European Management Journal Vol. 25, No. 2, pp.

118–131, 2007
Ó 2007 Elsevier Ltd. All rights reserved.
0263-2373 $32.00
doi:10.1016/j.emj.2007.01.001

Strategic Issues and

Local Constraints in
Transnational
Compensation
Strategies:
An Analysis of Cultural,
Institutional and
Political Influences
MARION FESTING, ESCP-EAP European School of Management, Germany
JUDITH EIDEMS, ESCP-EAP European School of Management, Germany
SUSANNE ROYER, International Institute of Management, University of Flensburg,
Germany

In response to globalisation, increasing numbers of national compensation strategy implemented by a

multinational enterprises (MNEs) have imple-
mented transnational corporate strategies character-
ised by global standardisation as well as local
responsiveness. If human resource management
(HRM) is to provide a support function, it is sug-
gested that these strategic developments should
be reflected in the compensation strategies of the
MNEs.
The authors apply a resource dependence perspec-
tive to analyse power relations in MNEs. Political
influences, in addition to cultural and institutional
influences, may impact the balance between global
standardisation and local responsiveness within
the transnational compensation strategy. This the-
ory-based analysis is applied to the case of a trans-
pharmaceutical MNE. The result of these theoreti-
cal and empirical considerations is a framework
of critical resources being responsible for different
power relations in MNEs.
Ó 2007 Elsevier Ltd. All rights reserved.
Keywords: Transnational strategy, Compensation,
IHRM, Resource dependence, Culture, Institutions,
Case study
Introduction
Multinational enterprises (MNEs) have developed
transnational corporate strategies combining high

