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Human Resource Management in Developing Countries

Pawan S. Budhwar and Yaw A. Debrah

INTRODUCTION
DEVELOPING COUNTRIES AND HRM
FACTORS DETERMINING HRM IN DEVELOPING COUNTRIES
DEVELOPING HRM RESEARCH IN DEVELOPING COUNTRIES
CONCLUSION
ENTRY CITATION

INTRODUCTION
Until recent years, the study of human resource management (HRM) in developing
countries was overshadowed by that of international human resource management.
Implicit in the dominance of international human resource management was the
conception that only aspects of HRM in multinational firms (MNCs) in developing
countries were worthy of the attention of researchers. In parallel, this view
downplayed the existence and importance of HRM practices in local (indigenous)
firms in developing countries. This was due to the fact that most local firms were
generally small and micro enterprises often managed by family members and
employing relatives or friends. In such organisations, people management was mainly
informal rather than formal and as such meaningful HRM practices were conspicuous
by their absence (Nguyen and Bryant, 2004). However, with increasing economic
globalisation and its associated international competitiveness, as well as the
privatisation of public enterprises in developing countries, the importance of local
firms in competing in the global economy has come to the fore. With this has come
the realisation of the importance of local firms developing their HRM functions to
give them a competitive edge (Steel, 1992). Moreover, with the emergence of
developing countries such as China and India as important economic powers, it is now
very timely to understand the nature of HRM in developing countries.
In view of these developments, this chapter does three things. First, it explains the
concept of developing countries and highlights the need, in the globalised era, to
understand HRM in these countries. Second, it assesses the conceptual models that
have been employed to explain the dynamics of HRM in developing countries. This
draws on examples from different parts of the world to enlighten us on the main
factors influencing HRM in developing countries. Finally, it highlights the key
challenges facing HRM in developing countries and presents propositions along
which future research that can be conducted to enhance our understanding of the role
and nature of HRM in developing countries.

DEVELOPING COUNTRIES AND HRM


There is less consensus on the definition of the term developing country. Many
authors use terms such as less developed countries, newly industrialised countries,
third world countries, emerging nations, emerging markets, and transitional

economies interchangeably for developing countries (for details see Budhwar and
Debrah, 2004, 2005). For the purposes of this chapter, developing countries are the
ones which are in their early growth stages of economic development and are in the
process of industrialising (see Budhwar and Debrah, 2004; Napier and Vu, 1998).
This is an ideal type description as all developing countries are at different stages of
economic development. The term developing countries in this chapter is, thus, used in
a broad generic sense to represent all countries other then advanced industrialised
societies which we refer to as developed countries. We also define HRM in a broad
sense as issues concerned with the management of all employees and employment
relationships in a firm.
In the last two decades or so, scholars (see for example, Jaeger and Kanungo, 1990;
Budhwar and Debrah, 2001a, 2004) have highlighted the dearth of HRM research on
developing countries and have repeatedly called for more research in the area. A
survey of the literature shows that until recent years, only a handful of studies had
been conducted (see, for example, Austin, 1990; Sparrow and Budhwar, 1997;
Budhwar and Debrah, 2001a; Kiggundu et al., 1983; Kanungo, 1995; Warner, 2000),
on HRM in developing countries. This can probably be explained in terms of the lack
of interest of researchers to study HRM issues in poor countries with mainly small
firms having less formal and structured HR systems. Presently, due a number of major
reasons such as the rapidly increasing levels of foreign direct investment (FDI) by
MNCs in developing countries, the increasing numbers of subsidiaries of MNCs in
the developing world, the projection of significant increase in the number of people to
be employed by MNCs in developing countries, the emerging trends of self-initiated
repatriates to developing countries (e.g. to both China and India), the prediction that
many global businesses will be from emerging markets (Deresky, 2008), and the
strong projection that BRIC countries (Brazil, Russia, China and India) would emerge
as the new world economic powers, are all major factors that are likely to lead to
interest in HRM in developing countries. In view of the above, there is now a strong
interest on the part of researchers to understand the pattern of and relevant
management systems for developing countries (see Kiriazov et al., 2000; Budhwar
and Debrah, 2001, 2004; Das, 2002; Klingner and Campos, 2002; Murphy, 2002; Zhu
and Nyland, 2004; Gomez-Samper and Monteferrante, 2005; Debrah and Ofori, 2006;
Hasler et al., 2006; Lynham and Cunningham, 2006).
In response to the increasing interest in developing countries a number of major
journals have devoted special issues to the area (see, for example, Special Issues of
Journal of International Business Studies, 2001, 32 (1); Academy of Management
Journal, 2000, 43, (3); Academy of Management Executive, May 2001). Also, some
dedicated volumes under the Global HRM Series have been developed which
analyse various aspects of HRM in different developing countries around the globe.
For example, Budhwar's (2004a) volume focuses on the HR in the Asia-Pacific
region, Budhwar and Mellahi (2006) cover people management issues in the MiddleEast region, Kamoche et al. (2004) examine HRM in the African context, and Elvira
and Davila (2005) reveal the diverse nature of HRM in Latin America. More recently,
some journals (e.g., International Journal of HRM, 2005, 2007 and Employee
Relations, 2007) have devoted special issues to the analysis of HRM in specific
regions in the developing world. Similarly, some academic journals have organised
special issues for specific countries such as China and India (e.g., International
Journal of HRM, 2002; Human Resource Management, 2009).

