onthe other hand neoliberalism-basedglobalization pressures encouragesmore flexible practices. Pressures by thelater subsequently erode key ingredientsrequired for the former—knowledgecreation and sharing and technologicaland production upgrading routes tocompetitiveness (Rowley & Lewis,1996; Rowley & Fitzgerald, 1999). Ko-rean firms have turned away from ear-lier ‘overinvestment’ (characterized byhigh employment security and traininginvestment, but with contributionsthrough immediate jobs) towards ‘un-derinvestment’ (characterized by fullcommitment from employees, yet withhigh numerical flexibility) employmentrelationships. Enhancing market func-tions and competition have weakenedthe harmony and cooperation of organi-zational members and the high care cli-mate. Neither has it helped training. Ko-rea’s 12.2% cut in training investmentbetween 1997 and 1998 (Cho et al.,1999) does not bode well for employ-ees, firms, the country and upgradingroutes to competition.

In particular, enhanced flexibility inemployment adjustment may bring withit problematic outcomes. For instance,in times of crisis MNEs look first forplant closures in locations with the leastrestrictive regulations that make redun-dancies quicker, easier and cheaper, asfrequently happens in the U.K. Yet, thisroute has long term implications for in-

vestment, training and dynamic produc-tivity as incentives for these are reducedwhile producing a downward spiral ofsearching for ever lower labor costs,with all its commensurate downsides.Furthermore, a lack of training reducesother possibilities, such as high value-added production or ‘mass customiza-tion’,8 which require substantial em-ployee training to operate and competewith. Recommendations to boost Ko-rea’s competitiveness by increasing itsskills base (McLean, 2001) recognizesthis.

Is All Change Good?

Many in academia and the businessworld have something of a ‘changes aregood’ mentality. Yet, changes that oc-cur may be echoes of institutional the-ory and not based on ‘efficiency’. Forexample, from the mid-1980s firms inKorea experimented with various ‘new’approaches, including total qualitymanagement, business process re-engineering, team-based work systems,and enterprise resource planning, notbecause of their economic effective-ness, but rather to align with institu-tional forces. For example, the take-upof team-based systems was explainedbetter by institutional legitimacy ratherthan by economic rationality (Lee &Kim, 1999). Likewise, workforce re-ductions and recent recruitment oc-curred partly because of institutionallegitimacy—because others were doingso.

Therefore, practitioners need to bearin mind two points. First, not all thingschange with the same extent and speed.For visionary companies, core ideology


(i.e., core values and core purpose) hadthe enduring character of an organiza-tion, hence it should be preserved;while goals and strategies (Collins &Porras, 1996) need to be stimulated forchange. Some Korean medium-sizedfirms, such as Medison Co. (diagnosticimaging), Yuhan Corporation (pharma-ceuticals), Mirae Corporation (semicon-ductor equipment), and KSS Shipping,have steadily grown from their found-ing. It is well known in Korea that thesefirms commonly have strong corporatecultures and have kept their core values,even during periods of environmentalturbulence. However, these firms alsostimulated changes and pursued techno-logical and organizational innovationswith an entrepreneurial spirit.

Second, practitioners need to be care-ful not to change things that may behard to recover. If not, recovery costswould exceed the benefits generatedfrom the changes. For instance, duringrecent downsizing many Korean firmslost their ‘human touch’ and broke the‘psychological contract’ of long-termattachment and trust. Now many man-agers comment that it was both hard forthem to expect loyalty from employees,and it had become more difficult to mo-tivate and retain core employees. Rec-ommendations to boost Korea’s com-petitiveness by increasing the value of amotivated and committed workforce(McLean, 2001) recognizes this.

Transfer Restrictions

Impediments to HRM transferenceremain. These factors that inhibit fullconvergence stem from particular andspecific political, economic and social

milieu. Furthermore, even if HRM prac-tices are transplanted, their acceptancemay occur only at certain levels. Atleast two points are relevant here. First,we need to understand the dual structureof a system: guiding principles andpractices. This distinction is related tothe division of IHRM orientation andfunctional focus (Rosenzweig & No-hria, 1994; Schuler et al., 1993; Yuen &Kee, 1993). Taylor et al. (1996: 966)defined MNE’s strategic IHRM orienta-tion as ‘the general philosophy or ap-proach taken by top management. . . ’.They also explained that the orientationdetermines the way of managing theIHRM function (such as mechanismsfor sharing HRM policies and prac-tices). In MNE subsidiaries they mayshare a common HRM orientation, buthave different sets of HRM practices.For successful transfer (or benchmark-ing) of HRM practices, practitionersneed to understand the basic assump-tions and guiding principles of the spe-cific practices (Schneider, 1988). With-out this architectural fit, a practicewould not work properly or as ex-pected.