118 European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
 STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
levels of global standardisation and high local
responsiveness to a great extent over the last years
(Engle et al., 2001). Considering the ongoing globali-
sation process human resource (HR) managers have
tried to develop innovative international HR strate-
gies to support and realise transnational strategies
(Engle and Mendenhall, 2004; Dowling et al., forth-
coming). The compensation strategy plays an impor-
tant role in supporting transnational corporate
strategies. 1 Compensation is ‘a powerful tool for fur-
thering the organization’s strategic goals [and] . . .
has a large impact on employee attitudes and behav-
iors‘ (Noe et al., 2006, 462). Strategic compensation
systems are defined as the sum of decisions concern-
ing pay mixes and levels supporting the business
strategy (Bloom et al., 2002).
This paper extends the scope of international com-
pensation studies beyond expatriate compensation,
the traditional focus of international compensation
(Armstrong and Murlis, 1991) to gain insights into
the use of different compensation practices for a lar-
ger group of the workforce. Within this research field,
conceptual as well as theoretical knowledge and
empirical data are lacking or sparse (for exceptions
see, e.g., Engle and Mendenhall, 2004; Bloom et al.,
2002; Gerhart and Milkovich, 1992). This paper anal-
yses compensation strategies for managers in MNEs
because this group of employees has extensive inter-
national responsibilities and is highly involved in
various cross-border activities. MNEs following
transnational management approaches often imple-
ment dual management systems, i.e., managers and
key personnel are covered by these transnational sys-
tems while lower-level management and employees
are in the responsibility of local systems (Evans and
Lorange, 1989). Consequently, the attention is on
‘senior management developers‘ and ‘top level lead-
ers‘ (Bartlett and Ghoshal, 2000) who act on a regional
and global level and these organisational members
have to transfer best practices across units and to bal-
ance ‘forces of change and continuity‘ (Engle and
Mendenhall, 2004, 618) in transnational corporations.
The paper starts with a discussion of the relationship
between pay strategies and transnational corporate
strategies before basic decisions regarding the pay
strategy in a transnational firm are addressed. Basic
pay decisions are described outlining how MNEs
may balance their specific strategic needs with
respect to different cultural and institutional environ-
ments. The answers to these questions are drawn
from a literature review and fulfil the descriptive
objective of this paper.
From this literature review a research deficit becomes
obvious revealing inconsistencies in compensation
strategies in MNEs. Even though there seem to exist
relationships between pay strategy and corporate
strategy as well as between pay strategy and local
context, certain pay decisions cannot be explained
solely by influences of the external environment,
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
i.e., local adaptations were not always the same
and could not always be sufficiently explained by
cultural or institutional constraints.
Even though institutional and cultural concepts have
proved to be very fruitful in terms of analysing trans-
national pay decisions, they seem to be not sufficient
to cover the complexity of those decisions. There are
indicators that the consideration of power relations
between different units of MNEs could add relevant
factors in explaining the balance between global stan-
dardisation and localisation of pay practices. By tak-
ing a resource dependence theory focus (Pfeffer and
Salancik, 2003) the control of critical resources by dif-
ferent units of a transnational company which may
impact the pay practices for managers is analysed.
This approach focuses on power relations in and
between company units and helps to identify how
decisions and actions in MNEs are influenced by
their affiliates or specific groups of managers in
designing their HRM systems (Taylor et al., 1996).
According to Tregaskis (2003) combining ideas from
new institutionalism and resource dependence the-
ory might be powerful in explaining patterns of stra-
tegic behaviour in MNEs given the conflict between
the need both for conformity and for differentiation
and given the diversity of institutional contexts influ-
encing multinationals’ operations.
Consequently, the theoretical objective of the paper is
to explain the complex puzzle of pay practices within
a MNE. This analysis acknowledges the importance
of the cultural and institutional context. However,
it is suggested that the extent to which adaptations
occur is influenced by existent power relationships
within the MNE. To sum up, the paper aims at
including institutional, cultural, and political influ-
ences in order to deliver a more encompassing expla-
nation of transnational pay practices.
While the first two perspectives have been inten-
sively studied the political influences have often been
neglected. As power-based analyses within the com-
plex cultural and institutional context of MNEs rep-
resent an innovative approach and knowledge is
scarce within this research field the authors have
taken an inductive research approach to investigate
transnational compensation strategies. In adopting
a qualitative case study design it is possible to
develop a complete picture of the research subject
(Seale, 1999), i.e., to gain a holistic understanding of
influencing variables on transnational pay strategies
in MNEs. Qualitative research is open to enable sur-
prising observations. Unlike traditional theory-based
quantitative research designs theories here have the
function of sensitisation for certain phenomena
(Eisenhardt, 1989).
In the following section theoretical knowledge from
cultural, institutional and political perspectives is
used for structuring and selecting variables of inter-
est. However, knowledge generated within the study
119
STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
should not be limited to a particular theoretical back-
ground (Stake, 2000). The methodological design of
the paper includes a single case study of a MNE ful-
filling distinct criteria (theoretical sampling) in order
to obtain deeper insights into the bases of the
resource dependencies in differing cultural and insti-
tutional contexts. Local and global components of
this pay strategy are identified and analysed with
respect to the chosen balance. The results derived
from theoretical and empirical insights lead to a
framework explaining the balance of global and local
pay components. The paper ends with a summary of
the theoretical and empirical findings and gives con-
cluding remarks with regard to future avenues for
research.
Pay Strategy and Corporate Strategy
in Transnational MNEs
In this section, existing knowledge in the area of
transnational compensation is summarised with
respect to the need of developing globally consistent
HR strategies and considering forces for local adap-
tation. The focus is on the relationships between
compensation strategies and transnational corporate
strategies as well as on transnational compensation
strategies and their local contexts.
Compensation systems can support the corporate
strategy and increase its effectiveness (Dowling
et al., forthcoming; Gomez-Mejia and Welbourne,
1991). Thus, the design and effective management
of a compensation system play a major role for
MNEs in realising competitive advantages (Bloom
et al., 2002; Rogovsky et al., 2000). The pay system
in a MNE also plays a relevant role in supporting
transnational corporate strategies: compensation sys-
tems must be aligned with the corporate strategy
(vertical fit) as well as with other HR practices in
the MNE (horizontal fit) (Gerhart and Rynes, 2003).
However, evidence regarding the actual effect of
pay strategy on transnational strategy is still scarce.
Transnational MNEs are faced with various chal-
lenges. The fit of the MNEs’ compensation strategy
with the organisation’s goals is influenced by the
choice of pay decisions. Thus, ‘it is imperative to gain
a better understanding of how MNEs balance global
and local pressures in designing and implementing
international compensation and rewards systems‘
(Bloom et al., 2002, 7). Within this paper, the authors
draw on the concept of the transnational strategy
outlined by Bartlett and Ghoshal (1986) as the basis
for discussing transnational compensation issues.
This strategic orientation represents the case of a
high degree of internationalisation in which global
competitiveness can best be pursued by simulta-
neously realising different goals: standardisation
and adaptation to local conditions. Another impor-
120
tant feature is worldwide learning by global diffu-
sion of innovations (Bartlett and Ghoshal, 2000).
MNEs have to coordinate and leverage their transna-
tional capabilities to exploit national differences and
reach economies of scale and scope (Bartlett and
Ghoshal, 1989; Doz and Prahalad, 1991). To balance
these three goals, MNEs may have decentralised net-
work structures in which subsidiaries act as diverse
competence centres exploiting their critical resources
(Bartlett and Ghoshal, 2000).
The authors have chosen to use Bartlett and Gho-
shal’s concept of transnational strategy because it
does not only address strategic issues but also
includes issues of the MNE organisation structure.
For example, as assumed in the concept of heterachy
(Hedlund, 1986) competence centres may not only be
located in the headquarters but also in subsidiaries.
A network structure allows the deployment of dis-