Another reason for the interest in HRM in developing countries is the fact that the
majority of the world's population live in developing countries and the projection is
that, amongst the top ten nations which will have greatest population increase in the
next five decades, nine are developing countries (US being the only developed
country) (DNA, 2006). Also, developing countries act as: 1) significant buyers'; 2)
important suppliers' of different resources (both natural and human) to industrialised
nations; 3) competitors' to developed countries with lower labour costs; 4) strategic
regional centres for expansion of MNCs; 5) production sites for MNCs; and 6)
capital users, i.e. from private creditors such as international banks, FDI, and
foreign aid (for more details see Budhwar and Debrah, 2004a; Kanungo, 2000; Napier
and Vu, 1998).
Due to globalisation and related factors, the movement of people around the globe has
increased significantly. In 2006 alone, close to 200 million people lived outside the
country of their origin (BBC, 2006). This and the above mentioned facts highlight the
great extent to which both developed and developing countries have now become
interdependent on each other. This is also evident from the creation of various
economic international trading blocs and growth triangles (Debrah et al., 2000).
Growth triangle is a type of regional or sub-regional economic cooperation and
integration which makes it possible for complementarities in factor endowments of
three or more countries to be tapped for trade and investment purposes. Itisessentially
a form of strategic alliance which relies on the exploitation of the principles of
comparative advantage to attract FDI for the production of exports (Waldron, 1997).
The expansion of the European Union has allowed the free movement of people from
the less developed member states to developed countries like the UK. This, however,
has created new challenges regarding how to manage such culturally diverse people.
In such circumstances it is important to realise that the state-of-the-art management
practices and techniques which are dictated by unique configurations of different
cultural and institutional factors, evolved in the context of Western cultural values,
cannot be uncritically adopted in developing countries or to manage efficiently people
moving from them to developed nations (Mendonca, 2000). Therefore, there is now a
more pressing need to research and highlight what kind of HR policies and practices
are relevant for developing countries.
From a theoretical perspective, the field of HRM has reached a stage where we now
have reliable information about the nature of HRM systems in developed nations.
However, we are still looking for answers to a number of big questions regarding the
field of HRM in the context of developing countries. Some of the primary questions
in this regard are: to what extent are HRM systems of developed and developing
nations converging or diverging? What is unique about HRM in developing countries?
To what extent can MNCs successfully transfer best practice HRM systems to their
subsidiaries in these contexts? What are the main factors and variables which
significantly determine HRM policies and practices of firms operating in developing
countries? What are the appropriate frameworks, methodologies and approaches for
conducting HRM research in developing countries? Answers to such questions will
contribute to the development of HRM theories and relevant policies and practices in
developing countries (Budhwar and Debrah, 2004). This is particularly imperative in
view of the fact that most developing countries have liberalised their economies and
opened their doors to foreign investors. Moreover, focusing on developing nations
would add a new impetus to HRM research and allow researchers to go beyond the

