Institutions as Constraints and Enablers: Changes in Human Resource Management Practices of Foreign Companies during Economic Reform in China

Authors

  • WEI LU

DOI:

https://doi.org/10.22439/cjas.v36i2.5649

Keywords:

economic reform, institutional transition, labour market institution, human resource management (HRM) practice, foreign companies, China

Abstract

This article demonstrates how the development of labour market institutions alongside economic reform has impacted the human resource management (HRM) practices of foreign companies in China. A historical approach is applied to examine the transformation of China from a centrally planned labour administration system to a market-based labour institution. The HRM practices of foreign companies are seen being embedded in China's macro-institutional environment, which constrains and/or enables foreign companies to exercise people management. Drawing on previous research, the study shows that HRM practices in the early reform period were primarily constrained both by formal and by informal institutions. The evidence from Finnish companies operating in China shows that HRM practices in the late reform period are largely enabled by formal institutions; however, foreign companies face the need for adaptation to the demands of informal institutions. Furthermore, the scarcity of human resources and rapid yet heterogeneous socio-economic development pose additional challenges for people management in China today.

Author Biography

WEI LU

WEI LU is a post-doctoral researcher at Aalto University School of Business. Her research interests focus on China, including the internationalization strategies of Finnish companies in China, economic reform and institutional transition in China, adaptation of HRM practices in multinational corporations (MNCs), Chinese Finnish communication and organizational commitment of Chinese employees.

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Published

2019-02-15

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