persed resources, and thus, the reinforcement of
power at different subsidiary-units (Ghoshal and
Bartlett, 1988).
Pursuing a transnational strategy has diverse impli-
cations for the design of transnational compensation
systems, i.e., pressures for standardisation and local-
isation can be identified. Regarding the objective of
global standardisation, consistency and transparency
supporting this requirement can be outlined. An
integrated compensation system, derived from a
transnational strategy is designed with the goal of
aligning a geographically fragmented workforce
around common principles and a set of common
objectives (Evans et al., 2002; White, 2005). A high
degree of transparency fosters a feeling of equal
treatment among the employees, which becomes
more important for managers of transnational firms
because cross border activities increase. Furthermore,
consistent systems can facilitate the administration
processes by increasing operational efficiencies
(Bloom et al., 2002).
However, global consistency does not mean that one
successful local compensation approach is ‘exported‘
to other countries in which the MNE operates. This
approach may not correspond to another core feature
of the transnational strategy, i.e., the local respon-
siveness, which may lead to a localisation of compen-
sation practices (Bartlett and Ghoshal, 1986). This
implies that the system should be open to integrating
country-specific aspects of the business network,
such as local cultural values, traditions, legislation
or other institutional constraints regarding compen-
sation (White, 2005). The challenge is to create a sys-
tem that operates effectively in multiple countries by
exploiting local differences and at the same time sus-
taining global consistency. 2
The emphasis with regard to the firm external con-
text is on how pay decisions can vary according to
the organisation’s environment (Armstrong and
Murlis, 1991). Mismatches between cultural, social
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
 STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
or political attributes and globally consistent com-
pensation systems may result in a number of dys-
functional effects such as problems in attracting
and retaining employees, labour relations conflicts
or ineffective employee behaviour (Gomez-Mejia
and Welbourne, 1991). Thus, MNEs may be forced
by the external context to alter consistent pay mixes
to assure local efficiency (Bloom et al., 2002).
Influences of the external context are usually
explained by culturalism and new institutionalism
theory providing a kind of automatism in the rela-
tionship between the local environment and the
pay strategy. A transnational firm operating within
the dilemma of globalisation and localisation has to
make decisions about pay levels and pay mix. These
are not the same decisions as in a national company
because of the different country specific environ-
ments of subsidiaries. Examples of these relation-
ships are given in the following paragraphs.
The significance of national culture is underlined by
Hofstede’s (1991) statement that most inhabitants of
a country share the same mental program. Following
the national culture approach means, that ‘compen-
sation and reward policies must be aligned with
and reinforce attributes of national culture‘ (Milko-
vich and Bloom, 1998, 18). Since Hofstede’s study
(1980) many other researchers have recognised the
importance of culture and its impact on HR and com-
pensation issues (Rogovsky et al., 2000). Sparrow
(2004), for example, has identified cultural influences
on reward behaviour such as ‘different expectations
of the manager-subordinate relationship and their
impact on performance management and motiva-
tional processes‘ (Sparrow, 2004, 105).
Cultural attributes as suggested by Hofstede (1980)
can strongly influence a company’s pay strategy
and should be considered with respect to the devel-
opment of a transnational strategy. Cultures wherein
work is based on more integrated personal social
‘relationships‘ may value a more complete balance
of intrinsic and extrinsic rewards, while cultures
characterised by personal independence and isola-
tion (‘individualism‘) as well as rapidly changing
personal and social contexts may emphasise extrinsic
rewards – given the absence of a strong and endur-
ing social matrix that attributes meaning and power
to intrinsic rewards (Frey, 1997; Triandis, 2002). For
example, it is suggested that labour and employment
laws reflect dominant cultural values (Hofstede,
1980).
The institutionalism perspective (DiMaggio and
Powell, 1983; Whitley, 1992) indicates that institu-
tional pressures may be powerful influences on pay
strategies. Examples for institutional factors affecting
reward expectations include that the ‘scope of labor
legislation and its regency of codification creates
new codes of conduct through issues such as sex dis-
crimination, equal pay for equal work, and minimum
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
wages‘ (Sparrow, 2004, 103). Thus, for legitimacy rea-
sons it can make sense for some organisations to offer
specific benefits even if they are very expensive.
Institutional norms and values may be based on the
features of a national business system (Whitley,
1992). For example, the characteristics of the indus-
trial relations system as part of the national business
system, including the importance societies place on
labour unions, can also have significant effects on
pay systems (Ferner, 1997).
Regarding financial participation Pendleton et al.
(2002) identify considerable differences among the
Member States of the European Union in the areas
of profit sharing and share ownership which ‘[. . .]
correlated broadly with the extent of differences in
legislative and fiscal support for them‘ (p. 21). Fest-
ing et al. (1999) confirm this and argue that the com-
plexity of German law and the formalised German
workplace industrial relations have led to the fact
that financial participation schemes are not very
common in the German context. As another impor-
tant external influencing factor they have identified
the government’s attitude to financial participation.
While in Britain the government supports the exis-
tence of profit sharing the German government
seems to be more conservative in this regard. Thus,
the government’s legislation can also be a determi-
nant of major importance. In summary, country level
factors strongly influence the incidence of financial
participation in Europe and their impact even
exceeds the importance of many internal influencing
factors in global pay systems (Pendleton et al., 2003).
Consequently, MNEs face a trade-off between global
pressures and a variety of local conditions including
cultural values, legal systems and other powerful
institutions (Bloom et al., 2002). These distinct and
partly contradicting requirements need to be bal-
anced according to the strategic needs of the firm
and supported by appropriate compensation prac-
tices. A one-size-fits-all-approach is not appropriate.
As a result transnational pay systems are varying
across international organisations because every
MNE is operating in a particular context (McWil-
liams et al., 2001; Pucik, 1997).
Basic Pay Decisions within Transnational
Compensation Strategies
In the context of the above-outlined conflicting
demands of transnational compensation strategies,
decisions must be taken with respect to the pay
mix and pay level. The pay mix describes what kind
of pay elements the compensation package includes.
The pay level refers to the relative pay another per-
son would earn for a comparable position in a differ-
ent company, industry or country (Dowling et al.,
2005). A transnational firm may want to standardise
121
STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
pay mixes and levels in order to achieve global con-
sistency and to support a globally integrated corpo-
rate strategy. However, at the same time, these
basic pay decisions may be subject to the need for
local adaptation. This paper mainly draws on those
choices that are considered to be of high relevance
for management compensation in a transnational
context. 3
The decision about variable and/or fixed pay is the
starting point which guides all the other decisions.
With respect to the company-specific level, Gomez-
Mejia and Welbourne (1988) state that a decision con-
cerning variable and/or fixed pay is a function of a
firm’s ability to measure the performance of their
managers. If a firm is not able to measure perfor-
mance the alternative is to offer a fixed salary to
the managers (Boxall and Purcell, 2003). 4 Consider-
ing country-specific aspects of this decision, the
results of a study by Lowe et al. (2002) indicate that
employees in the U.S., Taiwan, Mexico and Latin
America prefer variable pay incentives while their
counterparts in Australia and Japan only moderately
emphasise this kind of pay. Research shows that
seniority-based pay in terms of a fixed salary is more
likely to be found in countries with higher levels of
uncertainty avoidance such as Greece and Portugal
(Schuler and Rogovsky, 1998). If the cultural dimen-
sion of uncertainty avoidance (Hofstede, 1980) is
taken into account, it points out the extent to which
people are risk averse or are prepared to take risks.
Risk taking managers are probably ready to accept
large incentive payments while risk averse managers
are not prepared to accept high income variability,
which may be involved in performance-based pay. 5
This analysis of country-specific factors shows that
while a MNE may aim at a strong performance orien-
tation, local forces may alter the extent to which this
is possible.
Once a firm has decided to accept performance-
based pay the question about the basis of this pay