current predominant emphasis on research in countries in the European Union and


North America.
In the absence of established and tried research frameworks, the critical issue before
researchers is how to conduct meaningful research in developing countries. Lately
scholars in the field (see Schuler et al., 2002; Budhwar and Sparrow, 2002) have
reemphasized the need to conduct research that can help to highlight the context
specific aspects of HRM. In this regard Budhwar and associates (see Budhwar and
Debrah, 2001b; Budhwar and Sparrow, 1998, 2002) have developed a contextual
model which helps to analyse the context specific nature of HRM in a cross-national
setting. These authors have identified three levels of factors and variables, which are
known to influence HRM policies and practices, and worth considering for crossnational investigations. These are: national factors (involving national culture,
national institutions, business sectors and dynamic business environment); contingent
variables (such as age, size, nature, ownership, life cycle stage of organization); and
organizational strategies (such as the ones proposed by Miles and Snow and Porter)
and policies related to primary HR functions and internal labour markets (for details
of the main aspects of these factors and variables see Budhwar and Sparrow, 2002).
Perhaps, very large projects, spanning a long period of time can effectively examine
the influence of all the three sets of factors and variables on HRM systems of a
particular nation at a given period of time. However, considering the infancy stage of
HRM in many developing countries and the argument that HRM in a cross-national
context can be best analysed by examining the influence of national factors (Brewster
et al., 1996; Budhwar and Sparrow, 1998), it would be sensible to initially examine
the impact of the main national factors on HRM in different developing countries.
This will help to draw useful cross-national comparisons regarding the scenario of
HRM in such countries. The national factors such as culture and institutions form the
macro environment of organisations in a national context. This approach has been
recently adopted by Budhwarand Debrah (2004), Budhwar (2004) and Budhwar and
Mellahi (2006) to examine the HRM systems in developing countries and to highlight
the context-specific nature of HRM, developing in Asia, the Middle-East and Africa.
The next section provides examples from these analyses in the form of nature of HRM
functions and the key factors influencing the HRM in different national contexts.

FACTORS DETERMINING HRM IN


DEVELOPING COUNTRIES
In a review of the impact of the main issues affecting HRM in thirteen developing
countries, Debrah and Budhwar (2004b) identified three major influences. These are:
a) religious influences (Islam, Hinduism, Buddhism, and traditional beliefs in spirits,
fetishes and gods); b) traditional cultural beliefs (e.g., Confucianism, African
traditional practices and institutions, caste in India, etc); and c) western colonial and
modern influences.
Along similar lines, Mellahi and Budhwar (2006) analysed HR related studies in the
Middle-East and suggested that despite the accelerating globalisation of business,
people in the region have retained their work-related cultural values and as a result
have different attitudes towards employment and work. This is mainly due to the fact

that influences of traditional cultural values on work processes is deeply rooted,


