Employee commitment in MNCs: Impacts of organizational culture, HRM and top management orientations

Abstract

This article tests a model of organizational commitment in multinational corporations (MNCs). According to the model, organizational culture and human resource management (HRM) affect employee commitment directly as well as indirectly through top management team orientations. Szpecifically, we examined the effect of top management team global orientation and geocentric orientation, which are seen as contributing uniquely to employee commitment in MNCs. The model was tested on a sample of 1664 core employees working in 39 affiliates of 10 MNCs. We found strong overall support for the model. In particular, organizational culture characterized by high adaptability and a HRM system characterized by high performance work practices were found to have a significant and direct effect on employee commitment. In addition, we found that the effect of these traditional elements of the human organization is partially mediated through top management orientations, specific to international firms. The validity and generalizability of these results are reinforced by the control of a set of demographic variables as well as nationality of parent company.

Keywords:

• employee commitment
• global mindset
• high performance work practices
• international management
• organizational culture

Acknowledgements

This article contains material that is based upon work supported by the National Science Foundation under Grant No. 0080703. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation. The authors would also like to thank their home institutions for their support, and particularly the San Jose State Foundation and Lan Duong. In addition, they would like to thank Richard Osborne, Yiftach Gordoni, colleagues at ION, C7, the Academy of Management and the Academy of International Business for their earlier comments.

Notes

1. While Denison and Mishra's model of organizational culture encompasses four dimensions of culture – mission, adaptability, consistency and involvement – we chose only two of the dimensions for inclusion in this study. There are several reasons for this decision. First, mission and adaptability are the two cultural dimensions most associated with the external orientation of organizational culture, and it is this external environment that is particularly challenging for global firms. Hence firms that are perceived by employees to be effectively dealing with the external environment through nurturing an organizational culture that ‘fits’ with the environment (Kotter and Heskett 1992) are more likely to perceive it as successful and hence worthy of commitment. Second, research has found that organizational cultures that are weak on mission and adaptability are unlikely to grow (Denison et al. 2000), and Fey and Denison (2003) found, in their study of organizational culture of foreign firms in Russia, that adaptability and mission were the strongest predictors of profitability. Employee commitment is likely to be undermined by a sense of stagnation, and nurtured by a sense of corporate financial health.

2. In order to avoid confusion, we use the term ‘global orientation of top management’ to differentiate it from the more popular term ‘global mindset’. The definition of global mindset varies across authors (e.g., Adler and Bartholomew 1992; Kobrin 1994; Murtha et al. 1998; Black, Morrison and Gregersen 1999; Levy et al. 1999; Gupta and Govindarajan 2000). However, almost all agree that a key component is an orientation towards, and openness to, the global environment, and therefore we emphasize this aspect.

3. To be eligible for participation, overseas affiliates had to have a minimum of 100 employees and companies were asked to include both relatively successful and relatively unsuccessful units in the study.

4. The factorial validity of each scale was assessed by comparing alternative models giving theoretically possible explanations for the covariation among the items. Convergent validity was established using the following criteria: (a) fit indices of the chosen model; (b) significance levels of the item loadings and their standardized values, following the .5 recommended threshold (Kline 1998); (c) composite reliability index, which is an improved version of the internal consistency coefficient alpha, and should be above .7 (Fornell and Larcker 1981); (d) variance extracted index, which estimates the amount of variance in the items that is captured by the shared factor and should be above .5 (Fornell and Larcker 1981).

5. No use has been made of the sequential chi-square tests or the decision-tree framework proposed by Anderson and Gerbing (1988) because of the well known sensitivity of the chi-square test to sample size and its tendency to detect even trivial differences between the observed and reproduced covariance matrices (Bollen 1989; Tabachnick and Fidell 1996).