element needs to be addressed. The first important
distinction for performance-based managerial pay
is the one between individual and group perfor-
mance-based pay. A precondition to pay based on
individual performance as a motivational device is
that individual contributions can be accurately mea-
sured. If individual performance and reward are not
closely linked, motivational effects may not be as
powerful as expected. In contrast, ‘using group per-
formance as a basis for pay is recommended when
corporate goals or the nature of work demands close
cooperation in the work force‘ (Gomez-Mejia and
Welbourne, 1988, 173). Group performance-based
pay can be further differentiated when looking at
corporate vs. division performance. Gomez-Mejia
and Welbourne (1988, 177-178) describe the dilemma
as follows: ‘When utilizing only division perfor-
mance as a measuring stick to distribute rewards,
the corporation loses synergy and may find itself
with less control over its business units than might
122
be desired. Using only corporate performance allows
some divisional managers to receive undeserved
rewards.‘
While the above-mentioned arguments centre on
company-specific features such as performance mea-
surement or the link between pay and corporate
goals, the firm external dimension needs to be
considered here as well. Cultural aspects can lead
to emphasising individual vs. group performance-
based pay. Based on Hofstede’s individualism/
collectivism dimension (Hofstede, 1980) different
implications can be attributed to different cultural
orientations. For example, as employees in high-indi-
vidualism countries tend to be self-oriented and
favour independence, individual attributes and
internal locus of control, individual performance-
based pay schemes may meet these attitudes
(Gomez-Mejia and Welbourne, 1991). In contrast,
countries with low scores on the individualism index
emphasise team accomplishments, dependence on
the social unit, group attributions and an external
locus of control (Gomez-Mejia and Welbourne,
1991). Both individual performance-based pay as
well as group performance-based pay may be used
in combination in manager compensation systems
closely linking performance on different levels to cor-
porate goals (Armstrong and Murlis, 1991; Noe et al.,
2006). However, again the proportion of each may
vary according to the specific local environment.
Closely linked to the distinction between individual
and group performance-based pay is the short-term
or long-term orientation in the compensation system.
Short-term pay forms include frequent rewards that
are closely tied to desired behaviours such as bonus
systems while long-term oriented elements include
for example share options (Noe et al., 2006). Accord-
ing to Schuler and Rogovsky (1998) share options
and stock-ownerships plans, i.e., long-term incen-
tives are more appropriate in countries with high
individualism, low uncertainty avoidance and low
PAY STRATEGY
GLOBAL STANDARDISATION LOCALISATION
according to according to cultural
MNE’s strategic PAY LEVEL and institutional
requirements environment
PAY MIX
Fixed pay
and / or
Variable pay
Individual Corporate Short-
vs. vs.
Risk Aversion
vs.
vs.
Group Division
Risk Taking
Long-term
Performance Performance Orientation
Figure 1 Impact of a Transnational Strategy on Pay
Strategies and Underlying Basic Pay Decisions
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
 STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
power distance. Furthermore, institutional influences
such as different tax rates have an impact on their
effectiveness (Bloom et al., 2002).
To sum up, firms need to take strategic decisions
regarding the extent to which they will use variable
pay elements and if so, establish the basis of these
elements. Figure 1 provides a summarising overview
of different aspects outlined as relevant in the context
of a transnational compensation strategy.
A Resource Dependence Perspective
The preceding section has offered various examples
for the impact of country-specific determinants on
transnational pay systems. However, it has been sug-
gested that the actual effect of these determinants is
also influenced by resource dependencies within
the organisation. While the external perspective
focuses on causal mechanisms that operate indepen-
dently from actors’ interests, resource dependence
theory (Pfeffer and Salancik, 2003) suggests that at
times organisations respond differently to institu-
tional and cultural pressures (Goodrick and Salancik,
1996). This paper adapts this focus aiming at analy-
sing the power relations between different units
within the MNE and explaining the different kinds
of responses by the pay strategy.
In common with institutional theory, resource
dependence theory (Pfeffer and Salancik, 2003)
focuses on relationships between an organisation
and its constituencies. It helps in analysing power
relations in and between organisations and suggests
that crucial resources may affect strategic organisa-
tional behaviour. Pfeffer and Salancik (2003) argue
that where resources are scarce or controlled by a
few actors, those organisations which rely on obtain-
ing resources become dependent on actors who pro-
vide those resources. The stronger the dependencies
(see also Emerson, 1962) the more power the focal
actor has in terms of influencing organisational
behaviour. Consequently, management tries to coop-
erate with these actors by integrating their stipula-
tions in business strategies (Pfeffer and Salancik,
GLOBAL STANDARDISATION
according to
MNE’s strategic
requirements
Control
Critical Resources
and
Power Distribution
Figure 2 Resource and Power Distributions as Determinants of a Transnational Pay Strategy
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
2003). In this paper, the arguments aim at identifying
power and control relations inside the MNE, which
are considered to influence strategic international
HRM decisions (Taylor et al., 1996) in addition to cul-
tural and institutional constraints. Headquarters try
to reduce dependencies and to enhance their
resource control by integrating stipulations of certain
powerful subsidiaries in their strategic HRM, espe-
cially in the context of pay strategies (Balkin and
Bannister, 1993).
In the course of increasing globalisation, subsidiaries
are getting more and more important for the compet-
itiveness of the whole MNE because they are grow-
ing in size and are developing own distinct
resources (Tsai et al., 2006). In transnational organisa-
tions this phenomenon becomes even more preva-
lent. Every unit within the transnational structure,
headquarters as well as subsidiaries, may operate
as a strategically important competence centre (Bart-
lett and Ghoshal, 1986). For example, if a subsidiary
is the main contributor to the MNE’s profit or if a
subsidiary is operating in a key growth market it
controls vital resources, which are central for the
maintenance and success of the MNE (Roth and
O’Donnell, 1996).
In the following discussion the units of analysis are
resource bundles and the focus is on resulting depen-
dencies within the MNE. Those bundles of critical
resources usually would not be equally distributed
over all local units of a transnational network. This
explains why subsidiaries or groups of employees
in critical positions may be more or less powerful
in influencing important management decisions
(Tremblay et al., 2003) and may influence the balance
of transnational pay practices. Thus, power distribu-
tion within the MNE can explain local solutions that
are not solely caused by cultural or institutional dif-
ferences. This is graphically depicted in Figure 2.
Methodology
Analysing a specific MNE from the above-outlined
perspective, it is suggested that the identified
LOCALISATION
according to cultural
of
and institutional
environment
123
STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
transnational pay strategy reflects the particular glo-
bal business needs as well as the effects of specific
resource dependencies and local constraints within
the subsidiaries of the MNE. These different determi-
nants lead to a firm-specific puzzle of pay decisions.
As stated previously, empirical evidence with
respect to transnational compensation systems is rare
and thus the authors sought to shed light on this new
research topic through an investigation of the mix
and outcomes of compensation in a particular
MNE. Therefore a single case study in a MNE has
been conducted as a specific organisational setting
promises to help refining and stimulating ideas.
The results can assist in generating new testable
propositions (Charmaz, 2000). Case studies are the
preferred strategy with regard to ‘how‘ or ‘why‘
questions at multiple levels of analysis combined
with little control of investigators over events and
when a contemporary phenomenon is in the centre
of attention (Yin, 2002). Data for the case study on
the MNE has been gathered through combined data
collection methods such as analysing firm-specific
documents as well as interviews. Internal firm docu-
ments, project manuals, internal company presenta-
tions and annual reports were analysed. These
include facts about the company, the corporate strat-
egy, the HR strategy and the performance manage-
ment system which includes transnational
compensation policies and practices. Furthermore,
in-depth structured interviews were conducted with
three international experienced managers working
for the HR department, among them the head of
HR. Specific questions about the compensation prac-
tices in the Japanese subsidiary were asked to the
head of HR of the Japanese subsidiary by e-mail. This
type of triangulation was used to minimise the per-
sonal perspective bias and enhance the validity of