especially in the absence of formal, structured and rationalised systems and do not
change in short to medium term. For example countries like Kuwait, Egypt, Iran,
Saudi Arabia, Turkey and Morocco show a degree of homogeneity around high power
distance, collectivism, Islamic values and Arab traditions. Further, the high power
distance exhibited in some Middle Eastern countries (such as Kuwait, Saudi Arabia,
Morocco and Egypt) has an impact on managers perception towards the delegation of
authority to lower levels in the organisation and ways of interaction with employees.
It also tendstoproduce centralised decision making processes, unwillingness to
delegate responsibility, and rigidly designed and expected to be followed HRM
policies (also see Benson and Al Arkoubi, 2006; Ali and Al-Kazemi, 2006; Hatem,
2006). Such influences are an outcome of a given socio-cultural, political and
economic context (apart from other factors) which take a long time to change,
especially in the case of developing countries. However, as countries and regions of
the world develop economically, politically and technologically, we can see such
impacts to diminish and taken over by a more professional and rationalised approach
to HRM. Hence, such influences are less visible in developed nations.
Further, Mellahi (2006) and Abdalla (2006) highlight the strong prevalence of
collectivism and Arab (and Turkish and Persian) traditions in Saudi Arabia and Qatar,
where loyalty to one's family and friends is expected to override loyalty to
organisational procedures and as such has resulted in the use of inequitable criteria in
recruitment, promotion and compensation. The influence of Islamic values and
principles of Shura i.e., consultation, social harmony and respect are manifested in
consensus decision making styles. Equally, respect for authority and age and concern
for the well being of employees and society at large are also evident in HRM policies
and practices in organisations in the Middle-East (see Mellahi and Budhwar, 2006).
Debrah and Budhwar (2004) highlight the influence of Islamic religion on HR
management in countries like Iran, Pakistan, Saudi Arabia and Algeria. Arguably, of
all the factors influencing HRM in these countries, the Islamic influence is probably
the dominant one. Their further analysis of HRM in the Sub-Saharan African
countries reveals that traditional African culture exerts strong influence on HRM. In
Ghana, Nigeria, Kenya and elsewhere in Africa, people in organisations still place a
lot of emphasis on traditional beliefs such as spirits, witchcraft, fetishes, and gods (see
Gardiner, 1996), traditions and institutions, customs and socio-cultural issues
(Debrah, 2000). In Kiggundu's (1989) view these traditional practices tend to have
negative effects on organisational performance. In particular, they compromise the
integrity and efficiency of formal bureaucratic system, injecting an element of
subjectivity in HR functions such as recruitment and selection, performance appraisal,
promotion, demotion and compensation. Such practices remove fairness from the
treatment of employees and HR decision making in organisations (Beugre and
Offodile, 2001).
Similar to other developing countries, HRM in both India and Nepal is significantly
influenced both by national culture and national institutions. Hinduism, as the
dominant religion in both these countries, exerts pressures on HRM. Budhwar
(2004b) and Adhikari and Muller (2004) suggest that HRM practices in these two
countries is governed largely by social contacts, based on one's caste, religion,
economic status and political affiliation. Similarly, in both China and Taiwan, just as

in Korea, Confucian values have found their way into management, for example,
Guanxi', face and renqing' are some of the means of regulating interpersonal
relationships in Chinese organisations. Although it is evident that there are some
differences in the management practices in the three East Asian countries some
traditional cultures have similar, if not the same, impacts on management in all three
countries.
There is also still a strong influence of British colonial traditions in India and Nepal in
the form of numerous legislation and red-tape ridden bureaucratic system. Again, in
common with other African countries the provisions of labour laws are not seriously
implemented and, moreover, the uncooperative and disruptive nature of unions
reduces the efficiency of organisations. However, all this is now challenged and is
slowly changing due to the pressures created by the liberalisation of the economy and
increased global competition.
Apart from the above, other institutions (for example, trade unions, legal systems and
employers associations) are important aspects of national factors (in Budhwar and
associates context model) which are known to significantly influence HRM in
different cross-national contexts. With the changes in the economic systems of
developing countries and changes in the role of the government we are witnessing
changes in HRM policies and practices in different national settings. In most cases,
the scanty available evidence suggests that the role of governments has shifted from
an interventionist (where it used to develop centralised HR framework for
organisations to follow), to an abstentionist role, giving organisations a free hand over
HRM matters, albeit within a legal framework in many developing countries such as
in Egypt, Algeria, Turkey, Morocco, Saudi Arabia and Iran. For example, in Algeria,
HRM departments have been asked by the government to change from being a purely
administrative function to developing effective HRM systems to help firms compete
at home and abroad. As a result, HRM departments are asked to undergo radical
changes to grapple with the new challenges of the market driven economy. However,
given the lack of HRM skills in most developing countries HR managers have been
muddling through, often relying on trial and error to cope with the impact of market
liberalisation and severe international competition (see Mellahi and Budhwar, 2006).
Many developing countries whose human resources do not possess key skills and
capabilities (mainly due to less developed educational and vocational institutions) are
experiencing difficulties in the employment of qualified locals (for example in many
Middle-East countries such as Kuwait, Saudi Arabia, Qatar, UAE and Oman). But
governments in such countries are putting pressure on private sector firms to employ
more locals (Mellahi, 2006). In particular, a trend is emerging in the UAE
(Emiratisation) and in Oman (Omanisation) where a strong emphasis is placed on
recruiting locals (see Rees et al., 2007; Al-Hamadi et al., 2007). Given the top down
nature of these policies, private firms view government policies to employ locals as
unrealistic and that they undermine their ability to compete. Further, while past HRM
practices in the private sector in these countries, such as free hand to hire and fire,
and compensation based purely on financial rewards, were designed to manage a
foreign workforce with minimum rights (for example in Qatar and Saudi Arabia),
these practices are not attuned to the needs of local workers who are protected by
government legislation and have high demands and expectations from their employers
(for more details see Mellahi and Budhwar, 2006).

