From the host country perspective, there are host country effects on the shaping and
implementation of HRM policies and practices in MNC subsidiaries. The variables consist of the
nature of the host business system, its cultural characteristics and its relative power in relation
with MNCs. The superiority/inferiority of the host system determines its relative openness or
receptiveness to dominant ‘best practice’. In a permissive/open host country environment,
which poses fewer constraints on firms, the introduction of country of origin practices is easier
(Whitley 1992). In contrast, MNCs may be prevented from transferring country-of-origin
practices into a constraining/closed host country environment, which is highly regulated and
distinctive (Whitley 1992). The subsidiaries can utilise their resources (expertise about local
environment and market, specialist knowledge, culture, etc.) to block diffusion (Edwards et al.
1993).
The transfer of HRM policies and practices between two economies needs to be seen as part of
the global economy. Smith and Meiksins (1995) argued that, ‘countries can be slotted into
[global] commodity chains relative to societal endowments, and have their comparative
superiority and inferiority reinforced’. The dominance effect’(Elger & Smith 1994) or inferiority of a
business system strongly determines what and how the HRM system is transferred from one
business system to another. Elger and Smith (1994) argued that the dominance, largely in
economic terms, of a home system itself is one mechanism of diffusion. Dominant states are
more able to exert or invite dissemination and adoption of their version of capitalism in other
national systems. ‘Firms from strongly integrated and successful economies may carry over
national character to subsidiaries when locating abroad, and transfer home country practices
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Being practical with theory: a window into business research.
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rather than adopt the practices encountered in the host country’ (Smith & Meiksins 1995,p. 262).
On the other hand, host countries can also be slotted into a relative position of power. A
combination of internal strength and economic power determines a host country’s relative power
position towards MNCs (Vo 2004