the data (Yin, 1981; Seale, 1999). Results have been
analysed, focussing mainly on measurement validity.
In order to assure external validity, i.e, to guarantee
that respondents and researchers used the same
language and that the researchers correctly inter-
preted the documents, the case was proof-read
repeatedly by the head of HR. To ensure internal
validity the three authors analysed the data indepen-
dently from each other and compared and discussed
their results.
The aim of this case study is to illustrate the relation-
ship between the transnational corporate strategy
and the HR strategy with a special emphasis on the
global compensation system. Using the lens of Figure
1 the features of the corporate strategic orientation
and the global compensation system are described
and analysed. According to the theoretical perspec-
tive of resource dependence theory applied in the
varying cultural and institutional contexts special
emphasis is given to critical resources associated
with dependency relations in the MNE. The combi-
nation of theoretical and empirical knowledge leads
to the development of new ideas about how com-
124
pany-specific transnational compensation systems
may be explained.
The case study has been selected following a theoret-
ical sampling logic (Pauwels and Matthyssens, 2004).
Key selection criteria included a transnational corpo-
rate strategic orientation and a matching HRM
strategy including transnational compensation. Fur-
thermore, important activities in highly different
institutional and cultural contexts were a precondi-
tion for carrying out the case study. Limitations of
a single case study approach include that the results
are only valid for the specific case (Strauss and Cor-
bin, 1996) and that in contrast to multiple case stud-
ies theory-driven variance and divergence is limited
or non-existent (Pauwels and Matthyssens, 2004).
As the company name should not be disclosed the
MNE will be called Healthcare for the purpose of this
paper.
Case: HR and Compensation Strategies of
a European MNE
Healthcare is a research-based pharmaceutical com-
pany, headquartered in Europe, with more than 140
subsidiaries inside and outside Europe, employing
more than 25,000 employees in 2005, net sales
amounting to more than € 5,000 m, and a net profit
of more than € 900 m. The foreign subsidiaries have
high strategic importance as they generate more than
70% of the profit. Strategically the most important
markets are Europe (net profit is around € 500 m),
the American (net profit is around € 200 m) and Jap-
anese markets (net profit is around € 100 m). Com-
paratively, the Brazilian market as an emerging
market does not contribute the same amount of profit
– here the net profit is around € 40 m.
Changes in the environment such as increasing costs
for research and development and increasing
pressure on prices (cost containment by national
authorities, generic competition) force innovative
pharmaceutical companies such as Healthcare to
operate their key business processes globally and to
develop a multi-centred company in order to ensure
an effective utilization of the distributed resources
and fast market penetration. Corporate-wide R&D
processes, a concentration on a few production sites
with worldwide supply responsibility and a fast pen-
etration of the key markets lead to faster and cost
effective development of innovative products,
reduced production costs, significant sales growth
and an increased profitability.
In the past, Healthcare’s situation was characterised
by worldwide activities but mainly local business
processes in the different subsidiaries (e.g., develop-
ment and production focusing on local/regional
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
 STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
markets). Consequently, the HRM processes were
adapted to country- or region-specific conditions
and global standardisation was not a major issue.
For example, managers and high potentials were
recruited, selected, assessed, and compensated based
on different regional standards.
Considering the change in the competitive situation
in the pharmaceutical industry, which has induced
a change in Healthcare’s corporate strategy towards
a higher level of global standardisation, the firm
identified the need for changing the HR activities
in order to better support its corporate strategy.
Within the context of this new strategic orientation
Healthcare has also implemented a standardised
bonus system for all managers which is part of a glo-
bal performance management system. Healthcare
intends to foster the performance culture in the com-
pany by means of such a global performance system
and to facilitate a common orientation of all
managers.
The bonus system is characterised by a balance of
corporate standards and local adaptations for cash-
related compensation. Fringe benefits are organised
on a local or regional level. The most centralised
compensation element is long-term incentives. As with
many other companies Healthcare grants share
options to its managers. The number of options
depends mostly on the layer to which a manager
belongs. Every layer is characterised by a possible
range of options.
With respect to base pay and short-term incentives
the situation is different. Global standards define
an orientation for the level of total cash (fixed pay +
variable pay) to local or regional market standards.
This means that the total cash a manager receives
depends mainly on the compensation levels in the
country/region he or she is located. Corporate stan-
dards define the market standards and the basis for
the calculation of the bonus – the bonus system.
Thus, the pay level is defined according to local
standards considering Healthcare’s industry-specific
positioning.
The bonus of managers at Healthcare is based on three
components:
1. ‘Individual component‘: based on results of 6 to 10
individual objectives in the respective area of
responsibility. The weight of this component is
50%.
2. ‘My Unit‘ component for Regions, Countries, Glo-
bal Business Units or Regional Business Units:
reflects the performance of the organisational unit
a manager is responsible for or working in. The
weight of this component is 25%. The goal
achievement is measured by deviation between
contribution margin and net sales goals and the
actual numbers. For headquarters’ functions
(e.g., controlling or HR), which have no profit
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
and loss account the ‘My Unit‘ component is
replaced by an additional individual component,
which accounts for 25% as well.
3. ‘Broader Context‘ component: this reflects the joint
responsibility for performance of a higher organi-
sational level, i.e., the corporate level. The weight
of this component is 25%. The evaluation of goal
achievement on corporate level is based on the
degree of Corporate Goal achievement. Corporate
Goals are decided by the Board each year, the
leading parameter is corporate contribution
margin.
The ‘Broader Context‘ and the ‘My Unit‘ components
are leveraged. As a consequence, a goal achievement
of, e.g., 120% will lead to 200% pay out for this
component. However, a goal achievement of less
than 100% will decrease the pay-out for the respec-
tive component disproportionably. For every compo-
nent a pay out is calculated, the sum of the
individual components is the total bonus a manager
receives.
While this system has been designed to ensure
worldwide consistency, some room for flexibility
and local adaptations remains. This is enabled via
currency considerations and through the definition of
the bonus potential. The success indicators for the
‘My Unit’ and the ‘Broader Context’ components
are consolidated contribution margin and net sales
(deviation between plan and actual). Usually, the rel-
evant currency is Euro. But the strategic importance
of the markets in the US and Japan require an excep-
tion to this rule. In these two markets the bonus of
the managers depends on the contribution margin
and net sales achievements in local currencies. This
avoids that managers suffer or gain from major
exchange rate changes.
For every manager a bonus potential is defined. The
total bonus potential is allocated to the components
of the bonus system (25% to ‘Broader Context‘ and
‘My Unit‘, 50% to ‘Individual‘). If the goal achieve-
ment in all components is 100% the pay out to the
manager would be exactly his or her bonus potential.
The bonus potential is defined as a percentage of the
manager’s fixed pay and this percentage varies
according to management layer. For higher ranking
managers the percentage is higher (total cash
depends more on short-term performance) than for
mangers belonging to lower layers (proportion of
fixed income is higher). Healthcare has decided to
base the percentage for bonus potential calculation
not only on the management layers but to consider
other factors as well, e.g., market needs or market
significance. This takes into account that in some
countries/regions the proportion of variable pay on
manager’s total cash is higher than in other coun-
tries/regions. Hence, the percentages for calculating
the bonus potentials are defined as ranges and not
as a single number. Consequently, for managers
125
STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
belonging to the same layer the percentage of vari-
able pay to total cash can be different.
Discussion
It has been outlined that due to the competitive sit-
uation in the pharmaceutical industry, Healthcare
had to redesign its cross border activities. While
the company has always been active in a high num-
ber of foreign markets, previously business pro-
cesses were mainly locally orientated. With respect
to the typology of international firms developed
by Bartlett and Ghoshal (1986) this corresponds to