At another level, both political and legal framework in different developing countries
influence HRM policies and practices in their own unique way. For example, China
allows the existence of only one national union which functions strictly according to
the wishes of the communist party. But, in India there are many local, regional and
national unions which generally function in an adversarial way (see Saini and
Budhwar, 2004).
Apart from the above-mentioned national culture and national institutions, the
dynamic business environment is also known to influence HRM in developing
countries. For example, Debrah and Budhwar (2004) argue that in many developing
countries, to enhance international competitiveness in the globalised era has become a
national priority. As a result, economic liberalisation, deregulation and privatisation
feature prominently in many developing countries restructuring programmes. The
economic liberalisation and restructuring in developing countries brought on by
globalisation have in turn initiated changes in HRM policies and practices (as is the
case in most sub-Saharan African countries). For example, there is clear evidence of
the near demise of permanent employment in both public and private sectors in
many developing countries. In particular, we are witnessing the rise of the insecure
workforce' and the disappearance of the standard forms of employment (see, for
example, Mbaku, 1999).
Research undertaken by Mellahi and Budhwar (2006) also reveals the significant role
of a country's historical context in the developments of specific HRM models. For
example, in the case of Iran, the Islamic revolution has contributed significantly in
shaping its HRM practices by moving from merit and competence based criteria in
selecting and rewarding employees to putting more emphasis on ideological
orientation and personal trust and loyalty (also see Namazie and Tayeb, 2006).
Similarly, in North African countries (such as Morocco, Algeria and Tunisia), the
impact of the Frenchcol onialismon HRM policies is clearly evident, in particular the
predominance of French language as a criterion for entry to professional jobs and for
career advancement. In addition to the above factors, national wealth, composition of
workforce, trade unions, employment legislations (as discussed above), all combine
together to createa unique country or region specific HRM model. For instance, the
Middle-East has some of the richest countries in the world (such as the UAE and
Qatar) and some of the poorest countries in the world (for example, Yemen).
These various factors in different countries, understandably, result in different
approaches to HRM. On this issue, Benson and Al Arkoubi (2006) report that in
Morocco it is rare for small and medium size organisations to invest in formal
training. While this is partly due to the fact that managers are not convinced or
perhaps do not value the possible impact of HRM on improving organisational
performance, there is some evidence that organisation can hardly afford the cost of
conducting such training. This is not the case in other countries in the region, such as
the UAE, where training and development of locals is extensive.
In addition to the issue of varying impact of wealth disparity on HRD, the structure
and composition of the labour market also yield different HRM systems. For instance,
because of the small size of indigenous population, GCC countries (Gulf Co-operation
Council) require an extensive use of foreign labour to develop their infrastructure and
manage their economies. As a result, the structure of the labour market in GCC

