Bracing for MNC competition through innovative HRM practices: The way ahead for Indian firms

• DOI: http://doi.org/10.1002/tie.20093
• Published date: 01 March 2006
• Author: Ashok Som
• Date: 01 March 2006

207

Bracing for MNC Competition

Through Innovative HRM

Practices: The Way Ahead for

Indian Firms

Ashok Som

Executive Summary

With increasing globalization, firms are entering a dynamic world of international

business that is marked by liberalization of economic policies in a large number of

emerging economies like India. To face the challenge of increasing competition that

has resulted from liberalization, Indian organizations have initiated adoption of

innovative human resource management practices both critically and constructively

to foster creativity and innovation among employees. With the help of 11 in-depth case

studies, this ar ticle tries to understand how innovative HRM practices are being

adopted by Indian firms to brace for competition in the postliberalization scenario.

© 2006 Wiley Periodicals, Inc.

INTRODUCTION

The decades of the 1980s and the 1990s witnessed an upheaval in economic

thinking and brought about major societal changes. Firms entered a more

dynamic world of international business with globalization of world markets,

marked by the emergence of new international business blocs and economic lib-

eralization of most developed and emerging economies. The dramatic surge in

market reforms throughout the developing world meant that more than 75

developing and postsocialist economies, with a combined population of more

than 3 billion people, aimed at integrating themselves into the global market sys-

tem. Dozens of these economies in Asia, Latin America, and central Europe have

Ashok Som is associate professor and co-chair in the Management Area at ESSEC Business School,

Paris. He received his doctoral degree from the Indian Institute of Management (IIM), Ahmedabad.

His research has been published in

Human Resource Management,

the

International Journal of

Human Resource Development and Management, Keio Business Forum,

and the

Asia Case

Research Journal.

He is currently the representative of France at the International Management Divi-

sion, Academy of Management, USA. Web site: http://www.ashoksom.com (som@essec.fr).

Thunderbird International Business Review, Vol. 48(2) 207–237 • March–April 2006

Published online in Wiley InterScience (www.interscience.wiley.com).

© 2006 Wiley Periodicals, Inc. • DOI: 10.1002/tie.20093

succeeded in attracting large flows of capital, and, most strikingly,

more than 30 countries have succeeded in establishing stock markets

capable of attracting international portfolio investments. These

changes have had profound implications for the entire world econ-

omy and are leading to a reallocation of global savings and invest-

ment. These changes have propelled the most dynamic of the

reforming countries into unprecedented levels of sustained economic

growth and reshaped global capital markets by introducing new

opportunities for both portfolio and foreign direct investment. India,

one of the most important emerging markets in the world, with a

tremendous potential for sustained high rates of economic growth, is

increasingly becoming a key player in the world economy.

The liberalization of the Indian economy created a dynamic business

environment that has resulted in hypercompetition. To face this

hypercompetitive environment, organizational adaptations and alter-

native adaptations of innovative practices have been put in place by

firms for survival and for sustainable corporate performance. This

article attempts to examine how Indian firms have braced for com-

petition through creative and innovative human resource manage-

ment (HRM) strategies and practices in the after math of liberaliza-

tion of the Indian economy in 1991 and the HRM adaptations that

have been relatively more effective in this dynamic context. This arti-

cle presents a theoretical framework of aligning effective innovative

HRM strategies and practices for effective corporate coping in a com-

petitive market. For the purposes of this article, innovative HRM

strategies and practices are defined as:

Any intentional introduction of HRM program, policy, practice,

or system designed to influence or adapt employee attitudes and

behaviors that is perceived to be new and cr eates current capabil-

ities and competencies.1

In this article, HRM strategies and practices indicate a proactive pro-

cess that has been well accepted and recognized in the literature and

is being used only recently by Indian corporates as part of their over-

all business strategy.2The Indian context provides an excellent illus-

tration of the phenomenon of large-scale entry of multinational cor-

porations (MNCs) and the resultant changes in the competitive

structure of the markets where more creative, innovative HR prac-

tices keep employees motivated.3This ar ticle presents evidence from

11 different in-depth case studies that have dealt with the various

facets of HRM practices. The findings reveal how Indian firms are

adopting, aligning, and integrating their strategic initiatives with

Ashok Som

208

Thunderbird International Business Review • DOI: 10.1002/tie • March–April 2006

The liberalization

of the Indian

economy created

a dynamic busi-

ness environ-

ment that has

resulted in

hypercompeti-

tion.