Second, practitioners need to give at-tention to the internalization process ofpractices. As Kostova (1999) suggested,it is important for practitioners to helpemployees to have satisfaction with,commitment to, and psychologicalownership of, practices. One way to en-hance these perceptions is to provideopportunities to participate during theprocess of practice transfer (Lawler,1986). Much well known research sug-gests that employee participation in-creases ownership and acceptance, anddecreases resistance to practice adop-


tion. Another way, as suggested in mo-tivational and change management lit-erature, is to recognize and rewarddesired attitudes and behaviors by bothformal and symbolic reward mecha-nisms. Finally, managers may need toprovide a vivid image of the future statewhen new practices are implemented, toreduce uncertain and uncomfortablefeelings that employees may have.

CONCLUSION

We have examined the impacts of glob-alization on HRM using Korean exam-ples. In Korea, globalization has be-come commonly discussed and impliedglobal integration and standards and themarket function. This phenomenon wasespecially prominent regarding finan-cial and accounting systems, with em-phasis on transparency. With this trend,and labor market flexibility issues,some Korean firms looked to applyglobal standards to HRM. Therefore,globalization may push convergencethrough the transfer of ‘best practices’.As a result, there have been somechanges in HRM practices.

However, how much HRM transfer,its causes, level of occurrence and ac-ceptance and its results, are open todebate. There may be change at thepolicy, but not acceptance level. Even ifthe practice is changed, it may not beintegrated (but rather ‘pick and mix’),nor infused in the mindsets of compa-nies and employees and may even becompetency destroying. One concernwith the changes in HRM is that currentstrategic choices are contradictory toskill development and knowledge accu-

mulation, by building competence-destroying, rather than competence-enhancing, HRM systems (c.f., Lado &Wilson, 1994). This orientation will be-come increasingly problematic overtime and may become a self-fulfillingprophecy.

Key issues include alignment/fit andinstitutionalization (implementation andinternalization). First of all, during thetransition period, firms should be cau-tious in changing their HRM systemsand not to discard their merits to gainsome benefits of other systems. We ar-gue that it is quite possible to realizemultiple values simultaneously. Sec-ond, there is a paradox of ‘best practice’which are not ‘best’ for all firms. Forfirms to have ‘best practice’ effects,they need to have adequate alignmentsof architectural, structural, and culturalaspects. Third, the transferability of sys-tems hinges on, on the one hand, cul-tural and institutional factors, and onthe other, organizational factors. Fi-nally, to have competitive advantagethrough HRM practices, firms shouldhave successful internalization pro-cesses for their employees even after allthe aforementioned factors are consid-ered. In sum, even in an era of global-ization, national systems of HRM re-main robust in their individuality andusefulness.

NOTES

1. From now on we use ‘Korea’ as shorthand forSouth Korea.

2. Two hundred seventy-eight firms across variousindustries in November 1998 (Park & Ahn,1999)

3. Of firms with over 100 employees in 1999, 4,303out of 5,097 business units replied.


4. Interestingly, in support of our earlier point con-cerning varied restraints on management prerog-atives, Kim and Biscoe (1997) note that con-straints could stem from the process. Forinstance, this HRM change was initiated in atraditional Korean top down fashion, and whilesuch approaches were unquestioned in the past,the increase in the levels of democracy and par-ticipation, now produces more questioning.

5. For Korean values and routine practices seeChang and Chang (1994); Cho and Park (1998).

6. Authors variously define ‘resources’, to make theargument on HRM issues we follow Barney(1991: 101) as in firm resources he included ‘allassets, capabilities, organizational processes,firm attributes, information, knowledge and soforth controlled by a firm that enable the firm toconceive of and implement strategies that im-prove its efficiency and effectiveness’.

7. This disappointment may not be the sole reasonfor outflow. Beyond push factors (i.e., dissatis-faction with rigidity and job insecurity in bigcompanies), there are also some pull factors (i.e.,attracting power of venture firms such as highincome and entrepreneurial culture). Indeed,some younger Korean employees, like counter-parts in other countries, streamed to venturefirms and ‘dot com’ companies in anticipation of‘instant’ and ‘easy’ wealth. We thank the editorsfor reminding us of this point.

8. Variations in the product line to make differentproducts in small batches.

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The impact of globalization on HRM: the case of South Korea