Intermediate conformity of HRM practices in host countries: Why and how they work

The institutional theory suggests that multinational enterprises (MNEs) need to conform to institutional norms to gain legitimacy, thereby enhancing their survival in host countries. Conversely, from the perspective of business strategy, MNEs gain a competitive advantage by leveraging organizational capabilities worldwide. These two perspectives imply that MNEs face conflicting pressures when adopting HRM practices in their host country subsidiaries. This article discusses the rationale for why MNEs’ subsidiaries should intermediately conform to both internal and external institutional forces and adopt a combination of home and host country HRM practices. Furthermore, it suggests that intermediate conformity contributes to a higher survival rate of MNE subsidiaries in host countries through improved operational efficiency and gained legitimacy. Additionally, this article discusses the moderating role of a subsidiary’s resource dependency on the local environment, indicating that when the resource dependency is higher, the relationship between intermediate conformity, operation efficiency, legitimacy, and survival rate is weaker.