countries is markedly different from the rest of the Middle-East. While unemployment
is high in both GCC countries and other Middle Eastern countries, the causes
underpinning unemployment are different in GCC countries from those causing
unemployment in other Middle Eastern countries. In Algeria, Egypt, Morocco, and
Tunisia unemployment is caused by lack of jobs in the labour market to absorb the
high number of young people entering the job market. In GCC countries, however,
unemployment is caused by local people shunning socially undesirable jobs (see, for
example, Mellahi, 2006). Finally, while most Middle Eastern countries provide
workers with the right to form and join trade unions, in GCCs countries trade unions
are not allowed (this is probably due to GCCs high dependence on foreign workers
from Asia), although a new form of work associations emerged in the early 2000s.
However, the role of these associations is often limited to dealing with abuse of
foreign workers such as delay in payments of salaries and arbitrary deportation (for
more details see Mellahi and Budhwar, 2006).
The above discussion highlights the impact of a number of factors and variables on
HRM in developing countries. However, the main challenge facing HRM scholars in
developing countries is how to delineate the impact of different factors and variables
on HRM in each country. In order to take the field further and guide researchers to
conduct meaningful research in future, in the next section we identify some of the key
challenges facing HRM in developing countries and put forward some future research
directions for HRM researchers in developing countries. Dealing with the same
should result in the development of both appropriate HRM theory and practice
suitable for developing countries.

DEVELOPING HRM RESEARCH IN


DEVELOPING COUNTRIES
By far the most important challenge for HRM researchers is the development of
theoretical/conceptual models that facilitate the conduct of research which can
highlight the context specific nature of HRM functions in general. Schuler et al.
(2002: 41), who highlighting the importance of context-specific nature of HRM and
the strong need to pursue research in the area, say that HRM research in contextual
isolation is not only misleading, but it strongly hinders the understanding of core
aspects of the phenomenon in any significant way. Considering such pressing
demands, we have proposed below a number of future research directions.

Future research direction 1


Researchers need to focus on illuminating our understanding about the contextspecific nature of personnel functions and relevant HRM system (s) in developing
countries. We argue that the contents of the contextual model by Budhwar and
colleagues (see Figure 23.1) of factors and variables affecting HRM in cross-national
settings can significantly help to reveal the context specific nature of HRM in
developing countries. Perhaps the key challenge in the successful adoption of this
model for research in developing countries is the adoption of appropriate
methodologies as the proposed constructs and measures might not be equally valid in
each developing country due to the differences in them.

Nevertheless, future research in developing countries should aim to:

Future research direction 2


Throw light on the main factors and variables which determine HRM systems
applicable to specific developing countries.
With the pressures for change facing HR managers in developing countries as a result
of globalisation and international competitiveness, one would have thought that
organisations would develop HR strategic responses. But, with the exception of some
countries such as Taiwan, South Korea and to some extent in India, where HR
departments are involved in the formulation of business strategies and HR is closely
linked to business strategy, one does not get the impression that there is a movement
towards HRM (as understood in Western academic sense) in most of the developing
countries (see Debrah and Budhwar, 2004).
Perhaps these countries have not fully embraced a strategic integrated and focused
approach to HRM. Perhaps most firms operating (indeed the exception can be the
MNCs) in many developing countries are not aware of the benefits of such an
integrated approach. Or, even if they have an idea about it they are perhaps not sure
about how they can pursue this in practice. The existing literature (for example,
Brewster and Larsen, 1992; Budhwar and Sparrow, 1997, 2002) provides details of
both benefits of strategic integration of HRM into the corporate strategy and also
scales which organisations can adopt in practice. In this regard, future research
should:

Figure 23.1 Factors influencing cross-national HRM

Future research direction 3


Aim to highlight the extent to which strategic HRM is practised by firms in
developing countries and its related benefits and also the obstacles in the practise of
HRM.