the typical case of a multinational firm. Changing
this towards a global orientation of business pro-
cesses means increasing global standardisation.
Consequently, it can be stated that Healthcare is
developing a transnational strategy now by globally
integrating certain activities while leaving room for
local responsiveness. These developments in Health-
care’s cross border corporate strategy are shown in
Figure 3.
This tendency is also reflected in the HR strategy.
The overall goal of the new transnational HR solu-
tion is to strengthen an aligned performance orienta-
tion and to support global coordination, which is
essential for globally integrated business processes.
The transnational HR strategy has not been devel-
oped by the headquarters’ HR department itself but
local HR representatives as well as managers from
different regions and business units have been
involved as well. Together with HR specialists and
line managers from all over the world the HR depart-
ment in the headquarters has analysed the business
needs and important competencies needed by the
managers. Then tools concerning compensation as
well as other HR functions were developed in inter-
national task forces.
High
c
b as a result of political processes
Coordination
of company
processes
a GLOBAL STANDARDISATION
Low
Geographically Configuration Geographically
concentrated dispersed
a Healthcare’s past situation
b Healthcare’s current situation
c Healthcare’s future situation
Figure 3 Recent Developments in the Internationali-
zation Strategy of Healthcare
126
The strategic change within Healthcare has led to a
change in managerial pay, which clearly emphasises
global consistency. The firm has decided to deter-
mine the manager’s base pay according to local/
regional conditions and individual performance is
reflected in merit increase. For the performance-
based variable pay Healthcare has chosen a combina-
tion of individual and group performance (with cor-
porate and group elements). Placing a high emphasis
on performance-based pay reflects a risk-taking
approach to global compensation clearly document-
ing the performance orientation of the firm. These
aspects characterise the global compensation guide-
lines of Healthcare.
As has been stated above, reasons for local adapta-
tions rules may lie in the cultural and institutional
environment. In the case of legal requirements, firms
do not have a choice whether to adapt to the local con-
ditions or not. For example, fringe benefits are deter-
mined to a large extent by the legal environment.
Thus, here local rules must be followed. In the lan-
guage of new institutionalism this would be named
‘coercive isomorphism’ (DiMaggio and Powell,
1983). However, if practices are not based on laws
the situation is different. The use of the ranges for cal-
culating the bonus potential within the variable pay
system is due to cultural preferences. In the case of
high uncertainty avoidance, the bonus potential
would not be fully used while in countries character-
ised by low uncertainty avoidance the contrary would
be the case. Here, the MNE can choose whether spe-
cific culture-bound practices are adapted or not.
However, Healthcare’s transnational compensation
strategy includes further components that cannot
be explained solely by cultural and/or institutional
adaptations. There are exceptions such as currency
rules, which do not follow the pattern of firm
external determinants. An explanation for these
exceptions can be the above-discussed resource
Healthcare’s PAY STRATEGY
between headquarters and subsidiaries
LOCALISATION
according to according to cultural
MNE’s strategic and institutional
requirements environment
Global Payment Rules Local Adaptation Rules
Fixed Pay Ranges within
Long-term incentives the bonus potential
Short-term incentives Fringe benefits
Basic pay decisions,
e.g. Formula indicating the Local Exceptions
importance of individual, group U.S. and Japanese currency
and corporate performance bases for calculation of
short-term incentives
Figure 4 Healthcare’s Compensation Strategy
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
 STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
dependence arguments. In the case of Healthcare,
exceptions for the currency base of the perfor-
mance-based pay elements have been decided for
the markets in the US and Japan. While one reason
for this is that local labour markets underlie specific
regulations it also becomes clear that these are mar-
kets of high strategic importance and consequently,
represent critical resources for Healthcare.
Figure 4 gives a summary of this particular puzzle of
pay practices at Healthcare which can be seen as a
result of political processes between headquarters
and subsidiaries.
Framework Explaining the Balance in
Transnational Compensation Strategies
The strategic importance of subsidiaries can be
attributed to specific features. As mentioned before,
a transnational network is composed of interdepen-
dent competence centres which are all contributing
to the competitiveness of the firm. According to
Thompson (1967) such a situation in which every
unit renders a discrete contribution to the whole
and at the same time each unit is supported by the
whole is characterised by a pooled interdependence.
However, the kind of interdependency displayed
depends on the specific distribution of critical
resources between units. Interdependencies can also
be of a sequential (i.e., the output of one organisa-
tional unit is the input for another) or reciprocal nat-
ure (i.e., mutual exchange of in- and outputs among
organisational units) (Thompson, 1967). The consid-
eration of interdependencies is an important issue
when analysing resource dependencies.
In the case of Healthcare, the US and the Japanese
markets represent the main research centres of the
company outside the headquarters. Thus, they are
of major importance for a research-based pharma-
ceutical MNE and contribute largely to building
competitive advantage of the MNE. As they offer
access to the latest knowledge in this area and com-
bine the knowledge and experiences of experts in
R&D they provide highly relevant strategic func-
tion-specific skills.
In terms of sales both markets are characterised as
important by size. As outlined by Nohria and Gho-
shal (1997) the size of the market a subsidiary is oper-
ating in might be a critical resource for a MNE. Thus,
the power position of a local entity within the busi-
ness network might depend on the dimensions of
the local market. In some MNEs subsidiaries act in
larger local markets than the parent company. This
is also the case for Healthcare’s activities in the US
market. Thus, their success is of high strategic impor-
tance for the effectiveness of the whole MNE. Fur-
thermore, the turnover and profit usually is closely
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
linked to the market size of subsidiaries. The bigger
the portion of the subsidiaries’ turnover is, the more
specific might be their role (Roccur, 1966; Roth and
O’Donnell, 1996; Tremblay et al., 2003). It is also pos-
sible that foreign subsidiaries generate more profit
than the parent company. This is often the case for
so-called ‘born global companies‘ (Rennie, 1993;
Zaby, 1999).
Another important feature of subsidiaries which may
have an effect on HRM decisions is the competitive
situation in different local markets (Andersson and
Forsgren, 1995). If competition is intense because
the subsidiary is surrounded by one or more strong
local competitors, the MNE has to adapt to these
market-specific conditions in order to ensure com-
petitiveness (Tsai et al., 2006). For example, the sub-
sidiary managers need to develop appropriate
management skills and reward employees who pos-
sess these skills. A subsidiary would not be able to
attract and retain successful managers if it offered
lower wages than the market stipulates. Further-
more, specific market knowledge of managers in
terms of experiences with buyers and national insti-
tutions might also be an important advantage of a
subsidiary strengthening their political position
(Morris et al., 2006). The same is true for social rela-
tions. Strong internal networks, i.e., relations to other
units, and external networks with, e.g., legal institu-
tions, representing an intangible resource for particu-
lar subsidiaries might represent a strategic advantage
as well (Burt, 1993) and thus, lead to important
resource dependencies.
These examples show that MNE subsidiaries may be
of differing strategic importance within the MNE
network and consequently their influence on strate-
gic decisions may vary. From the comparative analy-
sis of the U.S. and Japanese subsidiaries of Healthcare
as compared to other subsidiaries which are operat-
ing in smaller markets characterised by less compet-
itiveness and less strategic significance, it becomes
clear that the firm has adapted the pay strategy for
managers to the local cultural and institutional envi-
ronment to a differing extent.
To sum up, there are in indicators that politically rel-
evant features of subsidiaries alter the extent to
which subsidiaries adapt HRM strategies, especially
global pay strategies to the respective cultural or
institutional context. The most important influencing
factors found in the theoretical as well in the empir-
ical analysis of the Healthcare case study are summa-
rised in Figure 5.
As these criteria are derived from one single case
study and selected literature the authors have
included the dimension ‘others‘ into Figure 5. To
develop a more encompassing and representative
catalogue of criteria determining the strategic
importance of a subsidiary in a specific cultural
127
STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES

