The transfer of Japanese cross-border practices to an emerging market economy

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Résumé:

The purpose of the paper

The paper examines Japanese MNCs’ transfer of Japanese work, organization and employment practices to its joint-venture firms operate in Indonesia. The empirical study uses a cross-sectional dataset from both Japanese and locally-owned automotive sectors, including cars, motorcycles and autoparts firms, resulting from two phases of data collection in Japan and Indonesia. It focuses on the MNC headquarter and subsidiaries relationships in legitimizing and adopting the Japanese MNC’s practices in an Asian emerging market economy. It applies institutional theory on power capabilities and interests of actors in framing cross-border human resources practices and abortive capacity. It aims to deepen our understanding of the importance of dialectic power capabilities in mediating institutional distance between home- and host-country institutions and examining subsidiary knowledge transfer strategies at inter- and intra-firm levels. A cross-case analysis reveals that even in a weak institution setting such as Indonesia, different types of subsidiary power may interact and the ‘Boy Scout’ and ‘subversive’ strategies play vital specific role to the knowledge transfer.

Theoretical background

The key theoretical frameworks of this paper are absorptive capacity of Dana Minbaeva, Pedersen, Björkman, Fey, and Park (2003), and power and institutions of Ferner, Edwards, and Tempel (2012). These theories provide theoretical generalisability of the basis of the importance and length of Japanese MNC (JMNC) intervention at Indonesian subsidiary, the Astra Automotive Group: Toyota (car), Honda (motorcycle) and Astra Autoparts (AOP). It is as a paradigmatic case for Japanese vs. Indonesia, the institutional differences between Japan and Indonesia, as well as through extensive triangulation of both findings and explanations in Indonesia and Japan. Building on Minbaeva et al.’s (2003) absorptive capacity model, the main objective of this study is to develop a theoretical concept of inward knowledge transfer. It examines the causality and implications of human resources and employment practices (HR-EP) on subsidiaries’ motivations, capacity, power and institution to absorb new knowledge. The study analyses knowledge inflow mechanisms at multiple organizational levels, proposing an integrative theoretical model to examine the structure of absorptive capacity. It considers a range of theoretical perspectives on organizational learning (i.e. Cohen & Levinthal, 1990; Gupta & Govindarajan, 2000; Dana Minbaeva et al., 2003; Zahra & George, 2002) and empirical constructs of multi-level (inter-organizational, intra-organizational and managerial) absorptive capacity mechanisms. In addition, Ferner et al. (2012: 164) argue that there is a little sense of what is “at stake” for actors in the confrontation of cognitive, normative and regulative frameworks that arise when practices are transferred. Thus, Ferner et al.’s (2012) framework focuses on the analysis of power and interest of actor shape transfer through processes that draw on institutional resources at the macro and micro level of JMNCs. In particular, how power relations and actor interactions in MNCs influence the outcomes of practice transfer between different institutional domains. Ferner et al.’s (2012) argue both HQ’s and subsidiary's actor power, i.e. manager, employee and union. These processes in turn influence the transformations and adaptations undergone by transferred practices. Institutional context provides actors with power capabilities with which to facilitate, block or modify cross-border HR-EP transfer. These type of actors’ power interactions are the focus of this research. Three propositions are developed from theoretical constructs, with operational constructs examining Japanization and knowledge inflow.

The concept of absorptive capacity in adopting Japanization

• Hypothesis 1. Inter-organizational and MNC actor interactions that impact positively on employees’ ability and motivation will increase the level of knowledge transfer.

HR-EP policies

• Hypothesis 2. Training that positively promotes inter-human relationships shapes subsidiary employees’ ability to adopt Japanization.

• Hypothesis 3. Internal communication positively shapes employees’ motivation.

The approach taken and the methods of analysis

This draws on in-depth, qualitative research produced through two phases of rigorous data collection. A qualitative approach captures the subtleties of inter-human relationships that give rise to inter- and intra-organizational capabilities, interaction and motivation. Such nuances can only be captured by engaging in discussions and talking to people. The triangulation and reliability of this study rest on the selection, operation and collection of data gathered from various participants, including management, employees, union and agency representatives (Miles, Huberman, & Saldaña, 2014; Yin, 2013). Toyota, Honda and AOP (includes tier 1, 2 and 3 suppliers) have dynamic capabilities for transfer and coordination, driven by different levels of Japanese ownership and length of presence. Japanese and Indonesian agencies’ direct involvement in facilitating the dissemination of HR-EP to subsidiaries enables inward knowledge transfer to be examined at the meso-institutional level. Figure 1: Toyota, Honda and AOP case studies The six selected AOP subsidiaries have different levels of Japanese ownership and length of presence: Figure 2: Japanese attributes in selected AOP subsidiaries The selected case study subsidiaries have an MNC HQ in Japan and a local parent firm (Astra) in Indonesia, with varying levels of Japanese involvement across the subsidiaries. They were chosen for the study because they represent a reasonably diverse sample in terms of their capacity to execute Japanese work practices.

Findings and contributions

This study finds that inter-human relations not only serve as a conduit for knowledge transfer, but are also an important characteristic of knowledge transfer. The analysis of the AOP cases demonstrates that Japanese work systems permeate to local affiliates, thus boosting absorptive capacity. Therefore, it concludes that the structure of subsidiaries’ HR-EP is a significant element of an inter-and intra-organizational knowledge transfer mechanism. Furthermore, it demonstrates the existence of two levels of absorptive capacity: direct knowledge transfer from foreign firms and spillovers into the wider economy. Ownership structures are important in this process, resulting in varying levels of organizational capabilities that promote, facilitate, or inhibit competitive dynamics. The AOP case illustrates the apparent tension between JMNCs and the objective of Japanese knowledge transfer agencies to promote Japanization in Southeast Asia. The situation at AOP indicates the extent to which this knowledge improves the performance of potential competitors. Many dominant firms in Southeast Asia have similar structures to AOP, with varying degrees of foreign involvement. However, what the paper has established here is that while the degree of Japanization increases in line with the extent of the Japanese holding, there is potential for this trend to spread through the organization and into areas of the business that compete directly with the foreign partner. Japanese agencies facilitates Japanization directly to the benefit of Japanese firms seeking improvement in their local suppliers. In turn, this process generates intra-organization knowledge flows, independent of Japanese links, increasing competitiveness in the wider sector. The practical relevance of this empirical construct of multi-level analysis relates to the central role of management in mechanisms for the power of resources, processes and meaning, and organizational cognitive ability to shape the institutions of cross-border transfer.