This is necessary because commentators (such as Kanungo and Jaeger, 1990) caution
against the attempts by both researchers and practitioners to try to blindly adopt the
western HRM models, approaches, measures or scales in the developing countries
context. As a result of possible differences due to a combination of factors between
developed and developing nations and issues related to concept equivalence (amongst
others), adoption of western HRM constructs to developing countries will not be
sensible. To get a real picture of HRM scenario in developing countries there is then a
need to:

Future research direction 4


Highlight the unique aspects of indigenous HRM policies and practices. Also,
research should examine which western/global standardized HR policies and practices
can be successfully implemented in the developing countries context and why and/or
why not.
This is related to a re-emergent debate in the field of western HRM relating to the
convergence-divergence thesis (Katz and Darbishire, 2001; McGaughey and De
Cerie, 1999). To what extent HRM systems of developing countries are converging or
diverging is then worthy of examination by future researchers. Budhwar (2004a)
summarises the convergence-divergence debate examined by scholars in the AsiaPacific developing countries. Though, over the last few years, research evidence has
helped to supplant the convergence view with the knowledge that managerial
attitudes, values, behaviours, and efficacy differs across national cultures (see
McGaughey and De Cerie, 1999), recent investigations in the Asia-Pacific region (see
for example, Warner, 2002) emphasise the notion of soft convergence (partial
impact) as an outcome of globalisation. From the MNCs perspective, the
implementation of global standardised HRM practices and policies (with local
adjustments) is also an indication of soft convergence (see Bjorkman and Budhwar,
2007). Globalisation and international trade and finance place pressures on firms to
standardise practices and policies. Considering the sheer variations (such as
population, geography, economies, economic development phase, labour markets,
socio-cultural, legal and political set-up, and HRM systems) in the developing
countries around the world, it will not be sensible to talk about significant or hard
convergence. Possibly, a thorough cross-national analysis of the key factors which
form the basis of national HRM systems and the level (both depth and acceptance) at
which a given HR practice is adopted in different developing countries, can help to
examine the convergence-divergence thesis in a more meaningful manner. Hence,
researchers should:

Future research direction 5


Examine the convergence-divergence thesis for HRM in developing countries and
highlight the main factors contributing to either of these.
As discussed above, there is emerging evidence suggesting that globalisation,
liberalisation and structural adjustment affect HRM systems in developing Asian
countries. Also, the impact of both legislation and unions on reemployment relations
is highlighted in the literature on developing countries. However, due to the scarcity
of research evidence and the transition phase of things, it is not clear what new pattern

(s) of employment relations are emerging in developing countries. Hence, future


research should endeavour to:

Future research direction 6


Reveal the emerging patterns of employment relations in developing countries and
highlight the main factors contributing to the development of these patterns.
The existing research highlights distinction in patterns of HRM systems based on
industrial sectors (see Budhwar and Sparrow, 2002). At the moment, specific sectors
are appearing to be dominant in certain national contexts. For example, in the Chinese
context, manufacturing is the dominant industrial sector. Similarly, in the Indian setup, information technology related services, along with R&D, are dominating. In the
Arab context, it is the oil sector which leads the way. In this regard, there is then a
need to examine and highlight:

Future research direction 7


The kinds of HRM systems suitable for specific industrial sectors that are dominant in
specific developing countries.
During the transition phase of economies (for example from developing to developed)
a key challenge for HRM in developing countries can be the effects of the transition
from an established HRM systems to a new one (for example from collectivist to
individualised HRM practices or from experience based to performance related
compensation system). How to achieve an effective and successful change at a macro
level is then a critical challenge for all managers in developing countries. Future
research should attempt to:

Future research direction 8


Achieve a balance between the traditional management customs which are strongly
dictated by socio-cultural aspects of a given society and the changing emphasis of
HRM functions. Key steps which can help in this regard should also be highlighted.
We assert that globalisation and its associated international competitive pressures
have precipitated the introduction of flexibility of operations, contingent reward
systems, lean production methodologies in a process of ongoing change to underpin
efficiency, thereby leading to new challenges to HRM at organisational level,
particularly with regard to industrial relations policy and practice (Debrah and
Budhwar, 2004). Still, it will not be sensible to generalise such developments to all
the developing countries. However, this kind of information is useful to both
researchers and practitioners in the field of HRM as it indicates the direction in which
things are moving in developing countries.