GLOBAL STANDARDISATION
according to
MNE’s strategic
requirements

LOCALISATION
according to cultural
CONTROL and institutional
OF environment
CRITICAL RESOURCES
INCLUDING

Strategically important function-specific

skills (e.g. R&D)
Market size (e.g. sales, potential customers)
Market competitiveness
Management skills (e.g. specific market skills)
Others

Figure 5 Framework Explaining Transnational Compensation Strategies

and institutional context from a resource dependence

perspective, further research in this area is needed.
Independent Variables: Dependent Variable:
The framework depicted in Figure 5 is informed by Features of local entities Transnational compensation strategy
influencing resource dependencies within the local entity
strategic management approaches, cultural and insti-
tutional perspectives as well as resource dependence Strategic importance of function
function-specific skills
theory. It might build a novel theoretical basis for the
development of testable hypotheses, which may Extent to which localised
Market Size
guide future research. It suggests that the strategic elements are included
importance of a subsidiary evaluated by analysing in the transnational
strategically important function-specific skills (here: Market Competitiveness compensation strategy
R&D), market size, market competitiveness, manage-
ment skills and specific market knowledge leads to Strategic importance
of management skills
resource dependencies and thus, to a differing extent
of empowerment of the local management possibly
involving concessions in the global standardisation
of the pay strategy. Thus, examples for propositions
Figure 6 The Impact of Critical Resources on the
derived from the framework would include the Extent to which Localised Elements are Included in
following: the Transnational Compensation Strategy

Proposition 1: Strategically important function-specific

skills in a foreign subsidiary lead to more localised ele-
ments within the transnational compensation strategy.
Proposition 2: The control of an important market size by
a foreign subsidiary leads to more localised elements
within the transnational compensation strategy.
Proposition 3: Success in a highly competitive market of a
foreign subsidiary leads to more localised elements within
the transnational compensation strategy.
Proposition 4: Strategically important management skills
in a foreign subsidiary lead to more localised elements
within the transnational compensation strategy.
The propositions are summarised in Figure 6. The
analysis would among others include a regression
analysis aiming at giving empirical evidence about
the importance of the identified critical resources
and their impact on the balance between global stan-
dardisation and localisation of transnational com-
pensation strategies with respect to selected
organisational units. However, the challenges of
operationalising the variables of interest and choos-
ing the appropriate methodology need to be
addressed.
Conclusion
An appropriate balance of transnational pay strate-
gies is crucial for the implementation of transnational
business strategies and thus, for the competitiveness
of MNEs. With this in mind, theoretical and empiri-
cal implications are drawn with respect to the expla-
nation of this balance between local pay practices
and global compensation standards firstly on the
basis of cultural and institutional determinants. This
analysis has been extended by applying a resource
dependence perspective (Pfeffer and Salancik, 2003)
which enables the integration of political influences
of different network units in the analysis of transna-
tional pay practices. Significant relevant features of
subsidiaries have been identified that cause the
extent to which subsidiaries adapt HRM practices,

