It reflected that the economy was then based mainly on the labour intensive manufacturing activities where unskilled and semi skilled workers dominated the workforce of such enterprises. Indeed, the majority of workers from the rural areas were concentrated in these industrial enterprises, located in Bangkok and the four neighbouring provinces; namely, Thonburi, Samutprakarn, Samut-Songkram and Pathumthani. These are centres that predominantly host manufacturing activities. Moreover, the central notion of Buddhism, the national religion, to the Thai culture, the practices of ‘middle path’, which means no encouragement of extremism, has contributed to the unique HRM and industrial relations framework of Thailand (Siengthai 1993).
It was not until foreign direct investment started to flow into the country around mid 1970s that modern, or professional, management became commonly practiced. This transition of traditional to modern management was reflected by foreign, or joint venture, firms that recruited professional managers, who were expatriates sent from the headquarters to operate their business. In practice, the firms hired professional HR managers who had formal training in HRM to oversee the HR operations. To some extent, the acceptance of such management prerogatives was endorsed by the government policy which was to promote the export oriented industries. In terms of institutional comparison, the HRM practices of these more progressive entities were in contrast to the majority of the business community that was still family owned and hired mainly those who were related by blood, or those who were close to the family networks. Notably, the introduction of professional HRM practices was underpinned by managers who were educated in the foreign countries, particularly in the home countries of the multinational enterprises (MNEs), or the joint venture companies (Siengthai & Bechter 2004).
Different nationality or ownership of firms may have significant impact on organisational performance. Within the foreign MNEs sector, the relevant distinction can be observed between the policies pursued by Japanese subsidiaries and those pursued by subsidiaries of Western MNEs. In many ways, the systems that were endorsed were consistent with the stereotypical notions of Western and Japanese styles of HRM, with some modifications necessitated by the Thai environment (Lawler, et al. 1997). However, efforts by Western and Japanese MNEs to impose HRM systems in an ethnocentric fashion in their Thai operations had, on occasion, generated significant cultural clashes in the workplace.