Future research direction 9


We propose that future research should highlight the emerging nature of industrial
relations policy and practice in developing countries.

We stress that employee relations practices within present day organisations,


including internal labour market (ILM) structures in most developing countries, are
dictated by factors such as social and cultural values, religious beliefs, caste/ethnic
based stratification, political affiliation and economic power (for example, in the
Indian context, see Saini and Budhwar, 2004). Such types of ILMs result in the
decrease in organisational performance and breed corruption and red-tapism. In the
context of the changes taking place in most developing countries in terms of
privatisation and structural adjustment programmes, there is now a strong need for
HRM systems in these countries to be consistent with rationalised, objective and
systematic employment systems. This is already happening in some of the countries,
such as India. However, there is a dearth of information available from most
developing countries in this regard. This formsan important agenda for future
research.

Future research direction 10


It is our view that future research should highlight the emerging nature and
constituents of ILMs in firms operating in developing countries. In addition, it should
explore the main factors which determine ILMs in the changing business environment
in developing countries.
It is apparent that most developing nations have established legal structures in the
form of relevant labour laws to safeguard the interests of employees. However, in
many cases the provisions of the labour laws are not at all seriously implemented,
which results in the exploitation of employees. Child labour and minimum wage laws
are typical examples. Relevant law enforcing agencies in developing countries need to
ensure serious implementation and enforcement of such provisions. Moreover, many
developing countries do not actively promote equal opportunities, hence the existence
of disadvantage on the grounds of ethnicity, gender and age. This is another important
challenge facing HRM in developing countries and HRM managers need to develop
policies accordingly to tackle these problems. In this regard the following proposition
is proposed.

Future research direction 11


We assert that future research needs to draw attention to the nature and kind of
legislation suitable to safeguard the present workforce in developing countries. It
should reveal which existing laws are now obsolete and badly need amending.
It is believed that, once the above mentioned research issues are investigated and their
useful results are adopted by HR practitioners in developing nations, then it should
help to improve firms performance. This, then, leads to the latest and on-going debate
in the field, i.e. the extent to which HRM helps in organisational performance (see
Katou and Budhwar, 2007). The literature also reveals that most research
investigations in this regard have been conducted in western developed nations and
there is a strong scarcity of such studies in the developing nations context.

Future research direction 12

Finally, future research needs to examine the extent to which HRM practices in firms
operating in developing countries are contributing to improving organisational
performance. Also, future research should accentuate the dominant perspective (i.e.,
best practice, contingency or configurational) within this field in the developing
countries context.

CONCLUSION
We have made an attempt in this chapter to provide an overview of the scenario of
HRM in developing countries and developed a number of propositions for future
research. We believe that findings derived from research carried out with these
propositions should help to take the field further. Nevertheless, in the absence of
research culture, conducting research in the developing countries is more challenging
in getting access, getting quality data (because many people are reluctant to
participate in questionnaire surveys), adopting valid and reliable measures and scales,
getting funding from Western funding bodies to conduct research in developing
countries, publishing such research in top tier management journals and so on.
However, considering the rapid pace with which MNCs are entering these countries
and the growing economic power of some developing countries, it has now become an
imperative for scholars to research and reveal to the world the relevant HRM systems
for firms operating in these nations. We hope that the information provided in this
chapter will be useful to both researchers and practitioners who have an interest in
developing countries.
Further Readings

Entry Citation:
Budhwar, Pawan S., and Yaw A. Debrah. "Human Resource Management in
Developing Countries." The SAGE Handbook of Human Resource Management.
2009. SAGE Publications. 15 Apr. 2010. <http://www.sageereference.com/hdbk_humanresourcemgmt/Article_n23.html>.
Chapter DOI: 10.4135/978-1-8570-2149-3.n23

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