128 European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
 STRATEGIC ISSUES AND LOCAL CONSTRAINTS IN TRANSNATIONAL COMPENSATION STRATEGIES
especially global pay strategies to the respective cul-
tural or institutional context. The resource depen-
dence perspective was found to offer systematic
explanations for other significant influences on inter-
national HRM decisions and can contribute to the
understanding of selected balances between global
standardisation and local variations of transnational
pay practices.
The suggested theory-based framework provides a
conceptualisation of the influence of resource depen-
dencies in transnational firms and summarises
important sources of dependence relations that can
be used also for the analysis of other HRM functions.
In the same way solutions concerning recruitment
and selection as well as training and development
can be discussed (see also Taylor et al., 1996). As
the paper mainly focuses on the extent to which sub-
sidiary stipulations have an impact on strategic solu-
tions it might also provide the basis for analysing
organisational behaviour in other functions such as
marketing or procurement. These aspects represent
relevant topics for future research. With respect to
the methodological approach to further investiga-
tions the empirical basis should be enlarged. Oppor-
tunities would either include an increase in the
number of case studies to be conducted or in taking
a quantitative approach. An avenue for the latter
research design has been given.
In summary, the illustrative single case study despite
many limitations clearly shows that power relations
play a relevant role in MNEs. The impact of
unequally distributed resources on functional or cor-
porate strategies, however, is often underestimated.
This paper shows how important it is that HR man-
agers are aware of the political situations and pro-
cesses within the firm to cope successfully with
challenges involved in developing and implementing
transnational solutions in the field of HRM.
Acknowledgements
The authors would like to thank their interview part-
ners for their support, especially the Head of HR of
the investigated firm. For valuable comments on an
earlier version of the paper, we thank Kerry Brown
Bernadette Mueller as well as two anonymous
reviewers.
Notes
1. Results from the Watson Wyatt Worldwide’s 2004/2005 Strate-
gic Rewards Report underlines this: it reveals that among those
organisations that do not yet have a globally consistent reward
program, 72% plan to take steps in that direction within the next
two years.
2. A transnational corporation could give equal compensation
packages to all executives worldwide. However, strategic
choices address a variety of dimensions, thus, involving a high
degree of complexity. This complexity becomes obvious when
European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007
comparing typical management structures in different coun-
tries. Examples of these differences are the relatively narrow
wage differentials between top and lower-level employees, e.g.,
in German firms (Jones, 2005) compared to the situation in the
U.S., where the average CEO salary in 1996 was 210 times that
of the average industrial worker (Murphy, 1999).
3. In their analysis of studies in the field of compensation research
Gomez-Mejia and Welbourne (1988) differentiate between
varieties of basic dimensions to be considered when taking
decisions related to compensation. Examples for their basic
dimensions are: job-based vs. skill-based pay, individual
performance vs. group performance based pay, short-term vs.
long-term orientation, performance vs. seniority orientation,
risk aversion vs. risk taking, corporate vs. division performance,
internal vs. external equity, hierarchical vs. egalitarian orienta-
tion, qualitative vs. quantitative performance measures, and
internal vs. external equity.
4. However, recently performance-based managers’ pay has
become widespread, being used especially as an incentive and
motivational device (Armstrong and Murlis, 1991; Lazear, 2000).
5. However, this distinction cannot only be made according to
country-specific cultural values but also with respect to indus-
try-specific feature, e.g., the firms belonging to high-tech
industries or the so-called new economy have seen more risk
taking managers than traditional firms (Gomez-Mejia and
Welbourne, 1988; Gomez-Mejia and Welbourne, 1991).
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MARION FESTING, SUSANNE ROYER,

ESCP-EAP European
School of Management,
Chair of Human Resource
Management and Inter-
cultural Leadership, Heu-
bnerweg 6, 14059 Berlin,
Germany. E-mail: mar-
ion.festing@escp-eap.de
Marion Festing is Profes-
sor of Human Resource
Management and Inter-
cultural Leadership at the Berlin campus of ESCP-EAP
European School of Management in Germany. She
received her PhD from the Faculty of Business
Administration and Economics of the University of
Paderborn, Germany. Her research interests include
international human resources management with spe-
cial emphasis on strategies, careers and compensation
issues in differing institutional and cultural contexts.
JUDITH EIDEMS,
ESCP-EAP European
School of Management,
Chair of Human Resource
Management and Inter-
cultural Leadership, Heu-
bnerweg 6, 14059 Berlin,
Germany. E-mail: judi-
th.eidems@escp-eap.de
International Institute of
Management Chair of
Business Administration,
esp. Strategic and Interna-
tional Management, Uni-
versity of Flensburg,
Munketoft 3, 24937 Flens-
burg, Germany. E-mail:
royer@uni-flensburg.de
Susanne Royer is a Profes-
sor of Strategic and Inter-
national Management and a Director of the
International Institute of Management at the University
of Flensburg, Germany. Susanne Royer is also Adjunct
Professor at the Queensland University of Technology,
Brisbane, Australia. She received her PhD from the
Faculty of Business Administration and Economics of
the University of Paderborn, Germany. Her research
interests include strategic alliances, changing forms of
value net organisation, as well as strategic issues in
industrial relations.

Judith Eidems is Research

Assistant and Doctoral
Candidate at the Chair of
Human Resource Management and Intercultural
Leadership at the Berlin campus of ESCP-EAP Euro-
pean School of Management in Germany. Her research
interests lie in the field of international HR strategies
as well as global compensation.

European Management Journal Vol. 25, No. 2, pp. 118–131, April 2007 131